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
