Annual Report - Financial Statements
T. Rowe Price
Tax-Exempt
Money Fund
February 29, 2000
Portfolio Highlights
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/99 2/29/00
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Hospital Revenue 33% 30%
General Obligation - State 18 20
Educational Revenue 10 12
General Obligation - Local 14 11
Prerefunded Bonds 6 8
Industrial and Pollution Control Revenue 5 5
Electric Revenue 2 3
Nuclear Revenue 4 2
Water and Sewer Revenue 2 2
Dedicated Tax Revenue 3 2
All Other 5 3
Other Assets Less Liabilities -2 2
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Total 100% 100%
T. Rowe Price Tax-Exempt Money Fund - Tax-Exempt Shares
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Financial Highlights For a share outstanding throughout each period
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Year
Ended
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment activities
Net investment
income (loss) 0.029 0.029 0.032 0.030 0.033
Distributions
Net investment income (0.029) (0.029) (0.032) (0.030) (0.033)
NET ASSET VALUE
End of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------
Ratios/Supplemental Data
Total return (diamond) 2.94% 2.97% 3.24% 3.05% 3.38%
Ratio of total expenses
to average net assets 0.53% 0.52% 0.52% 0.55% 0.56%
Ratio of net investment
income (loss) to average
net assets 2.91% 2.93% 3.20% 3.00% 3.33%
Net assets,
end of period
(in thousands) $669,615 $710,569 $740,757 $678,135 $679,143
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Exempt Money Fund - Tax-Exempt PLUS Shares
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Financial Highlights For a share outstanding throughout each period
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Year 11/1/98
Ended Through
2/29/00 2/28/99
NET ASSET VALUE
Beginning of period $ 1.000 $ 1.000
Investment activities
Net investment income (loss) 0.028* 0.007*
Distributions
Net investment income (0.028) (0.007)
NET ASSET VALUE
End of period $ 1.000 $ 1.000
-----------------------
Ratios/Supplemental Data
Total return (diamond) 2.79% 0.74%*
Ratio of total expenses
to average net assets 0.67%* 0.99%*!
Ratio of net investment
income (loss) to average
net assets 2.81%* 2.01%*!
Net assets, end of period
(in thousands) $ 17,694 $ 4,208
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during the period, assuming reinvestment
of all distributions.
* Excludes expenses in excess of a 1.00% voluntary expense limitation
in effect through 4/30/00.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Exempt Money Fund
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February 29, 2000
Statement of Net Assets Par Value
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In thousands
ALABAMA 2.1%
Birmingham, GO
VRDN (Currently 3.85%) $ 1,600 $ 1,600
VRDN (Currently 3.88%) 5,400 5,400
Huntsville Health Care Auth.
VRDN (Currently 3.90%) (MBIA Insured) 7,600 7,600
Total Alabama (Cost $14,600) 14,600
ALASKA 0.1%
Anchorage, GO, 6.40%, 7/1/00 (MBIA Insured) 500 504
Total Alaska (Cost $504) 504
ARIZONA 1.6%
Arizona Transportation Board,
Maricopa County Regional Area
7.00%, 7/1/00 (MBIA Insured) 2,000 2,019
Phoenix, GO, 5.70%, 7/1/00 1,065 1,070
Univ. of Arizona, Student Union Bookstore
3.55%, 3/8/00 (AMBAC Insured) 8,000 8,000
Total Arizona (Cost $11,089) 11,089
COLORADO 0.3%
Denver, W. W. Grainger, IDR, VRDN
(Currently 4.05%) 2,190 2,190
Total Colorado (Cost $2,190) 2,190
DELAWARE 1.1%
Delaware, GO, 5.00%, 4/1/00 6,500 6,505
Delaware Transportation Auth.,
Transit Systems
7.20%, 7/1/03 (Prerefunded 7/1/00!) 1,345 1,387
Total Delaware (Cost $7,892) 7,892
DISTRICT OF COLUMBIA 0.3%
Dist. of Columbia
American Univ., VRDN (Currently 3.90%) 1,000 1,000
Dist. of Columbia
Howard Univ., 7.25%, 10/1/11
(Prerefunded 10/1/00!) $ 1,000 $ 1,037
Total District of Columbia (Cost $2,037) 2,037
FLORIDA 1.8%
Jacksonville HFA, Genesis Rehabilitation Hosp.
VRDN (Currently 3.85%) 9,050 9,050
Orange County IDA, W. W. Grainger
VRDN (Currently 4.05%) 1,185 1,185
Tampa Bay Water, Utility Systems, VRDN
(Currently 3.98%) (FGIC Insured) 2,000 2,000
Total Florida (Cost $12,235) 12,235
GEORGIA 7.0%
Atlanta Water and Sewer, VRDN
(Currently 3.98%) (FGIC Insured) 3,995 3,995
Dalton Combined Utilities,
4.75%, 1/1/01 (MBIA Insured) 4,450 4,468
Douglasville-Douglas Water and Sewer
6.875%, 6/1/09 (MBIA Insured)
(Prerefunded 6/1/00!) 1,000 1,028
Downtown Savannah Auth., GO, Public Ed.
VRDN (Currently 3.90%) 1,000 1,000
Fulton-DeKalb Private Hosp. Auth.
Children's Health, VRDN (Currently 3.90%) 1,000 1,000
Egleston Childrens Hosp.,
VRDN (Currently 3.90%) 21,400 21,400
Georgia, GO
6.25%, 8/1/00 1,780 1,800
7.00%, 11/1/00 1,000 1,018
7.25%, 7/1/00 4,645 4,695
7.25%, 9/1/00 1,000 1,017
Georgia Private Colleges & Univ. Auth.
Emory Univ., 3.70%, 3/9/00 4,500 4,500
Gwinnett County Hosp. Auth.
VRDN (Currently 3.90%) (MBIA Insured) 1,000 1,000
Gwinnett County Water and Sewer Auth.,
COP, GO, 8.30%, 8/1/00 1,000 1,017
Total Georgia (Cost $47,938) 47,938
HAWAII 0.3%
Hawaii, GO, 7.125%, 9/1/10
(Prerefunded 9/1/00!) $ 1,700 $ 1,743
Total Hawaii (Cost $1,743) 1,743
IDAHO 0.3%
Idaho HFA, St. Lukes Regional Medical Center
VRDN (Currently 3.85%) 1,800 1,800
Total Idaho (Cost $1,800) 1,800
ILLINOIS 9.0%
Chicago Metropolitan Water Reclamation Dist., GO
5.30%, 12/1/00 1,625 1,638
Illinois, GO, 4.75%, 10/1/00 1,500 1,507
Illinois Dev. Fin. Auth., Palos Community Hosp.
VRDN (Currently 3.85%) 25,000 25,000
Illinois EFA
Northwestern Univ.
VRDN (Currently 3.85%) 4,800 4,800
VRDN (Currently 3.90%) 9,900 9,900
4.75%, 12/1/00 1,150 1,155
Illinois HFA
Advocate Health Care Network
VRDN (Currently 4.05%) 1,000 1,000
4.50%, 8/15/00 1,540 1,541
Little Co. of Mary Hosp.
VRDN (Currently 3.98%)
(MBIA Insured) 12,795 12,795
Northwest Community Hosp.
VRDN (Currently 3.90%) 1,300 1,300
Niles Village, W. W. Grainger, IDR, VRDN
(Currently 4.05%) 1,000 1,000
Total Illinois (Cost $61,636) 61,636
INDIANA 4.0%
Gary, W. W. Grainger, IDR, VRDN
(Currently 4.05%) 730 730
Indiana Bond Bank, GO, TAN
Advanced Funding Program, 4.75%, 1/18/01 5,000 5,026
Indiana HFFA, Variable Ascension Health Credit
VRDN (Currently 3.95%) $ 16,000 $ 16,000
Indiana Univ., Student Fee, 7.00%, 8/1/10
(Prerefunded 8/1/00!) 700 722
Indianapolis Local Public Improvement Bond Bank
7.40%, 7/1/20 (Prerefunded 7/1/00!) 1,230 1,269
Petersburg Solid Waste, Power and Light
VRDN (Currently 3.90%)
(AMBAC Insured) 3,800 3,800
Total Indiana (Cost $27,547) 27,547
IOWA 0.6%
Iowa Fin. Auth., Iowa Health System
VRDN (Currently 3.85%)
(AMBAC Insured) 1,000 1,000
Sheldon, Sioux Valley Hosp., VRDN
(Currently 3.95%) 3,200 3,200
Total Iowa (Cost $4,200) 4,200
KANSAS 0.1%
Wichita, GO, 6.30%, 9/1/00 475 481
Total Kansas (Cost $481) 481
KENTUCKY 0.3%
Kentucky Turnpike Auth.
7.125%, 5/15/01 (Prerefunded 5/15/00!) 2,000 2,044
Total Kentucky (Cost $2,044) 2,044
LOUISIANA 5.5%
Jefferson Sales Tax Dist.,
5.00%, 12/1/00 (FSA Insured) 1,000 1,006
Lake Charles Harbor and Terminal Dist., Conoco
VRDN (Currently 3.90%) 5,800 5,800
Louisiana, GO
7.125%, 9/1/10 (Prerefunded 9/1/00!) 3,510 3,633
7.25%, 9/1/06 (FSA Insured)
(Prerefunded 9/1/00!) 540 559
Louisiana PFA, Willis Knighton Medical Center
VRDN (Currently 4.00%)
(AMBAC Insured) 19,900 19,900
New Orleans Aviation Board
VRDN (Currently 3.90%) (MBIA Insured) $ 1,800 $ 1,800
Plaquemines Port, Harbor and Terminal,
Chevron, 3.50%, 9/1/00 5,000 4,974
Total Louisiana (Cost $37,672) 37,672
MARYLAND 8.6%
Baltimore County, Spring Hill Apartments
VRDN (Currently 3.85%)
(GNMA Guaranteed) 1,000 1,000
Carroll County, GO, County Commisioners
Public Improvement, 5.00%, 12/1/00 1,230 1,239
Gaithersburg Economic Dev., Asbury Methodist
VRDN (Currently 3.95%) (MBIA Insured) 8,200 8,200
Howard County, GO,
Consolidated Public Improvement
6.90%, 5/15/05 (Prerefunded 5/15/00!) 2,180 2,196
Maryland, 7.00%, 10/15/02
(Prerefunded 10/15/00!) 1,000 1,024
Maryland, GO
State & Local Fac.
4.10%, 8/1/00 1,000 1,001
4.75%, 8/1/00 3,880 3,897
5.00%, 10/15/00 1,000 1,007
6.75%, 7/15/03 (Prerefunded 7/15/00!) 760 775
Maryland DOT
3.875%, 6/15/00 1,000 1,002
4.00%, 9/15/00 1,000 1,000
6.10%, 9/1/01 (Prerefunded 9/1/00!) 2,000 2,036
6.20%, 9/1/02 (Prerefunded 9/1/00!) 1,000 1,021
6.25%, 9/1/03 (Prerefunded 9/1/00!) 1,000 1,023
Maryland HHEFA
Johns Hopkins Hosp., 7.00%, 7/1/23
(Prerefunded 7/1/00!) 1,000 1,030
Johns Hopkins Univ., 6.20%, 7/1/00 10,255 10,255
Loyola College, VRDN (Currently 3.90%)
(MBIA Insured) 1,650 1,650
Pooled Loan Program, VRDN (Currently 3.85%) 8,900 8,900
Maryland Water Quality Fin. Administration,
Revolving Loan Fund
7.25%, 9/1/11 (Prerefunded 9/1/00!) 1,295 1,343
Montgomery County Economic Dev. Auth.
Howard Hughes Medical Fac.
VRDN (Currently 3.85%) $ 1,000 $ 1,000
Univ. of Maryland, 6.50%, 4/1/11
(Prerefunded 4/1/00!) 2,625 2,683
Washington Suburban Sanitary Dist., GO
Sewage Disposal, 5.00%, 6/1/00 1,775 1,779
Water Supply
4.00%, 6/1/00 1,950 1,952
5.00%, 6/1/00 1,825 1,830
Total Maryland (Cost $58,843) 58,843
MASSACHUSETTS 0.6%
Boston, GO
5.25%, 10/1/00 (MBIA Insured) 400 403
5.00%, 11/1/00 (FGIC Insured) 620 623
Massachusetts, GO
5.00%, 8/1/00 (FSA Insured) 375 377
5.50%, 7/1/00 1,500 1,507
7.00%, 12/1/10 (Prerefunded 12/1/00!) 965 985
Massachusetts Water Resources Auth.
7.50%, 4/1/09 (Prerefunded 4/1/00!) 500 512
Total Massachusetts (Cost $4,407) 4,407
MICHIGAN 2.2%
Michigan Hosp. Fin. Auth.
VRDN (Currently 3.96%) (MBIA Insured) 10,000 10,000
Henry Ford Health Systems, 7.00%, 7/1/10
Prerefunded (7/1/00!) 1,000 1,031
Michigan Hospital Fin. Auth.
Mercy Health Services, 5.50%, 8/15/00 500 503
Mid-Michigan Obligation, 6.625%, 6/1/10
(MBIA Insured) (Prerefunded 6/1/00!) 3,430 3,452
Total Michigan (Cost $14,986) 14,986
MINNESOTA 1.5%
Becker Minnesota Pollution, TECP,
3.70%, 4/3/00 2,000 2,000
Minneapolis & St. Paul Housing
& Redev. Auth., Health One
8.00%, 8/15/14 (Prerefunded 8/15/00!) $ 1,330 $ 1,380
Minnesota, GO
VRDN (Currently 3.96%) 3,400 3,400
4.90%, 8/1/00 1,500 1,507
Minnesota, PFA, Water Pollution, VRDN
(Currently 3.96%) 2,300 2,300
Total Minnesota (Cost $10,587) 10,587
MISSISSIPPI 0.2%
Rankin County, PCR, Siemens Energy
and Automation
VRDN (Currently 3.95%) 1,600 1,600
Total Mississippi (Cost $1,600) 1,600
MISSOURI 1.9%
Missouri Environment Improvement Energy,
TECP, 4.00%, 3/9/00 2,000 2,000
Missouri HEFA
Sisters of Mercy Health, VRDN
(Currently 3.85%) 10,000 10,000
St. Anthony's Medical Center
VRDN (Currently 3.85%) 1,000 1,000
Total Missouri (Cost $13,000) 13,000
NEVADA 1.1%
Clark County, GO
5.70%, 6/1/00 (AMBAC Insured) 1,025 1,029
Las Vegas Convention & Visitors Auth.
5.40%, 7/1/00 (MBIA Insured) 2,000 2,011
Clark County School Dist., GO
6.50%, 6/15/00 (FGIC Insured) 2,785 2,807
7.65%, 5/1/10 (Prerefunded 5/1/00!) 2,000 2,053
Total Nevada (Cost $7,900) 7,900
NEW HAMPSHIRE 0.8%
New Hampshire, Turnpike Systems
7.40%, 4/1/20 (Prerefunded 4/1/00!) 5,165 5,282
Total New Hampshire (Cost $5,282) 5,282
NEW JERSEY 0.2%
New Jersey Transportation Trust Fund Auth.
Transportation System Bonds, 4.50%, 6/15/00 $ 1,500 $ 1,502
Total New Jersey (Cost $1,502) 1,502
NEW MEXICO 1.6%
New Mexico, GO, 4.50%, 6/30/00 10,300 10,321
New Mexico Severance Tax, 4.50%, 7/1/00 1,000 1,002
Total New Mexico (Cost $11,323) 11,323
NEW YORK 2.9%
New York City, GO, VRDN (Currently 4.05%) 14,000 14,000
New York City Municipal Water Finance Auth.
Water & Sewer System, VRDN (Currently 3.93%)
(FGIC Insured) 2,000 2,000
New York State Environmental Fac.
State Water Revolving Fund, 4.10%, 6/15/00 750 750
Triborough Bridge and Tunnel Auth.
VRDN (Currently 4.04%) (FGIC Insured) 3,250 3,250
Total New York (Cost $20,000) 20,000
NORTH CAROLINA 0.6%
North Carolina, GO, VRDN (Currently 3.98%) 1,245 1,245
North Carolina EFA, Bowman Gray School of Medicine
VRDN (Currently 3.98%) 950 950
Winston Salem, GO
COP, VRDN (Currently 3.90%) 2,000 2,000
Total North Carolina (Cost $4,195) 4,195
OHIO 2.3%
Columbus, GO, 8.125%, 5/1/00 1,000 1,007
Cuyahoga County Hosp., Univ. Hosp.
VRDN (Currently 3.85%)
(AMBAC Insured) 10,000 10,000
Franklin County Hosp., Mt. Carmel Health
7.25%, 6/1/03 (AMBAC Insured)
(Prerefunded 6/1/00!) $ 2,920 $ 3,002
Ohio, GO, Highway Capital Improvement,
4.00%, 5/1/00 1,000 1,000
Ohio Public Fac. Commission,
Higher Ed., 4.625%, 12/1/00 500 502
Total Ohio (Cost $15,511) 15,511
OREGON 0.8%
Oregon, GO, Veterans' Welfare, VRDN
(Currently 3.85%) 1,100 1,100
Oregon Housing & Community Services Dept.
Single Family Mortgage, 3.45%, 6/29/00 4,200 4,200
Total Oregon (Cost $5,300) 5,300
PENNSYLVANIA 3.2%
Doylestown Hosp. Auth.
VRDN (Currently 3.95%)
(AMBAC Insured) 4,000 4,000
Montgomery County, W. W. Grainger, IDA
VRDN (Currently 4.05%) 1,230 1,230
Northampton County Higher Ed.,
Lafayette College
VRDN (Currently 3.95%) 6,300 6,300
Philadelphia HEFA, Jefferson Health,
3.25%, 3/30/00 3,950 3,950
York County, PCR, Duke Energy, TECP,
3.65 - 3.75%, 4/5/00 6,700 6,700
Total Pennsylvania (Cost $22,180) 22,180
RHODE ISLAND 2.0%
Rhode Island, GO
VRDN (Currently 3.90%) 10,000 10,000
5.00%, 7/15/00 (FGIC Insured) 1,000 1,004
Multi-Modal, VRDN (Currently 3.90%) 3,000 3,000
Total Rhode Island (Cost $14,004) 14,004
SOUTH CAROLINA 2.1%
Florence County, PCR, 7.60%, 3/1/14
(Prerefunded 3/1/00!)
(AMBAC Insured) 2,000 2,020
South Carolina, GO
VRDN (Currently 3.98%) 3,495 3,495
South Carolina, GO
5.00%, 7/1/00 $ 1,000 $ 1,004
South Carolina Public Service,
5.80%, 7/1/00 750 755
Spartanburg County, Siemens Energy & Automation
VRDN (Currently 3.95%) 6,400 6,400
Western Carolina Regional Sewer
6.75%, 3/1/10 (Prerefunded 3/1/00!)
(AMBAC Insured) 1,000 1,000
Total South Carolina (Cost $14,674) 14,674
SOUTH DAKOTA 3.5%
South Dakota HEFA
Sioux Valley Hosp.
VRDN (Currently 3.95%) 23,855 23,855
Total South Dakota (Cost $23,855) 23,855
TENNESSEE 4.7%
Knox County Health, Ed. & Housing Fac. Board
Catholic Healthcare
VRDN (Currently 3.85%) 2,600 2,600
VRDN (Currently 3.90%) 2,035 2,035
Metropolitan Davidson County, Nashville HEFA
Vanderbilt Univ., 4.15%, 1/15/01 3,000 3,000
Shelby County Tennessee, TECP,
3.70%, 4/10/00 10,000 10,000
Tennessee, BAN, GO, VRDN
(Currently 3.85%) 15,000 15,000
Total Tennessee (Cost $32,635) 32,635
TEXAS 9.8%
Austin Utility Systems
10.75%, 5/15/10 (Prerefunded 5/15/00!) 485 491
Colorado River Municipal Water Dist.
6.75%, 1/1/11 (AMBAC Insured)
(Prerefunded 1/1/01!) 2,500 2,551
Colorado River Municipal Water Dist.,
Water Transmission Fac.
8.50%, 1/1/02 (Prerefunded 11/1/01!) 1,150 1,190
Dallas County Community College Dist.
VRDN (Currently 3.90%) 13,200 13,200
Dallas Independent School Dist.
3.75%, 3/1/00 (Escrowed to Maturity) $ 1,200 $ 1,200
Dallas Water and Sewer, 7.50%, 4/1/00 1,000 1,003
Gulf Coast Waste Disposal Auth., Amoco Oil
4.00%, 7/15/00 5,280 5,280
Harris County, GO
VRDN (Currently 3.85%) 11,000 11,000
Harris County Flood Control Dist., GO,
5.50%, 10/1/00 2,000 2,016
Midland, W. W. Grainger, IDR, VRDN
(Currently 4.05%) 775 775
Southwest Higher Ed. Auth.
Southern Methodist Univ. Project,
VRDN (Currently 3.85%) 9,200 9,200
Texas, GO, TRAN, 4.50%, 8/31/00 10,000 10,038
Texas Public Fin. Auth., GO
5.00%, 10/1/00 1,300 1,307
9.00%, 10/1/00 6,600 6,785
Univ. of Texas, Constitutional Appropriation,
6.00%, 8/15/00 1,000 1,009
Total Texas (Cost $67,045) 67,045
UTAH 3.0%
Intermountain Power Agency
VRDN (Currently 3.96%) (MBIA Insured) 5,000 5,000
6.00%, 7/1/00 (MBIA Insured) 4,500 4,531
Utah, GO, VRDN (Currently 3.85%) 5,000 5,000
Utah Board of Regents, Auxiliary and Campus Fac.
VRDN (Currently 3.90%) (AMBAC Insured) 5,800 5,800
Total Utah (Cost $20,331) 20,331
VIRGINIA 2.4%
Charlottesville Ind. Dev.,
Martha Jefferson Hosp. Project
7.25%, 10/1/05 (Prerefunded 10/1/00!) 1,000 1,039
Fairfax County, GO, VRDN (Currently 3.98%) 7,695 7,695
Henrico County Economic Dev.
Refunding Regional Jail Project,
5.00%, 11/1/00 685 690
Roanoke IDA
Roanoke Memorial Hosp., Carilion Health System
VRDN (Currently 3.85%) $ 1,500 $ 1,500
7.25%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/00!) 1,055 1,087
Rockingham County IDA, Merck, VRDN
(Currently 4.10%) 2,400 2,400
Univ. of Virginia, 4.00%, 6/1/00 1,000 1,001
Virginia Beach, GO, Public Improvement,
6.10%, 8/1/00 975 983
Total Virginia (Cost $16,395) 16,395
WASHINGTON 4.0%
King County, GO
VRDN (Currently 3.98%) 1,100 1,100
4.20%, 6/1/00 500 501
Washington, 6.10%, 9/1/00
(Escrowed to Maturity) 1,905 1,928
Washington, GO
VRDN (Currently 3.90%) 5,000 5,000
4.625%, 1/1/01 6,330 6,351
5.50%, 9/1/00 1,000 1,007
Motor Vehicle Fuel, 6.50%, 7/1/00 935 943
Washington HFA, Fred Hutchinson
Cancer Research Center
VRDN (Currently 3.90%) 4,230 4,230
Washington Public Power Supply System
5.10%, 7/1/00 (MBIA Insured) 1,500 1,506
5.45%, 7/1/00 2,430 2,440
Nuclear Systems, 8.00%, 7/1/17
(Prerefunded 7/1/00!) 2,400 2,476
Total Washington (Cost $27,482) 27,482
WISCONSIN 3.2%
Wisconsin, GO
4.20%, 11/1/00 1,500 1,502
4.50%, 5/1/00 500 501
6.20%, 5/1/02 (Prerefunded 5/1/00!) 1,000 1,013
TECP, 3.65%, 3/7/00 12,000 12,000
TECP, 3.75%, 4/10/00 6,000 6,000
Wisconsin Public Power Agency
7.40%, 7/1/20 (AMBAC Insured)
(Prerefunded 7/1/00!) $ 1,000 $ 1,030
Total Wisconsin (Cost $22,046) 22,046
Total Investments in Securities
97.6% of Net Assets (Cost $670,691) $ 670,691
Other Assets Less Liabilities 16,618
NET ASSETS $ 687,309
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Net Assets Consist of:
Accumulated net investment income
- - net of distributions $ 179
Paid-in-capital applicable to $0.01 par
value capital stock outstanding;
5,000,000,000 shares authorized 687,130
NET ASSETS $ 687,309
----------
NET ASSET VALUE PER SHARE
Tax-Exempt shares
($669,615,104 / 669,644,195 shares outstanding) $ 1.00
----------
TAX-EXEMPT PLUS SHARES
($17,693,915 / 17,693,764 shares outstanding) $ 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
FSA Financial Security Assurance Corp.
GNMA Government National Mortgage Association
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
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
PFA Public Facility Authority
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
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Statement of Operations
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In thousands
Year
Ended
2/29/00
Investment Income (Loss)
Interest income $ 23,162
Expenses
Investment management 2,829
Shareholder servicing
Tax-Exempt shares 471
Tax-Exempt PLUS shares 12
Custody and accounting 159
Prospectus and shareholder reports 45
Legal and audit 17
Registration 16
Directors 8
Miscellaneous 31
Total expenses 3,588
Expenses paid indirectly (3)
Net expenses 3,585
Net investment income (loss) 19,577
Realized Gain (Loss)
Net realized gain (loss) on securities 3
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 19,580
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
2/29/00 2/28/99
Increase (Decrease) in Net Assets
Operations
Net investment
income (loss) $ 19,577 $ 22,091
Net realized gain (loss) 3 20
Increase (decrease) in net
assets from operations 19,580 22,111
Distributions to shareholders
Net investment income
Tax-Exempt shares (19,210) (22,083)
Tax-Exempt PLUS shares (367) (8)
Decrease in net assets
from distributions (19,577) (22,091)
Capital share transactions*
Shares sold
Tax-Exempt shares 632,661 684,304
Tax-Exempt PLUS shares 44,835 5,383
Increase in net assets
from shares sold 677,496 689,687
Distributions reinvested
Tax-Exempt shares 18,234 20,754
Tax-Exempt PLUS shares 361 8
Increase in net assets
from distributions reinvested 18,595 20,762
Shares redeemed
Tax-Exempt shares (691,852) (735,267)
Tax-Exempt PLUS shares (31,710) (1,182)
Decrease in net assets
from shares redeemed (723,562) (736,449)
Increase (decrease) in net
assets from capital share
transactions (27,471) (26,000)
Net Assets
Increase (decrease) during period (27,468) (25,980)
Beginning of period 714,777 740,757
End of period $ 687,309 $ 714,777
---------- ----------
*Capital share transactions at net asset value of $1.00 per share.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
February 29, 2000
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. Its goals are
preservation of capital, liquidity, and, consistent with these, the highest
current income exempt from federal income taxes. The fund offers two
classes of shares, Tax Exempt and Tax-Exempt PLUS. Tax-Exempt PLUS Shares
were first offered on November 1, 1998, and provide expanded shareholder
services, the cost of which is borne by the PLUS shareholders. Each class
has exclusive voting rights on matters related solely to that class,
separate voting rights on matters which relate to both classes, and, in all
other respects, the same rights and obligations as the other class.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
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.
Class Accounting Shareholder servicing expenses are charged directly to the
class to which they relate. Expenses common to both classes, investment
income, and realized gains and losses are allocated to the classes based
upon the relative daily net assets of each class. Income distributions are
declared by each class on a daily basis, and paid monthly. Capital gain
distributions, if any, are declared by the fund on an annual basis.
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. Expenses paid indirectly reflect
credits earned on daily uninvested cash balances at the custodian and are
used to reduce the fund's custody charges.
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.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended February 29, 2000. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
---------------------------------------------------------------------------
Undistributed net investment income $ 28,000
Undistributed net realized gain (23,000)
Paid-in-capital (5,000)
At February 29, 2000, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$670,691,000.
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 $228,000 was payable at February 29, 2000. 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 0.295% for
assets in excess of $120 billion. At February 29, 2000, and for the year
then ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
The manager has agreed to bear any expenses through April 30, 2000, which
would cause Tax-Exempt PLUS' ratio of total expenses to average net assets
to exceed 1.00%. Thereafter, though April 30, 2002, Tax-Exempt PLUS is
required to reimburse the manager for theses expenses, provided that its
average net assets have grown or expenses have declined sufficiently to
allow reimbursement without causing its ratio of total expenses to average
net assets to exceed 1.00%.
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
$404,000 for the year ended February 29, 2000, of which $38,000 was payable
at period-end.
T. Rowe Price Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Tax-Exempt Money Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price Tax-Exempt Money Fund, Inc. ("the Fund") at February 29,
2000 and the results of its operations, the changes in its net assets and
the financial highlights for each of the fiscal periods presented, in
conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at February 29, 2000 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 2000
T. Rowe Price Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/29/00
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $19,181,000 which qualified as
exempt-interest dividends.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Invest with Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F52-050 2/29/00
Annual Report
Tax-Free Funds
February 29, 2000
T. Rowe Price
Report Highlights
- --------------------------------------------------------------------------------
Tax-Free Funds
o Interest rates rose and bond prices fell as the Fed tightened monetary
policy to constrain inflationary pressures.
o Money market funds benefited from rising rates, but the longer-term funds
were generally weaker in a difficult environment.
o A combination of duration and credit strategies helped boost the funds'
dividend yields as we positioned the portfolios for the year ahead.
o Municipal yields are currently very attractive compared with the yields
on similar taxable alternatives.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
Fellow Shareholders
The Federal Reserve raised the federal funds rate three times in 1999 and
twice so far in 2000 in a continuing effort to slow economic growth to a
pace that will constrain inflationary pressures. As a result of a powerful
economy and higher interest rates, many intermediate and longer-term funds
posted weak returns during the past 6- and 12-month periods, although the
tone of the market began to improve early this year. Only money market
funds benefited from rising short-term rates.
MARKET ENVIRONMENT
Municipal Bond and Note Yields
- --------------------------------------------------------------------------------
30 Year AAA 5-Year AAA 1-Year Moody's
General Obligation General Obligation Investment Grade 1 Note
02/28/99 4.99 3.78 3
5.04 3.83 3.15
5.08 3.85 3.2
5/99 5.16 4 3.2
5.33 4.33 3.5
5.41 4.3 3.55
8/99 5.6 4.4 3.75
5.7 4.43 3.75
5.89 4.58 3.95
11/99 5.87 4.53 3.95
5.93 4.68 4.1
6.03 4.9 4.1
2/29/00 5.9 4.94 4.2
Source: T. Rowe Price Associates
The Fed has drawn a clear line in the sand in the face of a persistently
strong economy, which surged more than 6% in the second half of 1999. By
early 2000, it was evident that domestic demand was not slowing
sufficiently to temper the powerful economy, which has been augmented by a
recovery in U.S. exports and by increased government spending made possible
by soaring tax receipts. In this environment, Fed Chairman Alan Greenspan
left no room for doubt that the Fed will remain diligent in its fight to
contain inflation.
Interest rates and municipal bond yields trended upward in response to the
Fed's hikes in key short-term rates. After outperforming taxable bonds
during the first half of 1999, municipals lost ground in the second half as
lower-quality tax-exempt securities, in particular, did poorly. Year-end
was particularly challenging for municipal bond funds due to a confluence
of events. Municipals began to weaken when some buyers fled into
higher-yielding corporate bonds, which flooded the market in the third
quarter. In the fourth quarter, normally strong demand from investors waned
because of competition from the surging stock market and from selling to
realize tax losses at year-end. Redemptions from municipal bond funds
increased as a result of these factors. One factor that aided municipals in
1999 was the relatively light supply of new issues, which was down 21% from
the previous year.
The funds' fiscal year ended on a positive note, however, as prices climbed
and long-term municipal yields fell in February along with longer-term
Treasury yields. The rally in bond prices began when the Treasury announced
its intention to reduce debt further through the purchase of Treasury
bonds. The proposed reduction in federal debt sent shock waves through the
bond market as investors scrambled to discern which maturities would be
affected most and searched for alternative securities. The Treasury's
buyback program led to an inversion of the yield curve, as two-year
Treasury yields rose above 30-year yields. The municipal yield curve,
however, maintained a positive slope, and the sharp drop in long-term
Treasury yields has made similar municipal yields attractive in comparison.
TAX-EXEMPT MONEY FUND AND PLUS SHARES
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Exempt Money Fund 1.54% 2.94%
Tax-Exempt Money Fund
PLUS Class 1.46 2.79
Lipper Tax-Exempt Money
Market Funds Average 1.46 2.77
The Tax-Exempt Money Fund's results surpassed those of the Lipper peer
group average for both the 6- and 12-month periods ended February 29, 2000.
The six-month return for the Tax-Exempt Money Fund PLUS shares was in line
with the Lipper average, while the 12-month return was slightly ahead of
Lipper despite the PLUS shares' higher expenses that accompany their
additional services.
During the past six months, the Federal Reserve raised key short-term
interest rates three times following two earlier rate hikes, for a total of
125 basis points (100 basis points equal one percentage point). As would be
expected, tax-exempt money market yields moved higher by a similar amount.
For the entire fiscal year, 30- to 90-day rates rose about 100 basis
points, while six-month and one-year note rates climbed 115 and 120 basis
points to 4.05% and 4.20%, respectively.
The short-term municipal yield curve steepened during the 12-month period,
as six-month and one-year yields rose more than shorter-term yields. A year
ago, this was not the case. For the six months ended February 1999,
overnight and weekly securities offered the same average return as a
one-year security, so performance was not necessarily influenced by the
maturity structure of the portfolio. At the end of February 2000, overnight
and weekly investments averaged 3.49% over the previous six months while
one-year notes averaged 3.98%, a difference of 49 basis points.
These changes in money market yields benefited performance relative to our
peer group. While the portfolio's maturity remained fairly constant during
the year, our competitors have allowed their maturities to shorten,
enabling us to provide a higher yield than the average for our peer group.
We expect the Federal Reserve to apply gradual, but persistent, pressure to
the fed funds rate until economic growth slows to an acceptable level. It
is the Fed's gradual approach that has kept us so far from shortening our
maturity. We believe we can earn the additional income that the yield curve
offers without a quick pickup in rates, and we expect to increase our yield
as the move to higher interest rates unfolds in a measured fashion.
TAX-FREE SHORT-INTERMEDIATE FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Short-
Intermediate Fund 0.74% 0.67%
Lipper Short-Intermediate
Municipal Debt Funds Average 0.35 -0.39
Your fund managed to provide modest positive returns for the 6- and
12-month periods ended February 29, 2000, in an environment characterized
by falling prices and rising yields for all but the shortest maturities.
Fund results exceeded the Lipper Short-Intermediate Municipal Debt Funds
Average in both periods, largely because of our duration and credit
strategy and the fund's low expenses.
Earlier in the fund's fiscal year, we had maintained a conservative
duration to protect the portfolio against rising rates. In November, we
took advantage of an opportunity to extend the fund's duration when the
yield on 10-year municipal bonds approached 5.25%. (Duration is a measure
of a bond fund's sensitivity to interest rates. For example, a fund with a
duration of three years would fall or rise about 3% in price in response to
a one-percentage-point rise or fall in interest rates.) Bond prices rallied
shortly afterward, and rates moved lower in December, at which time we took
the opportunity to shorten duration to a neutral position. In January,
rates on 10-year securities rose to 5.25%, and we lengthened once again.
More recently, with interest rates falling, we have been maintaining an
above-average duration because of the value we see in the market despite
the Fed's bias toward a tighter monetary policy. Ten-year municipal yields
are as high as they have been since 1994 and are extremely attractive in
both absolute and relative terms compared with similar Treasuries.
We had been overweighting sectors of the market that offer more yield to
take advantage of improving credit ratings. For example, we began to focus
on New York bonds about four years ago when the state started to benefit
from strength in the financial industry, and we currently hold about 18% of
fund assets in various New York issues-three times the amount of our
next-largest state allocation. Many of these securities were upgraded as
New York's economy improved. In addition, we focused on uninsured bonds in
three areas: electric/ nuclear revenue, lease-backed, and industrial
revenue/pollution control. All three sectors offer incremental yield and
improving fundamentals. Conversely, we have been underweighted in insured
and prerefunded bonds, which do not provide the yields we find in the other
areas.
Our goal was to raise the portfolio's yield by swapping securities for
others with higher yields. The six-month dividend yield rose from 4.03% to
4.22% over the past six months-equal to a taxable yield of 6.59% for
someone in the 36% income tax bracket.
TAX-FREE INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
Tax-Free Intermediate
Bond Fund 0.49% -1.37%
Lipper Intermediate
Municipal Debt Funds Average -0.05 -1.92
The fund's returns surpassed the Lipper Intermediate Municipal Debt Funds
Average in both periods but were negative for the fiscal year due to rising
interest rates. The better performance compared with the benchmark was
primarily attributable to our duration strategy and to relatively low fund
expenses.
In a generally negative environment for fixed income securities over the
past six months, we maintained the duration of the portfolio in a range
nearly half a year shorter than during the previous six months. (See the
report on the Tax-Free Short-Intermediate Fund for an explanation of the
effect duration has on bond funds when interest rates rise or fall.) In a
favorable environment, when bond prices are rising and rates falling, we
would ordinarily attempt to keep duration longer.
Earlier in the period, we had adopted a so-called "barbell" maturity
structure, with positions in cash equivalents and longer maturities, which
protects the portfolio against rising interest rates. Recently, we have
begun to unwind it in favor of a "laddered" structure with maturities
ranging between five and 12 years, since this area of the yield curve
provides a higher yield than the barbell structure. We accomplished this
shift by using cash reserves, as well as the proceeds from selling 20-year
bonds, to increase our holdings of 10-year bonds without significantly
changing the fund's overall duration.
Since we received approval to drop the fund's insurance requirement in
December 1998, we have been gradually reducing exposure to this sector,
from more than 80% a year ago to 64% at the end of February. We replaced
these securities largely with state general obligation and dedicated-tax
bonds, which carry high credit ratings. We have been particularly
overweighted in Massachusetts general obligations, whose credit out-look
has been improving, and in bonds issued by Chicago, which have recently
been upgraded.
We focused on raising the portfolio's income by trading into new securities
with higher yields. The fund's dividend yield for the past six months rose
from 4.45% last August to 4.66% at the end of February, which is equivalent
to a taxable yield of 7.28% for someone in the 36% income tax bracket.
TAX-FREE INCOME FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Income Fund -0.44% -3.42%
Lipper General Municipal
Debt Funds Average -1.31 -4.58
In a weak environment for bonds, your fund provided negative returns but
surpassed its peer group average in both periods through a combination of
our investment strategy, credit profile, and low expenses. In the first
half of the fund's fiscal year, we focused on maintaining a neutral
duration and buying bonds with more defensive characteristics. (See the
report on the Tax-Free Short-Intermediate Fund for an explanation of the
effect duration has on bond funds when interest rates rise or fall.) During
the past six months, as interest rates rose more sharply, we took
additional steps to manage the portfolio's interest rate exposure and take
advantage of the higher yields available in the marketplace. The fund's
six-month dividend yield rose from 5.28% to 5.51% since the end of
August-equivalent to a taxable yield of 8.61% for an investor in the 36%
income tax bracket.
The fund's weighted average maturity ranged between 15.5 and just over 16
years during the past six months, its shortest position in 10 years. We
accomplished this by underweighting bonds with maturities longer than 20
years and overweighting bonds in the 10- to 20-year range. We also raised
cash levels in August in anticipation of higher liquidity needs toward
year-end, which proved to be an accurate forecast. As a result, we were
able to weather higher-than-normal redemptions from November to January
without having to sell securities into a weak market.
We also focused on raising the portfolio's income by swapping bonds with
losses for new securities with higher yields. These losses are useful,
since they can be carried forward to offset capital gains. A year ago we
were concerned about preserving the portfolio's income as interest rates
fell, but the latter part of 1999 offered an opportunity to increase the
dividend yield.
From a credit perspective, the fund benefited from less exposure to
lower-rated bonds that performed poorly in the last six months as their
yield premiums widened relative to higher-quality yields. At year-end, our
overall credit sector allocation was little changed with a modest reduction
in hospital revenue bonds that continued to be under pressure. Our
weighting in BBB and lower-rated bonds may rise in coming months, since
they offer significantly higher yields in return for taking on greater
credit risk.
As rates continued to rise in January, we grew a bit more optimistic about
prospects for the municipal market. Long-term yields well above 6%, which
exceeded taxable Treasury yields on some days, looked attractive in an
environment of 2% to 2.5% inflation, particularly when compared with
taxable alternatives. The municipal new issues calendar is light, and some
year-end selling pressures appear to have abated. We took advantage of the
higher yields on long-term bonds and were pleased to see the market
strengthen in February. We are not out of the woods as far as the Fed's
tighter monetary policy is concerned, but so far it seems to be having more
of an impact on short-term securities.
TAX-FREE HIGH YIELD FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free High Yield Fund -2.77% -5.41%
Lipper High Yield Municipal
Debt Funds Average -2.90 -4.75
The fund's fiscal year was characterized by two different periods for
tax-exempt high-yield investors, neither one favorable for investors.
High-yield bonds posted negative returns during the first six months but
outperformed investment-grade municipals. The past six months, however,
found our segment of the market lagging greatly. Our relatively low
allocation to lower-grade bonds helped us versus the competition during the
six months ended February 29, and the fund pulled ahead of the Lipper High
Yield Municipal Debt Funds Average. We lagged for the year as a whole since
the fund carried a longer duration and we were underweighted during the
first half when high-yield securities did better. In recent months, we have
been taking advantage of lower prices by adding to lower-grade bonds, and
we believe this strategy is beginning to bear fruit.
The high-yield market was hurt due to waning investor interest because of
the high yields available in AAA bonds, increased supply at year-end, and
heavy redemptions from November through January. Your fund was fairly well
positioned entering the second half with higher-than-normal cash reserves
and an ability to add lower-quality bonds as prices fell.
Quality Diversification
- --------------------------------------------------------------------------------
Tax Free High Yield Fund
Percent
AAA 8
AA 15
A 17
BBB 28
BB and Below 32
Our below investment-grade holdings represented 32% of fund assets on
February 29, 2000, compared with 22% a year ago, while exposure to BBB
securities was 28%, up from 26%. (See accompanying chart.) We reduced the
portfolio's component of hospital bonds to below 15%, where we intend to
keep it until we see signs of financial recovery in this troubled sector.
We increased our exposure to long-term care and corporate-backed holdings
to around 15% as part of our longer-term goal of holding approximately 40%
of the fund in below investment-grade and 25%-30% in BBB securities. In
addition, we reduced the fund's sensitivity to interest rates in
anticipation of further tightening by the Fed.
Many new holdings offer attractive yields, and we intend to add additional
bonds in the education, housing, and transportation sectors in coming
months. These strategies have contributed to an increase in the fund's
dividend yield to more than 6%, up from a bit over 5.5% six months ago. (A
tax-exempt yield of 6% is equivalent to a taxable yield of 9.38% for
investors in the 36% income tax bracket.) We remain confident that the
outlook for this segment of the municipal market is brighter following a
difficult period through most of last year.
OUTLOOK
The economy has yet to show signs of slowing to a level the Fed would
prefer. Rather, available economic data suggest that real GDP growth could
approach 5% in the first quarter of 2000. Except for soaring oil and some
other commodity prices, overall inflation remains in check. However, the
strong pace of economic growth is straining the supply of both labor and
products. Cost pressures have been mounting, and the Fed is concerned that
they will be reflected in higher inflation. As long as accelerating
inflation remains a threat, the Fed is likely to move short-term rates
higher in the months ahead.
Municipal prices have built up some momentum after their February gains.
Light municipal supply continues to benefit our segment of the fixed income
market, and there has been a slight pickup in cash flows into municipal
bond funds. Any slowdown in economic growth as a result of Fed tightening
should bode well for the overall bond market. Yields on municipal bonds are
extremely attractive compared with yields in the taxable market.
Respectfully submitted,
Mary J. Miller
Director
Municipal Bond Department
March 24, 2000
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/99 2/29/00
- --------------------------------------------------------------------------------
Tax-Exempt Money Fund
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.014 0.015
For 12 months 0.027 0.029
Dividend Yield (7-Day Compound) * 2.80% 3.41%
Weighted Average Maturity (days) 54 55
Weighted Average Quality ** First Tier First Tier
Tax-Exempt Money Fund PLUS Shares
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.013 0.015
For 12 months -- 0.028
Dividend Yield (7-Day Compound) * 2.67% 3.22%
Weighted Average Maturity (days) 54 55
Weighted Average Quality ** First Tier First Tier
To request a prospectus for any T. Rowe Price fund, please
call 1-800-638-5660. Read the prospectus carefully before investing.
(continued on next page)
- --------------------------------------------------------------------------------
Change in Management
Effective April 1, 2000, Mary J. Miller became Chairman of the Investment
Advisory Committee for the Tax-Free High Yield Fund, responsible for its
day-to-day management. Ms. Miller is Director of the Municipal Bond Department
and has been a member of the fund's advisory committee since its 1985 inception.
She has been with T. Rowe Price since 1983. She succeeds William F. Snider, who
has left T. Rowe Price to pursue new opportunities.
This updates the portfolio management section of the Tax-Free Funds prospectus
dated July 1, 1999.
T. Rowe Price Tax-Free Funds
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/99 2/29/00
Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
Price Per Share $ 5.27 $ 5.20
Dividends Per Share
For 6 months 0.11 0.11
For 12 months 0.21 0.21
Dividend Yield *
For 6 months 4.03% 4.22%
For 12 months 4.14 4.19
30-Day Standardized Yield 3.97 4.48
Weighted Average Maturity (years) 4.2 4.3
Weighted Average Effective Duration (years) 3.0 3.1
Weighted Average Quality *** AA- AA-
Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ 10.65 $ 10.46
Dividends Per Share
For 6 months 0.24 0.24
For 12 months 0.48 0.48
Dividend Yield *
For 6 months 4.45% 4.66%
For 12 months 4.56 4.64
30-Day Standardized Yield 4.16 4.61
Weighted Average Maturity (years) 7.3 8.0
Weighted Average Effective Duration (years) 5.1 5.5
Weighted Average Quality *** AA AA
(continued on next page)
T. Rowe Price Tax-Free Funds
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/99 2/29/00
Tax-Free Income Fund
- --------------------------------------------------------------------------------
Price Per Share $ 9.39 $ 9.10
Dividends Per Share
For 6 months 0.25 0.25
For 12 months 0.50 0.49
Dividend Yield *
For 6 months 5.28% 5.51%
For 12 months 5.42 5.55
30-Day Standardized Yield 4.81 5.23
Weighted Average Maturity (years) 15.5 16.1
Weighted Average Effective Duration (years) 7.7 8.2
Weighted Average Quality *** AA- AA-
Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Price Per Share $ 11.87 $ 11.21
Dividends Per Share
For 6 months 0.33 0.33
For 12 months 0.65 0.66
Dividend Yield *
For 6 months 5.52% 6.02%
For 12 months 5.65 6.01
30-Day Standardized Yield 5.10 5.85
Weighted Average Maturity (years) 18.4 18.7
Weighted Average Effective Duration (years) 8.2 8.6
Weighted Average Quality *** A- BBB+
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the fund's net asset value at the end of the 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
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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 benchmarks, which may
include a broad-based market index and a peer group average or index.
Market indexes do not include expenses, which are deducted from fund
returns as well as mutual fund averages and indexes.
Tax-Exempt Money Shares
- --------------------------------------------------------------------------------
Lipper TEMF
2/90 10.000 10.000
2/91 10.541 10.522
2/92 10.955 10.910
2/93 11.221 11.167
2/94 11.436 11.397
2/95 11.729 11.697
2/96 12.117 12.093
2/97 12.473 12.462
2/98 12.861 12.865
2/99 13.227 13.247
2/00 13.594 13.637
Tax-Exempt Money Plus Shares
- --------------------------------------------------------------------------------
Lipper TEM+-Line TEM+Area
10/31/98 10000 10000 10000
2/99 10083 10074 10074
2/00 10365 10355 10355
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
Lehman Lipper TFS
2/90 10.000 10.000 10.000
2/91 10.837 10.780 10.706
2/92 11.720 11.631 11.449
2/93 12.738 12.704 12.308
2/94 13.181 13.172 12.738
2/95 13.527 13.448 13.109
2/96 14.616 14.434 14.009
2/97 15.288 15.025 14.572
2/98 16.105 15.843 15.341
2/99 16.956 16.582 16.093
2/00 17.197 16.602 16.200
Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Lehman Lipper TII
11/30/92 10.000 10.000 10.000
2/93 10.542 10.544 10.681
2/94 11.008 11.045 11.267
2/95 11.277 11.272 11.566
2/96 12.434 12.305 12.672
2/97 13.050 12.862 13.204
2/98 14.043 13.830 14.168
2/99 14.880 14.562 14.929
2/00 14.753 14.318 14.724
Tax-Free Income Fund
- --------------------------------------------------------------------------------
Lehman Lipper TFI
2/90 10.000 10.000 10.000
2/91 10.922 10.818 10.840
2/92 12.013 11.922 11.943
2/93 13.666 13.620 13.719
2/94 14.423 14.361 14.474
2/95 14.695 14.491 14.749
2/96 16.318 15.957 16.269
2/97 17.217 16.717 17.051
2/98 18.790 18.284 18.650
2/99 19.946 19.219 19.672
2/00 19.530 18.368 18.999
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
Tax-Free High Yield Fund
Lehman Lipper TFH
2/90 10.000 10.000 10.000
2/91 10.920 10.561 10.793
2/92 12.095 11.659 11.933
2/93 13.853 13.079 13.597
2/94 14.721 13.938 14.615
2/95 14.948 14.152 14.800
2/96 16.643 15.633 16.372
2/97 17.625 16.513 17.391
2/98 19.342 18.239 19.203
2/99 20.500 19.064 20.125
2/00 20.000 18.205 19.037
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.
Since Inception
Periods Ended 2/29/00 1 Year 5 Years 10 Years Inception Date
- --------------------------------------------------------------------------------
Tax-Exempt Money 2.94% 3.12% 3.15% - 4/8/81
Tax-Exempt Money PLUS 2.79 - - 2.67% 11/1/98
Tax-Free Short-Intermediate 0.67 4.33 4.94 - 12/23/83
Tax-Free Intermediate Bond -1.37 4.95 - 5.48 11/30/92
Tax-Free Income -3.42 5.20 6.63 - 10/26/76
Tax-Free High Yield -5.41 5.16 6.65 - 3/1/85
Investment returns represent past performance and will vary. Shares of the bond
funds may be worth more or less at redemption than at original purchase.
Investments in the Money Fund and PLUS Class shares are not insured or
guaranteed by the FDIC or any other government agency. Although they seek to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund and PLUS Class shares.
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
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.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
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, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a September 1999 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending on
size of order.
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
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.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
Please call for a prospectus. Read it carefully before investing.
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.
T. Rowe Price Advisory Services and Retirement Resources
- --------------------------------------------------------------------------------
Advisory Services, Retirement Resources
T. Rowe Price is your full-service retirement specialist. We have developed
unique advisory services that can help you meet the most difficult
retirement challenges. Our broad array of retirement plans is suitable for
individuals, the self-employed, small businesses, corporations, and
nonprofit organizations. We also provide recordkeeping, communications, and
investment management services, and our educational materials, self-help
planning guides, and software tools are recognized as among the industry's
best. For information or to request literature, call us at 1-800-638-5660,
or visit our Web site at www.troweprice.com.
ADVISORY SERVICES
T. Rowe Price Retirement Income ManagerSM helps retirees or those within
two years of retirement determine how much income they can take in
retirement. The program uses extensive statistical analysis and the input
of financial planning professionals to suggest an income plan that best
meets your objectives.
T. Rowe Price Rollover Investment Service offers asset allocation advice to
those planning a major change in their qualified retirement plans, such as
a 401(k) rollover from a previous employer or an IRA transfer
RETIREMENT RESOURCES AT T. ROWE PRICE
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning
AnalyzerTM CD-ROM or diskette $19.95.
To order, please call
1-800-541-5760. Also available
on the Internet for $9.95.
T. Rowe Price Variable Annuity AnalyzerTM
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
T. Rowe Price Immediate Variable
Annuity (Income Account)
Investment Kits
We will be happy to send you one of our easy-to-follow investment kits when
you are ready to invest in any T. Rowe Price retirement vehicle, including
IRAs, qualified plans, small-business plans, or our no-load variable
annuities.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
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Los Angeles Area
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21800 Oxnard Street, Suite 270
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900 17th Street N.W.
Farragut Square
T. Rowe Price, Invest with Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. C03-050 2/29/00
