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FUND PROFILE
February 24, 1999
T. Rowe Price Prime Reserve Fund
A money market fund for income-oriented investors primarily seeking
preservation of capital and liquidity.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by
calling 1-800-401-4833, or by visiting our Web site at www.troweprice.com.
1. What is the fund's objective?
The fund's goals are preservation of capital, liquidity, and, consistent with
these, the highest possible current income.
2. What is the fund's principal investment strategy?
The fund, which is managed to provide a stable share price of $1.00, invests
in high-quality, U.S. dollar-denominated money market securities. The fund's
average weighted maturity will not exceed 90 days, and its yield will
fluctuate with changes in short-term interest rates. In selecting securities,
fund managers may examine the relationships among yields on various types and
maturities of money market securities in the context of their outlook for
interest rates. For example, commercial paper often offers a yield advantage
over Treasury bills. If rates are expected to fall, longer-maturities, which
typically have higher yields than shorter maturities, may be purchased to try
to preserve the fund's income level. Conversely, shorter maturities may be
favored if rates are expected to rise.
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Further information about the fund's investments, including a review of
market conditions and fund strategies and their impact on performance, is
available in the annual and semiannual shareholder reports. To obtain free
copies of any of these documents, or for shareholder inquiries, call
1-800-401-4833.
3. What are the main risks of investing in the fund?
Since money market funds such as Prime Reserve Fund are managed to maintain a
constant $1.00 share price, they should have little risk of principal loss.
However, there is no assurance the fund will avoid principal losses in the
rare event that fund holdings default or 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.
This should be an advantage when interest rates are rising but not when rates
are falling. An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
4. How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. Over time, money market securities have provided
greater stability but lower returns than bonds or stocks. If you have some
money for which safety and accessibility are more important than total return
or capital growth over time, the fund should be an appropriate investment.
The fund can be used for both regular and tax-deferred accounts, such as IRAs
and Keoghs.
5. How has the fund performed in the past?
The bar chart and the average annual total return table indicate risk by
illustrating how much returns can differ from one year to the next. Although
the fund has experienced no losses, its returns, as shown in the chart, have
reflected changes in prevailing interest rates. The fund's past performance
is no guarantee of its future returns.
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.
<TABLE>
INSERT PRF PROFILE BAR CHART
HERE
<CAPTION>
Calendar Year Total Returns
--------------------------------
<S> <C>
1989 8.90%
1990 7.73
1991 5.67
1992 3.34
1993 2.60
1994 3.74
1995 5.48
1996 4.90
1997 5.10
1998 5.13
--------------------------------
</TABLE>
The fund can also experience short-term performance swings. The best calendar
quarter return during the years depicted in the chart was 2.30% in the second
quarter of 1989, and the worst was 0.62% in the second quarter of 1993.
<TABLE>
Average Annual Total Returns
<CAPTION>
Periods ended December 31, 1998
--------------------------------------------------------------------------- 1 year 5 years 10 years
<S> <C> <C> <C> <S>
Prime Reserve Fund 5.13% 4.87% 5.24%
------------------------------------
Lipper Money Market Funds Average 4.84 4.77 5.20
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</TABLE>
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
6. What fees or expenses will I pay?
The fund is 100% no load. There are no fees or charges to buy or sell fund
shares, reinvest dividends, or exchange into other T. Rowe Price funds. There
are no 12b-1 fees.
<TABLE>
Fees and Expenses of the Fund
<CAPTION>
Annual fund operating expenses
(expenses that are deducted from fund assets)
---------------------------------------------------------------------------------
<S> <C> <S>
Management fee 0.37%
Other expenses 0.26%
Total annual fund 0.63%
operating expenses
---------------------------------------------------------------------------------
</TABLE>
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other funds. Although your actual costs may be higher
or lower, the
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table shows how much you would pay if operating expenses remain the same, you
invest $10,000, you earn a 5% annual return, and you hold the investment for
the following periods:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <S>
1 year 3 years 5 years 10 years
$64 $202 $351 $786
----------------------------------------------------------------------
</TABLE>
7. Who manages the fund?
The fund is managed by T. Rowe Price Associates. Founded in 1937, T. Rowe
Price and its affiliates manage investments for individual and institutional
accounts. The company offers a comprehensive array of stock, bond, and money
market funds directly to the investing public.
Edward A. Wiese manages the fund day-to-day and has been chairman of its
Investment Advisory Committee since 1990. He has been managing investments
for T. Rowe Price since 1985.
The following questions and answers about buying and selling shares and
services do not apply to employer-sponsored retirement plans. If you are a
participant in one of these plans, please call your plan's toll-free number
for additional information.
8. How can I purchase shares?
Fill out and return a New Account Form in the postpaid envelope, along with
your check. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors) or $50 if investing through Automatic Asset Builder.
The minimum subsequent investment is $100 ($50 for IRAs, gifts or transfers
to minors, or Automatic Asset Builder). You can also open an account by bank
wire, by exchanging from another T. Rowe Price fund, or by transferring
assets from another financial institution.
9. How can I sell shares?
You may redeem or sell any portion of your regular or IRA account on any
business day. Simply write to us or call. You can also access your account at
any time via Tele*Access /(R)/ or our Web site. We offer free exchange among
our entire family of domestic and international funds. Restrictions may apply
in special circumstances, and some redemption requests need a signature
guarantee. A $5 fee is charged for wire redemptions under $5,000.
10. When will I receive income and capital gain distributions?
The fund distributes income monthly and net capital gains, if any, at
year-end. For regular accounts, income and short-term gains are taxable at
ordinary income rates, and long-term gains are taxable at the capital gains
rate. Distributions are reinvested automatically in additional shares unless
you
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choose another option, such as receiving a check. Distributions paid to IRAs
and employer-sponsored retirement plans are automatically reinvested.
11. What services are available?
A wide range, including but not limited to:
. retirement plans for individuals and large and small businesses;
. automated information and transaction services by telephone or computer;
. electronic transfers between fund and bank accounts;
. automatic investing and automatic exchange;
. brokerage services;
. asset manager accounts.
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To Open a Mutual Fund, Asset Manager, or Brokerage Account
Investor Services
1-800-401-4833
For Information on Existing Accounts
Shareholder Services
1-800-225-5132
For Yields and Prices and Account Transactions
Tele*Access/(R)/
1-800-638-2587 24 hours, 7 days
For Fund Information and Account Transactions on the Internet
www.troweprice.com
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
Headquarters
100 East Pratt Street Baltimore, MD 21202
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