Annual Report - Financial Statements
T. Rowe Price
Tax-Exempt
Money Fund
February 28, 1997
Portfolio Highlights
SECTOR Diversification
Percent of Percent of
Net Assets Net Assets
8/31/96 2/28/97
____________________________________________________
Tax-Exempt Money Fund
Hospital Revenue 27% 27%
General Obligation - State 13 15
Educational Revenue 14 14
General Obligation - Local 12 13
Prerefunded Bonds 10 6
Industrial and Pollution
Control Revenue 9 6
Nuclear Revenue 1 4
Electric Revenue 2 3
Dedicated Tax Revenue 3 3
Miscellaneous Revenue 2 2
Pooled Loan Revenue 2 2
Water and Sewer Revenue 1 2
All Others 6 2
Other Assets Less Liabilities -2 1
____________________________________________________
Total 100% 100%
T. Rowe Price Tax-Exempt Money Fund
For a share outstanding throughout each period
Financial Highlights
Year
Ended
2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
NET ASSET VALUE
Beginning
of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment
activities
Net
investment
income 0.030 0.033 0.026 0.020 0.023
Distributions
Net
investment
income (0.030) (0.033) (0.026) (0.020) (0.023)
NET ASSET VALUE
End of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Ratios/
Supplemental
Data
Total
return 3.05% 3.38% 2.63% 2.05% 2.36%
Ratio of
expenses
to average
net assets 0.55% 0.56% 0.58% 0.59% 0.60%
Ratio of net
investment
income to
average
net assets 3.00% 3.33% 2.59% 2.04% 2.35%
Net assets,
end of period
(in
thousands) $ 678,135 $679,143 $687,022 $732,900 $695,699
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Tax-Exempt Money Fund
February 28, 1997
Statement of Net Assets
Par Value
In thousands
ALABAMA 6.1%
Alabama, GO, 5.55%, 3/1/97 $15,000 $15,000
Birmingham, GO
VRDN (Currently 3.30%) 12,450 12,450
Jefferson County, GO,
VRDN (Currently 3.40%) 10,000 10,000
Montgomery, IDR, PCR,
Solid Waste Disposal
(General Electric), TECP
3.45 - 3.50%, 3/19 -
6/10/97 4,000 4,000
Total Alabama (Cost $41,450) 41,450
ARIZONA 1.8%
Salt River Agricultural
Improvement and Power Dist.
TECP, 3.45 - 3.50%, 4/4 -
5/8/97 11,000 11,000
Electrical System
7.625%, 1/1/08
(Prerefunded 1/1/98!) 1,250 1,314
Total Arizona (Cost $12,314) 12,314
ARKANSAS 0.6%
Arkansas Dev. Fin. Auth.,
Sisters of Mercy
VRDN (Currently 3.25%) 4,000 4,000
Total Arkansas (Cost $4,000) 4,000
CALIFORNIA 4.9%
California
GO, 9.00%, 6/1/97 5,000 5,065
GO, RAN, 4.50%, 6/30/97 10,365 10,384
Oakland
COP, VRDN (Currently 3.65%) 2,900 2,900
GO, TRAN, 4.75%, 6/30/97 10,000 10,027
San Diego, GO, TAN, 4.50%,
7/2/97 5,000 5,012
Total California (Cost $33,388) 33,388
COLORADO 1.7%
Colorado HFA
Kaiser Permanente,
VRDN (Currently 3.30%) $ 3,900 $ 3,900
Sisters of Charity Health
System
VRDN (Currently 3.30%) 5,400 5,400
Denver, IDR, W. W. Grainger,
VRDN (Currently 3.30%) 2,190 2,190
Total Colorado (Cost $11,490) 11,490
DISTRICT OF COLUMBIA 1.9%
Dist. of Columbia, American
Univ., VRDN (Currently
3.35%) 12,890 12,890
Total District of Columbia
(Cost $12,890) 12,890
FLORIDA 7.6%
Alachua County HFA, Shands
Teaching Hosp.
VRDN (Currently 3.30%)
(MBIA Insured) 13,000 13,000
Hillsborough County IDA,
PCR, Tampa Electric Co.
VRDN (Currently 3.45%) 1,800 1,800
Jacksonville Electric Auth.,
TECP, 3.40 - 3.55%, 4/9 -
5/21/97 7,600 7,600
Jacksonville HFA, Genesis
Rehabilitation Hosp.
VRDN (Currently 3.45%) 8,800 8,800
Orange County IDA, W. W.
Grainger
VRDN (Currently 3.30%) 1,185 1,185
Orlando
Capital Improvement, TECP,
3.40%, 4/9/97 3,500 3,500
Wastewater, TECP, 3.45 -
3.50%, 3/19 - 6/9/97 3,525 3,525
Reedy Creek Improvement Dist.
8.25%, 6/1/07 (Prerefunded
6/1/97!) 5,300 5,468
Sunshine State Gov't. Fin.
Commission, TECP
3.50 - 3.55%, 5/7 -
5/14/97 6,500 6,500
Total Florida (Cost $51,378) 51,378
GEORGIA 1.2%
De Kalb Private Hosp. Auth.,
Egleston Childrens Health
Care System VRDN (Currently
3.35%) 3,200 3,200
Fulton County School Dist.
7.50%, 5/1/08
(Prerefunded
5/1/97!) $ 1,000 $ 1,036
7.625%, 5/1/17
(Prerefunded 5/1/97!) 3,000 3,108
Georgia Tech Foundation Fac.
Auth., Wardlaw Project
VRDN (Currently 3.30%) 600 600
Municipal Electric Auth. of
Georgia
8.125%, 1/1/20
(Prerefunded 1/1/98!) 500 528
Total Georgia (Cost $8,472) 8,472
HAWAII 1.1%
Honolulu City and County, GO,
TECP, 3.50%, 5/8 - 5/9/97 7,350 7,350
Total Hawaii (Cost $7,350) 7,350
IDAHO 1.5%
Idaho, GO, TAN, 4.50%, 6/30/97 9,065 9,084
Idaho HFA, Holy Cross Hosp.,
VRDN (Currently 3.40%) 1,200 1,200
Total Idaho (Cost $10,284) 10,284
ILLINOIS 11.1%
Chicago Public Building
Commission, Chicago Board
of Ed.7.50%, 1/1/98
(FGIC Insured)
(Escrowed to Maturity) 1,000 1,031
Du Page Water Commission
6.80%, 5/1/07
(Prerefunded 5/1/97!) 1,000 1,025
Hazel Crest, Hosp. Rev.,
South Suburban Hosp.
9.125%, 7/1/17
(Prerefunded 7/1/97!) 2,800 2,906
Illinois
Sales Tax
5.50%, 6/15/97 500 502
7.20%, 6/15/01
(Prerefunded 6/15/97!) 1,200 1,236
7.30%, 6/15/00 (Prerefunded
6/15/97!) 2,000 2,060
Illinois Dev. Fin. Auth.,
Palos Community Hosp.
VRDN (Currently 3.25%) 23,000 23,000
Illinois EFA
Northwestern Univ.
VRDN (Currently 3.35%) 14,800 14,800
VRDN (Currently 4.125%) 1,500 1,500
Illinois HFA
Advocate Healthcare Network
VRDN (Currently 3.45%) $10,000 $10,000
Children's Memorial Hosp.
VRDN (Currently 3.30%) 5,000 5,000
Univ. of Chicago Hosp.
VRDN (Currently 3.30%)
(MBIA Insured) 10,000 10,000
Niles Village, IDR, W. W.
Grainger, VRDN
(Currently 3.30%) 1,000 1,000
Springfield Electric, 5.00%,
9/1/97 (Escrowed to
Maturity) 1,000 1,006
Total Illinois (Cost $75,066) 75,066
INDIANA 0.5%
Gary, IDR, W. W. Grainger,
VRDN (Currently 3.30%) 730 730
Indiana HFFA, Daughters of
Charity, VRDN (Currently
3.35%) 1,700 1,700
Petersburg Industrial
Pollution Control, PCR
Indianapolis Power and
Light, TECP
3.45%, 6/12/97 1,000 1,000
Total Indiana (Cost $3,430) 3,430
KANSAS 0.9%
Wichita, Renewal and
Improvement, GO, 4.25%,
8/28/97 5,945 5,965
Total Kansas (Cost $5,965) 5,965
KENTUCKY 0.3%
Trimble County, PCR,
Louisville Gas and
Electric, TECP
3.50%, 5/9/97 1,965 1,965
Total Kentucky (Cost $1,965) 1,965
LOUISIANA 3.1%
East Baton Rouge, Sewage
Commission
9.125%, 9/1/06
(Prerefunded 9/1/97!) 2,410 2,548
Louisiana, GO, 7.00%,
8/1/02 (Prerefunded 8/1/97!) 1,670 1,724
Louisiana PFA
Sisters of Charity of the
Incarnate Word, TECP
3.45 - 3.50%, 3/6/97 $ 7,600 $ 7,600
Willis Knighton Medical
Center
VRDN (Currently 3.25%)
(AMBAC Insured) 7,100 7,100
New Orleans Aviation Board,
VRDN (Currently 3.20%)
(MBIA Insured) 2,000 2,000
Total Louisiana (Cost $20,972) 20,972
MAINE 1.0%
Maine, GO, TAN, 4.50%, 6/27/97 7,000 7,014
Total Maine (Cost $7,014) 7,014
MARYLAND 5.1%
Baltimore County, Sheppard
and Enoch Pratt Hosp.
VRDN (Currently 3.25%) 6,800 6,800
Howard County, GO, 6.20%,
7/1/06 (Prerefunded 7/1/97!) 1,000 1,029
Maryland, State and Local Fac.,
GO, 3.50%, 7/15/97 1,300 1,300
Maryland DOT
6.30%, 11/1/97 680 692
6.70%, 7/1/98
(Prerefunded 7/1/97!) 1,000 1,017
Maryland HHEFA
Johns Hopkins Univ.
6.20%, 7/1/13 (Prerefunded
7/1/97!) 10,255 10,255
Kaiser Permanente, VRDN
(Currently 3.30%) 400 400
Maryland-National Capital Park
and Planning
Prince George's County, GO,
5.50%, 1/15/98 1,000 1,015
Montgomery County, Consolidated
Public Improvement, GO
5.25%, 10/1/97 1,000 1,009
Montgomery County Economic Dev.,
Howard Hughes Medical Fac.
VRDN (Currently 3.30%) 10,000 10,000
Washington Suburban Sanitary
Dist., GO, 5.00%, 6/1/97 1,000 1,003
Total Maryland (Cost $34,520) 34,520
MASSACHUSETTS 0.6%
Massachusetts HEFA, Harvard
Univ., TECP, 3.40%, 5/21/97 4,300 4,300
Total Massachusetts (Cost
$4,300) 4,300
MICHIGAN 1.8%
Detroit School Dist., Wayne
County School Aid, GO, RAN
4.50%, 5/1/97 5,000 5,005
Michigan, GO, TAN, 4.50%,
9/30/97 5,000 5,030
Univ. of Michigan Hosp., VRDN
(Currently 3.50%) 1,900 1,900
Total Michigan (Cost $11,935) 11,935
MINNESOTA 5.9%
Becker, PCR, Northern States Power
TECP, 3.55%, 5/16/97 7,900 7,900
Cottage Grove, PCR, Minnesota
Mining and Mfg. Co.
VRDN (Currently 3.59%) 2,000 2,000
Minnesota, GO
4.15%, 8/1/97 750 751
5.50%, 8/1/97 3,815 3,844
Rochester Health Care Fac.
Mayo Foundation/Mayo Medical
Center
VRDN (Currently 3.50%) 5,000 5,000
TECP, 3.40 - 3.45%,
4/3 - 5/8/97 8,000 8,000
Univ. of Minnesota, TECP,
3.50%, 4/4/97 12,260 12,260
Total Minnesota (Cost $39,755) 39,755
MISSISSIPPI 0.2%
Rankin County, PCR, Siemens
Energy and Automation
VRDN (Currently 3.35%) 1,600 1,600
Total Mississippi (Cost $1,600) 1,600
MISSOURI 1.0%
Missouri, Fourth State Building,
GO, 6.00%, 8/1/97 1,675 1,689
Missouri Environmental
Improvement and Energy
Research Auth.
PCR, Union Electric Co.
TECP, 3.40-3.45%,
3/7-4/15/97 $ 4,300 $ 4,300
Missouri HEFA, St. Anthony's
Medical Center
VRDN (Currently 3.25%) 500 500
Total Missouri (Cost $6,489) 6,489
NEVADA 0.2%
Nevada, GO, 5.25%, 5/15/97 1,525 1,530
Total Nevada (Cost $1,530) 1,530
NEW HAMPSHIRE 1.6%
New Hampshire HHEFA
Dartmouth College, 3.75%,
6/1/97 4,000 4,000
Dartmouth Ed. Loan, 3.80%,
6/1/97 1,000 1,000
St. Paul's School, VRDN
(Currently 3.25%) 6,000 6,000
Total New Hampshire
(Cost $11,000) 11,000
NEW JERSEY 0.1%
Brick Township, Municipal
Utilities Auth.
4.00%, 12/1/97 (
FGIC Insured) 450 451
Total New Jersey (Cost $451) 451
NEW MEXICO 0.4%
Albuquerque, VRDN
(Currently 3.35%) 3,000 3,000
Total New Mexico (Cost $3,000) 3,000
NEW YORK 5.5%
New York City
GO, 8.75%, 11/1/15
(Prerefunded 11/1/97!) 1,000 1,048
GO, RAN, 4.50%, 4/15/97 13,630 13,644
New York City Municipal
Water Fin. Auth.
TECP, 3.45%, 4/10/97 5,000 5,000
New York City Municipal
Water Fin. Auth.
Water and Sewer
VRDN (Currently 3.55%) $ 200 $ 200
7.625%, 6/15/16
(Prerefunded 6/15/97!) 1,000 1,027
7.625%, 6/15/16
(FSA Insured)
(Prerefunded 6/15/97!) 1,000 1,026
7.00%, 6/15/18
(MBIA Insured)
(Prerefunded 6/15/97!) 1,000 1,025
New York State Medical Care
Fac. Fin. Agency
8.875%, 8/15/07
(Prerefunded 8/15/97!) 1,000 1,044
Columbia Presbyterian
Hosp., 8.00%, 2/15/25
(FHA Guaranteed)
(Prerefunded 8/15/97!) 650 675
Greater New York Health
Insurance Plan
8.50%, 11/1/15
(Prerefunded 12/1/97!) 3,555 3,670
New York State Power Auth., TECP
3.45 - 3.51%, 3/20 -
5/14/97 5,500 5,500
Rochester, GO, BAN, 4.50%,
10/30/97 3,090 3,106
Total New York (Cost $36,965) 36,965
NORTH CAROLINA 1.9%
Charlotte Mecklenberg Hosp.
Auth., North Carolina Health Care
VRDN (Currently 3.25%) 1,000 1,000
North Carolina Eastern
Municipal Power Agency
7.625%, 1/1/22
(Prerefunded 1/1/98!) 800 841
North Carolina EFA, Bowman
Gray School of Medicine
VRDN (Currently 3.30%) 950 950
North Carolina Municipal
Power, Catawaba Electric
7.875%, 1/1/19
(Prerefunded 1/1/98!) 1,380 1,455
Winston Salem, GO, COP,
VRDN (Currently 3.30%) 8,500 8,500
Total North Carolina (Cost
$12,746) 12,746
OHIO 3.6%
Clermont County, Mercy
Health System
VRDN (Currently 3.25%) $ 6,000 $ 6,000
Cuyahoga County, Cleveland
Clinic Foundation
VRDN (Currently 3.30%) 1,000 1,000
Dublin City School Dist.,
GO, BAN, 4.00%, 6/10/97 4,000 4,006
Franklin County Hosp.
Holy Cross Health Systems,
4.75%, 6/1/97 1,230 1,233
VRDN (Currently 3.40%) 2,500 2,500
U.S. Health, VRDN
(Currently 3.30%) 10,000 10,000
Total Ohio (Cost $24,739) 24,739
PENNSYLVANIA 3.0%
Berks County Municipal Auth.,
Pennsylvania Pooled Fin.
Program 6.70%, 9/1/07
(Prerefunded
9/1/97!) 2,000 2,031
Geisinger Auth., Health
Systems, VRDN
(Currently 3.45%) 1,400 1,400
Montgomery County, IDA,
W. W. Grainger
VRDN (Currently 3.30%) 1,230 1,230
Pennsylvania
GO, 4.75%, 6/15/97 2,000 2,007
GO, 5.00%, 5/1/97 1,865 1,869
GO, TAN, 4.50%, 6/30/97 5,000 5,012
Pennsylvania Intergovernmental
Coop. Auth. Philadelphia
Funding Program
5.00%, 6/15/97
(FGIC Insured) 7,000 7,025
Total Pennsylvania (Cost $20,574) 20,574
PUERTO RICO 0.7%
Puerto Rico Commonwealth, TRAN,
4.00%, 7/30/97 5,000 5,010
Total Puerto Rico (Cost $5,010) 5,010
RHODE ISLAND 0.3%
Rhode Island Housing and
Mortgage Fin. Corp.,
Homeownership
3.65%, 12/2/97 1,800 1,800
Total Rhode Island (Cost $1,800) 1,800
SOUTH CAROLINA 0.9%
Spartanburg County, Siemens
Energy and Automation
VRDN (Currently 3.35%) $ 6,400 $ 6,400
Total South Carolina (Cost $6,400) 6,400
SOUTH DAKOTA 1.4%
South Dakota HEFA, Sioux
Valley Hosp.
VRDN (Currently 3.35%) 9,500 9,500
Total South Dakota (Cost $9,500) 9,500
TENNESSEE 1.4%
Clarksville Public Building
Auth., Pooled Loan
VRDN (Currently 3.25%)
(MBIA Insured) 7,299 7,299
Metropolitan Gov't. of
Nashville and Davidson County
Vanderbilt Univ., 3.70%,
5/1/97 (FGIC Insured) 1,150 1,150
Tennessee, School Bond Auth.,
GO, BAN
VRDN (Currently 3.20%) 1,000 1,000
Total Tennessee (Cost $9,449) 9,449
TEXAS 8.0%
Dallas County Community
College Dist.
VRDN (Currently 3.40%) 17,800 17,800
Fort Worth, Water and Sewer
6.90%, 3/1/04
(Prerefunded 3/1/97!) 1,300 1,300
Harris County, Toll Road
8.70%, 8/15/17
(Prerefunded 8/15/97!) 500 527
Harris County Health Fac.
Dev. Corp.
Sisters of Charity of
the Incarnate Word, TECP
3.45 - 3.50%, 3/6/97 15,400 15,400
Harris County IDC, Lubrizol
Corp., VRDN (Currently
3.35%) 5,000 5,000
Midland, IDC, W. W. Grainger,
VRDN (Currently 3.30%) 775 775
San Antonio, Water, 5.40%,
5/15/97 (FGIC Insured) 2,000 2,007
Texas, GO, TRAN, 4.75%,
8/29/97 10,000 10,049
Texas PFA, GO, 4.50%,
10/1/97 1,160 1,165
Total Texas (Cost $54,023) 54,023
UTAH 0.1%
Intermountain Power Agency,
8.625%, 7/1/21
(Prerefunded 7/1/97!) $ 500 $ 518
Total Utah (Cost $518) 518
VERMONT 1.8%
Vermont, GO, TECP, 3.55%,
5/6/97 10,000 10,000
Vermont Ed. and Health
Buildings Fin. Agency
Middlebury College, 3.70%,
5/1/97 2,000 2,000
Total Vermont (Cost $12,000) 12,000
VIRGINIA 3.3%
Big Stone Gap Redev. and
Housing
Wallen Ridge Dev., 4.10%,
9/1/97 1,000 1,003
Fairfax County IDA, Inova
Health System, TECP
3.50%, 6/10/97 1,500 1,500
Peninsula Ports Auth., Shell
Oil, VRDN (Currently 3.50%) 2,000 2,000
Richmond, GO, BAN, VRDN
(Currently 3.30%) 2,000 2,000
Rockingham County IDA, Merck
and Company, Inc.
VRDN (Currently 3.55%) 2,400 2,400
Univ. of Virginia, VRDN
(Currently 3.30%) 6,100 6,100
Virginia College Building
Auth., Univ. of Richmond
VRDN (Currently 3.30%) 400 400
Virginia Public Building Auth.,
Correctional Fac
6.75%, 8/1/97 500 506
Virginia Public School Auth.
School Fin.
5.00%, 8/1/97 6,005 6,039
5.50%, 1/1/98 500 507
Total Virginia (Cost $22,455) 22,455
WASHINGTON 1.5%
King County, 7.60%, 12/1/06
(Prerefunded 12/1/97!) 700 720
Port of Seattle, GO, VRDN
(Currently 3.30%) 600 600
Washington
GO, 5.00%, 1/1/98 $ 1,225 $ 1,238
GO, 5.50%, 7/1/97 1,000 1,007
Motor Vehicle Fuel Tax, GO,
6.50%, 1/1/98 2,060 2,107
Washington HFA, Fred
Hutchinson Cancer Research
Center
VRDN (Currently 3.45%) 4,385 4,385
Total Washington (Cost $10,057) 10,057
WISCONSIN 0.9%
New Berlin, GO, 4.25%, 12/1/97 865 869
Oak Creek, Wisconsin Electric
Power Co.
VRDN (Currently 3.35%) 500 500
Wisconsin
7.20%, 5/1/01 (Prerefunded
5/1/97!) 1,000 1,016
Transportation, 5.00%,
7/1/97 (FGIC Insured) 3,525 3,538
Total Wisconsin (Cost $5,923) 5,923
WYOMING 2.7%
Converse County Pollution
Control, PCR, Pacificorp
TECP, 3.45%, 4/4/97 1,800 1,800
Gillette County, PCR, Pacificorp
TECP 3.45%, 5/8/97 1,800 1,800
Sweetwater County, PCR,
Pacificorp
TECP, 3.35 - 3.45%,
3/21 - 5/8/97 7,135 7,135
Uinta County, PCR
Amoco Oil, 3.90%, 12/1/97 2,500 2,506
Chevron, VRDN (Currently
3.50%) 5,100 5,100
Total Wyoming (Cost $18,341) 18,341
Total Investments in Securities
Value
In thousands
99.2% of Net Assets
(Cost $672,508) $ 672,508
Other Assets Less Liabilities 5,627
NET ASSETS $ 678,135
____________
Net Assets Consist of:
Accumulated net investment
income - net of distributions $ 142
Accumulated net realized
gain/loss - net of distributions (171)
Paid-in-capital applicable to
678,240,717 shares of $0.01 par
value capital stock outstanding;
5,000,000,000 shares authorized 678,164
NET ASSETS $ 678,135
____________
NET ASSET VALUE PER SHARE $ 1.00
____________
! Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
BAN Bond Anticipation Note
COP Certificates of Participation
DOT Department of Transportation
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
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
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.
T. Rowe Price Tax-Exempt Money Fund
Statement of Operations
In thousands
Year
Ended
2/28/97
Investment Income
Interest income $ 23,785
Expenses
Investment management 2,880
Shareholder servicing 515
Custody and accounting 173
Registration 44
Prospectus and shareholder reports 35
Legal and audit 13
Directors 12
Miscellaneous 11
Total expenses 3,683
Net investment income 20,102
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 18
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 20,120
__________
The accompanying notes are an integral part of these financial
statements.
Statement of Changes in Net Assets
In thousands
Year
Ended
2/28/97 2/29/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 20,102 $ 22,740
Net realized gain (loss) 18 56
Change in net unrealized
gain or loss - 92
Increase (decrease) in
net assets from
operations 20,120 22,888
Distributions to shareholders
Net investment income (20,102) (22,740)
Capital share transactions*
Shares sold 628,499 665,684
Distributions reinvested 19,039 21,267
Shares redeemed (648,564) (694,978)
Increase (decrease) in net
assets from capital
share transactions (1,026) (8,027)
Net Assets
Increase (decrease) during
period (1,008) (7,879)
Beginning of period 679,143 687,022
End of period $ 678,135 $679,143
*Share information
Shares sold 628,499 665,684
Distributions reinvested 19,039 21,267
Shares redeemed (648,564) (694,978)
Increase (decrease) in
shares outstanding (1,026) (8,027)
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Tax-Exempt Money Fund
February 28, 1997
Notes to Financial Statements
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 and commenced operations on April 8,
1981.
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.
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.
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
$171,000, which expire in 1998. Capital loss carry-forwards
utilized in fiscal 1997 amounted to $11,000. The fund intends to
retain gains realized in future periods that may be offset by
available capital loss carryforwards.
At February 28, 1997, the aggregate cost of investments for federal
income tax and financial reporting purposes was $672,508,000.
Note 4 - 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 $221,000 was payable at
February 28, 1997. 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 0.305% for
assets in excess of $50 billion. At February 28, 1997, and for the
year then ended, the effective annual group fee rate was 0.33% .
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 $466,000 for the
year ended February 28, 1997, of which $42,000 was payable at
period-end.
T. Rowe Price Tax-Exempt Money Fund
Report of Independent Accountants
T. Rowe Price Shareholder Services
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, 1997, 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, 1997, by correspondence with the
custodian. 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, 1997, the results of its operations, the changes in
its net assets, and financial highlights for each of the periods
presented, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 19, 1997
Investment Services And Information
Knowledgeable Service Representatives
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
Account Services
Checking Available on most fixed income funds ($500 minimum)
Automatic Investing From your bank account or paycheck.
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Distribution Options Reinvest all, some, or none of your
distributions.
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Discount Brokerage*
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and other securities at a savings over regular commission rates.
Investment Information
Combined Statement Overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and
results.
T. Rowe Price Report Quarterly investment newsletter discussing
markets and financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund
results.
Insights Educational reports on investment strategies and
financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit,
Personal Strategy Planner, Retirees Financial Guide, and Retirement
Planning Kit.
*A division of T. Rowe Price Investment Services, Inc. Member
NASD/SIPC.
T. Rowe Price Mutual Funds
T. Rowe Price Discount Brokerage
Stock Funds
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OTC**
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Spectrum Growth
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Tax-Free Insured
Intermediate Bond
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Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Global Government Bond
Emerging Markets Bond
International Bond
MONEY MARKET FUNDS
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Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
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BLENDED ASSET FUNDS
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T.ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
** Effective May 1, 1997, the fund's name will change to Small-Cap
Stock.
Please call for a prospectus. Read it carefully before you invest
or send money.
The T. Rowe Price No-Load Variable Annuity [V6021] is issued by
Security Benefit Life Insurance Company. In New York, it
[FSB201(11-96)] is issued by First Security Benefit Life Insurance
Company of New York, White Plains, NY. T. Rowe Price refers to the
underlying portfolios' investment managers and the distributors, T.
Rowe Price Investment Services, Inc., T. Rowe Price Insurance
Agency, Inc., and T. Rowe Price Insurance Agency of Texas, Inc. The
Security Benefit Group of Companies and the T. Rowe Price companies
are not affiliated. The variable annuity may not be available in
all states. The contract has limitations. Call a representative for
costs and complete details of the coverage.
Discount Brokerage
A Division of T. Rowe Price Investment Services, Inc., Member
NASD/SIPC
This low-cost service gives you the opportunity to easily
consolidate all your investments with one company. Through T. Rowe
Price Discount Brokerage, you can buy and sell individual
securities - stocks, bonds, options, and others - at considerable
commission savings. We also provide a wide range of services,
including:
Automated Telephone and Computer Services You can enter trades,
access quotes, and review account information 24 hours a day, seven
days a week. Any trades executed through these programs save you an
additional 10% on commissions.*
Investor Information A variety of informative reports, such as our
Brokerage Insights series, S&P Market Month newsletter, and
optional S&P Stock Reports, can help you better evaluate economic
trends and investment opportunities.
Dividend Reinvestment Service Virtually all stocks held in
customer accounts are eligible for this service, free of charge.
*Discount applies to our current commission schedule; subject to
our $35 minimum commission.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://www.troweprice.com
T. Rowe Price Associates
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-Exempt Money Fund(registered trademark).
Investor Centers:
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Baltimore, MD 21202
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Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor.
RPRTTEM 2/28/97
THE SHAREHOLDER LETTER AND REPORT FOR THE COMBINED TAX-FREE FUNDS
IS ATTACHED HERE BY ACCESSING THE FOLLOWING:
Annual Report
Tax-Free
Funds
February 28, 1997
T. Rowe Price
Report Highlights
o Interest rates ended the fiscal year slightly higher than a year ago,
resulting in moderate returns for municipal bond investors.
o Municipal bonds outperformed Treasuries during most of the year.
o All five funds generated greater returns than their peer group averages
during the year ended February 28.
o Your funds relied to a great extent on credit research and sector
selection to enhance returns. Tax-exempt high-yield securities were
particularly good performers.
o With the economy showing ongoing strength and the Federal Reserve
indicating a bias toward tighter monetary policy, our outlook is
somewhat cautious for the coming months.
Fellow Shareholders
The municipal bond market and your funds generated moderate returns during
the fiscal year ended February 28, 1997. Interest rates fluctuated during the
year and ended slightly higher than where they started at the end of last
February. The U.S. economy was characterized by modest wage inflation with
low unemployment, prompting the Federal Reserve to leave monetary policy
unchanged since January 1996.
MARKET ENVIRONMENT
Much of the movement in interest rates reflected the market's anticipation
of action or inaction by the Federal Reserve. The fiscal year began with
interest rates rising due to signs of both stronger growth and the
realization that balanced budget legislation would not be passed in 1996. As
market expectations for a tightening in monetary policy grew throughout the
first half, rates continued to increase. The long-term Treasury bond yield
remained in a trading range between 6.75% and 7.20% during the third quarter.
Intermediate and long-term rates then reversed course and fell through
November as it became evident that the economy was slowing in the third
quarter and the Federal Reserve was not going to raise rates. Another uptick
in rates took place late in 1996 as investors once again perceived strength
in the economy and anticipated possible tightening by the Federal Reserve.
Chart 1 - Municipal Bond and Yield Notes line chart
In the municipal market, rates came full circle over the year, rising about
45 basis points (100 basis points equal one percent) during the first six
months before settling slightly above year-ago levels. Long-term high-grade
general obligation bonds yielded 5.50% on February 28, 1997, versus 5.75% on
August 31, 1996, and 5.45% a year ago. Five-year high-grade bonds were 20
basis points higher in yield than in February 1996. One-year note rates
traded within a 70-basis-point range during the year, ending at 3.70%
compared with 3.25% a year ago.
Municipals provided higher returns than long-term Treasuries throughout most
of the fiscal year, as concerns regarding tax reform and flat tax legislation
diminished. As a result, long-term municipal yields were 81% of the yield on
comparable Treasuries on February 28, a level that benefits investors in
brackets above 19%, whereas a year ago with the ratio at 87%, investors in
brackets upwards of 13% benefited from municipals.
Lower-quality bonds performed well as the spread between their yields and
those of higher-rated bonds narrowed, resulting in good price appreciation.
The narrowing yield spread between different quality bonds reflected a solid
economy with no immediate concern about recession and also the growing number
of insured bonds in the market, which shrunk the supply of higher-yielding
bonds.
New issuance in both the long- and short-term markets increased in 1996 for
the first time since 1993, reflecting healthier state and local economies,
a backlog of borrowing needs, and less resistance from the voters to new
bond-financed projects. The increased supply was well received by investors
after two years of declining issuance.
TAX-EXEMPT MONEY FUND
Our longer maturity strategy resulted in attractive returns, helping your
fund outperform its peer group during both the 6- and 12-month periods ended
February 28, 1997.
Chart 2- Performance Comparison
Periods Ended 2/28/976 Months 12 Months
____________________________________________________________
Tax-Exempt Money Fund1.51% 3.05%
Lipper Tax-Exempt Money
Market Funds Average1.45 2.91
Despite last year's stable monetary policy, the yields of 6- and 12-month
municipal notes managed to vacillate in a range of 70 basis points. At the
end of the fiscal year, yields of 1- to 30-day maturities were little changed
from a year ago, but yields on 60-day to 1-year maturities were 20 to 50
basis points higher.
Your fund ended the fiscal year with a weighted average maturity of 58 days,
shorter than the 65 days of a year earlier and 66 days at the end of August.
By comparison, the weighted average maturity for our peer group at the end
of February was only 46 days. Lending support to our modestly longer maturity
posture was the robust demand generated by cash inflows to tax-exempt money
funds, which expanded to a record $147 billion. An additional $12 billion in
new cash inflows more than offset a $5 billion increase in the supply of new
issues.
We emphasized longer maturities throughout the year, since we felt reasonably
confident that the Federal Reserve would wait for more concrete evidence of
rising inflation before raising the federal funds rate. We took advantage of
the upwardly sloping yield curve by concentrating more on 6- and 12-month
municipal notes, which provided an average of 40 basis points more yield than
shorter maturities. We also reduced the percentage of variable rate
securities in the portfolio. We will carefully consider recent remarks by
Chairman Greenspan about a possible preemptive move against inflation (see
the Outlook section) as we set our maturity strategy in coming months.
TAX-FREE SHORT-INTERMEDIATE FUND
Duration management and credit research helped your fund outperform the
average for similar funds during both the 6- and 12- month periods ended
February 28.
Chart 3- Performance Comparison
Periods Ended 2/28/97 6 Months 12 Months
_____________________________________________________
Tax-Free Short-
Intermediate Fund 3.13% 4.02%
Lipper Short-Intermediate
Debt Funds Average 3.07 3.72
The threat of higher short-term interest rates early in the year prompted us
to keep duration (a measure of a fund's sensitivity to changes in interest
rates) around 2.6 years, near the short end of our usual range. However, as
we moved into the third quarter, signs of slower growth began to emerge,
causing yields on five-year maturities to fall from 4.65% in early September
to 4.15% in early December. We extended the fund's duration to about 3.0
years, gaining some but not all of the price appreciation in the rally.
Recently, we reduced duration to 2.8 years because of the decreasing
likelihood of further increases in bond prices.
While our timing on duration was modestly successful, we were able to enhance
performance with credit research and sector selection. The prolonged strength
of the economy improved the financial condition of many municipal issuers.
Last year, Standard & Poor's upgraded credit ratings on more than three times
as many issues as it downgraded. As a result, lower-rated securities
outperformed higher-rated AAA issues, narrowing the yield differential
between them. We had positioned the fund to take advantage of this phenomenon
in both 1995 and 1996 by increasing fund exposure to lower-rated states such
as Massachusetts, Louisiana, New York, and Pennsylvania. We also purchased
financially sound hospital revenue bonds, which we think will benefit from
demographic changes.
Two sectors we continued to underweight are municipally owned electric
utilities and housing bonds. In many cases, municipal utilities sell
high-cost nuclear power, and deregulation of the industry should allow
low-cost providers to compete more effectively. As a result, many local
utilities were downgraded last year by Moody's and Standard & Poor's.
We avoided short-term housing bonds primarily because of their structure, not
because of creditworthiness. Housing bonds are issued at par, while we prefer
higher-yielding bonds at premium prices. If interest rates should rise, the
prices of short-term par bonds tend to fall faster than bonds trading at a
premium with the same duration.
TAX-FREE INSURED INTERMEDIATE BOND FUND
A combination of higher yield, credit management, and a lower fund expense
ratio enabled your fund to match the average return of similar funds over the
six-month period and slightly surpass it over 12 months.
Chart 4- Performance Comparison
Periods Ended 2/28/97 6 Months 12 Months
_____________________________________________________
Tax-Free Insured
Intermediate Bond Fund 4.00% 4.19%
Lipper Intermediate
Municipal Debt Funds Average 3.98 4.14
Interest rates over the past 12 months have been confined to a relatively
tighter trading range than in recent years. Yields on 10-year AAA-rated
securities ranged between 4.65% and 5.30% since early March, a 65-basis-point
range compared with 100 basis points a year ago and 155 two years earlier.
The recent tighter range limited returns that could be reaped from duration
management, which generated mixed results over the 6- and 12-month periods.
In the first half, our short posture contributed positively to performance
as interest rates moved higher. We gave back some of these gains in the
second half, as rates turned lower in September while we remained slightly
cautious.
Lower volatility rendered credit research and sector selection increasingly
important in our effort to outperform our peer group. We focused on
undervalued securities within the insured market. Even though two different
issues may carry insurance from the same company, the marketplace sometimes
values them differently. For instance, Denver International Airport is rated
BBB by Moody's and Standard & Poor's. While insurance earns the bonds a AAA
rating from both agencies, the marketplace usually values bonds lower,
according to their underlying rating. Early in the year we increased the
fund's exposure to the Denver Airport bonds because we believed they
represented good value versus other insured bonds.
TAX-FREE INCOME FUND
Overall, it was a year of modest returns for long-term bonds. In this
environment, your fund matched the average performance of its peer group
during the past six months and exceeded it over the year.
Chart 5- Performance Comparison
Periods Ended 2/28/97 6 Months 12 Months
_____________________________________________________
Tax-Free Income Fund 4.80% 4.81%
Lipper General Municipal
Debt Funds Average 4.79 4.51
During much of the year, we kept the fund's duration within a narrow range.
We felt that interest rates were likely to fluctuate more modestly than
during the two prior years, providing few opportunities for aggressive shifts
in strategy. As a result, the fund's duration remained close to 7.5 years for
most of 1996. We increased it slightly in the third quarter but then returned
to a more conservative position near the end of the fiscal year.
With municipal yields flirting with their lows of the past two decades, we
felt there was little chance of a strong rise in bond prices and further rate
declines. Therefore, we focused more on enhancing the portfolio's yield where
we could. This strategy included holding on to older, higher-yielding bonds
and identifying suitable high-yield securities, which performed well in 1996.
Going forward, the opportunity for further price appreciation from
lower-quality bonds seems limited, leading us to be more selective in
considering them.
Bonds insured by third parties began to look more attractive as the amount
of insured new issues rose during the year. Twelve months ago, the yields of
insured municipal bonds were only 10 to 15 basis points higher than those of
high-quality general obligation bonds; by year-end this spread was closer to
25 basis points, making the yields on insured bonds relatively appealing.
We will continue to focus on income enhancement, maintain duration closer to
the low end of our neutral range, and wait for opportunities to extend
maturities. The municipal market's stronger performance relative to taxable
securities during the first two months of the year, combined with a growing
new issues calendar for March, suggests that we will be able to invest at
higher yield levels in coming months.
TAX-FREE HIGH YIELD FUND
The Tax-Free High Yield Fund outperformed its peer group over both the fiscal
year and the most recent six-month period. It has exceeded the average
performance of similar funds for the past nine fiscal years.
Chart 6- Performance Comparison
Periods Ended 2/28/97 6 Months 12 Months
_____________________________________________________
Tax-Free High Yield Fund 5.37% 6.22%
Lipper High Yield Municipal
Debt Funds Average 4.98 5.27
Opportunistic credit selection dominated fund performance last year,
enhancing returns in three important ways. First, several individual holdings
boosted fund returns by outperforming the market because of improved credit
standing and refinancings. Key issues in this category included
investor-owned utility and hospital revenue bonds. Second, the selective sale
of securities and avoidance of certain sectors, such as specialized solid
waste and paper recycling bonds, meant we were able to avoid significant
credit problems. Finally, the fund was a beneficiary of yet another year of
narrowing yield spreads, with lower-quality bonds significantly outperforming
many higher-quality issues.
Your fund's concentration in below-investment-grade holdings fell steadily
last year, from 28% to 23% of net assets. This move reflected a combination
of factors, including ratings upgrades, refinancings, and a continuing
selective approach when considering new issues. However, positions in the BBB
category rose slightly to 34% of net assets. Absent a recession or a large
market sell-off, we expect yield differences between securities of different
credit ratings to remain tight. Another factor contributing to the narrow
yield spreads was the increasing market share of bond insurance, shrinking
the supply of uninsured lower-rated bonds. As a result, we are being
selective in our purchases of lower-quality bonds and do not expect a
material change in your fund's average credit quality, which was BBB+ at the
end of February.
Chart 7- Quality Diversification pie
We managed duration and the weighted average maturity within a narrow range,
with duration remaining between 7.0 and 7.4 years. Your fund was slightly
defensive versus its peer group early in the year, which was a plus in a down
market. We lengthened maturities modestly during much of the second half,
maintaining a weighted average maturity of 19 years and a cash level of about
3%. At the end of February, your fund could be characterized as being fairly
neutral versus its peer group.
OUTLOOK
The economy is in its sixth year of expansion, and while it has exhibited few
signs of inflationary pressure, the Federal Reserve remains on alert. Fed
chairman Alan Greenspan stated in recent testimony to the Senate Banking
Committee that the Fed cannot rule out a preemptive tightening in monetary
policy before signs of actual higher inflation become evident.
We expect economic growth and inflation to remain moderate throughout the
rest of 1997, with no evidence of recession visible to date. Consumer and
business sentiment remain high, inventories are not excessive, and
availability of credit is ample. The Federal Reserve, as indicated, could
push the fed funds rate higher to keep prices in check, but we believe any
increase will be small since short-term rates are well above the recent trend
rate of inflation. This was not the case in 1994, when the Fed was forced to
move aggressively.
The supply of municipal bonds should increase over the near term, possibly
exerting some downward pressure on bond prices if demand does not increase
commensurately. Given our expectation that interest rates will move in a
relatively narrow channel, we would regard higher rates as an opportunity to
provide additional yield in the funds. Overall, however, we do not expect to
see a significant move in bond prices in the months ahead. As in the past
year, the returns from municipal securities should come primarily from
income.
Respectfully submitted,
Mary J. Miller
Director
Municipal Bond Department
March 21, 1997
T. Rowe Price Tax-Free Funds
Portfolio Highlights
KEY STATISTICS
8/31/96 2/28/97
Tax-Exempt Money Fund
_____________________________________________________
Price Per Share $ 1.00 $ 1.00
Dividends Per Share!
For 6 months 0.015 0.015
For 12 months 0.031 0.030
Dividend Yield
(7-Day Compound) * 3.06% 3.02%
Weighted Average
Maturity (days) 66 58
Weighted Average Quality ** First Tier First Tier
Tax-Free Short-Intermediate Fund
_____________________________________________________
Price Per Share $ 5.30 $ 5.35
Dividends Per Share!
For 6 months 0.12 0.11
For 12 months 0.23 0.23
Dividend Yield *
For 6 months 4.32% 4.37%
For 12 months 4.40 4.39
Weighted Average Maturity
(years) 3.2 3.6
Weighted Average Effective
Duration (years) 2.6 2.8
Weighted Average Quality *** AA AA
(continued on next page)
T. Rowe Price Tax-Free Funds
Portfolio Highlights
Key statistics
8/31/96 2/28/97
Tax-Free Insured Intermediate Bond Fund
_____________________________________________________
Price Per Share $ 10.62$ 10.80
Dividends Per Share!
For 6 months 0.24 0.24
For 12 months 0.48 0.48
Dividend Yield *
For 6 months 4.44% 4.58%
For 12 months 4.51 4.56
Weighted Average
Maturity (years) 7.7 7.4
Weighted Average Effective
Duration (years) 5.6 5.3
Weighted Average Quality *** AA AA
Tax-Free Income Fund
Price Per Share $ 9.40 $ 9.59
Dividends Per Share!
For 6 months 0.26 0.26
For 12 months 0.52 0.52
Dividend Yield *
For 6 months 5.44% 5.48%
For 12 months 5.52 5.54
Weighted Average
Maturity (years) 17.0 17.0
Weighted Average Effective
Duration (years) 7.5 7.7
Weighted Average Quality *** AA- AA-
Key statistics
8/31/962/28/97
Tax-Free High Yield Fund
_____________________________________________________
Price Per Share $ 11.84 $ 12.12
Dividends Per Share!
For 6 months 0.35 0.35
For 12 months 0.71 0.70
Dividend Yield *
For 6 months 5.92% 5.94%
For 12 months 6.05 6.02
Weighted Average
Maturity (years) 19.4 19.1
Weighted Average Effective
Duration (years) 7.1 7.2
Weighted Average Quality *** BBB+ BBB+
! Taxability of dividends: 100% of the dividends paid for the 12 months
ended 2/28/97 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.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
T. Rowe Price Tax-Free Funds
Performance Comparison
These charts show the value of a hypothetical $10,000 investment in each fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
Chart 8 - Tax Exempt Money Fund line chart
Chart 9 - Tax-Free Short-Intermediate Fund line chart
Chart 10 - Tax-Free Insured Intermediate Bond Fund line chart
Chart 11 - Tax-Free Income Fund line chart
Chart 12 - Tax-Free High Yield Fund line chart
Average Annual Compound Total Return
This table shows how each fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Periods Ended Since Incep-
2/28/97 1 5 10 Incep- tion
Year Years Years tion Date
_________________________________________________________
Tax-Exempt Money 3.05% 2.70% 3.77% - 4/8/81
Tax-Free Short-
Intermediate 4.02 4.94 5.13 - 12/23/83
Tax-Free Insured
Intermediate Bond 4.19 - - 6.76% 11/30/92
Tax-Free Income 4.81 7.38 6.40 - 10/26/76
Tax-Free High Yield 6.22 7.82 7.60 - 3/1/85
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://www.troweprice.com
T. Rowe Price Associates
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.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor.
RPRTTFF 2/28/97
Chart 1- yield line chart showing 30-year AAA GO, 5-year AAA GO, and 1-year
MIG1 note from 2/29/96 through 2/28/97
Chart 7 - quality diversification pie chart showing AAA 4%, AA 26%, A 13%,
BBB 34%, and BB and Below 23% on 2/28/97
Chart 8 - Tax Exempt Money Fund line chart showing the cumulative growth of
$10,000 invested in the TEM Fund over the past 10 years (or from inception
for funds lacking 10-year histories) compared with $10,000 invested in a
broad-based index or average over the same period.
Chart 9 - Tax-Free Short-Intermediate Fund line chart showing the cumulative
growth of $10,000 invested in the TEM Fund over the past 10 years (or from
inception for funds lacking 10-year histories) compared with $10,000 invested
in a broad-based index or average over the same period.
Chart 10 - Tax-Free Insured Intermediate Bond Fund line chart showing the
cumulative growth of $10,000 invested in the TEM Fund over the past 10 years
(or from inception for funds lacking 10-year histories) compared with $10,000
invested in a broad-based index or average over the same period.
Chart 11 - Tax-Free Income Fund line chart showing the cumulative growth of
$10,000 invested in the TEM Fund over the past 10 years (or from inception
for funds lacking 10-year histories) compared with $10,000 invested in a
broad-based index or average over the same period.
Chart 12 - Tax-Free High Yield Fund line chart showing the cumulative growth
of $10,000 invested in the TEM Fund over the past 10 years (or from inception
for funds lacking 10-year histories) compared with $10,000 invested in a
broad-based index or average over the same period.
