T. Rowe Price Tax-Exempt Money Fund N-CSR Certified annual shareholder report (management investment company)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
 
 

Investment Company Act File Number: 811-03055

T. Rowe Price Tax-Exempt Money Fund, Inc.

(Exact name of registrant as specified in charter)

100 East Pratt Street, Baltimore, MD 21202

(Address of principal executive offices)

David Oestreicher

100 East Pratt Street, Baltimore, MD 21202

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: (410) 345-2000
 
 
Date of fiscal year end: February 28
 
 
Date of reporting period: February 28, 2014

Item 1. Report to Shareholders

Tax-Exempt Money Fund February 28, 2014

The views and opinions in this report were current as of February 28, 2014. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.

REPORTS ON THE WEB

Sign up for our E-mail Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information.

Manager’s Letter

Fellow Shareholders

Tax-free municipal bond returns were mostly lower in the one-year period ended February 28, 2014, as strong gains in the last six months did not quite offset losses in the first half of our fiscal year—except for shorter maturities. Intermediate- and long-term Treasury interest rates increased over the last year amid moderate economic growth and expectations that the Federal Reserve would start to reduce the size of its monthly asset purchases—which it did at the beginning of 2014. Longer-term municipal interest rates also rose during the year, while shorter-term yields were little changed.

ECONOMY AND INTEREST RATES

Despite higher federal tax rates and spending cuts at the beginning of 2013, the U.S. economy grew at a moderate pace over the last 12 months. Gross domestic product expanded at a 4.1% annualized rate in the third quarter of 2013, the highest rate in about two years, and at a milder 2.4% rate in the fourth quarter, in part because of weaker-than-expected consumer spending. Still, steady job growth helped reduce the national unemployment rate to 6.7% in February. We anticipate that the U.S. economic recovery will strengthen in 2014, as last year’s fiscal policy headwinds subside and wage growth improves.

To support the recovery, the Federal Reserve purchased $45 billion in Treasuries and $40 billion in agency mortgage-backed securities (MBS) every month in 2013 to suppress longer-term rates. In January and February 2014, however, the Fed reduced the size of its monthly purchases by $10 billion. We anticipate that the Fed will announce similar reductions after future monetary policy meetings, with asset purchases likely to end by the end of 2014. While Fed tapering may result in higher long-term interest rates, short-term rate increases seem unlikely to occur until sometime in late 2015 or 2016.

The Treasury and municipal yield curves steepened over the last year: Long-term yields increased as the taper approached, while short-term rates remained anchored by the Fed’s commitment to keep them low even after unemployment drops below 6.5%—assuming inflation remains contained. However, high-quality 30-year municipal yields rose more than the 30-year Treasury yield, which is unusual, and were slightly higher than the 30-year Treasury yield at the end of our reporting period. On a relative basis, this demonstrates the attractiveness of long-term tax-free bonds as an alternative for fixed income investors.

As of February 28, 2014, the 3.72% yield offered by a 30-year tax-free bond rated AAA was about 104% of the 3.58% pretax yield offered by a 30-year Treasury bond. An investor in the 28% federal tax bracket would need to invest in a taxable bond yielding about 5.17% to receive the same after-tax income. (To calculate a municipal bond’s taxable-equivalent yield, divide the municipal bond’s yield by the quantity of 1.00 minus your federal tax bracket expressed as a decimal—in this case, 1.00 – 0.28, or 0.72.)

MUNICIPAL MARKET NEWS

Full-year municipal issuance in 2013 totaled about $330 billion versus about $380 billion in 2012, according to The Bond Buyer, while issuance in the first two months of 2014 has been lower than expected, at around $34 billion. Issuance since mid-2013 has been somewhat limited, as higher long-term interest rates discouraged municipalities from refinancing older debt. Outflows from the municipal market persisted throughout the second half of 2013, and rising rates and credit concerns in certain parts of the muni market restrained demand from individual investors during that period. These trends abated somewhat in the first two months of 2014, but a resumption of rising rates or cash flows out of municipal bond portfolios could weigh on the market.

Austerity-minded state and local government leaders remain conservative about adding to indebtedness, which we consider to be supportive. Indeed, most states have acted responsibly in the last few years by cutting spending and raising taxes and fees to close budget deficits. While state tax revenues are growing again, the pattern has been slower and more uneven than it has been historically, and expense pressures continue. We believe that many states deserve high credit ratings and that state governments will be able to continue servicing their outstanding debts. However, we have longer-term concerns about some states’ willingness and ability to address sizable pension obligations and other retirement benefits.

Detroit’s Chapter 9 bankruptcy case, while not an indicator of a systemic breakdown in municipal credit fundamentals, remains a concern for municipal investors. The judge in the case has ruled that the city is eligible for bankruptcy and that pension benefits—even though they are protected by the Michigan constitution—could be reduced through the federal bankruptcy process.

Also, the deteriorating fiscal situation in the Commonwealth of Puerto Rico, as highlighted in the media and indicated by recent credit rating agency downgrades to below investment grade, is still a risk to the broader muni market. This U.S. territory’s liabilities are large relative to the size of its economy, with close to $50 billion of municipal debt outstanding and over $70 billion of general indebtedness for the Commonwealth and its various governmental agencies. We continue to have very low exposure to Puerto Rico and would not be surprised if there are additional downgrades or the Commonwealth seeks a debt restructuring in the next year or two. Puerto Rico’s $3.5 billion bond issuance in early March will provide some stability in the short run, but over the long term, the Commonwealth’s government will need to make difficult decisions in order to improve its fiscal and economic profile.

In terms of sector performance, state and local general obligations (GO) were flat but held up better than revenue bonds over the last 12 months. We favor bonds backed by a dedicated revenue stream over GOs, with a bias toward transportation and utility bonds issued by these essential service providers. Among revenue bonds, special tax and power bonds were two of the worst-performing sectors for the year due to weakness in Puerto Rican issues. Most remaining revenue segments were flat, but housing bonds outperformed with mild gains, helped by the residential real estate recovery.

PORTFOLIO STRATEGY

TAX-EXEMPT MONEY FUND

The fund returned 0.01% in each of the past 6- and 12-month periods ended February 28, 2014, the same as for the Lipper Tax-Exempt Money Market Funds Index. The Federal Reserve’s extraordinary regime of easy monetary policy is now more than five years old and counting. The Fed’s zero-interest rate policy continues to affect money fund investors most dramatically. While the Fed has begun to taper its large-scale asset purchase program, money market rates remain immune to such changes in policy.

Over the past six months, yields in the municipal money market moved lower still. Rates ranged from two basis points (0.02%) for overnight maturities to 16 basis points (0.16%) for notes maturing in one year. The shape of the money market yield curve remained fairly unchanged over the period, though it has shifted lower by about two basis points across maturities.

The supply/demand imbalance on the front end of the money market curve pressures rates lower, even at today’s overall low level of interest rates. The low interest rates of the past few years have encouraged municipal issuers to borrow in longer maturities to lock in favorable financing costs. In many cases, we have seen issuers refinance variable rate demand notes (VRDN) with much longer 10-, 20-, and even 30-year issues. This trend has resulted in a reduction of overall available supply in the short end. For example, VRDN issuance was down 32% in 2013. The total amount of VRDNs outstanding has declined about 39% since 2008 as new issuance is not sufficient to offset the supply taken out of the market. Meanwhile, money market assets over the last year have remained somewhat stagnant—creating the perfect storm of too much demand chasing too little supply.

As always, credit quality plays a major role in the management of the fund. As such, we favor highly rated GOs, housing finance, and hospitals and higher education bonds. Some of the prominent positions in the portfolio include the Howard Hughes Medical Institute, Northwestern University, and Texas GOs. We continue to like prerefunded bonds (which are escrowed in U.S. Treasury debt) and prefer high-quality issuers that can provide self-liquidity. Where self-liquidity is not possible, we look to liquidity providers such as JPMorgan Chase, Wells Fargo, and U.S. Bank. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

While the Fed has started the long process of removing monetary accommodation, money market yields are not expected to change significantly for quite some time. Our view is that the Fed will not begin actively targeting short-term interest rates until late 2015, at the earliest. Obviously, Fed policy is subject to the ever-changing fortunes of the U.S. economy. Still, given our outlook, we remain comfortable continuing to operate in the longer end of our permissible weighted average maturity (WAM) range, targeting a WAM of 50 to 55 days. We remain committed to managing a high-quality, diversified portfolio that focuses on the liquidity and stability of principal important to our shareholders.

TAX-FREE SHORT-INTERMEDIATE FUND

The fund returned 2.26% during the six-month period ended February 28, 2014, and 0.89% during the past 12 months, compared with 2.51% and 0.38%, respectively, for the Lipper Short-Intermediate Municipal Debt Funds Average, which measures the performance of competing funds. (Performance is also shown in the table for the Advisor Class, which has a different fee structure.) The fund’s net asset value per share was $5.68 at the end of February, up from $5.60 six months earlier. Dividends per share contributed $0.09 to the fund’s total return during the 12-month period.

We made only minimal changes to the fund’s investment strategy during the past six months. The portfolio’s duration at 2.7 years at the end of the reporting period was marginally lower than it was at the end of August and close to that of our Barclays benchmark index. Our allocations to various sectors did not change significantly; transportation, state GOs, and health care remained the fund’s three largest exposures, close to their levels of six months ago.

The fund’s holdings along the yield curve did shift slightly, as we held more one- to three-year bonds and fewer bonds in the five- to seven-year range, primarily due to the passage of time with bonds rolling down the yield curve. While these changes were not significant, we temporarily extended the portfolio’s duration to three years in the fall to take advantage of higher interest rates, before shortening again to close out the period at the level mentioned when rates declined during the first two months of 2014.

The most significant occurrence during the fund’s fiscal year was the disparity in performance between the two reporting periods. Over the six-month period ended August 31, 2013, five-year yields rose 75 basis points (0.75%), contrasted with a sharp decline during the past six months. Fortunately, the fund’s strong gain in the second half of the calendar year more than compensated for its negative performance in the first half.

The divergence in performance is worth noting since it is a possible precursor for the environment we face in the coming months. No one can accurately predict the direction of interest rates, but most observers expect the Fed to start raising short-term rates at some point down the road, and investors inevitably will try to anticipate such a move. As they position themselves accordingly, it could lead to higher volatility for shorter-maturity bonds.

We will monitor the situation closely in an effort to take advantage of any change in monetary policy, which we do not think will take place until we move closer to 2015. We would like to remind investors that this is a fund with a short duration, with many of our holdings maturing during the next two years. As such, we believe our research capabilities make it possible to deal with any conditions, and seize any opportunities, that arise.

TAX-FREE INCOME FUND

The fund returned 6.35% during the six-month period ended February 28, 2014, and -1.16% during the past 12 months, compared with 6.09% and -1.62%, respectively, for the Lipper General & Insured Municipal Debt Funds Average, which measures the performance of competing funds. (Results for the Advisor Class were somewhat lower, reflecting its different fee structure.) The fund’s net asset value per share was $10.09 at the end of February, up from $9.68 six months earlier. Dividends per share contributed $0.40 to the fund’s total return during the 12-month period.

The fund’s yield curve positioning minimally shifted from one year ago. The fund is underweight in the 3- to 10-year range, where absolute yields are low and look quite rich relative to taxable-equivalent Treasury rates. We reduced exposure to bonds with maturities of 20 years and longer and remain overweight in this area, reflecting our conviction that long-term bonds offer greater relative value. While longer-term bonds carry greater interest rate risk, we believe shorter bonds will underperform over time.

The fund’s duration declined by almost a year, to 4.9 from 5.8 years six months ago, as interest rates declined and more holdings began pricing to their optional calls. We generally managed the portfolio’s duration longer than that of the Barclays Municipal Bond Index, although our positioning at the end of the period appeared to be growing shorter than the peer group median. The fund’s weighted average maturity at 16.9 years increased from 15.8 years since our last report in August, reflecting a drawdown of a large cash balance from that period. Nevertheless, duration is lower than it was a year ago, reflecting our outlook for higher rates as the economy gains traction and the Fed slowly begins its path to normalizing rates.

As we’ve mentioned in prior reports, based on fundamental credit research, our outlook assumes persistent fiscal challenges for many state and local governments, particularly those heavily burdened with long-term pension and other post-employment benefit liabilities. Therefore, the fund continues to be overweight revenue bonds and underweight both state and local GO debt, as we believe the former offer greater value.

There were some shifts in the fund’s quality diversification in the latter half of the period. High-quality AAA holdings declined by half, due to a drop in elevated cash levels during the previous reporting period. A rated bonds compose the largest portion of the fund. The fund is overweight A and BBB rated holdings relative to the Barclays index, as we believe they offer greater value than their higher-quality counterparts.

We made minimal changes in the fund’s sector holdings, increasing the health care and transportation sectors 2.6 and 2.7 percentage points, respectively, since our last report. These are the fund’s two largest sectors and the largest overweights relative to the Barclays index. Our recent purchases include New York State Thruway Authority and the Port Authority of New York & New Jersey. Colorado’s Catholic Health Initiatives is a new addition in the health care sector. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

In general, fund positions that underperformed the market over the one-year period were bonds with long maturities and durations, including noncallable and zero-coupon bonds. Additionally, Puerto Rico-domiciled holdings significantly underperformed as the Commonwealth’s credit profile deteriorated and ratings were downgraded to below investment grade. Bonds from the Commonwealth are widely held because their income is tax-exempt in all states. We had been reducing our exposure over the past two years, and fund performance benefited by our underweight. The fund presently has no holdings domiciled in Puerto Rico. Holdings that fared best were mostly lower-quality, shorter-maturity bonds, whose valuations were not significantly affected by higher rates and whose higher yields cushioned any principal losses.

TAX-FREE HIGH YIELD FUND

The Tax-Free High Yield Fund posted a strong return of 8.20% for the six-month period ended February 28, 2014, and -1.37% for the past 12 months, compared with 7.21% and -2.92%, respectively, for the Lipper High Yield Municipal Debt Funds Average. (The results for the Advisor Class, which has a different fee structure, are also shown in the table.) The fund’s net asset value per share was $11.33 at the end of February, up from $10.72 six months earlier, and dividends per share contributed $0.51 to the fund’s total return during the 12-month period.

It was a tale of two halves in the muni market. The spring and summer of 2013 were difficult seasons for fixed income markets. Long-term interest rates rose sharply due to the expected cessation of the Federal Reserve’s Treasury bond purchases. Municipals recovered throughout the fall and winter months as curtailed new issue supply and renewed investor demand (at higher rates) spurred prices upward.

We maintained significant exposure to health care-related credits in both the hospital and life-care sectors. Hospital bonds typically offer significant yield premiums to similarly rated bonds due to constant uncertainty surrounding reimbursement from both federal and state payers. We continue to favor hospital systems that enjoy strong balance sheets, profitable operations, diverse payment sources, and limited geographic competition. Our life-care revenue bonds also provide notable yield opportunities. We added to Huntsville (AL) Redstone Village and Goshen (IN) Greencroft Obligated Group (both around 7%) and Marshes of Skidaway (GA) at 7.38%. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

The fund retained a significant stake in industrial development/ pollution control revenue bonds. These securities are backed by corporations that occasionally qualify for tax-exempt issuance. Toward the end of the calendar year, we added exposure to several corporate-backed issuers, including Pratt Industries USA (IN)yielding 7%, National Gypsum (IN) at 7.25%, and Navistar (IL) at 6.78%. We continue to like the risk/reward opportunities in this sector and actively partner with our corporate and equity research colleagues in this area. The fund profited from further improvement in legacy American Airlines debt, which converted to preferred equity in January 2014—after its emergence from Chapter 11.

The fund greatly benefited from conservative positioning in Puerto Rico-domiciled bonds versus our competitors. We believe the Commonwealth’s debt burden is unsustainable given the size and growth prospects of the island’s underlying economic base. Throughout the period, market participants shed holdings of Puerto Rico bonds at significant losses, as further fiscal challenges, rating agency downgrades, and concerns about market access intensified.

We continued to favor essential service revenue bonds issued for airports and toll roads. These capital intensive projects often benefit from strong, noncyclical demand and limited competition. We added to our holdings in several toll road projects (Elizabeth River Crossings, Route 460 Funding Corp., and Central Texas Regional Mobility Authority), as they appeared undervalued by the market. We reduced some holdings in airport bonds (DFW and Memphis Shelby TN) to fund higher-yielding opportunities.

For the one-year period, our underweights in tobacco securitization bonds paid dividends. Cigarette smoking declines have far outpaced the assumptions on which full payment for these bonds is based. However, toward the end of the period, tobacco bonds improved sharply, based on the market’s hope that e-cigarette sales could be included in the master settlement agreement revenues for bondholder payment. We believe this notion is highly optimistic and a potential litigation lightning rod for years to come.

In a roller coaster year for municipal investors, we feel that our bottom-up, research-driven process proved worthy. Our steady emphasis on picking sound credits for the long term enables our team to take advantage of market disruptions as they appear—opportunistically. And, while we continue to believe that higher interests rates and healthier economic growth will ultimately come, these conditions should favor patient, research-conscious investors like T. Rowe Price.

OUTLOOK

The decline in municipal bond prices that we witnessed in 2013 has rattled some investors, but it does not represent a fundamental change in the nature, quality, or risk characteristics of the market. We continue to believe that it is a high-quality market, with good investment opportunities for those with a long-term focus seeking attractive tax-free income—particularly for those in the highest tax brackets—in what is still a very low interest rate environment. The underperformance of long-term munis has made their nominal and taxable-equivalent yields more attractive, but price declines are likely if market outflows resume and interest rates start rising again.

We have been concerned about the potential for rising rates for some time. Our interest rate strategy and economics teams regularly make forward-looking projections of rates and yield curves, and we incorporate these assessments into our investment strategies. Given the potential for rates to rise further, we will remain careful with any investment shift that might materially increase our portfolios’ interest rate sensitivity. However, we believe further rate increases will be more modest than those we have seen since spring 2013.

Irrespective of interest rate movements, the credit and economic environment for municipalities is starting to get better but could remain challenging. Modest economic growth and improving income and sales tax revenues are providing some support for state and local governments. Also, improvements in the health of the real estate market should translate into stabilizing property tax revenues for local governments.

State and local government liabilities such as pension benefits and health care costs are a growing long-term concern. While most municipal governments are maintaining balanced budgets, fewer municipalities have addressed these longer-term liabilities meaningfully. States need to continue these efforts on their own, as a federal bailout of state and local governments without some losses to bond-holders seems unlikely. As for Detroit, we continue to monitor the bankruptcy proceedings closely because there is the potential for adverse legal precedents to arise out of the case. Regarding Puerto Rico, our dedication to thorough, fundamental credit research has helped us minimize our exposure to this increasingly risky, yet significant, issuer of municipal bonds. Puerto Rico is working hard to turn its fiscal situation around, but significant challenges remain, and a debt restructuring seems likely without a strong economic rebound.

We believe T. Rowe Price’s strong credit research capabilities have been and will remain an asset for our investors. Even as interest rates return to more normal levels, bonds will remain an important asset class, and we expect to continue finding good investment opportunities for long-term income-seeking investors. We continue to conduct thorough research and assign our own independent credit ratings before making investment decisions. As always, we are on the lookout for attractively valued bonds issued by municipalities with good long-term fundamentals—an investment strategy that we believe will continue to serve our investors well.

Thank you for investing with T. Rowe Price.

Respectfully submitted,

Joseph K. Lynagh
Chairman of the Investment Advisory Committee
Tax-Exempt Money Fund

Charles B. Hill
Chairman of the Investment Advisory Committee
Tax-Free Short-Intermediate Fund

Konstantine B. Mallas
Chairman of the Investment Advisory Committee
Tax-Free Income Fund

James M. Murphy
Chairman of the Investment Advisory Committee
Tax-Free High Yield Fund

March 18, 2014

The committee chairmen have day-to-day responsibility for managing the portfolios and work with committee members in developing and executing the funds’ investment programs.

RISKS OF FIXED INCOME INVESTING

Since money market funds are managed to maintain a constant $1.00 share price, there should be little risk of principal loss. However, there is no assurance the fund will avoid principal losses if fund holdings default or are downgraded, or if interest rates rise sharply in an unusually short period. In addition, the fund’s yield will vary; it is not fixed for a specific period like the yield on a bank certificate of deposit. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in it.

Bonds are subject to interest rate risk (the decline in bond prices that usually accompanies a rise in interest rates) and credit risk (the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default by failing to make timely payments of interest or principal), potentially reducing the fund’s income level and share price. High yield bonds could have greater price declines than funds that invest primarily in high-quality bonds. Municipalities issuing high yield bonds are not as strong financially as those with higher credit ratings, so the bonds are usually considered speculative investments. Some income may be subject to state and local taxes and the federal alternative minimum tax.

GLOSSARY

Barclays Municipal Bond Index: An unmanaged index that tracks municipal debt instruments.

Barclays 1–5 Year Blend (1–6 Year Maturity) Index: A subindex of the Barclays Municipal Bond Index. It is a rules-based, market value-weighted index of short-term bonds engineered for the tax-exempt bond market.

Barclays 65% High-Grade/35% High-Yield Index: An index that tracks Barclays indexes of both investment-grade and below investment-grade municipal debt instruments.

Basis point: One one-hundredth of one percentage point, or 0.01%.

Duration: A measure of a bond fund’s sensitivity to changes in interest rates. For example, a fund with a duration of five years would fall about 5% in price in response to a one-percentage-point rise in interest rates, and vice versa.

Federal funds rate: The interest rate charged on overnight loans of reserves by one financial institution to another in the United States. The Federal Reserve sets a target federal funds rate to affect the direction of interest rates.

General obligation debt: A government’s strongest pledge that obligates its full faith and credit, including, if necessary, its ability to raise taxes.

Gross domestic product: The total market value of all goods and services produced in a country in a given year.

Investment grade: High-quality bonds as measured by one of the major credit rating agencies. For example, Standard & Poor’s designates the bonds in its top four categories (AAA to BBB) as investment grade.

Lipper averages: The averages of available mutual fund performance returns for specified time periods in categories defined by Lipper.

Lipper indexes: Fund benchmarks that consist of a small number (10 to 30) of the largest mutual funds in a particular category as tracked by Lipper Inc.

Prerefunded bond: A bond that originally may have been issued as a general obligation or revenue bond but that is now secured by an escrow fund consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders.

SEC yield (7-day simple): A method of calculating a money fund’s yield by annualizing the fund’s net investment income for the last seven days of each period divided by the fund’s net asset value at the end of the period. Yield will vary and is not guaranteed.

SEC yield (30-day): A method of calculating a fund’s yield that assumes all portfolio securities are held until maturity. Yield will vary and is not guaranteed.

Weighted average life: A measure of a fund’s credit quality risk. In general, the longer the average life, the greater the fund’s credit quality risk. The average life is the dollar-weighted average maturity of a portfolio’s individual securities without taking into account interest rate readjustment dates. Money funds must maintain a weighted average life of less than 120 days.

Weighted average maturity: A measure of a fund’s interest rate sensitivity. In general, the longer the average maturity, the greater the fund’s sensitivity to interest rate changes. The weighted average maturity may take into account the interest rate readjustment dates for certain securities. Money funds must maintain a weighted average maturity of less than 60 days.

Yield curve: A graphic depiction of the relationship between yields and maturity dates for a set of similar securities such as Treasuries or municipal securities. Securities with longer maturities usually have a higher yield. If short-term securities offer a higher yield, then the curve is said to be “inverted.” If short-and long-term bonds are offering equivalent yields, then the curve is said to be “flat.”

 

Performance and Expenses

Growth of $10,000

This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which 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.

 

Growth of $10,000

This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which 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.

 

 

Fund Expense Example

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

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

Please note that the Tax-Free Short-Intermediate Fund, Tax-Free Income Fund, and Tax-Free High Yield Fund have two share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, and the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee. Each share class is presented separately in the table.

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

Note: T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Preferred Services, Personal Services, or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $100,000). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.

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

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

Notes to Financial Statements

T. Rowe Price Tax-Exempt Money Fund, Inc. (the fund), is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund commenced operations on April 8, 1981. The fund seeks to provide preservation of capital, liquidity, and, consistent with these objectives, the highest current income exempt from federal income taxes.

NOTE1 - SIGNIFICANTACCOUNTINGPOLICIES

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

InvestmentTransactions,InvestmentIncome,andDistributions Income and expenses are recorded on the accrual basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. 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 on the ex-dividend date. Income distributions are declared daily and paid monthly.

Credits The fund earns credits on temporarily uninvested cash balances held at the custodian, which reduce the fund’s custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits.

NOTE2 - VALUATION

The fund’s financial instruments are valued and its net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. The fund’s financial instruments are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) has been established by the fund’s Board of Directors (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations.

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

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

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

Level 3 – unobservable inputs

Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions market participants would use to price the financial instrument. Unobservable inputs are those for which market data are not available and are developed using the best information available about the assumptions that market participants would use to price the financial instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining those values. For example, securities held by a money market fund are generally high quality and liquid; however, they are reflected as Level 2 because the inputs used to determine fair value are not quoted prices in an active market.

In accordance with Rule 2a-7 under the 1940 Act, the fund values its securities at amortized cost, which approximates fair value. Securities for which amortized cost is deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee. On February 28, 2014, all of the fund’s financial instruments were classified as Level 2 in the fair value hierarchy.

NOTE3 - OTHERINVESTMENTTRANSACTIONS

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.

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

NOTE4 - FEDERALINCOMETAXES

No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its income and gains. Distributions determined in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not adjusted for temporary differences.

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

Reclassifications to paid-in capital relate primarily to a tax practice that treats a portion of the proceeds from each redemption of capital shares as a distribution of taxable net investment income or realized capital gain. For the year ended February 28, 2014, the following reclassifications were recorded to reflect tax character (there was no impact on results of operations or net assets):

Distributions during the years ended February 28, 2014 and February 28, 2013, were characterized for tax purposes as follows:

At February 28, 2014, the tax-basis cost of investments and components of net assets were as follows:

NOTE5 - RELATEDPARTY TRANSACTIONS

The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group). The investment management agreement between the fund and Price Associates provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.10% of the fund’s average daily net assets, and a group fee. The group fee rate is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.275% for assets in excess of $400 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At February 28, 2014, the effective annual group fee rate was 0.29%.

Price Associates may voluntarily waive all or a portion of its management fee and reimburse operating expenses to the extent necessary for the fund to maintain a zero or positive net yield (voluntary waiver). Any amounts waived or reimbursed under this voluntary agreement are not subject to repayment by the fund. Price Associates may amend or terminate this voluntary arrangement at any time without prior notice. For the year ended February 28, 2014, management fees waived totaled $3,671,000.

In addition, the fund has entered into service agreements with Price Associates and a wholly owned subsidiary of Price Associates (collectively, Price). Price Associates computes the daily share price and provides certain other administrative services to the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund’s transfer and dividend-disbursing agent. For the year ended February 28, 2014, expenses incurred pursuant to these service agreements were $116,000 for Price Associates and $221,000 for T. Rowe Price Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.

As of February 28, 2014, T. Rowe Price Group, Inc., or its wholly owned subsidiaries owned 51,467,173 shares of the fund, representing 5% of the fund’s net assets.

Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, 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 28, 2014, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 28, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
April 16, 2014

Tax Information (Unaudited) for the Tax Year Ended 2/28/14

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:

• Less than $1,000 from short-term capital gains
   
• $2,000 from long-term capital gains, subject to the 15% rate gains category
   
• $91,000 which qualified as exempt-interest dividends.

Information on Proxy Voting Policies, Procedures, and Records

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

The description of our proxy voting policies and procedures is also available on our website, troweprice.com. To access it, click on the words “Social Responsibility” at the top of our corporate homepage. Next, click on the words “Conducting Business Responsibly” on the left side of the page that appears. Finally, click on the words “Proxy Voting Policies” on the left side of the page that appears.

Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through our website, follow the above directions to reach the “Conducting Business Responsibly” page. Click on the words “Proxy Voting Records” on the left side of that page, and then click on the “View Proxy Voting Records” link at the bottom of the page that appears.

How to Obtain Quarterly Portfolio Holdings

The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s website (sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 100 F St. N.E., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.

About the Fund’s Directors and Officers

Your fund is overseen by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of the Board’s members are independent of T. Rowe Price Associates, Inc. (T. Rowe Price), and its affiliates; “inside” or “interested” directors are employees or officers of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-638-5660.

Independent Directors
Name
(Year of Birth)
Year Elected*
[Number of T. Rowe Price	Principal Occupation(s) and Directorships of Public Companies and
Portfolios Overseen]	Other Investment Companies During the Past Five Years
William R. Brody	President and Trustee, Salk Institute for Biological Studies (2009
(1944)	to present); Director, Novartis, Inc. (2009 to present); Director, IBM
2009	(2007 to present); Director, BioMed Realty Trust (2013 to present)
[157]
Anthony W. Deering	Chairman, Exeter Capital, LLC, a private investment firm (2004 to
(1945)	present); Director, Brixmor Real Estate Investment Trust (2012 to
1983	present); Director and Member of the Advisory Board, Deutsche
[157]	Bank North America (2004 to present); Director, Under Armour
	(2008 to present); Director, Vornado Real Estate Investment Trust
	(2004 to 2012)
Donald W. Dick, Jr.	Principal, EuroCapital Partners, LLC, an acquisition and management
(1943)	advisory firm (1995 to present)
2001
[157]
Bruce W. Duncan	President, Chief Executive Officer, and Director, First Industrial Realty
(1951)	Trust, owner and operator of industrial properties (2009 to present);
2013	Chairman of the Board (2005 to present), Interim Chief Executive
[157]	Officer (2007), and Director (1999 to present), Starwood Hotels &
	Resorts, a hotel and leisure company
Robert J. Gerrard, Jr.	Advisory Board Member, Pipeline Crisis/Winning Strategies (1997
(1952)	to present); Chairman of Compensation Committee and Director,
2013	Syniverse Holdings, Inc. (2008 to 2011)
[157]
Karen N. Horn	Limited Partner and Senior Managing Director, Brock Capital
(1943)	Group, an advisory and investment banking firm (2004 to present);
2003	Director, Eli Lilly and Company (1987 to present); Director, Simon
[157]	Property Group (2004 to present); Director, Norfolk Southern (2008
	to present)
Paul F. McBride	Former Company Officer and Senior Vice President, Human
(1956)	Resources and Corporate Initiatives (2004 to 2010)
2013
[157]
Cecilia E. Rouse, Ph.D.	Dean, Woodrow Wilson School (2012 to present); Professor and
(1963)	Researcher, Princeton University (1992 to present); Director, MDRC,
2013	a nonprofit education and social policy research organization
[157]	(2011 to present); Member, National Academy of Education (2010
	to present); Research Associate, National Bureau of Economic
	Research’s Labor Studies Program (2011 to present); Member,
	President’s Council of Economic Advisors (2009 to 2011); Chair
	of Committee on the Status of Minority Groups in the Economic
	Profession, American Economic Association (2012 to present)
John G. Schreiber	Owner/President, Centaur Capital Partners, Inc., a real estate
(1946)	investment company (1991 to present); Cofounder and Partner,
1992	Blackstone Real Estate Advisors, L.P. (1992 to present); Director,
[157]	General Growth Properties, Inc. (2010 to present); Director, BXMT
	(formerly Capital Trust, Inc.), a real estate investment company
	(2012 to present); Director and Chairman of the Board, Brixmor
	Property Group, Inc. (2013 to present); Director, Hilton Worldwide
	(2013 to present)
Mark R. Tercek	President and Chief Executive Officer, The Nature Conservancy (2008
(1957)	to present); Managing Director, The Goldman Sachs Group, Inc.
2009	(1984 to 2008)
[157]
*Each independent director serves until retirement, resignation, or election of a successor.
Inside Directors
Name
(Year of Birth)
Year Elected*
[Number of T. Rowe Price	Principal Occupation(s) and Directorships of Public Companies and
Portfolios Overseen]	Other Investment Companies During the Past Five Years
Edward C. Bernard	Director and Vice President, T. Rowe Price; Vice Chairman of the
(1956)	Board, Director, and Vice President, T. Rowe Price Group, Inc.;
2006	Chairman of the Board, Director, and President, T. Rowe Price
[157]	Investment Services, Inc.; Chairman of the Board and Director,
	T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price
	Services, Inc.; Chairman of the Board, Chief Executive Officer,
	and Director, T. Rowe Price International; Chairman of the Board,
	Chief Executive Officer, Director, and President, T. Rowe Price Trust
	Company; Chairman of the Board, all funds
Michael C. Gitlin	Vice President, Price Hong Kong, Price Singapore, T. Rowe Price,
(1970)	T. Rowe Price Group, Inc., and T. Rowe Price International
2010
[52]
*Each inside director serves until retirement, resignation, or election of a successor.

Officers
Name (Year of Birth)
Position Held With Tax-Exempt
Money Fund	Principal Occupation(s)
Austin Applegate (1974)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.; formerly Senior Municipal Credit
	Research Analyst, Barclays (to 2011)
Steven G. Brooks, CFA (1954)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.
M. Helena Condez (1962)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.
G. Richard Dent (1960)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.
Roger L. Fiery III, CPA (1959)	Vice President, Price Hong Kong, Price
Vice President	Singapore, T. Rowe Price, T. Rowe Price Group,
	Inc., T. Rowe Price International, and T. Rowe
	Price Trust Company
John R. Gilner (1961)	Chief Compliance Officer and Vice President,
Chief Compliance Officer	T. Rowe Price; Vice President, T. Rowe Price
	Group, Inc., and T. Rowe Price Investment
	Services, Inc.
Gregory S. Golczewski (1966)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Trust Company
Gregory K. Hinkle, CPA (1958)	Vice President, T. Rowe Price, T. Rowe Price
Treasurer	Group, Inc., and T. Rowe Price Trust Company
Marcy M. Lash (1963)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.
Alan D. Levenson, Ph.D. (1958)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.
Patricia B. Lippert (1953)	Assistant Vice President, T. Rowe Price and
Secretary	T. Rowe Price Investment Services, Inc.
Joseph K. Lynagh, CFA (1958)	Vice President, T. Rowe Price, T. Rowe Price
President	Group, Inc., and T. Rowe Price Trust Company
Alexander S. Obaza (1981)	Vice President, T. Rowe Price, T. Rowe Price
Vice President	Group, Inc., and T. Rowe Price Trust Company
David Oestreicher (1967)	Director, Vice President, and Secretary, T. Rowe
Vice President	Price Investment Services, Inc., T. Rowe
	Price Retirement Plan Services, Inc., T. Rowe
	Price Services, Inc., and T. Rowe Price Trust
	Company; Chief Legal Officer, Vice President,
	and Secretary, T. Rowe Price Group, Inc.; Vice
	President and Secretary, T. Rowe Price and
	T. Rowe Price International; Vice President,
	Price Hong Kong and Price Singapore
Deborah D. Seidel (1962)	Vice President, T. Rowe Price, T. Rowe Price
Vice President	Group, Inc., T. Rowe Price Investment Services,
	Inc., and T. Rowe Price Services, Inc.
Chen Shao (1980)	Assistant Vice President, T. Rowe Price
Assistant Vice President
Douglas D. Spratley, CFA (1969)	Vice President, T. Rowe Price and T. Rowe Price
Vice President	Group, Inc.
Julie L. Waples (1970)	Vice President, T. Rowe Price
Vice President
Edward A. Wiese, CFA (1959)	Director and Vice President, T. Rowe Price Trust
Vice President	Company; Vice President, T. Rowe Price and
	T. Rowe Price Group, Inc.
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least 5 years.

Item 2. Code of Ethics.

The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.

Item 3. Audit Committee Financial Expert.

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

Item 4. Principal Accountant Fees and Services.

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

Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant’s financial statements and specifically include the issuance of a report on internal controls and, if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance, tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation of Federal, state, and excise tax returns. All other fees include the registrant’s pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant’s Board of Directors/Trustees.

(e)(1) The registrant’s audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted.

     (2) No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.

(g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $1,862,000 and $1,651,000, respectively.

(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. Accordingly, these services were considered by the registrant’s audit committee in maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

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

(b) Not applicable.

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

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

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

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.

(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.

    (2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

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

(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

T. Rowe Price Tax-Exempt Money Fund, Inc.
 

	By	/s/ Edward C. Bernard
		Edward C. Bernard
		Principal Executive Officer
Date     April 16, 2014

 

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 

	By	/s/ Edward C. Bernard
		Edward C. Bernard
		Principal Executive Officer
Date     April 16, 2014
	By	/s/ Gregory K. Hinkle
		Gregory K. Hinkle
		Principal Financial Officer
Date     April 16, 2014