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September 15, 1999
FUND PROFILE
T. ROWE PRICE
Prime Reserve Fund
A money market fund 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
1-800-401-4765, or by visiting our Web site at www.troweprice.com.
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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.
The fund may sell holdings for a variety of reasons, such as to adjust the
portfolio's average maturity or quality or to shift assets into
higher-yielding securities.
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, call 1-800-401-4765.
3. What are the main risks of investing in the fund?
Since the fund seeks to maintain a $1.00 share price, it should have little
risk of principal loss. However, there is no assurance the fund will avoid
principal losses in the rare event that holdings default or interest rates
rise sharply in an unusually short period.
The fund's yield will vary; it is not fixed for a specific period like the
yield on a bank certificate of deposit. This is a disadvantage when interest
rates are falling. An investment in the fund is not insured or guaranteed by
the 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.
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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. The
fund's past performance is no guarantee of its future returns.
<TABLE>
<CAPTION>
Calendar Year Total Returns
"89" "90" "91" "92" "93" "94" "95" "96" "97" "98"
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.90 7.73 5.67 3.34 2.60 3.74 5.48 4.90 5.10 5.13
----------------------------------------------------------------------
</TABLE>
Quarter ended Total return
Best quarter 6/30/89 2.30%
Worst quarter 6/30/93 0.62%
The fund can experience short-term performance swings. The best calender
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 June 30, 1999
1 year 5 years 10 years
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<S> <C> <C> <C>
Prime Reserve Fund 4.76% 5.01% 5.00%
Lipper Money Market Funds Average 4.51 4.90 4.98
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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.
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<TABLE>
Fees and Expenses of the Fund
<CAPTION>
Annual fund operating expenses
(expenses that are deducted from fund assets)
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<S> <C>
Management fee 0.37%/ // /
Other expenses 0.29%
Total annual fund operating 0.66%/ // /
expenses
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</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 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>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C>
$67 $211 $368 $822
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</TABLE>
7. Who manages the fund?
The fund is managed by T. Rowe Price Associates, Inc. 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 joined T. Rowe Price in 1984 and
has been managing investments 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 the New Account Form and return it with your check in the postpaid
envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors). 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 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 convenient exchange among our
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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. 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 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; and
. asset manager accounts.
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T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
RPS F44-035
T. Rowe Price Investment Services, Inc., Distributor
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