- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Prime Reserve Fund
- --------------------------------------------------------------------------------
November 30, 1997
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
Prime Reserve Fund
* Subdued inflation kept money market rates mostly flat during the six-month
period.
* The Prime Reserve Fund's six-month gain was ahead of its Lipper peer
group's average gains.
* The fund's return advantage was largely due to successful management of the
fund's maturity structure.
* If current favorable conditions persist, money market rates should stay
within narrow ranges.
FELLOW SHAREHOLDERS
During the six months ended November 30, 1997, the money market began to
shake off inflation fears that had caused rates to rise earlier in the year.
Especially after June, money market yields were generally flat as inflation
remained subdued despite strong economic growth. In this environment, the Prime
Reserve Fund boosted its yield and edged out its average peer fund for both the
6- and 12-month periods.
Market Environment
At the time of our last report six months ago, inflation was a significant
concern to investors. A March 1997 interest rate hike by the Fed, intended to
curb economic growth, crowned a period of rising rates, with one-year yields
peaking near 6%. After that time, the economy continued to perform well - gross
domestic product continued to grow at a more than 3% annualized rate - but
inflation decelerated unexpectedly.
<PAGE>
[Interest Rate Levels graph showing interest rates for the 1-year Treasury
bill, 90-day Treasury bill, and Federal Funds Target Rate 11/30/96 through
11/30/97.]
A strong bond rally in April, and a subsequent easing of inflation fears,
allowed money market yields to fall back toward year-ago levels, where they
remained in the late summer and fall. Government debt paydowns in May caused no
more than a brief dip in yields; even a significant global currency crisis
emanating from Southeast Asia in October had minimal effect on money market
instruments (indeed, the only issues jeopardized by the crisis were short-term
Japanese banking securities). The yield on 90-day Treasury bills at the end of
November was only 12 basis points higher than its level one year earlier (100
basis points equal one percentage point). The one-year Treasury bill yield
climbed only nine basis points during the same period, even though the Federal
Reserve tightened monetary policy in March of 1997, moving the federal funds
target rate from 5.25% to 5.5 %.
PERFORMANCE AND STRATEGY REVIEW
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 11/30/97 6 Months 12 Months
- --------------------------------------------------------------------------------
Prime Reserve Fund 2.53% 5.06%
Lipper Money Market
Funds Average 2.45 4.88
================================================================================
In the generally quiet market environment described above, we were able
both to elevate your fund's yield and to outperform our peer group. Between May
31 and November 30, 1997, the fund's seven-day compound dividend yield jumped
from 5.09% to 5.24%. That increase contributed to a 2.53% total return for the
six-month period, a step above the 2.45% gain notched by the Lipper Money Market
Funds Average. Over the past 12 months, your fund posted a 5.06% return compared
with a 4.88% gain for the Lipper average.
The fund's increased dividend yield was partly due to modestly higher
interest rates. However, we were also able to add value by managing the
portfolio's maturity structure. After taking a generally cautious stance in the
spring, when interest rates were rising, we used the past six months to extend
the average maturity of the fund's holdings from 53 to 77 days. We accomplished
this by owning several one-year instruments, which typically have higher yields
than money market instruments with shorter maturities. To counter the added
interest rate risk of the one-year maturities, we maintained a significant stake
in more defensive one-month instruments. This "barbell" portfolio allowed us to
increase fund yield over the past six months, when rates overall were flat to
only slightly higher.
Although we shifted among different types of investments during the period,
our asset allocation strategy did not change significantly. The fund remains
heavily weighted toward bank certificates of deposit (CDs) and commercial paper.
We modestly trimmed our exposure to U.S. dollar-denominated foreign negotiable
CDs, and some of the proceeds went toward finance and credit securities. The
fund did not have any exposure to Japanese banking instruments.
<PAGE>
Continuing a long-term trend, we again mildly expanded our combined
holdings in asset-backed securities and asset-backed structured notes. These two
segments now represent 17% of assets, a significant stake for the fund. We
continue to be interested in the diversification potential and the competitive
yields these securities provide, along with their high credit quality. Finally,
our stake in floating rate instruments stayed the same at 10% of assets.
Although these securities perform well when rates drift higher (their yields
increase along with interest rates), we did not add to our holdings because
these issues recently have been priced unattractively compared with alternative
investments.
OUTLOOK
Despite the economy's strength, we believe the recent developments in Asia
and continued subdued inflation may obviate the need for any immediate action by
the Fed. Indeed, we do not expect any change in policy for the next quarter or
two. Although the Fed has maintained a bias toward higher short-term rates, it
is no longer a foregone conclusion that its next move will be a tightening.
Looking further ahead, we expect a continuation of good growth, although
perhaps a touch slower than the recent pace. Consumer spending on big ticket
items may decline, since many individuals are burdened with high debt and may be
worried about volatility in the stock markets. However, consumer confidence is
high and employment is strong. If growth slows to a sustainable pace, and
inflation does not accelerate, it is likely that yields on money market
instruments will continue to stay within narrow ranges.
Respectfully submitted,
/s/
Edward A. Wiese
President and Chairman of the Investment Advisory Committee
December 19, 1997
T. Rowe Price Prime Reserve Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Key statistics
5/31/97 11/30/97
- --------------------------------------------------------------------------------
Price Per Share ....................................... $ 1.00 $ 1.00
Dividends Per Share
For 6 months ..................................... 0.024 0.025
For 12 months .................................... 0.048 0.049
Dividend Yield (7-Day Compound) * ..................... 5.09% 5.24%
Weighted Average Maturity (days) ...................... 53 77
Weighted Average Quality ** ........................... First Tier First Tier
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the average daily net asset values per share for the same
period.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
================================================================================
<PAGE>
T. Rowe Price Prime Reserve Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
SECTOR Diversification
Percent of Percent of
Net Assets Net Assets
5/31/97 11/30/97
- --------------------------------------------------------------------------------
U.S. Negotiable Bank Notes ................................. 6% 4%
Certificates of Deposit .................................... 34 31
Domestic Negotiable CDs ........................... 3 3
Eurodollar Negotiable CDs ......................... 10 11
U.S. Dollar Denominated Foreign Negotiable CDs .... 21 17
Commercial Paper and Medium-Term Notes ..................... 59 62
Banking ........................................... 12 13
Finance and Credit ................................ 7 11
Asset-Backed ...................................... 11 10
Asset-Backed Structured Notes ..................... 4 7
Petroleum ......................................... 5 5
All Other ......................................... 20 16
Canadian Government and Municipalities ..................... -- 1
Foreign Government and Municipalities ...................... 1 1
Other Assets Less Liabilities .............................. -- 1
- --------------------------------------------------------------------------------
Total ...................................................... 100% 100%
Fixed Rate Obligations ..................................... 90% 90%
Floating Rate Instruments .................................. 10% 10%
================================================================================
<PAGE>
T. Rowe Price Prime Reserve Fund
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
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 a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Prime Reserve Fund SEC chart shown here]
Average Annual Compound Total Return
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Periods Ended 11/30/97 ......... 1 Year 3 Years 5 Years 10 Years
Prime Reserve Fund ............. 5.06% 5.16% 4.32% 5.47%
Investment return represents past performance and will vary. While the fund
is managed to maintain a stable share price of $1.00, this is not guaranteed. An
investment in the fund is not insured or guaranteed by the U.S. government.
================================================================================
<PAGE>
T. Rowe Price Prime Reserve Fund
================================================================================
Unaudited
<TABLE>
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
<CAPTION>
6 Months Year 3 Months# Year
Ended Ended Ended Ended
11/30/97 5/31/97 5/31/96 5/31/95 5/31/94 2/28/94 2/28/93
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment activities
Net investment income 0.025 0.048 0.051 0.047 0.008 0.026 0.030
Distributions
Net investment income (0.025) (0.048) (0.051) (0.047) (0.008) (0.026) (0.030)
NET ASSET VALUE
End of period ........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Ratios/Supplemental Data
Total return ............ 2.53% 4.92% 5.25% 4.85% 0.76% 2.60% 3.06%
Ratio of expenses to
average net assets ...... 0.64%+ 0.64% 0.66% 0.67% 0.73%+ 0.74% 0.75%
Ratio of net investment
income to average
net assets .............. 5.03%+ 4.83% 5.07% 4.76% 3.02%+ 2.56% 3.04%
Net assets, end of period
(in millions) ........... $ 4,540 $ 4,561 $ 4,011 $ 3,841 $ 3,627 $ 3,379 $ 3,597
====================================================================================================================================
<FN>
+ Annualized.
# The fund's fiscal year-end was changed to May 31.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Prime Reserve Fund
================================================================================
Unaudited November 30, 1997
Statement of Net Assets
- --------------------------------------------------------------------------------
Par Value
In thousands
BANK NOTES 3.6%
FCC National Bank of Wilmington, 5.82%, 9/18/98 ...... $ 25,000 $ 24,992
First National Bank of Boston
5.85%, 7/30/98 ............................... 25,000 25,000
5.87%, 10/14/98 .............................. 25,000 25,012
Mellon Bank N.A., 6.25%, 12/16/97 .................... 50,000 50,013
National Bank of Commerce, VR, 5.778%, 12/24/97 ...... 15,000 15,010
Suntrust Bank, 5.83%, 7/14/98 ........................ 25,000 24,991
Total Bank Notes (Cost $165,018) ..................... 165,018
CERTIFICATES OF DEPOSIT 31.1%
Abbey National, (London), 5.59%, 12/31/97 ............ 50,000 50,001
Banco Bilbao Vizcaya, (London)
5.78%, 2/20 - 2/27/98 ........................ 51,000 51,001
Banco Santander, 5.79%, 1/20/98 ...................... 10,000 10,000
Bank of Brussels, 5.81%, 8/4/98 ...................... 19,000 18,996
Bank of Montreal
5.77%, 1/14/98 ............................... 40,000 40,000
5.81%, 11/9/98 ............................... 25,000 24,991
Bank of Nova Scotia, 5.925%, 8/14/98 ................. 25,000 25,012
Bankers Trust, 5.88%, 7/14/98 ........................ 20,000 20,010
Banque Nationale de Paris
5.87%, 8/20/98 ............................... 9,900 9,907
5.96%, 6/30/98 ............................... 15,000 15,006
5.97%, 6/16/98 ............................... 20,000 20,018
Barclays Bank PLC
(London)
5.63%, 1/20/98 ............................... 10,000 10,000
5.67%, 2/10/98 ............................... 20,000 19,996
5.85%, 7/28/98 ............................... 30,000 30,017
Bayerische Vereinsbank
5.70%, 10/6/98 ............................... 27,900 27,884
5.79%, 9/21/98 ............................... 30,000 29,988
(London), 5.77%, 2/24/98 ......................... 47,000 47,001
Berliner Handels und Frankfurt, (London)
5.60%, 12/22/97 .............................. 21,000 21,000
Canadian Imperial Bank of Commerce
5.86%, 8/11/98 ............................... $ 25,000 $ 25,001
5.95%, 6/29/98 ............................... 20,000 20,018
Commerzbank
5.78%, 9/18/98 ............................... 25,000 24,983
5.90%, 9/10/98 ............................... 9,000 9,009
(London), 6.00%, 7/7/98 .......................... 15,000 15,009
Credit Suisse, 5.80%, 10/13/98 ....................... 25,000 25,000
Creditanstalt Bankverien, 5.76%, 2/24/98 ............. 50,000 50,000
Deutsche Bank AG
5.73%, 2/27/98 ............................... 25,000 24,999
(London), 5.85%, 9/18/98 ......................... 30,000 30,021
<PAGE>
First Tennessee Bank N.A., 5.54%, 12/8/97 ............ 15,000 15,000
Generale Bank, 5.81%, 2/27 - 7/31/98 ................. 50,000 49,994
Huntington National Bank, 5.84%, 7/27/98 ............. 25,000 24,997
ING Bank
5.85%, 10/30/98 .............................. 35,000 35,014
5.87%, 7/29/98 ............................... 10,000 10,001
National Australia Bank, 5.735%, 10/13/98 ............ 30,000 29,989
National Westminster Bank, 5.66%, 3/5/98 ............. 20,000 19,998
Royal Bank of Canada, 5.65%, 3/3/98 .................. 30,000 29,991
Royal Bank of Scotland
5.85%, 10/5/98 ............................... 25,000 25,015
5.86%, 10/5/98 ............................... 10,000 10,007
Societe Generale
5.56%, 12/3/97 ............................... 24,825 24,825
5.80%, 1/13 - 2/3/98 ......................... 28,500 28,504
Svenska Handelsbank
5.78%, 2/27/98 ............................... 24,800 24,801
(London), 5.62%, 12/19/97 ........................ 15,000 15,000
Swiss Bank
5.75%, 2/11/98 ............................... 49,800 49,800
5.76%, 2/17/98 ............................... 40,000 40,000
5.87%, 8/19/98 ............................... 40,000 39,998
Toronto Dominion Bank, (London), 5.76%, 2/24/98 ...... 38,000 38,000
Union Bank, 5.80%, 10/6/98 ........................... 29,900 29,900
Westdeutsche Landesbank
5.61%, 12/31/97 .............................. 75,000 75,000
Westdeutsche Landesbank
(London)
5.82%, 8/3/98 ................................ $ 33,000 $ 32,990
5.88%, 7/16/98 ............................... 16,000 16,002
Wilmington Trust, 5.68%, 2/5/98 ...................... 50,000 50,000
Total Certificates of Deposit (Cost $1,409,694) ...... 1,409,694
COMMERCIAL PAPER 53.7%
ABB Treasury Center (USA), 4(2), 5.62%, 12/3/97 ........ 25,000 24,992
AC Acquisition, 5.50%, 12/12 - 12/19/97 ................ 18,655 18,617
Allied Signal
5.58%, 12/17/97 ................................ 19,957 19,908
5.62%, 12/30/97 ................................ 20,000 19,909
AON
5.54%, 12/1/97 ................................. 5,800 5,800
5.60%, 12/11/97 ................................ 5,360 5,352
5.62%, 12/11/97 ................................ 10,800 10,783
Asset Securitization Cooperative
4(2)
5.50%, 12/4/97 ................................. 25,000 24,988
5.52%, 12/5/97 ................................. 38,000 37,977
5.60%, 2/20/98 ................................. 20,000 19,748
Associates Finance Services
5.52%, 12/12/97 ................................ 4,300 4,293
5.60%, 12/12/97 - 2/12/98 ...................... 18,800 18,683
Barnett Banks, 5.59%, 12/16/97 ......................... 25,000 24,942
BBL North America, 5.58%, 12/29/97 ..................... 11,891 11,839
<PAGE>
Bell Atlantic Financial Services, 5.52%, 12/1/97 ....... 20,000 20,000
Bell South Telecommunication, 5.80%, 12/1/97 ........... 2,000 2,000
Bex America Finance
5.51%, 12/8/97 ................................. 20,000 19,979
5.70%, 2/23/98 ................................. 20,000 19,734
BHF Finance (Delaware), 5.50%, 3/3/98 .................. 50,000 49,297
BMW U.S. Capital
5.50%, 12/19/97 ................................ 22,000 21,940
5.52%, 12/18/97 ................................ 31,700 31,617
5.57%, 12/19/97 ................................ 25,370 25,299
5.60%, 12/18/97 ................................ 10,000 9,974
BP America, 5.80%, 12/1/97 ............................. $ 40,000 $40,000
Caisse D'Amortissement, 5.55%, 12/9/97 ................. 1,600 1,598
Caisse des Depots et Consignations
4(2)
5.55%, 12/12/97 ................................ 25,000 24,957
5.60%, 12/19/97 ................................ 7,275 7,255
California Pollution Control, 5.60%, 12/18/97 .......... 25,000 25,000
Canada Government, 5.55%, 12/5/97 ...................... 39,540 39,516
Chevron
5.50%, 12/9 - 12/11/97 ......................... 35,000 34,953
5.60%, 12/10/97 ................................ 30,000 29,958
Ciesco L.P. ............................................
5.50%, 12/4/97 ................................. 10,000 9,995
5.51%, 12/11/97 ................................ 25,000 24,962
5.80%, 12/4/97 ................................. 100 100
Commercial Credit
5.50%, 12/8/97 ................................. 50,000 49,946
5.68%, 2/18/98 ................................. 20,000 19,751
Corporate Asset Funding, 4(2), 5.53%, 12/2/97 .......... 53,000 52,992
Countrywide Funding
5.63%, 2/3/98 .................................. 25,000 24,750
5.70%, 1/13/98 ................................. 5,000 4,966
Cregem North America, 5.61%, 2/9/98 .................... 50,000 49,455
Delaware Funding
4(2)
5.53%, 12/1 - 12/10/97 ......................... 10,110 10,103
5.55%, 12/2/97 ................................. 60,716 60,706
5.60%, 12/15/97 ................................ 30,000 29,935
Den Danske, 5.50%, 12/8/97 ............................. 65,000 64,931
Dover, 4(2), 5.60%, 12/18/97 ........................... 22,500 22,441
Dresdner U.S. Finance, 5.60%, 12/2/97 .................. 100,000 99,984
Electronic Data Systems, 4(2), 5.55%, 12/18/97 ......... 13,900 13,864
Falcon Asset Securitization
4(2)
5.53%, 12/5/97 ................................. 7,500 7,495
5.58%, 12/17/97 ................................ 36,000 35,911
5.60%, 12/22/97 ................................ 25,000 24,918
5.64%, 1/21/98 ................................. 21,000 20,832
Falcon Asset Securitization
4(2)
5.65%, 12/17/97 $ .............................. 4,135 $ 4,125
5.70%, 2/5/98 .................................. 10,625 10,514
<PAGE>
Finova Capital
5.63%, 2/12/98 ................................. 25,000 24,715
5.70%, 2/11/98 ................................. 7,000 6,920
Ford Credit, 5.60%, 12/4/97 - 2/18/98 .................. 88,000 87,510
Gannett, 5.80%, 12/1/97 ................................ 2,300 2,300
General Electric Capital, 5.70%, 1/22/98 ............... 50,000 49,588
General Motors Acceptance Corporation, 5.63%, 12/9/97 .. 8,050 8,040
Golden Managers Acceptance, 5.60%, 12/18/97 ............ 10,100 10,073
Island Finance of Puerto Rico
5.60%, 12/11 - 12/15/97 ........................ 28,300 28,251
5.61%, 12/8/97 ................................. 20,000 19,978
5.68%, 2/17/98 ................................. 29,800 29,433
Koch Industries, 5.63%, 12/1/97 ........................ 50,000 50,000
Lucent Technology, 5.60%, 12/22/97 ..................... 25,000 24,918
Market Street Funding, 5.64%, 12/9/97 .................. 10,000 9,987
Merrill Lynch
5.53%, 12/15/97 ................................ 6,000 5,987
5.55%, 1/30/98 ................................. 25,000 24,769
Metlife Funding, 5.70%, 1/23/98 ........................ 39,159 38,830
Nationsbank, 5.60%, 2/13/98 ............................ 25,000 24,712
Nordbanken North America, 5.55%, 1/8/98 ................ 19,800 19,684
Preferred Receivables Funding
5.51%, 12/11/97 ................................ 12,000 11,981
5.58%, 12/2/97 ................................. 27,680 27,676
5.60%, 12/1/97 ................................. 29,300 29,300
Progress Capital Holdings, 5.60%, 12/4/97 ............ 10,000 9,995
Repeat Offering Security
5.65%, 2/3 - 2/6/98 .......................... 47,900 47,417
5.73%, 2/27/98 ............................... 17,000 16,762
Rio Tinto Finance, 5.60%, 12/17/97 ................... 16,000 15,960
Safeco Credit
5.56%, 12/18/97 .............................. 19,000 18,950
5.60%, 12/8/97 ............................... 1,281 1,280
5.67%, 2/5/98 ................................ 32,850 32,508
5.68%, 1/29/98 ............................... 20,000 19,814
5.70%, 2/19/98 ............................... 10,000 9,873
SBC Communications, 5.80%, 12/1/97 ................... $ 12,500 $ 12,500
Smith Barney, 5.62%, 1/21/98 ......................... 45,000 44,642
Snap On Tools, 5.55%, 12/4/97 ........................ 10,000 9,995
Southern New England Telecommunications, 4(2)
5.57%, 12/12/97 .............................. 14,000 13,976
Statoil (Den Norske Stats Oljeselskap)
5.56%, 12/3/97 ............................... 9,365 9,362
5.58%, 12/10/97 .............................. 32,000 31,956
Sunamerica Life Insurance, 5.51%, 12/15/97 ........... 24,750 24,697
Sysco, 4(2), 5.54%, 12/9/97 .......................... 20,000 19,975
Tasmanian Public Finance, 5.54%, 7/8/98 .............. 13,000 12,562
Telstra, 5.50%, 12/10/97 ............................. 5,000 4,993
Transamerica Finance
5.54%, 12/9/97 ............................... 30,000 29,963
5.70%, 1/22/98 ............................... 17,000 16,860
UBS Finance (Delaware), 5.62%, 12/1/97 ............... 100,000 100,000
<PAGE>
Unifunding
5.54%, 12/15/97 .............................. 7,000 6,985
5.57%, 12/15/97 .............................. 22,000 21,953
5.60%, 12/15/97 .............................. 12,700 12,672
Yale University
5.52%, 12/18/97 .............................. 7,795 7,775
5.60%, 12/11/97 .............................. 38,700 38,640
Yorkshire Building Society, 5.55%, 1/13/98 ........... 19,800 19,669
Total Commercial Paper (Cost $2,439,970) ............. 2,439,970
MEDIUM-TERM NOTES 10.0%
Ford Capital, 9.00%, 8/15/98 ............................... 13,420 13,701
Ford Motor Credit, 6.25%, 2/26/98 .......................... 5,000 5,006
Goldman Sachs Group L.P., VR
5.688%, 12/3/97 .................................... 79,775 79,775
Household Finance, 7.55%, 3/16/98 .......................... 5,000 5,026
PHH, VR, 5.656%, 12/10/97 .................................. 50,000 50,000
Rabobank, VR, 5.688%, 12/19/97 + ........................... 96,584 96,584
Sears Roebuck Acceptance, 6.25%, 10/6/98 ................... 35,000 35,118
Short Term Card Account Trust, (144a), VR, 5.708%, 12/15/97 56,000 56,000
SMM Trust, VR, 5.688%, 12/26/97 ............................ 75,000 75,000
Tiers Trust, VR, (144a), 5.688%, 12/15/97 .................. 39,850 39,850
Total Medium-Term Notes (Cost $456,060) ....................456,060
U.S. GOVERNMENT AGENCY OBLIGATIONS 0.2%
Federal Home Loan Mortgage, Discount Notes, 5.55%, 12/5/97 . $6,783 $6,779
Total U.S. Government Agency Obligations (Cost $6,779) ..... 6,779
FUNDING AGREEMENTS 0.9%
General American Life Insurance, VR, 5.85%, 12/1/97 + ...... 39,850 39,850
Total Funding Agreements (Cost $39,850) .................... 39,850
Total Investments in Securities
99.5% of Net Assets (Cost $4,517,371) ...................... $ 4,517,371
Other Assets Less Liabilities .............................. 22,533
NET ASSETS ................................................. $ 4,539,904
Net Assets Consist of:
Accumulated net investment income -
net of distributions ....................................... $ 814
Accumulated net realized gain/loss -
net of distributions ....................................... (573)
Paid-in-capital applicable to 4,541,160,435
shares of $0.01 par value capital stock
outstanding; 15,000,000,000 shares authorized .............. 4,539,663
<PAGE>
NET ASSETS ................................................. $ 4,539,904
NET ASSET VALUE PER SHARE .................................. $ 1.00
+ Private Placement
VR Variable Rate
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors".
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers - total of such securities at period-end amounts to
2.1% of net assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
================================================================================
Unaudited
================================================================================
Statement of Operations
In thousands
6 Months
Ended
11/30/97
Investment Income
Interest income $ ............................................ 130,420
Expenses
Investment management .................................... 8,608
Shareholder servicing .................................... 5,443
Prospectus and shareholder reports ....................... 469
Custody and accounting ................................... 145
Registration ............................................. 47
Legal and audit .......................................... 22
Directors ................................................ 20
Miscellaneous ............................................ 40
Total expenses ........................................... 14,794
Net investment income ........................................ 115,626
Realized Gain (Loss)
Net realized gain (loss) on securities ....................... 700
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ....................................... $116,326
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
T. Rowe Price Prime Reserve Fund
Unaudited
================================================================================
Statement of Changes in Net Assets
In thousands
6 Months Year
Ended Ended
11/30/97 5/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income ........................... $ 115,626 $ 209,649
Net realized gain (loss) ........................ 700 828
Increase (decrease) in net assets from operations 116,326 210,477
Distributions to shareholders
Net investment income ........................... (115,626) (209,649)
Capital share transactions *
Shares sold ..................................... 4,531,026 9,635,634
Distributions reinvested ........................ 110,976 202,044
Shares redeemed ................................. (4,664,110) (9,288,213)
Increase (decrease) in net assets from capital
share transactions .............................. (22,108) 549,465
Net Assets
Increase (decrease) during period ................... (21,408) 550,293
Beginning of period ................................. 4,561,312 4,011,019
End of period ....................................... $ 4,539,904 $ 4,561,312
*Share information
Shares sold ..................................... 4,531,014 9,635,634
Distributions reinvested ........................ 110,976 202,044
Shares redeemed ................................. (4,664,094) (9,288,213)
Increase (decrease) in shares outstanding ....... (22,104) 549,465
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Prime Reserve Fund
================================================================================
Unaudited November 30, 1997
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Prime Reserve 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 March 3, 1976.
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 discounts on debt securities are
amortized for both financial reporting and tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
NOTE 2 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $1,273,000, which expire in 1998. The fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
At November 30, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $4,517,371,000.
<PAGE>
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 $1,396,000 was payable at November 30, 1997. The fee is computed daily
and paid monthly, and consists of an individual fund fee equal to 0.05% 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 0.30% for assets in excess of $80 billion. At
November 30, 1997, and for the six months 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.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries 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. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $4,538,000 for the six months
ended November 30, 1997, of which $901,000 was payable at period-end.
Additionally, through August 18, 1997, the fund was one of several T. Rowe
Price-sponsored mutual funds (underlying funds) in which the T. Rowe Price
Spectrum Funds (Spectrum) may invest. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. For the six months ended
November 30, 1997, the fund was allocated $72,000 of Spectrum expenses, $20,000
of which were payable at period-end.
<PAGE>
T. Rowe Price Shareholder Services
================================================================================
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE Shareholder service representatives are available from 8
a.m. to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5
p.m. ET on weekends. Call 1-800-225-5132 to speak directly with a
representative who will be able to assist you with your accounts.
IN PERSON Visit one of our investor center locations to meet with
a representative who will be able to assist you with your
accounts. You can also drop off applications or obtain
prospectuses and other literature at these centers.
AUTOMATED 24-HOUR SERVICES
TELE*ACCESS [Registration Mark] Call 1-800-638-2587 to obtain
information such as account balance, date and amount of your last
transaction, latest dividend payment, fund prices, and yields.
Additionally, you have the ability to request prospectuses,
statements, and account and tax forms; to reorder checks; and to
initiate purchase, redemption, and exchange orders for
identically registered accounts.
T.ROWE PRICE ONLINE Through a personal computer via dial-up
modem, you can replicate all the services available on
Tele*Access plus conduct transactions in your Discount Brokerage
and Variable Annuity accounts.
ACCOUNT SERVICES
CHECKING Write checks for $500 or more on any money market and
most bond fund accounts (except the High Yield and Emerging
Markets Bond Funds).
AUTOMATIC INVESTING Build your account over time by investing
directly from your bank account or paycheck with Automatic Asset
Builder. Additionally, Automatic Exchange enables you to set up
systematic investments from one fund account into another, such
as from a money fund into a stock fund. A $50 minimum makes it
easy to get started.
AUTOMATIC WITHDRAWAL If you need money from your fund account on
a regular basis, you can establish scheduled, automatic
redemptions.
DIVIDEND AND CAPITAL GAINS PAYMENT OPTIONS Reinvest all or some
of your distributions, or take them in cash. We give you maximum
flexibility and convenience.
<PAGE>
DISCOUNT BROKERAGE*
INVESTMENTS AVAILABLE You can trade stocks, bonds, options,
precious metals, and other securities at a savings over regular
commission rates.
TO OPEN AN ACCOUNT Call a shareholder service representative for
more information.
INVESTMENT INFORMATION
COMBINED STATEMENT A comprehensive overview of your T. Rowe Price
accounts is provided. The summary page gives you earnings by tax
category, provides total portfolio value, and lists your
investments by type-stock, bond, and money market. Detail pages
itemize account transactions by fund.
SHAREHOLDER REPORTS Portfolio managers review the performance of
the funds in plain language and discuss T. Rowe Price's economic
outlook.
T. ROWE PRICE REPORT This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T.
Rowe Price's economic perspective.
PERFORMANCE UPDATE This quarterly report reviews recent market
develop- ments and provides comprehensive performance information
for every T. Rowe Price fund.
INSIGHTS This library of information includes reports on mutual
fund tax issues, investment strategies, and financial markets.
DETAILED INVESTMENT GUIDES Our widely acclaimed Asset Mix
Worksheet, College Planning Kit, Diversifying Overseas: A Guide
to International Investing, Retirees Financial Guide, and
Retirement Planning Kit (also available on disk for PC use) can
help you determine and reach your investment goals.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
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
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
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
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
<PAGE>
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured 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 Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Government 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
<PAGE>
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.
** Formerly the OTC Fund.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access [Registration Mark]:
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
<PAGE>
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T.Rowe Price Prime Reserve Fund. [Registration Mark]
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F44-051 11/30/97
