Item 1. Report to Shareholders
T. Rowe Price Prime Reserve Fund
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Certified Semiannual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which
requires that public companies, including mutual funds, affirm that the
information provided in their annual and semiannual shareholder reports
fully and fairly represents their financial position.
T. Rowe Price Prime Reserve Fund
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Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
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6 Months Year
Ended Ended
11/30/03 5/31/03 5/31/02 5/31/01 5/31/00 5/31/99
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NET ASSET VALUE
Beginning
of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment activities
Net investment
income (loss) 0.003 0.010 0.024 0.057 0.051 0.047
Distributions
Net investment
income (0.003) (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 $ 1.000
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Ratios/Supplemental Data
Total return^ 0.26% 1.01% 2.47% 5.82% 5.22% 4.82%
Ratio of total
expenses to
average net assets 0.61%! 0.64% 0.63% 0.59% 0.62% 0.66%
Ratio of net
investment income
(loss) to average
net assets 0.52%! 1.01% 2.44% 5.66% 5.11% 4.70%
Net assets,
end of period
(in millions) $ 5,341 $ 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.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
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Certified Semiannual Report (Unaudited) November 30, 2003
STATEMENT OF NET ASSETS Par Value
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In thousands
BANK NOTES 0.8%
World Savings Bank, 1.04%, 12/3/03 $ 40,000 $ 40,000
Total Bank Notes (Cost $40,000) 40,000
Bankers' Acceptances 0.2%
Regions Bank
1.031%, 12/17/03 2,636 2,635
1.041%, 12/1 - 12/29/03 5,000 4,998
1.05%, 12/29/03 1,500 1,498
1.095%, 2/9/04 450 449
Total Bankers' Acceptances (Cost $9,580) 9,580
Certificates of Deposit - Domestic * 3.5%
American Express Centurion Bank, 1.05%, 12/4/03 25,000 25,000
Mercantile Safe Deposit & Trust
1.15%, 4/27 - 7/29/04 15,100 15,099
1.25%, 4/14/04 10,000 10,000
1.30%, 3/29/04 9,750 9,750
Wells Fargo Bank
1.04%, 12/22/03 25,000 25,000
1.05%, 12/10/03 50,000 50,000
Wilmington Trust, 1.10%, 12/4/03 49,500 49,500
Total Certificates of Deposit - Domestic (Cost $184,349) 184,349
Certificates of Deposit - Eurodollar ^ 5.2%
Bank of Nova Scotia, 1.06%, 12/29/03 64,000 64,000
Barclays Bank, 1.15%, 3/8/04 12,000 12,001
Deutsche Bank, 1.075%, 12/30/03 30,000 30,000
HBOS Treasury Services, 1.08%, 12/10/03 50,000 50,000
National Australia Bank
1.28%, 8/31/04 50,000 50,000
1.40%, 9/7/04 50,000 50,000
Societe Generale, 1.335%, 3/31/04 20,000 20,002
Total Certificates of Deposit -
Eurodollar (Cost $276,003) 276,003
Certificates of Deposit - Yankee ++ 16.3%
Abbey National Treasury Services
1.14%, 5/21/04 $ 24,810 $ 24,810
1.15%, 5/14/04 25,000 25,000
1.42%, 10/21/04 25,000 24,998
Bank of Montreal
1.05%, 12/5 - 12/29/03 100,000 100,000
Barclays Bank, 1.18%, 1/5/04 35,000 35,000
BNP Paribas (SF Branch), 1.11%, 3/22/04 50,000 50,002
Canadian Imperial Bank of Commerce
1.22%, 4/2/04 10,000 10,000
1.25%, 3/10/04 25,000 25,008
Credit Agricole Indosuez, 1.10%, 4/14/04 79,500 79,500
Fortis Bank, 1.15%, 5/24/04 39,750 39,750
KBC Bank, 1.06%, 12/18/03 50,000 50,000
Lloyds Bank, 1.035%, 12/29/03 50,000 49,999
Natexis Banque Populaires, 1.11%, 2/6/04 21,000 21,000
Nordea Bank Finland, 1.305%, 4/13/04 49,800 49,800
Rabobank Nederland
1.0275%, 12/9/03 49,500 49,496
1.23%, 10/1/04 24,900 24,875
Royal Bank of Canada, 1.14%, 5/24/04 50,000 50,000
Societe Generale, 1.06%, 12/8/03 29,400 29,400
Svenska Handelsbanken, 1.10%, 1/27/04 34,800 34,800
Toronto-Dominion Bank
1.08%, 12/5/03 49,500 49,500
1.38%, 8/27/04 24,825 24,821
UBS, 1.35%, 10/20/04 25,000 25,000
Total Certificates of Deposit - Yankee (Cost $872,759) 872,759
COMMERCIAL PAPER 45.8%
ABN Amro Number America Finance, 1.061%, 12/10/03 7,750 7,748
Alliance & Leicester
4(2)
1.061%, 12/16/03 20,000 19,991
1.102%, 1/12/04 11,500 11,485
Alpine Securitization
4(2)
1.051%, 12/9 - 12/17/03 $ 26,760 $ 26,749
1.06%, 12/12/03 1,087 1,087
1.103%, 2/20/04 40,000 39,901
ANZ (Delaware), 1.103%, 2/17/04 2,259 2,254
Asset Portfolio Funding, 1.07%, 12/22/03 6,000 5,996
Atlantic Asset Securitization
1.073%, 12/18/03 27,000 26,986
4(2), 1.06%, 12/11/03 1,338 1,337
BASF, 4(2), 1.08%, 12/5/03 50,000 49,994
Cafco, 4(2), 1.062%, 12/2/03 35,000 34,999
Cargill, 4(2), 1.103%, 2/6/04 5,831 5,819
CBA (Delaware) Finance
1.122%, 1/20/04 390 389
1.153%, 2/20/04 100 100
Ciesco, 1.062%, 12/3/03 47,000 46,997
Citibank Credit Card Issuance Trust
1.09%, 12/4/03 29,000 28,998
4(2)
1.051%, 12/12/03 50,000 49,984
1.10%, 1/9/04 40,000 39,952
CRC Funding
4(2)
1.05%, 12/17/03 50,000 49,977
1.102%, 1/6/04 33,093 33,056
Danske, 1.061%, 12/5/03 145 145
Delaware Funding, 4(2), 1.102%, 1/8/04 1,075 1,074
DePfa Bank Europe, 4(2), 1.102%, 1/23/04 1,000 998
Dexia Delaware LLC
1.047%, 12/10 - 12/22/03 80,900 80,860
1.123%, 2/23/04 1,060 1,057
Discover Card Master Trust
4(2)
1.07%, 12/17/03 1,000 999
1.112%, 1/16/04 48,250 48,182
1.123%, 2/13/04 50,000 49,885
DuPont
1.051%, 12/3 - 12/10/03 $ 8,103 $ 8,102
Fairway Finance
1.13%, 3/8 - 3/10/04 62,090 61,899
4(2), 1.157%, 5/17/04 19,967 19,860
Falcon Asset Securitization
4(2)
1.051%, 12/4 - 12/18/03 22,827 22,824
1.059%, 12/16/03 2,075 2,074
1.092%, 1/9 - 1/12/04 26,213 26,181
1.102%, 1/13/04 500 499
FCAR Owner Trust
1.11%, 2/3/04 24,000 23,953
1.113%, 2/10/04 50,000 49,891
1.12%, 2/17/04 24,100 24,041
Ford Credit Floorplan Master Owner Trust
4(2)
1.08%, 12/19/03 60,000 59,968
1.111%, 1/28/04 2,000 1,996
1.123%, 1/20/04 6,250 6,240
Giro Funding
4(2)
1.098%, 2/17/04 62,725 62,576
1.103%, 1/15/04 54,000 53,926
Giro Multi Funding, 4(2), 1.05%, 12/22/03 50,000 49,969
Grampian Funding
4(2)
1.103%, 1/7/04 50,000 49,944
1.156%, 4/14/04 25,000 24,892
Greyhawk Funding
1.08%, 12/5/03 29,000 28,996
1.09%, 12/5/03 20,000 19,998
Home Depot, 4(2), 1.00%, 12/2/03 31,769 31,768
International Lease Finance, 1.052%, 12/4/03 6,715 6,714
Jefferson Pilot
4(2)
1.095%, 1/20/04 $ 20,000 $ 19,970
1.097%, 1/20/04 23,000 22,965
1.102%, 1/16 - 1/27/04 47,000 46,930
1.114%, 2/25/04 10,000 9,973
K2 USA
1.09%, 1/26/04 25,000 24,958
1.092%, 12/1/03 24,800 24,800
1.12%, 4/26/04 24,750 24,637
1.126%, 3/15 - 3/22/04 46,603 46,444
1.137%, 4/20/04 22,000 21,903
Kitty Hawk Funding, 4(2), 1.12%, 3/22/04 23,390 23,308
Lloyds Bank, 1.153%, 2/26/04 390 389
MassMutual Funding
4(2)
1.051%, 12/12/03 2,000 2,000
1.061%, 12/16/03 2,200 2,199
1.07%, 12/1/03 4,700 4,700
1.071%, 12/12/03 2,000 1,999
1.082%, 1/13/04 7,050 7,041
MBNA Master Credit Card Trust II
1.07%, 12/3 - 12/18/03 32,000 31,990
1.071%, 12/3/03 3,970 3,970
1.072%, 12/3/03 2,280 2,280
4(2)
1.072%, 12/18/03 18,000 17,991
1.082%, 12/16/03 28,500 28,487
National City Credit Corp., 1.077%, 1/13/04 75,000 74,904
National Rural Utilities Coop. Fin., 1.082%, 1/22/04 12,500 12,480
New Center Asset Trust
1.07%, 12/19/03 49,100 49,074
1.104%, 2/10/04 20,000 19,956
New York State Power Authority
1.061%, 12/11/03 32,085 32,076
1.077%, 12/11/03 5,000 4,998
Nordea North America, 1.052%, 12/23/03 $ 8,000 $ 7,995
Old Line Funding
4(2)
1.062%, 12/3 - 12/19/03 18,601 18,597
1.072%, 12/8/03 46,351 46,341
1.102%, 1/14 - 1/15/04 50,519 50,451
Paradigm Funding
1.082%, 12/8/03 12,895 12,892
4(2), 1.051%, 12/9/03 6,792 6,791
Park Avenue Receivables, 4(2), 1.061%, 12/16/03 20,469 20,460
Preferred Receivables Funding, 4(2), 1.061%, 12/1/03 1,250 1,250
Province of Quebec, 1.105%, 4/26/04 15,000 14,933
Rabobank USA Fin. Corp., 1.102%, 1/30/04 1,300 1,298
Rio Tinto
1.06%, 12/8/03 4,077 4,076
4(2), 1.12%, 3/8/04 6,000 5,982
Shell Finance, 1.105%, 4/7/04 46,500 46,318
Siemens Capital Corp., 1.062%, 12/30/03 25,000 24,979
Sigma Finance
1.126%, 3/15/04 15,000 14,951
1.13%, 3/11/04 49,750 49,593
1.136%, 3/11/04 1,300 1,296
4(2), 1.124%, 3/16/04 7,000 6,977
Societe Generale, 1.105%, 4/20/04 50,000 49,785
Stadshypotek Delaware, 1.056%, 12/3/03 3,300 3,300
Stanford Univ., 1.051%, 12/11/03 7,900 7,898
Total Fina Elf Capital, 4(2), 1.031%, 12/10/03 45,000 44,988
Toyota Motor Credit Corp., 4(2), 1.06%, 12/19/03 23,700 23,687
UBS Finance
1.05%, 12/1/03 6,337 6,337
1.104%, 2/12 - 2/17/04 9,750 9,728
Variable Funding Capital Corp., 4(2), 1.092%, 1/26/04 25,000 24,958
Wal-Mart Funding, 4(2), 1.052%, 12/18/03 20,000 19,990
Yale University
1.06%, 12/2/03 600 600
1.134%, 2/12/04 30,500 30,430
Yorktown Capital
4(2)
1.056%, 12/1/03 $ 3,994 $ 3,994
1.073%, 12/12/03 16,928 16,922
Total Commercial Paper (Cost $2,443,529) 2,443,529
Funding Agreements 2.2%
Allstate Life Insurance
VR
1.27%, 12/1/03 !! 25,000 25,000
1.33%, 12/1/03 !! 25,000 25,000
GE Life & Annuity, VR, 1.24%, 12/12/03 50,000 50,000
Security Life of Denver, 1.17%, 12/22/03 15,000 15,000
Transamerica Occidential Life Insurance, VR,
1.27%, 12/3/03 5,000 5,000
Total Funding Agreements (Cost $120,000) 120,000
Medium-Term Notes 7.2%
3M, 144A, 5.6736%, 12/12/03 13,900 13,917
AIG Sunamerica Institutional Funding I, 6.25%, 6/2/04 16,919 17,324
AIG Sunamerica Institutional Funding II,
1.23%, 12/22/03 49,750 49,753
American Express Credit, VR, 1.17%, 12/17/03 3,000 3,000
BMW US Capital, 144A, VR, 1.12%, 12/10/03 25,000 25,000
Federal Home Loan Bank, 1.00%, 7/20/04 49,850 49,850
First Union, 7.10%, 8/15/04 19,900 20,700
GE Capital
5.375%, 4/23/04 9,750 9,901
VR, 1.20%, 12/9 - 12/17/03 38,800 38,800
Goldman Sachs Group, 144A, 1.12%, 12/1/03 44,500 44,500
New York Life Insurance, 1.22%, 12/1/03 38,000 38,000
Wal-Mart Stores, 5.199%, 6/1/04 73,000 74,542
Total Medium-Term Notes (Cost $385,287) 385,287
Municipal Securities 12.7%
California Dept. of Water Resources
VRDN (Currently 1.08%) 49,630 49,629
California HFA
Adventist Health System
VRDN (Currently 1.08%)
(MBIA Insured) $ 2,000 $ 2,000
Connecticut HEFA
Yale Univ.
VRDN (Currently 0.95%) 42,900 42,898
Fairfax County IDA
Inova Health System
VRDN (Currently 1.03%) 12,000 12,000
Gaithersburg
Asbury Solomons
VRDN (Currently 1.10%)
(MBIA Insured) 5,000 5,000
Harris County, GO, TECP, 1.17%, 12/4/03 12,000 12,000
Harris County Health Fac. Dev.
Methodist Healthcare System
VRDN (Currently 1.10%) 49,750 49,749
Illinois HFA
Northwestern Memorial Hosp.
VRDN (Currently 1.10%) 39,875 39,875
Indiana EFA
Univ. of Notre Dame
VRDN (Currently 1.05%) 12,150 12,149
Intermountain Power Agency, TECP, 1.15%, 12/4/03 20,500 20,500
Jay Street Dev. Corp.
VRDN (Currently 1.10%) 22,000 22,000
Kansas DOT
VRDN (Currently 1.12%) 10,000 10,000
Loudoun County IDA
Howard Hughes Medical Institute
VRDN (Currently 1.07%) 22,605 22,605
Massachusetts HEFA
Harvard Univ.
VRDN (Currently 1.06%) 40,000 39,999
Massachusetts Institute of Technology
VRDN (Currently 0.80%) $ 18,200 $ 18,199
Michigan Hosp. Fin. Auth.
Trinity Health Corp.
VRDN (Currently 1.12%)
(AMBAC Insured) 5,000 5,000
Montgomery County, GO, TECP, 1.08%, 12/5/03 5,000 5,000
Murray City
IHC Health Services
VRDN (Currently 1.11%) 8,000 8,000
Nassau County Interim Finance Auth.
VRDN (Currently 1.10%)
(FSA Insured) 15,905 15,905
New York City, GO
VRDN (Currently 1.08%) 11,800 11,800
VRDN (Currently 1.10%) 17,200 17,200
New York City Housing Dev. Corp
Multi-Family Housing
VRDN (Currently 1.10%)
(FHA Guaranteed) 17,000 17,000
New York City Municipal Water Fin. Auth.
VRDN (Currently 1.12%) 33,000 32,999
New York State Local Govt. Assistance
VRDN (Currently 1.10%)
(FSA Insured) 9,565 9,565
Orange County Trans. Auth.
VRDN (Currently 1.12%)
(AMBAC Insured) 23,500 23,500
Salt River Project Agricultural Improvement & Power
TECP, 1.15%, 12/2 - 12/4/03 26,835 26,835
San Antonio Water System, TECP, 1.13%, 12/3/03 40,000 40,000
South Carolina Public Service Auth.
TECP, 1.10%, 12/2 - 12/4/03 8,250 8,250
Texas, GO, Texas Veterans Housing
VRDN (Currently 1.12%) 9,000 9,000
Texas A&M Univ. System, TECP, 1.10%, 12/3/03 7,000 7,000
Triborough Bridge & Tunnel Auth.
VRDN (Currently 1.10%) $ 26,000 $ 26,000
Univ. of Michigan Board of Trustees
VRDN (Currently 1.08%) 4,000 4,000
Washington Public Power Supply System
VRDN (Currently 1.02%) 7,800 7,800
VRDN (Currently 1.10%) 45,325 45,324
Total Municipal Securities (Cost $678,781) 678,781
Foreign Governments &
Municipalities 3.7%
Electricite de France
1.03%, 12/15/03 32,000 31,987
1.07%, 12/15/03 15,450 15,444
KFW International Finance
4(2)
1.052%, 12/15/03 2,480 2,479
1.06%, 12/23/03 1,500 1,499
1.07%, 12/23/03 50,000 49,967
1.184%, 9/10/04 50,000 49,539
1.317%, 10/6/04 49,850 49,292
Total Foreign Governments & Municipalities
(Cost $200,207) 200,207
Total Investments in Securities
97.6% of Net Assets (Cost $5,210,495) $ 5,210,495
Other Assets Less Liabilities 130,722
NET ASSETS $ 5,341,217
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Net Assets Consist of:
Undistributed net investment income (loss) $ 736
Undistributed net realized gain (loss) 19
Paid-in-capital applicable to 5,341,174,422
shares of $0.01 par value capital stock outstanding;
15,000,000,000 shares authorized 5,340,462
NET ASSETS $ 5,341,217
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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 $83,417,000 and represents 1.6% 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
$1,509,913,000 and represents 28.3% of net assets
* Domestic certificates of deposit are issued by domestic branches
of U.S. banks
^ Eurodollar certificates of deposit are issued by foreign branches of
U.S. or foreign banks
++ Yankee certificates of deposit are issued by U.S. branches of
foreign banks
AMBAC AMBAC Assurance Corp.
DOT Department of Transportation
EFA Educational Facility Authority
FHA Federal Housing Authority
FSA Financial Security Assurance Inc.
GO General Obligation
HEFA Health & Educational Facility Authority
HFA Health Facility Authority
IDA Industrial Development Authority/Agency
MBIA MBIA Insurance Corp.
TECP Tax-Exempt Commercial Paper
VR Variable Rate
VRDN Variable-Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Prime Reserve Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF OPERATIONS
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In thousands
6 Months
Ended
11/30/03
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Investment Income (Loss)
Interest income $ 31,155
Expenses
Investment management 10,146
Shareholder servicing 6,063
Prospectus and shareholder reports 253
Custody and accounting 216
Registration 121
Legal and audit 16
Directors 12
Miscellaneous 31
Total expenses 16,858
Expenses paid indirectly (2)
Net expenses 16,856
Net investment income (loss) 14,299
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 41
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 14,340
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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 Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
11/30/03 5/31/03
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Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 14,299 $ 57,566
Net realized gain (loss) 41 36
Increase (decrease) in net assets
from operations 14,340 57,602
Distributions to shareholders
Net investment income (14,299) (57,565)
Capital share transactions *
Shares sold
Prime Reserve shares 1,828,046 4,175,302
Prime Reserve - PLUS Class shares - 24,412
Distributions reinvested
Prime Reserve shares 13,864 55,233
Prime Reserve - PLUS Class shares - 515
Shares redeemed
Prime Reserve shares (2,152,898) (4,196,132)
Prime Reserve - PLUS Class shares - (20,571)
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 (310,988) 38,759
Net Assets
Increase (decrease) during period (310,947) 38,796
Beginning of period 5,652,164 5,613,368
End of period $ 5,341,217 $ 5,652,164
---------------------------
* 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 Semiannual Report (Unaudited) November 30, 2003
Notes To Financial Statements
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
by 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 the T. Rowe Price Valuation
Committee, established by the fund's Board of Directors.
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 $2,000 for the six months ended November 30, 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. Premiums and discounts on
municipal and debt securities are amortized for financial reporting
purposes. Distributions to shareholders are recorded by the fund on the
ex-dividend date. In the normal course of business, the fund enters into
contracts that provide general indemnifications. The fund's maximum
exposure under these arrangements is dependent on claims
that may be made against the fund in the future and, therefore, cannot be
estimated; however, based on experience, the risk of material loss from
such claims is considered remote.
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 under Subchapter M of
the Internal Revenue Code 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 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. Financial records are not adjusted for temporary
differences. The amount and character of tax-basis distributions and
composition of net assets are finalized at fiscal year-end; accordingly,
tax-basis balances have not been determined as of November 30, 2003.
The fund intends to retain realized gains to the extend of available
capital loss carryforwards. As of May 31, 2003, the fund had $22,000 of
unused capital loss carryforwards that expire in 2009.
At November 30, 2003, the cost of investments for federal income tax
purposes was $5,210,495,000.
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 average
daily net assets to those of the group. At November 30, 2003, the effective
annual group fee rate was 0.32%, and investment management fee payable
totaled $1,624,000.
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 $4,055,000 for the six months
ended November 30, 2003, of which $688,000 was payable at period-end.
T. Rowe Price Prime Reserve Fund
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Certified Semiannual Report
INFORMATION ON PROXY VOTING
A description of the policies and procedures that the T. Rowe Price Prime
Reserve Fund uses to determine how to vote proxies relating to portfolio
securities is available, without charge, upon request by calling
1-800-225-5132. It also appears in the fund's Statement of Additional
Information (Form 485B), which can be found on the SEC's Web site,
www.sec.gov.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR,
applicable to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. A copy of this code of ethics will be filed as a required exhibit to
the registrant's annual Form N-CSR. No substantive amendments were approved or
waivers were granted to this code of ethics during the registrant's most recent
fiscal half-year.
Item 3. Audit Committee Financial Expert.
Not effective until registrant's next annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Not effective until registrant's next annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
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) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR will be
filed with the registrant's annual Form N-CSR.
(a)(2) 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(a) under the Investment Company Act of
1940, are attached.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
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 January 16, 2004
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 January 16, 2004
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date January 16, 2004