<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