Item 1. Report to Shareholders
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Performance Comparison
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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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
Prime Reserve Fund
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As of 5/31/03
Lipper
Money Market Prime
Funds Average Reserve Fund
05/31/93 10000 10000
05/31/94 10272 10273
05/31/95 10761 10771
05/31/96 11316 11336
05/31/97 11868 11893
05/31/98 12473 12507
05/31/99 13062 13109
05/31/00 13726 13793
05/31/01 14499 14596
05/31/02 14812 14956
05/31/03 14954 15107
Average Annual Compound Total Return
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Periods Ended
5/31/03 1 Year 3 Years 5 Years 10 Years
Prime Reserve Fund 1.01% 3.08% 3.85% 4.21%
Lipper Money Market
Funds Average 0.77 2.70 3.54 4.10
Returns do not reflect taxes that the shareholder may pay on fund distributions.
Past performance cannot guarantee future results.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Dear Shareholder
Reflecting low money market rates, your fund had a positive return of 1.01%
during the 12 months ended May 31, 2003. It outperformed the Lipper average of
similarly managed funds during the period due primarily to an emphasis on
higher-yielding money market securities as interest rates declined.
Interest Rate Levels
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6-Month 3-Month
Treasury Treasury Federal Funds
Bill Bill Target Rate
5/31/2002 1.88 1.72 1.75
6/30/2002 1.74 1.68 1.75
7/31/2002 1.68 1.69 1.75
8/31/2002 1.66 1.67 1.75
9/30/2002 1.5 1.55 1.75
10/31/2002 1.41 1.45 1.75
11/30/2002 1.28 1.21 1.25
12/31/2002 1.2 1.19 1.25
1/31/2003 1.18 1.17 1.25
2/28/2003 1.18 1.19 1.25
3/31/2003 1.11 1.11 1.25
4/30/2003 1.14 1.11 1.25
5/31/2003 1.08 1.1 1.25
As you know, the fund seeks preservation of capital, liquidity, and, consistent
with these, the highest possible current income by investing in a diversified
portfolio of high-quality, U.S. dollar-denominated money market securities. The
fund's average weighted maturity will not exceed 90 days, and we will not
purchase any security with a maturity longer than 13 months.
As shown in the Portfolio Characteristics table, the fund's weighted average
maturity slipped from 63 days to 53 days during its fiscal year. Its simple
seven-day dividend yield also declined from 1.45% to 0.62%, reflecting the
decline in interest rates during that period. The fund's price per share
remained steady at $1.00, and its weighted average quality remained very high
because we continued to focus primarily on money market instruments with the
highest credit quality.
Portfolio Characteristics
Periods Ended 5/31/02 5/31/03
Price Per Share $ 1.00 $ 1.00
Dividend Yield
(7-Day Simple)* 1.45% 0.62%
Weighted Average
Maturity (days) 63 53
Weighted Average
Quality ** AAA- AAA-
* Dividends earned for the last seven days of the period indicated are
annualized and divided by the fund's net asset value.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by the national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
Note: A money fund's yield more closely reflects its current earnings than the
total return.
We thank you for your continued support.
Respectfully submitted,
James S. Riepe
Chairman
June 13, 2003
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Financial Highlights For a share outstanding throughout each period
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Year
Ended
5/31/03 5/31/02 5/31/01 5/31/00 5/31/99
NET ASSET VALUE
Beginning of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment
activities
Net investment
income
(loss) 0.010 0.024 0.057 0.051 0.047
Distributions
Net investment
income (0.010) (0.024) (0.057) (0.051) (0.047)
NET ASSET VALUE
End of period 1.000 1.000 1.000 1.000 1.000
----- ----- ----- ----- -----
Ratios/Supplemental Data
Total return^ 1.01% 2.47% 5.82% 5.22% 4.82%
Ratio of total
expenses to
average net
assets 0.64% 0.63% 0.59% 0.62% 0.66%
Ratio of net
investment
income (loss)
to average
net assets 1.01% 2.44% 5.66% 5.11% 4.70%
Net assets,
end of period
(in millions) $ 5,652 $ 5,531 $ 5,758 $ 5,618 $ 5,169
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials May 31, 2003
Statement of Net Assets Par Value
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In thousands
BANK NOTES 1.6%
American Express Centurion Bank
1.31%, 6/11/03 $ 9,750 $ 9,750
1.31%, 6/9/03 3,000 3,000
US Bank National Assn.,
1.31%, 7/8/03 75,000 75,000
Total Bank Notes (Cost $87,750) 87,750
CERTIFICATES OF DEPOSIT 48.1%
Abbey National Treasury Services,
1.32%, 9/23/03 49,500 49,500
American Express Centurion Bank,
1.25%, 6/16/03 50,000 50,000
Australia & New Zealand Banking,
1.25%, 7/18/03 50,000 50,000
Bank of Montreal, London,
1.25%, 6/30/03 100,000 100,000
Bank of Nova Scotia, London,
1.26%, 6/19/03 75,000 75,000
Bank of Scotland,
1.26%, 7/2/03 46,500 46,500
Barclays Bank
1.18%, 1/5/04 35,000 35,000
1.24%, 8/4/03 50,000 50,004
London, 1.26%, 6/16/03 25,000 25,000
Bayerische Landesbank Girozentrale
1.29%, 7/15/03 25,000 25,000
1.30%, 7/16/03 24,500 24,500
2.10%, 3/12/04 60,000 60,421
London, 1.35%, 6/17/03 34,000 34,000
BNP Paribas
London
1.18%, 6/18/03 50,000 50,000
1.26%, 7/30/03 50,000 50,000
Canadian Imperial Bank of Commerce
1.22%, 4/2/04 10,000 10,000
1.31%, 7/7/03 24,750 24,750
Comerica Bank, 1.27%, 8/19/03 49,650 49,651
Credit Agricole Indosuez
1.25%, 6/23/03 25,000 25,000
London, 1.335%, 6/18/03 50,000 50,000
Credit Suisse
First Boston, 1.255%, 6/25/03 50,000 50,000
Danske Bank, 1.26%, 6/30/03 25,000 25,000
Deutsche Bank,
1.305%, 7/2/03 $ 100,000 $ 100,000
Dexia Bank Belgium,
1.255%, 6/30/03 100,000 100,000
First Tennessee Bank,
1.25%, 7/22/03 49,750 49,750
Fortis Bank, 1.25%, 6/2/03 50,000 50,000
HBOS Treasury Services,
London, 1.25%, 6/27/03 100,000 100,000
KBC Bank, 1.25%, 6/9/03 49,500 49,500
Landesbank Baden-
Wuerttemburg, 1.255%, 6/23/03 99,000 99,000
Landesbank Hessen-
Thuringen, London,
1.26%, 7/30/03 80,000 80,000
Lloyds Bank, London,
1.25%, 6/20/03 50,000 50,000
Marshall & Ilsley Bank,
1.18%, 6/19/03 49,300 49,300
Mercantile Safe Deposit & Trust
1.25%, 4/14/04 10,000 10,000
1.30%, 3/29/04 9,750 9,750
National Australia Bank, London,
1.33%, 9/24/03 50,000 50,002
Nordea Bank Finland
1.305%, 4/13/04 49,800 49,800
1.23%, 8/26/03 11,700 11,697
1.27%, 6/30/03 6,500 6,499
Nordeutsche Landesbank
London
1.26%, 6/18 - 7/31/03 125,000 125,000
1.27%, 7/2/03 30,000 30,000
Northern Rock
London
1.25%, 7/1/03 50,000 50,000
Rabobank Nederland
London
1.25%, 6/12/03 110,000 110,000
Royal Bank of Canada,
1.34%, 7/17/03 50,000 50,000
Royal Bank of Scotland, London,
1.25%, 6/25/03 50,000 50,000
San Paolo IMI
1.25%, 6/2 - 6/3/03 95,000 95,000
1.32%, 7/1/03 26,000 26,000
Skandinaviska Enskilda Banken,
1.25%, 7/31/03 50,000 50,000
Societe Generale
London
1.32%, 7/7/03 55,000 55,000
1.335%, 3/31/04 20,000 20,006
Toronto-Dominion Bank,
1.25%, 7/25/03 $ 50,000 $ 50,000
Wells Fargo Bank,
1.25%, 6/24/03 49,700 49,700
Westdeutsche Landesbank
1.21%, 8/12/03 14,750 14,750
1.25%, 4/7/04 49,850 49,850
London, 1.30%, 7/21/03 25,000 25,000
Wilmington Trust,
1.22%, 8/27/03 44,500 44,500
Total Certificates of Deposit (Cost $2,719,430) 2,719,430
COMMERCIAL PAPER 40.5%
Alpine Securitization
4(2)
1.25%, 6/17/03 50,000 49,972
1.26%, 6/17/03 25,000 24,986
Asset Portfolio Funding, 4(2),
1.22%, 7/3/03 6,700 6,693
Asset Securitization Cooperative, 4(2),
1.25%, 6/17/03 35,000 34,981
Atlantic Asset Securitization
1.26%, 6/12 - 6/24/03 50,772 50,749
4(2)
1.25%, 6/10/03 30,000 29,991
1.26%, 6/2 - 6/27/03 22,071 22,058
1.27%, 6/9/03 10,534 10,531
CBA (Delaware) Finance
1.255%, 6/5/03 100,000 99,986
1.27%, 7/14/03 2,100 2,097
Citibank Credit Card Issuance Trust
1.26%, 6/17/03 5,500 5,497
4(2)
1.24%, 6/27/03 40,000 39,964
1.25%, 6/4 - 6/6/03 100,000 99,986
Corporate Asset Funding, 4(2),
1.19%, 9/15/03 50,000 49,825
Corporate Receivables
4(2)
1.22%, 7/9/03 50,000 49,936
1.25%, 6/13/03 50,000 49,979
Danske Corporation
1.25%, 6/11/03 1,050 1,050
1.365%, 6/6/03 49,400 49,390
Delaware Funding
4(2)
1.24%, 6/12/03 $ 101,135 $ 101,097
1.26%, 6/24/03 100,000 99,919
Discover Card Master Trust
4(2)
1.26%, 7/17/03 122,995 122,869
Electricite de France
1.26%, 6/6 - 6/16/03 6,160 6,158
Fairway Finance
1.26%, 6/17/03 1,379 1,378
4(2)
1.25%, 6/23/03 3,000 2,998
1.26%, 6/20 - 6/23/03 53,806 53,770
1.27%, 6/10/03 500 500
Falcon Asset Securitization
4(2)
1.24%, 6/4/03 11,000 10,999
1.25%, 6/5 - 6/25/03 58,585 58,558
1.26%, 6/13/03 23,225 23,215
FCAR Owner Trust, 1.25%, 6/17/03 79,500 79,456
Ford Credit Floorplan Master Owner Trust
4(2)
1.27%, 7/1 - 7/25/03 50,150 50,059
Giro Funding
1.20%, 6/16/03 50,000 49,975
4(2)
1.26%, 7/8/03 1,800 1,798
1.27%, 6/27/03 50,000 49,954
Giro Multi-Funding
4(2)
1.25%, 6/16/03 50,000 49,974
1.26%, 6/12 - 6/20/03 40,000 39,979
Greyhawk Capital,
1.25%, 6/5/03 30,000 29,996
Home Depot, 4(2), 1.24%, 6/5/03 50,000 49,993
K2
4(2)
1.23%, 7/3/03 11,000 10,988
1.31%, 6/9/03 2,700 2,699
Kitty Hawk Funding, 4(2),
1.30%, 6/18/03 $ 3,693 $ 3,691
MassMutual Funding
4(2)
1.25%, 6/6 - 7/29/03 3,020 3,018
MBNA Master Credit Card Trust II
1.26%, 7/22/03 44,200 44,121
4(2), 1.26%, 6/3/03 6,000 6,000
New Center Asset Trust
1.26%, 6/6 - 7/30/03 114,000 113,877
New York State Power Authority,
1.26%, 6/5/03 24,653 24,649
Old Line Funding, 4(2),
1.25%, 6/10/03 10,000 9,997
Paradigm Funding
1.25%, 6/4/03 50,000 49,995
4(2)
1.26%, 6/11/03 14,500 14,495
1.27%, 6/10/03 50,000 49,984
Park Avenue Receivables
4(2)
1.24%, 6/10/03 40,000 39,988
1.25%, 6/12 - 6/24/03 111,544 111,484
1.26%, 6/3/03 50,000 49,996
Pennine Funding, 4(2),
1.27%, 6/16/03 16,500 16,491
Preferred Receivables Funding
4(2)
1.25%, 6/23/03 51,525 51,508
1.26%, 6/12/03 5,360 5,358
Province of Quebec,
1.25%, 10/10/03 7,000 6,968
Stadshypotek Delaware,
1.25%, 7/8/03 4,500 4,494
Stanford University,
1.27%, 6/9/03 10,000 9,997
Svenska Handelsbanken,
1.30%, 6/20/03 2,000 1,999
Total Fina Elf Capital, 4(2),
1.32%, 6/2/03 6,643 6,643
Toyota Motor Credit Corp., 4(2),
1.25%, 6/17/03 3,390 3,388
UBS Finance
1.25%, 6/4/03 3,200 3,199
1.26%, 6/10 - 6/25/03 15,855 15,845
Wal-Mart Funding
4(2)
1.24%, 6/26/03 20,000 19,983
1.25%, 6/26/03 50,000 49,956
Total Commercial Paper (Cost $2,291,127) 2,291,127
FUNDING AGREEMENTS 3.7%
Allstate Life Insurance
VR
1.468%, 6/2/03, + $ 25,000 $ 25,000
1.54%, 6/2/03, + 25,000 25,000
GE Life & Annuity, VR,
1.3625%, 6/12/03 50,000 50,000
Protective Life, VR,
1.50%, 6/2/03 12,500 12,500
Security Life Of Denver,
1.36%, 6/23/03 30,000 30,000
Transamerica Occidential Life
VR
1.46%, 6/2/03 40,000 40,000
1.47%, 6/2/03 25,000 25,000
Total Funding Agreements (Cost $207,500) 207,500
MEDIUM-TERM NOTES 7.6%
3M, 144A, 5.67%, 12/12/03 13,900 14,201
AIG Sunamerica
6.25%, 6/2/04 16,919 17,727
1.376%, 6/23/03 49,750 49,776
American Express Credit, VR,
1.367%, 6/17/03 3,000 3,001
BankAmerica, 6.875%, 6/1/03 2,500 2,500
BMW US Capital, VR, 144A,
1.31%, 6/11/03 25,000 25,000
Federal Home Loan Bank
1.25%, 9/4/03 50,000 50,000
1.30%, 6/8/04 99,500 99,500
GE Capital
5.375%, 4/23/04 9,750 10,093
1.34%, 6/9/04 23,900 23,900
1.3475%, 6/17/03 14,900 14,900
John Hancock Global Funding II,
VR, 144A,
1.38%, 6/30/03 30,000 30,009
Morgan Stanley, VR,
1.4375%, 6/10/03 19,750 19,751
New York Life, VR,
1.42%, 6/2/03 38,000 38,000
Wells Fargo,
4.25%, 8/15/03 32,300 32,484
Total Medium-Term Notes (Cost $430,842) 430,842
Value
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Total Investments in Securities In thousands
101.5% of Net Assets (Cost $5,736,649) $ 5,736,649
Other Assets Less Liabilities (84,485)
NET ASSETS $ 5,652,164
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Net Assets Consist of:
Undistributed net investment income (loss) $ 736
Undistributed net realized gain (loss) (22)
Paid-in-capital applicable to
5,652,162,080 shares of $0.01 par
value capital stock outstanding;
15,000,000,000 shares authorized 5,651,450
NET ASSETS $ 5,652,164
---------
NET ASSET VALUE PER SHARE $ 1.00
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+ Security contains restrictions as to public resale pursuant to the
Securities Act of 1933 and related rules-total of such securities at
period-end amounts to $50,000,000 and represents 0.9% of net assets
144A Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be resold in transactions exempt from registration only to
qualified institutional buyers-total of such securities at period-end
amounts to $69,210,000 and represents 1.2% of net assets
4(2) Commercial paper exempt from registration under Section 4(2) of the
Securities Act of 1933 and may be resold in transactions exempt from
registration only to dealers in that program or other "accredited
investors"-total of such securities at period-end amounts to $1,640,251,000
and represents 29.0% of net assets
VR Variable Rate
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Statement of Operations
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In thousands
Year
Ended
5/31/03
Investment Income (Loss)
Interest income $ 94,133
Expenses
Investment management 21,177
Shareholder servicing
Prime Reserve shares 14,133
Prime Reserve-Plus class shares 28
Prospectus and shareholder reports
Prime Reserve shares 559
Prime Reserve-Plus class shares --
Custody and accounting 456
Registration 122
Directors 44
Legal and audit 21
Proxy and annual meeting 1
Miscellaneous 38
Total expenses 36,579
Expenses paid indirectly (12)
Net expenses 36,567
Net investment income (loss) 57,566
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 36
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 57,602
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Statement of Changes in Net Assets
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In thousands
Year
Ended
5/31/03 5/31/02
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 57,566 $ 141,465
Net realized gain (loss) 36 (14)
Increase (decrease) in net assets
from operations 57,602 141,451
Distributions to shareholders
Net investment income
Prime Reserve shares (57,565) (139,687)
Prime Reserve-PLUS Class shares -- (1,778)
Decrease in net assets
from distributions (57,565) (141,465)
Capital share transactions *
Shares sold
Prime Reserve shares 4,175,302 4,842,498
Prime Reserve-PLUS Class shares 24,412 64,387
Distributions reinvested
Prime Reserve shares 55,233 135,992
Prime Reserve-PLUS
Class shares 515 1,785
Shares redeemed
Prime Reserve shares (4,196,132) (5,205,604)
Prime Reserve-PLUS
Class shares (20,571) (52,562)
Shares transferred in connection
with Plus Class closure
Prime Reserve shares 86,608 --
Prime Reserve-PLUS Class shares (86,608) --
Increase (decrease) in net
assets from capital share
transactions 38,759 (213,504)
Net Assets
Increase (decrease) during period 38,796 (213,518)
Beginning of period 5,613,368 5,826,886
End of period $ 5,652,164 $ 5,613,368
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* Capital share transactions at net asset value of $1.00 per share
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials May 31, 2003
Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Prime Reserve Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end
management investment company and commenced operations on January 26, 1976. The
fund seeks preservation of capital, liquidity, and, consistent with these, the
highest possible current income.
From November 1, 1998 through November 25, 2002, the fund also offered a second
class of shares. The T. Rowe Price Prime Reserve-PLUS Class (PLUS Class)
provided expanded shareholder services, the cost of which was borne buy its
shareholders. Each class had exclusive voting rights on matters related solely
to that class, separate voting rights on matters which related to both classes,
and, in all other respects, the same rights and obligations as the other class.
On November 25, 2002, all outstanding shares of the PLUS Class were transferred
into the Prime Reserve Fund class at their value on that date, and the PLUS
class was closed. The transfer was nontaxable to investors.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made 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 financial reporting
purposes.
Expenses Paid Indirectly
Credits earned on temporarily uninvested cash balances at the custodian are used
to reduce the fund's custody charges. Custody expense in the accompanying
statement of operations is presented before reduction for credits, which totaled
$12,000 for the year ended May 31, 2003.
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.
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 to
shareholders all of its taxable income and gains. Federal income tax regulations
differ from generally accepted accounting principles; therefore, distributions
determined in accordance with tax regulations may differ significantly in amount
or character from net investment income and realized gains for financial
reporting purposes. Financial reporting records are adjusted for permanent
book/tax differences to reflect tax character. Temporary differences are not
adjusted.
Distributions during the year ended May 31, 2003 totaled $57,565,000 and were
characterized as ordinary income for tax purposes. At May 31, 2003, the
tax-basis components of net assets were as follows:
- --------------------------------------------------------------------------------
Undistributed ordinary income 736,000
Capital loss carryforwards (22,000)
Paid-in capital 5,651,450,000
Net assets 5,652,164,000
-------------
The fund intends to retain realized gains to the extent of available capital
loss carryforwards for federal income tax purposes. In 2003, the fund utilized
$1,000 of capital loss carryforwards. As of May 31, 2003, the fund had $22,000
of capital loss carryforwards that expire in 2009.
At May 31, 2003, the cost of investments for federal income tax purposes was
$5,736,649,000
NOTE 3 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.05% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its net assets to those of the group. At May 31, 2003, the effective
annual group fee rate was 0.32%, and investment management fee payable totaled
$1,786,000.
In addition, the fund has entered into service agreements with Price
Associates and two wholly owned subsidiaries of Price Associates
(collectively, Price). Price Associates computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc.
provides shareholder and administrative services in its capacity as the fund's
transfer and dividend disbursing agent. T. Rowe Price Retirement Plan
Services, Inc. provides subaccounting and recordkeeping services for certain
retirement accounts invested in the fund. Expenses incurred pursuant to these
service agreements totaled $10,180,000 for the year ended May 31, 2003, of
which $1,059,000 was payable at period-end.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Report of Independent Auditors
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To the Board of Directors and Shareholders of T. Rowe Price Prime Reserve
Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
T. Rowe Price Prime Reserve Fund, Inc. (the "Fund") at May 31, 2003, the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at May 31, 2003 by correspondence with the custodian, provides a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
June 18, 2003
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
About the Fund's Directors and Officers
Your fund is governed by a Board of Directors that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's directors are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" directors are officers of T. Rowe Price. The Board of Directors
elects the fund's officers, who are listed in the final table. The business
address of each director and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund's directors and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Directors
Name
(Date of Birth) Principal Occupation(s) During Past 5 Years and
Year Elected* Directorships of Other Public Companies
Anthony W. Deering Director, Chairman of the Board, President, and Chief
(1/28/45) Executive Officer, The Rouse Company, real estate
1979 developers; Director, Mercantile Bank (4/03 to present)
Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an acquisition and
(1/27/43) management advisory firm
2001
David K. Fagin Director, Golden Star Resources Ltd., Canyon Resources
(4/9/38) Corp. (5/00 to present), and Pacific Rim Mining Corp.
2001 (2/02 to present); Chairman and President, Nye Corp.
F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates, Inc.,
(8/22/34) consulting environmental and civil engineers
1980
Hanne M. Merriman Retail Business Consultant; Director, Ann Taylor Stores
(11/16/41) Corp., Ameren Corp., Finlay Enterprises, Inc., The Rouse
2001 Company, and US Airways Group, Inc.
John G. Schreiber Owner/President, Centaur Capital Partners, Inc., a real
(10/21/46) estate investment company; Senior Advisor and Partner,
1992 Blackstone Real Estate Advisors, L.P.; Director, AMLI
Residential Properties Trust, Host Marriott Corp., and
The Rouse Company
Hubert D. Vos Owner/President, Stonington Capital Corp., a private
(8/2/33) investment company
2001
Paul M. Wythes Founding Partner, Sutter Hill Ventures, a venture
(6/23/33) capital limited partnership,providing equity capital to
2001 young high-technology companies throughout the United
States; Director, Teltone Corp.
*Each independent director oversees 105 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
T. Rowe Price Prime Reserve Fund
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Certified Shareholder Report and Financials
Inside Directors
Name
(Date of Birth)
Year Elected*
[Number of T. Rowe
Price Portfolios Principal Occupation(s) During Past 5 Years and
Overseen] Directorships of Other Public Companies
William T. Reynolds Director and Vice President, T. Rowe Price and T. Rowe
(5/26/48) Price Group, Inc.; Director, T. Rowe Price Global Asset
1995 Management Limited
[37]
James S. Riepe Director and Vice President, T. Rowe Price; Vice
(6/25/43) Chairman of the Board, Director, and Vice President,
1994 T. Rowe Price Group, Inc.; Chairman of the Board and
[105] Director, T. Rowe Price Global Asset Management Limited,
T. Rowe Price Global Investment Services Limited,
T. Rowe Price Investment Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., and T. Rowe Price
Services, Inc.; Chairman of the Board, Director,
President, and Trust Officer, T. Rowe Price Trust
Company; Director, T. Rowe Price International, Inc.;
Chairman of the Board, Prime Reserve Fund
M. David Testa Chief Investment Officer, Director, and Vice President,
(4/22/44) T. Rowe Price; Vice Chairman of the Board, Chief
1997 Investment Officer, Director, and Vice President,
[105] T. Rowe Price Group, Inc.; Director, T. Rowe Price
Global Asset Management Limited and T. Rowe Price Global
Investment Services Limited; Chairman of the Board and
Director, T. Rowe Price International, Inc.; Director
and Vice President, T. Rowe Price Trust Company
*Each inside director serves until retirement, resignation, or election of a
successor.
Officers
Name
(Date of Birth)
Title and Fund(s)
Served Principal Occupation(s)
Stephen V. Booth Vice President, T. Rowe Price, T. Rowe Price Group,
(6/21/61) Inc., and T. Rowe Price Trust Company
Vice President,
Prime Reserve Fund
Steven G. Brooks, CFA Vice President, T. Rowe Price and T. Rowe Price Group,
(8/5/54) Inc.
Vice President,
Prime Reserve Fund
Brian E. Burns Assistant Vice President, T. Rowe Price
(10/6/60)
Vice President,
Prime Reserve Fund
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name
(Date of Birth)
Title and Fund(s)
Served Principal Occupation(s)
Joseph A. Carrier Vice President, T. Rowe Price, T. Rowe Price Group,
(12/30/60) Inc., and T. Rowe Price Investment Services, Inc.
Treasurer,
Prime Reserve Fund
Patrick S. Cassidy Vice President, T. Rowe Price and T. Rowe Price Group,
(8/27/64) Inc.
Vice President,
Prime Reserve Fund
Roger L. Fiery III Vice President, T. Rowe Price, T. Rowe Price Group,
(2/10/59) Inc., T. Rowe Price International, Inc., and T. Rowe
Vice President, Price Trust Company
Prime Reserve Fund
Mark S. Finn Vice President, T. Rowe Price
(1/14/63)
Vice President,
Prime Reserve Fund
Alisa Fiumara Employee, T. Rowe Price; formerly Associate Analyst,
(2/7/74) Legg Mason (to 2000)
Vice President,
Prime Reserve Fund
Gregory S. Golczewski Vice President, T. Rowe Price and T. Rowe Price Trust
(1/15/66) Company
Vice President,
Prime Reserve Fund
Henry H. Hopkins Director and Vice President, T. Rowe Price Group, Inc.,
(12/23/42) T. Rowe Price Investment Services, Inc., T. Rowe Price
Vice President, Services, Inc., and T. Rowe Price Trust Company; Vice
Prime Reserve Fund President, T. Rowe Price, T. Rowe Price International,
Inc., and T. Rowe Price Retirement Plan Services, Inc.
Alan D. Levenson Vice President, T. Rowe Price and T. Rowe Price Group,
(7/17/58) Inc.
Vice President,
Prime Reserve Fund
Patricia B. Lippert Assistant Vice President, T. Rowe Price and T. Rowe
(1/12/53) Price Investment Services, Inc.
Secretary,
Prime Reserve Fund
Joseph K. Lynagh, CFA Vice President, T. Rowe Price and T. Rowe Price Group,
(6/9/58) Inc.
Vice President,
Prime Reserve Fund
James M. McDonald Vice President, T. Rowe Price, T. Rowe Price Group,
(9/29/49) Inc., and T. Rowe Price Trust Company
Executive Vice
President,
Prime Reserve Fund
Mary J. Miller Vice President, T. Rowe Price and T. Rowe Price Group,
(7/19/55) Inc.
Vice President,
Prime Reserve Fund
Joan R. Potee Vice President, T. Rowe Price and T. Rowe Price Group,
(11/23/47) Inc.
Vice President,
Prime Reserve Fund
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name
(Date of Birth)
Title and Fund(s)
Served Principal Occupation(s)
Susan G. Troll Vice President, T. Rowe Price and T. Rowe Price Group,
(8/27/66) Inc.
Vice President,
Prime Reserve Fund
Lea C. Ward Assistant Vice President, T. Rowe Price; formerly
(6/5/68) Customer Finance Analyst, Lucent Technologies (to 2000)
Vice President,
Prime Reserve Fund
Edward A. Wiese, CFA Vice President, T. Rowe Price, T. Rowe Price Group,
(4/12/59) Inc., and T. Rowe Price Trust Company; Chief Investment
President, Officer, Director, and Vice President, T. Rowe Price
Prime Reserve Fund Savings Bank
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
Not required at this time.
Item 3. Audit Committee Financial Expert.
Not required at this time.
Item 4. Principal Accountant Fees and Services.
Not required at this time.
Item 5. Audit Committee of Listed Registrants.
Not required at this time.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures
(a) The registrant's Principal Executive Officer and Principal Financial Officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) At the date of filing this Form N-CSR, the registrant's Principal Executive
Officer and Principal Financial Officer are aware of no significant changes in
the registrant's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Item 10. Exhibits.
(a) Not required at this time.
(b) Separate certifications by the registrant's principal executive officer and
principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2 under the Investment Company Act of 1940, are
attached.
A certification by the registrant's principal executive officer and principal
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is
attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Prime Reserve Fund, Inc.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date July 14, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date July 14, 2003
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date July 09, 2003