June 19, 2000
To the Board of Directors and Shareholders of
T. Rowe Price Prime Reserve Fund, Inc.
In planning and performing our audit of the financial statements of
T. Rowe Price Prime Reserve Fund, Inc. (hereafter referred to as
the "Fund") for the year ended May 31, 2000, we considered its internal
control, including control activities for safeguarding securities,
in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on
internal control.
The management of the Fund is responsible for establishing and
maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally,
controls that are relevant to an audit pertain
to the entity's objective of preparing financial statements
for external purposes that are fairly presented
in conformity with generally accepted accounting principles.
Those controls include the safeguarding
of assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors
or fraud may occur and not be detected. Also, projection of any
evaluation of internal control to future periods is subject to the
risk that controls may become inadequate because of changes in
conditions or that the effectiveness of their design and
operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be material
weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a
condition in which the design or operation of one or more of
the internal control components does not reduce to a relatively
low level the risk that misstatements caused by error or fraud
in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within
a timely period by employees in the normal course of
performing their assigned functions. However, we noted no
matters involving internal control and its operation, including
controls for safeguarding securities, that we consider to be
material weaknesses as
defined above as of May 31, 2000.
This report is intended solely for the information and use
of management, the Board of Directors of T. Rowe Price Prime
Reserve Fund, Inc., and the Securities and Exchange Commission and is not
intended to be and should not be used by anyone other then
these specified parties.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Baltimore, Maryland
