PRICE T ROWE PRIME RESERVE FUND INC
N-30D, 2001-01-10
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<PAGE>
                                 T. Rowe Price
--------------------------------------------------------------------------------
                               Semiannual Report
                               Prime Reserve Fund
--------------------------------------------------------------------------------
                                November 30, 2000
================================================================================
REPORT HIGHLIGHTS
-----------------
PRIME RESERVE FUND
------------------
*    Bucking a downward trend among longer-term yields, rates on very short-term
     securities rose during the past six months.
*    The Prime  Reserve Fund and PLUS shares  turned in solid  performances  and
     outpaced their peer group average.
*    As rates stabilized over the summer we looked for  opportunities to lock in
     higher yields on securities with slightly longer maturity dates.
*    Interest rates will probably move lower in coming months.

================================================================================
UPDATES AVAILABLE
-----------------
     For  updates  on T. Rowe Price  funds  following  the end of each  calendar
quarter, please see our Web site at www.troweprice.com.

================================================================================
FELLOW SHAREHOLDERS
-------------------
     The money markets proved to be a safe haven during the past six months amid
significant stock market volatility.  For most of the period, money market rates
rose, contributing to a solid showing for the Prime Reserve Fund.

MARKET ENVIRONMENT
------------------
     U.S.  fixed-income  markets have settled down  considerably  since the last
shareholder  letter  dated  May  31.  After  hiking  short-term  interest  rates
repeatedly  since early 1999, the Federal  Reserve made its last tightening move
on May 16, when it raised the federal funds target rate 50 basis points to 6.5%.
The rate increases appeared to have the intended effect: GDP growth and consumer
demand both cooled.  At the same time,  continued  improvements  in productivity
helped to keep inflation at bay.

                     1-Year             90-Day           Federal Funds
                  Treasury Bill      Treasury Bill        Target Rate
                  -------------      -------------        -----------
11/30/1999            5.65                5.28                5.50
                      5.95                5.33                5.50
                      6.17                5.59                5.50
2/29                  6.22                5.81                5.75
                      6.30                5.88                6.00
                      6.19                5.78                6.00
5/31                  6.28                5.92                6.50
                      6.13                5.84                6.50
                      6.06                6.20                6.50
8/31                  6.23                6.31                6.50
                      6.08                6.21                6.50
                      6.11                6.38                6.50
11/30/2000            6.00                6.26                6.50

<PAGE>

     Bond investors  took advantage of this relative calm  throughout the period
by bidding up prices and  correspondingly  pushing down yields on  intermediate-
and long-term  bonds. In the money market universe,  however,  yields took a bit
longer to stabilize, and only really declined in November.

     The  trends  produced  good total  returns  for bond  investors  while also
keeping  yields  strong for cash  investors.  At 6.26% on  November  30,  90-day
Treasury  bill  yields  were  well  above  the 5.52%  available  from  five-year
Treasuries.

     The federal budget surplus continued to increase, leading to a reduction in
the size and  frequency  of  Treasury  auctions.  Together  with the  Treasury's
buyback  program,  the dwindling  supply of Treasuries  bolstered demand for the
asset  class.  Short-term  corporate  and  mortgage-backed  securities  are more
plentiful and their yields have tended to be better.


PERFORMANCE AND STRATEGY REVIEW
-------------------------------

PERFORMANCE COMPARISON
----------------------
Periods Ended 11/30/00        6 Months     12 Months
----------------------        --------     ---------
Prime Reserve Fund              3.10%        5.98%

Prime Reserve
PLUS Shares                     3.00         5.78

Lipper Money Market
Funds Average                   2.93         5.63

     Compared with equities,  cash investments have produced only modest returns
for the past several  years.  However,  the choppy equity market  environment of
2000 so far is a good  example  of the way cash can  help  buffer a  portfolio's
performance when other  investments  falter.  Relatively  speaking,  your fund's
3.10% six-month and 5.98% 12-month  results  compared  favorably with its Lipper
peer group  benchmark.  In  addition,  dividends  per share  increased,  and the
seven-day compound dividend yield rose to an attractive 6.30%.

     The  six-month  return on the PLUS  shares of the  Prime  Reserve  Fund was
3.00%, and its 12-month advance was 5.78%.  These results outpaced the benchmark
average as well. The seven-day dividend yield on the PLUS shares also rose, from
5.91% six months ago to 6.12%.  We were pleased  with these  results as the PLUS
shares carry a higher  expense  ratio than the Prime  Reserve  Fund,  reflecting
additional services available to investors.


<PAGE>

     We were able to stay a step ahead of our competitors by taking advantage of
changes in the  direction  of interest  rates.  While the Fed was raising  rates
earlier in the year, we kept average maturity short. For example,  at the end of
May 2000,  maturity  stood at 43 days versus 53 days for the average money fund.
This stance  allowed us to  reinvest  proceeds  from  maturing  securities  more
quickly into  higher-yielding  instruments.  Once the Fed ceased to raise rates,
however,  we shifted into securities with slightly longer  maturities to lock in
their higher yields. On November 30, maturity was 58 days versus 56 for the peer
group.

     When the Fed backed off its  tightening  program,  we changed the portfolio
structure  to  invest a large  chunk of  assets  in  securities  with  three- to
six-month maturities,  rather than among issues with broadly varying maturities.
This is often called a "bullet"  strategy,  and it tends to perform  better when
rates are flat or declining.

     The  portfolio's  sector  exposures  changed  modestly from six months ago.
Fixed-rate securities became a larger component of the fund because we perceived
floating-rate  instruments  to be relatively  expensive,  offering  unattractive
yields.  For similar  reasons,  we trimmed  holdings in commercial  paper and in
other areas of the portfolio to increase our stake in  certificates  of deposit.
Within  commercial  paper,  however,  we once again raised the  weighting in the
asset-backed  sector,  where  yields  remain  attractive  and credit  quality is
extremely high.

OUTLOOK
-------
     Stable inflation and accelerating  productivity have bought the Fed time to
see if its 1999-to-2000  tightening  program will bring about moderate  economic
growth while maintaining full employment.  Fortunately,  noninflationary  growth
appears  achievable:  softening labor markets are slowing income growth;  weaker
income growth is limiting demand; and more moderate demand is cooling production
and hiring plans. As a result, third-quarter GDP has been much lower than recent
quarters.

     For these reasons,  we think that money market rates will continue to fall.
Because higher oil prices, disappointing corporate earnings, and higher interest
rates increase the risks of a hard landing,  we think there's a good possibility
that the Fed will lower rates in the coming three to six months.  As usual, your
fund will  continue to seek  attractive  yields  while  maintaining  high credit
quality.

Respectfully submitted,

/s/

Edward A. Wiese
President

December 14, 2000

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
KEY STATISTICS
                                                        5/31/00       11/30/00
                                                        -------       --------
PRIME RESERVE SHARES
--------------------------------------------------------------------------------
Price Per Share                                       $   1.00       $   1.00
--------------------------------------------------------------------------------
Dividends Per Share
--------------------------------------------------------------------------------
    For 6 months                                          0.028          0.031
--------------------------------------------------------------------------------
    For 12 months                                         0.051          0.058
--------------------------------------------------------------------------------
Dividend Yield (7-Day Compound) *                         6.15%          6.30%
--------------------------------------------------------------------------------
Weighted Average Maturity (days)                           43             58
--------------------------------------------------------------------------------
Weighted Average Quality **                           First Tier     First Tier
--------------------------------------------------------------------------------

PRIME RESERVE PLUS SHARES
--------------------------------------------------------------------------------
Price Per Share                                       $   1.00       $   1.00
--------------------------------------------------------------------------------
Dividends Per Share
--------------------------------------------------------------------------------
    For 6 months                                          0.027          0.030
--------------------------------------------------------------------------------
    For 12 months                                         0.049          0.056
--------------------------------------------------------------------------------
Dividend Yield (7-Day Compound) *                         5.91%          6.12%
--------------------------------------------------------------------------------
Weighted Average Maturity (days)                           43             58
--------------------------------------------------------------------------------
Weighted Average Quality **                           First Tier     First Tier
--------------------------------------------------------------------------------
*    Dividends  earned and reinvested  for the periods  indicated are annualized
     and  divided  by the  fund's  net  asset  value per share at the end of the
     period.

**   All  securities  purchased  in the  money  fund are  rated  in two  highest
     categories  (tiers) as established by the national  rating  agencies or, if
     unrated, are deemed of comparable quality by T. Rowe Price.

     To  request  a  prospectus  for  any  T.  Rowe  Price  fund,   please  call
1-800-638-5660. Read the prospectus carefully before investing.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
SECTOR DIVERSIFICATION
----------------------
                                                   Percent of     Percent of
                                                   Net Assets     Net Assets
                                                      5/31/00       11/30/00
-------------------------------------------------------------------------------
U.S. Negotiable Bank Notes                                3%             2%
-------------------------------------------------------------------------------
Certificates of Deposit                                  24             32
-------------------------------------------------------------------------------
    Domestic Negotiable CDs                               4              3
-------------------------------------------------------------------------------
    Eurodollar Negotiable CDs                             3             15
-------------------------------------------------------------------------------
    U.S. Dollar Denominated Foreign Negotiable CDs       17             14
-------------------------------------------------------------------------------
Commercial Paper and Medium-Term Notes                   69             64
-------------------------------------------------------------------------------
    Asset-Backed                                         20             22
-------------------------------------------------------------------------------
    Banking                                              17             20
-------------------------------------------------------------------------------
    Finance and Credit                                    3              5
-------------------------------------------------------------------------------
    Insurance                                             5              3
-------------------------------------------------------------------------------
    Telephone                                             3              3
-------------------------------------------------------------------------------
    All Other                                            21             11
-------------------------------------------------------------------------------
Foreign Government and Municipalities                     1              1
-------------------------------------------------------------------------------
Funding Agreements                                        2              2
-------------------------------------------------------------------------------
Other Assets Less Liabilities                             1             -1
-------------------------------------------------------------------------------
Total                                                   100%           100%

Fixed-Rate Obligations                                   80             85
-------------------------------------------------------------------------------
Floating-Rate Obligations                                20             15

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------
PERFORMANCE COMPARISON
----------------------
     These charts show the value of a  hypothetical  $10,000  investment in each
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.



              Lipper Money Market Funds Average     Prime Reserve Shares
              ---------------------------------     --------------------
Nov-1990                    10000                           10000
Nov-1991                    10598                           10588
Nov-1992                    10968                           10955
Nov-1993                    11257                           11243
Nov-1994                    11647                           11637
Nov-1995                    12277                           12276
Nov-1996                    12880                           12883
Nov-1997                    13526                           13535
Nov-1998                    14208                           14231
Nov-1999                    14859                           14894
Nov-2000                    15721                           15785


              Lipper Money Market Funds Average    Prime Reserve PLUS Shares
              ---------------------------------    -------------------------
11/1/1998                   10000                           10000
May-1999                    10204                           10250
Nov-1999                    10435                           10483
May-2000                    10709                           10766
Nov-2000                    10986                           11089


AVERAGE ANNUAL COMPOUND TOTAL RETURN
------------------------------------
     This table shows how each fund would have performed each year if its actual
(or  cumulative)  returns  for the  periods  shown had been earned at a constant
rate.
                                                               Since  Inception
Periods Ended 11/30/00       1 Year   5 Years   10 Years   Inception       Date
----------------------       ------   -------   --------   ---------       ----
Prime Reserve Shares          5.98%     5.16%     4.67%      7.31%     1/26/76
Prime Reserve PLUS shares     5.78         -         -       5.10      11/1/98

     Investment  return represents past performance and will vary. 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.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------                                      Unaudited
For a share outstanding throughout each period

FINANCIAL HIGHLIGHTS
--------------------
PRIME RESERVE SHARES
--------------------
PRIME RESERVE SHARES
                      6 Months      Year
                         Ended     Ended
                      11/30/00   5/31/00  5/31/99   5/31/98    5/31/97   5/31/96
NET ASSET VALUE

Beginning of period   $  1.000 $   1.000 $  1.000  $  1.000   $  1.000 $  1.000
Investment activities
 Net investment
 income (loss)           0.031     0.051    0.047     0.050      0.048    0.051
Distributions
 Net investment income  (0.031)   (0.051)  (0.047)   (0.050)    (0.048)  (0.051)

NET ASSET VALUE
End of period         $  1.000 $   1.000 $  1.000  $  1.000   $  1.000 $  1.000

Ratios/Supplemental Data
Total return*            3.10%     5.22%    4.82%     5.16%     4.92%     5.25%
-------------------------------------------------------------------------------
Ratio of total expenses
to average net assets    0.56%+    0.62%    0.66%     0.63%     0.64%     0.66%
-------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets               6.09%+    5.11%    4.70%     5.06%     4.83%     5.07%
-------------------------------------------------------------------------------
Net assets, end of period
(in millions)         $  5,558 $  5,618  $ 5,169  $  4,889  $  4,561  $  4,011

*    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.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------                                      Unaudited
For a share outstanding throughout each period

FINANCIAL HIGHLIGHTS
--------------------
PRIME RESERVE PLUS SHARES
-------------------------
                                   6 Months          Year         11/1/98
                                      Ended         Ended         Through
                                   11/30/00       5/31/00         5/31/99
NET ASSET VALUE
Beginning of period                $  1.000      $  1.000        $  1.000
Investment activities
 Net investment income (loss)         0.030         0.049           0.025
Distributions
 Net investment income               (0.030)       (0.049)         (0.025)
-----------------------------------------------------------------------------
NET ASSET VALUE
End of period                      $  1.000      $  1.000        $  1.000

Ratios/Supplemental Data
Total return*                         3.00%         5.04%           2.50%
-----------------------------------------------------------------------------
Ratio of total expenses to
average net assets                    0.77%+        0.79%           0.82%+
-----------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets          5.90%+        5.03%           4.22%+
-----------------------------------------------------------------------------
Net assets, end of
period (in millions)               $     56      $     49        $    20


*    Total  return  reflects  the rate that an investor  would have earned on an
     investment  in the fund during the  period,  assuming  reinvestment  of all
     distributions.

+    Annualized

The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------
Unaudited                                                     November 30, 2000

STATEMENT OF NET ASSETS
-----------------------                                    Par         Value
                                                                In thousands
BANK NOTES  1.8%
First Union National Bank
    VR
       6.62%, 12/18/00                                $   10,000  $     10,000
-------------------------------------------------------------------------------
       6.91%, 1/26/01                                     15,000        15,012
-------------------------------------------------------------------------------
Fleet National Bank, VR, 6.80%, 12/27/00                  10,000        10,004
-------------------------------------------------------------------------------
Key Bank N.A.
    VR
       6.661%, 12/29/00                                   17,000        17,005
-------------------------------------------------------------------------------
       6.924%, 7/13/01                                    25,000        25,014
-------------------------------------------------------------------------------
M&I Marshall & Ilsley Bank, 6.75%, 12/3/01                24,900        24,900
-------------------------------------------------------------------------------
Total Bank Notes (Cost  $101,935)                                      101,935
-------------------------------------------------------------------------------

CERTIFICATES OF DEPOSIT  32.3%
Abbey National
    (London)
       6.61%, 12/27/00                                    50,000        50,000
-------------------------------------------------------------------------------
       7.33%, 5/16/01                                     33,000        33,002
-------------------------------------------------------------------------------
Allfirst Bank
    VR
       6.61%, 12/11/00                                     5,880         5,880
-------------------------------------------------------------------------------
       6.617%, 12/27/00                                    9,000         9,000
-------------------------------------------------------------------------------
American Express Centurion Bank, 6.64%, 1/16/01           50,000        50,000
-------------------------------------------------------------------------------
Banco Bilbao Vizcaya Argentaria
       6.68%, 1/22/01                                     24,750        24,751
-------------------------------------------------------------------------------
    (London)
       6.63%, 5/21/01                                     45,000        45,001
-------------------------------------------------------------------------------
       6.68%, 3/28/01                                      5,000         5,000
-------------------------------------------------------------------------------
Bank Austria, 6.185%, 12/1/00                             50,000        50,000
-------------------------------------------------------------------------------
Bank of Nova Scotia, 6.22%, 12/4/00                       45,000        45,000
-------------------------------------------------------------------------------
Banque Paribas, 6.75%, 3/19/01                            10,000         9,999
-------------------------------------------------------------------------------

<PAGE>

Bayerische Vereinsbank
    (London)
       6.64%, 3/1/01                                      30,000        30,000
-------------------------------------------------------------------------------
       6.70%, 1/8/01                                      50,000        50,000
-------------------------------------------------------------------------------
       7.17%, 5/8/01                                      10,000         9,999
-------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, 6.62%, 12/27/00       45,750        45,751
-------------------------------------------------------------------------------
Chase Manhattan Bank (U.S.A), 6.72%, 1/31/01              50,000        50,000
-------------------------------------------------------------------------------
Commerzbank
       6.85%, 5/9/01                                  $   50,000  $     50,009
-------------------------------------------------------------------------------
       7.145%, 6/26/01                                    50,000        49,999
-------------------------------------------------------------------------------
Credit Agricole Indosuez
       6.63%, 12/9 - 12/20/00                            135,000       134,999
-------------------------------------------------------------------------------
       6.65%, 1/30/01                                     15,000        15,000
-------------------------------------------------------------------------------
Danske Bank, 6.60%, 12/1/00                               50,000        50,000
-------------------------------------------------------------------------------
Deutsche Bank
       6.19%, 12/1/00                                     30,000        30,000
-------------------------------------------------------------------------------
       6.225%, 12/18/00                                   45,000        44,999
-------------------------------------------------------------------------------
Dresdner Bank
    (London)
       6.65%, 1/31/01                                     35,000        35,000
-------------------------------------------------------------------------------
       6.74%, 2/21/01                                     89,000        88,999
-------------------------------------------------------------------------------
Firstar Bank N.A., 6.66%, 1/10/01                         50,000        50,000
-------------------------------------------------------------------------------
Halifax
       6.61%, 12/14/00                                    30,000        30,000
-------------------------------------------------------------------------------
       6.64%, 1/31/01                                     75,000        75,000
-------------------------------------------------------------------------------
       6.72%, 2/7/01                                      30,000        29,987
-------------------------------------------------------------------------------
Internationale Nederlanden Bank, 6.73%, 2/12/01           35,000        35,000
-------------------------------------------------------------------------------
Landesbank Baden-Wuerttemburg, 7.40%, 6/5/01              50,000        49,995
-------------------------------------------------------------------------------
Lloyds Bank, 6.615%, 2/12/01                             100,000       100,000
-------------------------------------------------------------------------------
Natexis Banque Populaires, 7.45%, 5/22/01                 30,250        30,250
-------------------------------------------------------------------------------
National Australia Bank, 6.65%, 1/29/01                   50,000        50,000
-------------------------------------------------------------------------------

<PAGE>

Norddeutsche Landesbank Girozentrale
       7.30%, 5/11/01                                     25,000        25,000
-------------------------------------------------------------------------------
       7.42%, 6/4/01                                      26,150        26,150
-------------------------------------------------------------------------------
Rabobank Nederland, 7.29%, 5/16/01                        19,000        19,009
-------------------------------------------------------------------------------
Royal Bank of Canada, 6.30%, 12/20/00                     50,000        49,999
-------------------------------------------------------------------------------
Svenska Handelsbanken, 6.71%, 3/13/01                     50,000        49,995
-------------------------------------------------------------------------------
UBS, 6.275%, 12/18/00                                     20,000        19,999
-------------------------------------------------------------------------------
Union Bank of California, VR, 6.62%, 12/1/00              37,300        37,300
-------------------------------------------------------------------------------
Westdeutsche Landesbank, (London), 6.75%, 2/12/01         50,000        50,000
-------------------------------------------------------------------------------
Westpac Banking, 6.65%, 3/5/01                            49,500        49,501
-------------------------------------------------------------------------------
World Savings Bank, 6.60%, 2/1/01                         25,000        25,000
-------------------------------------------------------------------------------
Total Certificates of Deposit (Cost  $1,814,573)                     1,814,573
-------------------------------------------------------------------------------

COMMERCIAL PAPER  54.1%
Alpine Securitization
    4(2)
       6.50%, 12/1/00                                 $   27,873  $     27,873
-------------------------------------------------------------------------------
       6.60%, 1/12/01                                     32,000        31,754
-------------------------------------------------------------------------------
AON, 6.54%, 12/7/00                                        7,200         7,192
-------------------------------------------------------------------------------
Asset Securitization Cooperative
    4(2)
       6.50%, 2/7/01                                      40,000        39,509
-------------------------------------------------------------------------------
       6.52%, 2/6/01                                      75,000        74,090
-------------------------------------------------------------------------------
       6.53%, 1/17 - 1/25/01                              55,000        54,487
-------------------------------------------------------------------------------
AT&T, 4(2), VR, 6.819%, 1/16/01                           59,500        59,500
-------------------------------------------------------------------------------
AWB Finance, 4(2), 6.51%, 2/28/01                         20,000        19,678
-------------------------------------------------------------------------------
B.B.V Finance (Delaware), 6.52%, 2/5/01                   50,000        49,402
-------------------------------------------------------------------------------
Bank of America Corp., 6.55%, 2/13/01                     50,000        49,327
-------------------------------------------------------------------------------
Banque Nationale de Paris, (Canada), 6.56%, 1/10/01       23,430        23,259
-------------------------------------------------------------------------------
British Telecommunications, VR, 6.59%, 12/4/00            75,000        74,995
-------------------------------------------------------------------------------

<PAGE>

CBA (Delaware) Finance
       6.50%, 1/19 - 1/29/01                              75,000        74,246
-------------------------------------------------------------------------------
Ciesco, 6.53%, 1/26/01                                    50,000        49,492
-------------------------------------------------------------------------------
Corporate Asset Funding
    4(2)
       6.53%, 2/8/01                                      30,000        29,624
-------------------------------------------------------------------------------
       6.548%, 1/12/01                                    24,500        24,313
-------------------------------------------------------------------------------
Corporate Receivables
    4(2)
       6.542%, 1/30/01                                    59,000        58,357
-------------------------------------------------------------------------------
       6.55%, 1/22/01                                     34,000        33,678
-------------------------------------------------------------------------------
DaimlerChrysler, ECN, 4(2), 6.53%, 12/5/00                40,000        39,971
-------------------------------------------------------------------------------
Delaware Funding
    4(2)
       6.53%, 1/18/01                                     11,955        11,851
-------------------------------------------------------------------------------
       6.55%, 1/17/01                                     40,000        39,658
-------------------------------------------------------------------------------
       6.58%, 1/16/01                                     55,857        55,387
-------------------------------------------------------------------------------
       6.60%, 1/22/01                                     10,121        10,025
-------------------------------------------------------------------------------
Dexia CLF Finance
    4(2)
       6.53%, 1/22 - 1/23/01                          $   90,000  $     89,147
-------------------------------------------------------------------------------
       6.54%, 1/16 - 1/18/01                              60,000        59,480
-------------------------------------------------------------------------------
Discover Card Master Trust, 4(2), 6.55%, 12/7/00          19,500        19,479
-------------------------------------------------------------------------------
Dover, VR, 4(2), 6.769%, 2/28/01                          32,500        32,500
-------------------------------------------------------------------------------
Enterprise Funding, 4(2), 6.53%, 2/16/01                  45,000        44,372
-------------------------------------------------------------------------------
Exxon Imperial, 4(2), 6.60%, 12/1/00                      10,367        10,367
-------------------------------------------------------------------------------
Falcon Asset Securitization
    4(2)
       6.50%, 12/1/00                                     45,000        45,000
-------------------------------------------------------------------------------
       6.53%, 1/22/01                                     20,000        19,811
-------------------------------------------------------------------------------
       6.60%, 1/23/01                                     25,000        24,757
-------------------------------------------------------------------------------
FCAR Owner Trust, 6.50%, 12/8/00                          15,000        14,981
-------------------------------------------------------------------------------
Fortis Funding
    4(2)
       6.50%, 3/9/01                                      19,550        19,204
-------------------------------------------------------------------------------
       6.53%, 1/12/01                                     18,000        17,863
-------------------------------------------------------------------------------
       6.54%, 1/10/01                                     37,900        37,625
-------------------------------------------------------------------------------
       6.55%, 1/31/01                                     25,000        24,722
-------------------------------------------------------------------------------

<PAGE>

France Telecom, 4(2), 6.59%, 1/17/01                      17,500        17,349
-------------------------------------------------------------------------------
General Electric Capital International Funding
    4(2)
       6.51%, 1/26/01                                     50,000        49,494
-------------------------------------------------------------------------------
       6.52%, 2/1/01                                      31,000        30,652
-------------------------------------------------------------------------------
       6.53%, 1/18 - 1/19/01                             100,000        99,120
-------------------------------------------------------------------------------
Golden Funding, 4(2), 6.56%, 1/29/01                       2,000         1,979
-------------------------------------------------------------------------------
Greenwich Funding, 4(2), 6.53%, 1/26/01                   26,500        26,231
-------------------------------------------------------------------------------
Halliburton, 6.51%, 2/28/01                                9,500         9,347
-------------------------------------------------------------------------------
Jefferson Pilot
    4(2)
       6.53%, 2/20 - 2/26/01                              56,745        55,904
-------------------------------------------------------------------------------
KFW International Finance, 6.52%, 1/17/01                 25,000        24,787
-------------------------------------------------------------------------------
Market Street Funding, 4(2), 6.55%, 1/18/01               16,730        16,584
-------------------------------------------------------------------------------
MBNA Master Credit Card Trust II, 4(2)
        6.54%, 12/18/00                                   38,845        38,725
-------------------------------------------------------------------------------
Merita North America, 6.50%, 2/23/01                  $   49,750  $     48,996
-------------------------------------------------------------------------------
Merrill Lynch, 6.55%, 1/17/01                             52,645        52,195
-------------------------------------------------------------------------------
New Center Asset Trust, 6.53%, 1/31/01                    50,000        49,447
-------------------------------------------------------------------------------
Nordbanken North America, 6.53%, 1/23 - 1/24/01           50,000        49,515
-------------------------------------------------------------------------------
Park Avenue Receivables
    4(2)
       6.51%, 12/8 - 12/15/00                             38,573        38,501
-------------------------------------------------------------------------------
       6.60%, 1/25/01                                     43,000        42,566
-------------------------------------------------------------------------------
       6.63%, 1/24/01                                      6,285         6,223
-------------------------------------------------------------------------------
Preferred Receivables Funding
    4(2)
       6.56%, 1/10/01                                     70,000        69,490
-------------------------------------------------------------------------------
       6.58%, 2/1/01                                      65,000        64,263
-------------------------------------------------------------------------------
       6.61%, 1/24/01                                     50,000        49,504
-------------------------------------------------------------------------------
Principal Financial Services, 4(2), 6.56%, 1/10/01        15,000        14,891
-------------------------------------------------------------------------------
Repeat Offering Securitisation Entity
    4(2)
       6.53%, 1/22/01                                     48,280        47,824
-------------------------------------------------------------------------------
       6.54%, 1/23 - 1/29/01                              38,394        38,015
-------------------------------------------------------------------------------
       6.56%, 1/23/01                                        500           495
-------------------------------------------------------------------------------

<PAGE>

Rio Tinto, 4(2), 6.514%, 2/14/01                          80,000        78,914
-------------------------------------------------------------------------------
San Paolo U.S. Finance, 6.52%, 1/24/01                    23,000        22,775
-------------------------------------------------------------------------------
Sand Dollar Funding
    4(2)
       6.53%, 2/14/01                                     34,056        33,593
-------------------------------------------------------------------------------
       6.55%, 2/28/01                                     37,889        37,275
-------------------------------------------------------------------------------
       6.56%, 1/19/01                                     16,500        16,353
-------------------------------------------------------------------------------
       6.60%, 1/12/01                                     15,000        14,884
-------------------------------------------------------------------------------
Sigma Finance, 4(2), 6.55%, 2/2/01                         3,750         3,707
-------------------------------------------------------------------------------
Svenska Handelsbanken Inc., 6.50%, 2/20/01                45,000        44,342
-------------------------------------------------------------------------------
Sysco, 4(2), 6.52%, 12/11/00                               2,015         2,011
-------------------------------------------------------------------------------
Tasmanian Public Finance, 4(2), 6.51%, 2/20/01            50,000        49,268
-------------------------------------------------------------------------------
Three Rivers Funding
    4(2)
       6.51%, 12/5/00                                     25,000        24,982
-------------------------------------------------------------------------------
       6.53%, 12/15/00                                    38,489        38,391
-------------------------------------------------------------------------------
       6.54%, 12/29/00                                    20,000        19,898
-------------------------------------------------------------------------------
Tulip Funding
    4(2)
       6.52%, 12/7 - 12/14/00                         $   60,619  $     60,504
-------------------------------------------------------------------------------
       6.55%, 2/15/01                                     50,000        49,309
-------------------------------------------------------------------------------
       6.62%, 1/30/01                                     20,000        19,779
-------------------------------------------------------------------------------
Unilever Capital, VR, 4(2), 6.68%, 12/7/00                20,000        20,000
-------------------------------------------------------------------------------
Variable Funding Capital, 4(2), 6.52%, 2/9/01             50,000        49,366
-------------------------------------------------------------------------------
Verizon Global Funding, VR, 4(2), 6.69%, 12/15/00         25,000        24,993
-------------------------------------------------------------------------------
Woolwich, 6.50%, 1/25/01                                  50,000        49,504
-------------------------------------------------------------------------------
Yale University
       6.52%, 1/16 - 2/21/01                              29,285        28,896
-------------------------------------------------------------------------------
ZCM Matched Funding
    4(2)
       6.53%, 12/5/00                                      4,166         4,163
-------------------------------------------------------------------------------
       6.57%, 12/1/00                                      3,940         3,940
-------------------------------------------------------------------------------
Total Commercial Paper (Cost  $3,035,920)                            3,035,920
-------------------------------------------------------------------------------
<PAGE>

MEDIUM-TERM NOTES  10%
Associates Corp. of North America, 6.75%, 10/31/01         2,800         2,798
-------------------------------------------------------------------------------
AT&T Capital
    VR
       6.973%, 1/10/01                                     2,000         2,001
-------------------------------------------------------------------------------
       7.503%, 12/1/00                                    21,250        21,250
-------------------------------------------------------------------------------
Banc One, VR, 6.80%, 12/26/00                             10,000        10,005
-------------------------------------------------------------------------------
Bank of Scotland Treasury Services, VR, 6.77%, 1/19/01    59,500        59,498
-------------------------------------------------------------------------------
BankBoston, VR, 6.876%, 2/26/01                           21,000        21,019
-------------------------------------------------------------------------------
Beta Finance, (144a), 6.75%, 3/15/01 +                     9,500         9,500
-------------------------------------------------------------------------------
Caterpillar International Finance, VR, 6.809%, 1/30/01    15,000        15,003
-------------------------------------------------------------------------------
CIT Group, VR, 6.604%, 12/6/00                             9,900         9,897
-------------------------------------------------------------------------------
Credit Suisse First Boston International (Guernsey), VR, (144a)
       6.619%, 12/18/00 +                                 10,000        10,000
-------------------------------------------------------------------------------
Diageo, 6.24%, 12/4/00                                    48,900        48,900
-------------------------------------------------------------------------------
First Security Auto Owner Trust, VR, 6.773%, 7/16/01       4,368         4,368
-------------------------------------------------------------------------------
Ford Motor Credit, VR, 6.968%, 7/16/01                     3,000         3,003
-------------------------------------------------------------------------------
General Motors Acceptance Corporation, VR,
        6.891%, 2/23/01                                    5,000         5,002
-------------------------------------------------------------------------------
Goldman Sachs Group
    VR
       6.619%, 12/19/00 +                                 50,000        50,000
-------------------------------------------------------------------------------
       6.664%, 12/8/00 +                                  25,000        25,000
-------------------------------------------------------------------------------
Household Finance
    VR
       6.737%, 12/27/00                               $   18,000  $     18,019
-------------------------------------------------------------------------------
       6.851%, 2/5/01                                     23,400        23,405
-------------------------------------------------------------------------------
       6.871%, 2/26/01                                     7,000         7,006
-------------------------------------------------------------------------------

<PAGE>

International Lease Finance, 5.875%, 1/15/01               8,600         8,593
-------------------------------------------------------------------------------
KFW International Finance, 9.50%, 12/15/00                 3,915         3,920
-------------------------------------------------------------------------------
Merrill Lynch, VR, 6.861%, 2/7/01                         16,500        16,506
-------------------------------------------------------------------------------
National Rural Utilities, 6.10%, 12/22/00                  5,000         4,999
-------------------------------------------------------------------------------
Northern Rock, VR, (144a), 6.619%, 12/20/00               19,750        19,750
-------------------------------------------------------------------------------
Rabobank Optional Redemption Trust, (144a), VR,
         6.62%, 12/18/00                                   5,313        5,313
-------------------------------------------------------------------------------
Sigma Finance, (144a)
    VR, 6.61%, 12/15/00 +                                 50,000        49,996
-------------------------------------------------------------------------------
       6.75%, 3/15/01 +                                   40,000        40,000
-------------------------------------------------------------------------------
Strategic Money Market Trust, (144a)
    VR
       6.64%, 12/13/00 +                                  15,000        15,000
-------------------------------------------------------------------------------
       6.66%, 12/13/00 +                                  50,000        50,000
-------------------------------------------------------------------------------
World Omni Auto Receivables Trust, VR, 6.694%, 8/15/00     4,801         4,801
-------------------------------------------------------------------------------
Total Medium-Term Notes (Cost  $564,552)                               564,552
-------------------------------------------------------------------------------

FUNDING AGREEMENTS  2.3%
Allstate Life Insurance, VR, 6.77%, 12/1/00 +             25,000        25,000
-------------------------------------------------------------------------------
Peoples Benefit
    VR
       6.76%, 12/1/00 +                                   40,000        40,000
-------------------------------------------------------------------------------
       6.77%, 12/1/00 +                                   25,000        25,000
-------------------------------------------------------------------------------
Protective Life Insurance, VR, 6.83%, 12/1/00 +           12,500        12,500
-------------------------------------------------------------------------------
Security Life Of Denver, 6.666%, 12/28/00 +               25,000        25,000
-------------------------------------------------------------------------------
Total Funding Agreements (Cost  $127,500)                              127,500
-------------------------------------------------------------------------------
Total Investments in Securities
100.5% of Net Assets (Cost $5,644,480)                            $  5,644,480

Other Assets Less Liabilities                                          (30,457)

NET ASSETS                                                        $  5,614,023

Net Assets Consist of:
Accumulated net investment income - net of distributions          $        735
Accumulated net realized gain/loss - net of distributions                  696
Paid-in-capital applicable to 5,614,085,574 shares of $0.01 par
value capital stock outstanding; 15,000,000,000 shares authorized    5,612,592
-------------------------------------------------------------------------------
NET ASSETS                                                        $  5,614,023
NET ASSET VALUE PER SHARE
Prime Reserve shares
  ($5,557,939,620 / 5,558,001,301 shares outstanding)             $       1.00
Prime Reserve PLUS shares
  ($56,083,631 / 56,084,273 shares outstanding)                   $       1.00


   +  Private Placement
 ECN  Extendible Commercial Note
  VR  Variable Rate
4(2)  Commercial Paper sold within terms of a private placement memorandum,
      exempt from registration under section 4.2 of the Securities Act of 1933,
      as amended, and may be sold only to dealers in that program or other
      "accredited investors".
144a  Security was purchased pursuant to Rule 144a under the Securities Act
      of 1933 and may not be resold subject to that rule except to qualified
      institutional buyers -- total of such securities at period-end amounts
      to 3.6% of net assets.

  The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------                                     Unaudited
STATEMENT OF OPERATIONS
-----------------------                                           In thousands

                                                                      6 Months
                                                                         Ended
                                                                      11/30/00
  Investment Income (Loss)
  Interest income                                                $    190,262
--------------------------------------------------------------------------------
  Expenses
   Investment management                                               10,444
   Shareholder servicing
     Prime Reserve shares                                               4,799
     Prime Reserve PLUS shares                                            100
   Prospectus and shareholder reports                                     239
   Custody and accounting                                                 210
   Registration                                                            65
   Directors                                                               14
   Legal and audit                                                          8
   Miscellaneous                                                          314
--------------------------------------------------------------------------------
   Total expenses                                                      16,193
   Expenses paid indirectly                                               (27)
--------------------------------------------------------------------------------
   Net expenses                                                        16,166
--------------------------------------------------------------------------------
  Net investment income (loss)                                        174,096
  Realized Gain (Loss)
   Net realized gain (loss) on securities                                  (1)
--------------------------------------------------------------------------------
  INCREASE (DECREASE) IN NET
  ASSETS FROM OPERATIONS                                         $    174,095

The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------                                     Unaudited
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------                                In thousands

                                                       6 Months           Year
                                                          Ended          Ended
                                                       11/30/00        5/31/00
  Increase (Decrease) in Net Assets
  Operations
   Net investment income (loss)                      $  174,096    $   275,364
   Net realized gain (loss)                                  (1)           (83)
-------------------------------------------------------------------------------
   Increase (decrease) in net assets from operations    174,095        275,281
-------------------------------------------------------------------------------
  Distributions to shareholders
   Net investment income
     Prime Reserve shares                              (172,550)      (273,628)
     Prime Reserve PLUS shares                           (1,546)        (1,736)
-------------------------------------------------------------------------------
   Decrease in net assets from distributions           (174,096)      (275,364)
-------------------------------------------------------------------------------
  Capital share transactions *
   Shares sold
     Prime Reserve shares                             3,517,330      9,281,286
     Prime Reserve PLUS shares                          126,509        142,392
-------------------------------------------------------------------------------
   Increase in net assets from shares sold            3,643,839      9,423,678
-------------------------------------------------------------------------------
  Distributions reinvested
     Prime Reserve shares                               166,319        263,286
     Prime Reserve PLUS shares                            1,420          1,706
-------------------------------------------------------------------------------
   Increase in net assets from
        distributions reinvested                        167,739        264,992
-------------------------------------------------------------------------------
   Shares redeemed
     Prime Reserve shares                            (3,743,961)    (9,095,273)
     Prime Reserve PLUS shares                         (120,418)      (115,500)
-------------------------------------------------------------------------------
   Decrease in net assets from shares redeemed       (3,864,379)    (9,210,773)
-------------------------------------------------------------------------------
   Increase (decrease) in net assets from
   capital share transactions                           (52,801)       477,897
-------------------------------------------------------------------------------
  Net Assets
  Increase (decrease) during period                     (52,802)       477,814
  Beginning of period                                 5,666,825      5,189,011
-------------------------------------------------------------------------------
  End of period                                      $5,614,023    $ 5,666,825

*Capital share transactions at net asset value of $1.00 per share

The accompanying notes are an integral part of these financial statements.

================================================================================

<PAGE>

T. Rowe Price Prime Reserve Fund
--------------------------------
Unaudited                                                     November 30, 2000

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 as a diversified,  open-end management investment
company. The fund seeks preservation of capital, liquidity, and, consistent with
these,  the  highest  possible  current  income.  The fund offers two classes of
shares -- Prime Reserve, offered since January 26, 1976, and Prime Reserve PLUS,
first  offered on  November  1,  1998.  Prime  Reserve  PLUS  provides  expanded
shareholder services, the cost of which is borne by its shareholders. Each class
has exclusive  voting rights on matters  related solely to that class,  separate
voting  rights on  matters  which  relate  to both  classes,  and,  in all other
respects, the same rights and obligations as the other class.

     The  accompanying  financial  statements  were prepared in accordance  with
generally  accepted  accounting  principles,  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 both financial reporting and tax purposes.

     In November,  2000, the American  Institute of Certified Public Accountants
issued a revised Audit and  Accounting  Guide -- Audits of Investment  Companies
(the  guide),  which will be  adopted be the fund as of June 1, 2001.  The guide
requires all premiums and discounts on debt  securities  to be  amortized.  Upon
adoption,   the  fund  will  adjust  the  cost  of  its  debt  securities,   and
corresponding  unrealized  gain/loss  thereon,  in the amount of the  cumulative
amortization  that would have been  recognized had  amortization  been in effect
from the purchase date of each holding.  This  adjustment will have no effect on
the fund's net assets or results of operations.

     Class Accounting Shareholder servicing expenses are charged directly to the
class to which they relate. Expenses common to both classes,  investment income,
and  realized  gains and  losses are  allocated  to the  classes  based upon the
relative daily net assets of each class.  Income  distributions  are declared by
each class on a daily basis, and paid monthly.

     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.  Income  and  capital  gain
distributions  are determined in accordance  with federal income tax regulations
and may differ from net  investment  income and  realized  gains  determined  in
accordance  with  generally  accepted  accounting   principles.   Expenses  paid
indirectly  reflect  credits  earned on daily  uninvested  cash  balances at the
custodian and are used to reduce the fund's custody charges.


<PAGE>

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 all of its
taxable  income.  As of May 31,  2000,  the  fund had  $2,000  of  capital  loss
carryforwards,  all of which  expires in 2008.  The fund intends to retain gains
realized  in  future  periods  that may be  offset  by  available  capital  loss
carryforwards.

     At November  30,  2000,  the cost of  investments  for  federal  income tax
purposes  was  substantially  the same as for  financial  reporting  and totaled
$5,644,480,000.

NOTE 3- RELATED PARTY TRANSACTIONS
----------------------------------

     The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates).  The  investment  management  agreement  between  the  fund and the
manager  provides for an annual  investment  management fee, of which $1,683,000
was payable at November 30, 2000.  The fee is computed  daily and paid  monthly,
and  consists  of an  individual  fund fee equal to 0.05% of  average  daily net
assets and a group fee. The group fee is based on the combined assets of certain
mutual funds sponsored by the manager or T. Rowe Price International,  Inc. (the
group).  The group fee rate ranges from 0.48% for the first $1 billion of assets
to 0.295% for assets in excess of $120  billion.  At November 30, 2000,  and for
the six months then ended,  the effective  annual group fee rate was 0.32%.  The
fund pays a pro-rata share of the group fee based on the ratio of its net assets
to those of the group.

     In addition, the fund has entered into agreements with Price Associates and
two wholly owned  subsidiaries of Price  Associates,  pursuant to which the fund
receives certain other services. Price Associates computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services, Inc. is
the fund's transfe r and dividend disbursing agent and provides  shareholder and
administrative  services to the fund. T. Rowe Price  Retirement  Plan  Services,
Inc. provides  subaccounting and recordkeeping  services for certain  retirement
accounts  invested in the fund.  The fund  incurred  expenses  pursuant to these
related party agreements  totaling  approximately  $4,056,000 for the six months
ended November 30, 2000, of which $788,000 was payable at period-end.

================================================================================

For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
<PAGE>

For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132

To open a brokerage account
or obtain information, call:
1-800-638-5660

For the hearing impaired, call:
1-800-367-0763

Internet address:
www.troweprice.com

Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.

T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland  21202

This report is authorized for distribution
only to shareholders and to others who have
received a copy of the prospectus appropriate
to the fund or funds covered in this report.

Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site at
www.troweprice.com/investorcenters

Baltimore Area
Downtown - new address
105 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road

Boston Area
386 Washington Street
Wellesley

Colorado Springs
2260 Briargate Parkway

Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills

San Francisco Area
1990 North California Boulevard
Suite 100
Walnut Creek

Tampa
4200 West Cypress Street
10th Floor

Washington, D.C.
900 17th Street N.W.
Farragut Square

T. Rowe Price Investment Services, Inc., Distributor.         F44-051  11/30/00


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