______________________
ANNUAL REPORT
______________________
U.S. TREASURY FUNDS
______________________
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
______________________
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
______________________
T. ROWE PRICE
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 of the T. Rowe Price U.S.
Treasury Funds.
<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
What a difference a year makes. In 1994, the economy picked up steam,
fueling a sharp rise in interest rates as the Federal Reserve applied the
brakes. After growing at a robust 5.1% annualized rate in last year's fourth
quarter, the economy steadily lost strength, slowing to a 2.7% rate of growth in
the first quarter of 1995.
Recent signs pointed to the possibility of a steepening slide. Employment
declined in April and May, inventories of unsold new homes and automobiles rose
to uncomfortable levels, and residential construction and manufacturing
declined. Economic growth in the second calendar quarter will likely end up well
below the long-term trend of 2% to 2.5%. It appears the much-desired soft
landing has hit some bumps.
[A 3-line chart showing the 90-Day Treasury bill, 5-Year Treasury note, and
30-Year Treasury Bond from 5/31/94 to 5/31/95.]
The softening economy curbed inflation fears, driving yields steadily
downward in the three months ended May 31 and sparking a sustained rally in the
bond markets. The benchmark 30-year Treasury bond yield slid roughly 75 basis
points in the quarter, finishing near 6.7% in early June, down from a high last
November of 8.16%. Yields on 2- to 10-year Treasury notes also dropped, with the
5-year Treasury note nosediving nearly 200 basis points during the quarter to
6.08%, down from 7.9% last January. Yields on Treasury bills generally hovered
around the 6% federal funds target.
The net result was a flattening of the Treasury yield curve, which means
the difference in yield among all maturities, and particularly between short and
intermediate maturities, narrowed sharply from last year's levels.
<PAGE>
[A Tree-line chart showing Treasury Yields (3 months to 30 years) on 5/31/94,
11/4/94 and 5/31/95.]
U.S. TREASURY MONEY FUND
Your fund's yield shot up from 3.23% a year ago to 5.46% on May 31. While
the Fed progressively tightened, we maintained a weighted average maturity (WAM)
close to the average for our peer group, hastening the rollover of maturing
assets into higher-yielding instruments.
In the first quarter of 1995, when it became clear that the economy was
slowing and the Fed was less likely to tighten further, we began to lengthen the
maturities of our holdings to maintain higher yields. The fund's WAM was 55 days
on May 31, up from 49 days at the end of February, and six days longer than the
Donoghue average. We also increased the fund's holdings of instruments that
mature in more than 90 days. These moves helped your fund perform slightly
better than its peer group average, for both the quarter and the year ended May
31.
- --------------------------------------------------------------------------------
Performance Comparison
================================================================================
Periods Ended 5/31/95
3 Months 12 Months
---------------------
U.S. Treasury Money Fund 1.35% 4.58%
Donoghue 100% U.S. Treasury
Money Funds Average 1.33 4.53
================================================================================
<PAGE>
Your investment in the U.S. Treasury Money Fund is neither insured nor
guaranteed by the U.S. government. Unless economic growth rekindles and the Fed
intends to tighten further, we expect to maintain this slightly more aggressive
maturity position. We will continue to narrowly adjust maturities depending on
our outlook for short-term rates.
U.S. TREASURY INTERMEDIATE FUND
Your fund weathered the stormy bond market of the last 12 months in better
shape than most of its peers. As the rise in intermediate- and long-term rates
slowed from May to November 1994, we nudged up our weighted average maturity
(WAM) and duration and pushed our GNMA holdings to the allowable limit (15%) in
order to capture higher yields. GNMAs provide more income than Treasuries with
no additional credit risk. The increased income offset declining bond prices,
helping the fund squeeze out a positive return in the six months ended November
30, while the average fund in our Lipper peer group sustained a slight loss.
The fund was well positioned to take advantage of the bond market rally
when intermediate Treasury yields began their descent in January. In the fiscal
third quarter ended February 28, the fund's net asset value was boosted by
rising bond prices, but its yield was insulated somewhat from falling rates by
the continuing maturity extension to a weighted average of 4.6 years by the
quarter's end. Your fund's profile changed little since our report three months
ago. Although the longer WAM reflects our optimistic outlook for interest rates,
the portfolio remains positioned near the middle of its typical three- to
seven-year maturity range. These maneuvers helped your fund exceed its Lipper
peer group average, in both the quarter and the year ended May 31.
- --------------------------------------------------------------------------------
Performance Comparison
================================================================================
Periods Ended 5/31/95
3 Months 12 Months
---------------------
U.S. Treasury
Intermediate Fund 5.01% 9.29%
Lipper Average of Intermediate
U.S. Treasury Funds 4.72 8.87
===============================================================================
<PAGE>
U.S. TREASURY LONG-TERM FUND
In the last three months, your fund continued extending its weighted
average maturity (WAM) and duration to take advantage of the strong rally in
bond prices. This gradual extension, which started last fall, captured much of
the appreciation accompanying the drop in long-term yields that began in
November 1994. On May 31, our WAM stood at 23.9 years, up from 17.3 years last
November. The fund's duration (a better measure of interest rate sensitivity
than maturity) stood at 10.6 years, up from 7.7 years last November. This means
that for each one percentage point move in interest rates, the fund's share
price will rise or fall about 10.6%.
Our GNMA position continued to be bolstered by a long-maturity CMO
(collateralized mortgage obligation) backed by GNMA certificates. The security,
which carries a 6.5% coupon, was bought at a substantial discount to Treasuries
and produced an attractive income as well as price appreciation when interest
rates fell. Our mortgage securities position now represents 14% of the
portfolio. Your fund substantially outperformed the Lipper average of similar
funds, for both the quarter and the year ended May 31.
- --------------------------------------------------------------------------------
Performance Comparison
================================================================================
Periods Ended 5/31/95
3 Months 12 Months
---------------------
U.S. Treasury
Long-Term Fund 9.95% 15.24%
Lipper Average of General
U.S. Treasury Funds 6.93 10.93
================================================================================
<PAGE>
OUTLOOK
With the economy slowing and inflation around 3.5% on an annualized basis,
we would not rule out a cut in the federal funds rate sometime this year.
However, we think the economy could grow sufficiently on its own, compelling the
Fed to stand pat. Fundamentally, the economy remains strong and stands little
chance of slipping into a recession.
We expect longer-term interest rates to hover around current levels. A Fed
ease, of course, would cause short-term rates to fall and be unfavorable for the
U.S. Treasury Money Fund, where lower yields translate to lower total returns.
Such a move may or may not be favorable for longer-term bonds, depending on the
overall outlook for the economy and inflation. Although bonds are not likely to
keep up the torrid price appreciation of the last quarter, the U.S. Treasury
bond funds should provide solid returns for the balance of the year.
Respectfully submitted,
[signature]
George J. Collins
President
June 21, 1995
Chairmen of the funds' Investment Advisory Committees:
- ------------------------------------------------------
Money Fund Edward A. Wiese
Intermediate Fund Charles P. Smith
Long-Term Fund Peter Van Dyke
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
Financial Summary
================================================================================
<S> <C> <C> <C>
Net Asset Value Dividend Per Share Dividend Yield*
Per Share 3 Months Ended 3 Months Ended
====================================================================================================================================
2/28/95 5/31/95 2/28/95 5/31/95 2/28/95 5/31/95
Money Fund $1.00 $1.00 0.012 0.013 5.30% 5.46%
Intermediate Fund 5.08 5.25 0.08 0.08 6.47 6.40
Long-Term Fund 9.75 10.54 0.17 0.17 7.25 6.83
<FN>
* Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
Money Fund yield is a seven-day compound yield.
</FN>
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
Quality, Duration, and Maturity
================================================================================
<S> <C> <C> <C>
Weighted Average Weighted Average Weighted Average
Quality* Effective Duration Maturity
===================================================================================================================================
2/28/95 5/31/95 2/28/95 5/31/95 2/28/95 5/31/95
Money Fund 1.0 1.0 -- -- 49 55 (DAYS)
Intermediate Fund 1.0 1.0 3.5 3.7 4.6 4.7 (Years)
Long-Term Fund 1.0 1.0 9.2 10.6 20.8 23.9
<FN>
*On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
</FN>
</TABLE>
[Fiscal-Year Performance Comparison line graph for U.S. Treasury Intermediate
fund annual report (May 31, 1995).]
[Fiscal-Year Performance Comparison line graph for U.S. Treasury Long-Term
fund annual report (May 31, 1995).]
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
Average Annual Compound Total Return-Fiscal and Calendar Years
================================================================================
<S> <C> <C>
Periods Ended 5/31/95 Periods Ended 3/31/95
------------------------------------------- ------------------------------
SEC 30-Day
1 Year 5 Years Since Inception Yield 1 Year 5 Years Since Inception
------ ------- ---------------- ---------- ----- ------ ----------------
Money Fund 4.58% 4.21% 6.17% (6/82) 5.46%* 4.17% 4.28% 6.19% (6/82)
Intermediate Fund 9.29 8.56 8.41 (9/89) 6.02 3.83 8.02 7.83 (9/89)
Long-Term Fund 15.24 10.22 9.54 (9/89) 6.48 4.09 8.69 8.11 (9/89)
<FN>
* Seven-day compound yield.
Total return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
</FN>
</TABLE>
================================================================================
<TABLE>
- --------------------------------------------------------------------------------
Investment Records
U.S. Treasury Funds
================================================================================
The following tables show the investment records of one share purchased at
the original offering prices of $1.00 for the Money Fund, $5.00 for the
Intermediate Fund, and $10.00 for the Long-Term Fund. Over the time periods
covered in each table, interest rates have been volatile. The results shown
should not be considered representative of the returns which would be realized
from investments made in the funds today.
<PAGE>
U.S. Treasury Money Fund
Adjusted to Reflect Reinvestment
----------------------------------------------
Cumulative Dollars
-----------------------------
<S> <C> <C> <C> <C> <C>
Income Dividend
Fiscal Net Asset Taken in Income Value of
Year Ended Value Cash Dividends Investment Total Return
---------- -------- -------- ---------- --------------- -----------
2/28/83 1 $1.00 $0.06 $0.06 $1.06 5.83%
1984 1.00 0.08 0.15 1.15 8.52
1985 1.00 0.09 0.26 1.26 9.44
1986 1.00 0.07 0.35 1.35 7.14
1987 1.00 0.05 0.42 1.42 5.36
1988 1.00 0.05 0.50 1.50 5.56
1989 1.00 0.07 0.60 1.60 6.85
1990 1.00 0.08 0.73 1.73 8.26
1991 1.00 0.07 0.86 1.86 7.18
1992 1.00 0.05 0.95 1.95 5.06
1993 1.00 0.03 1.01 2.01 2.97
1994 1.00 0.02 1.06 2.06 2.51
5/31/94 2 1.00 0.01 1.07 2.07 0.73
1995 1.00 0.04 1.17 2.17 4.58
Total $0.77
<FN>
1 From inception 6/28/82 to 2/28/83.
2 Fiscal year-end changed from February 28 to May 31;
figures are for three months from 3/1/94 to 5/31/94.
</FN>
</TABLE>
<PAGE>
<TABLE>
U.S. Treasury Intermediate Fund
<S> <C> <C> <C> <C> <C> <C>
Capital With With Dividends
Fiscal Net Asset Income Gain Dividends and Capital Total
Year Ended Value Dividends Distributions 2 Reinvested Gains Reinvested 2 Return
---------- -------- -------- ---------- ---------- ----------------- -----------
2/28/90 1 $4.98 $0.17 -- $5.15 $5.15 2.97%
1991 5.10 0.40 -- 5.71 5.71 10.92
1992 5.28 0.36 $0.03 6.33 6.37 11.54
1993 5.42 0.32 0.13 6.90 7.12 11.77
1994 5.32 0.29 0.01 7.15 7.39 3.80
5/31/94 3 5.11 0.08 0.02 6.97 7.23 -2.16
1995 5.25 0.31 -- 7.61 7.90 9.29
Total $1.93 $0.19
<FN>
1 From inception 9/29/89 to 2/28/90.
2 Includes short-term capital gain of $0.03 on 3/25/91 and $0.06 on 3/18/92.
3 Fiscal year-end changed from February 28 to May 31; figures are for three
months from 3/1/94 to 5/31/94.
</FN>
</TABLE>
<PAGE>
<TABLE>
U.S. Treasury Long-Term Fund
<S> <C> <C> <C> <C> <C> <C>
Capital With With Dividends
Fiscal Net Asset Income Gain Dividends and Capital Total
Year Ended Value Dividends Distributions 2 Reinvested Gains Reinvested 2 Return
---------- ---------- ----------- ----------------- ----------- ----------------- -----------
2/28/90 1 $9.79 $0.35 -- $10.13 $10.13 1.32%
1991 10.03 0.80 -- 11.27 11.27 11.21
1992 10.39 0.78 -- 12.60 12.60 11.86
1993 10.79 0.70 $0.28 14.00 14.38 14.11
1994 10.46 0.68 0.29 14.44 15.23 5.89
5/31/94 3 9.81 0.17 0.01 13.77 14.54 -4.50
1995 10.54 0.68 -- 15.87 16.76 15.24
Total $4.16 $0.58
<FN>
1 From inception 9/29/89 to 2/28/90.
2 Includes short-term capital gain of $0.02 on 3/18/92, $0.06 on 12/11/92, $0.02
on 3/29/93, and $0.25 on 12/10/93.
3 Fiscal year-end changed from February 28 to May 31; figures are for three
months from 3/1/94 to 5/31/94.
</FN>
</TABLE>
<TABLE>
Statement of Net Assets
T. Rowe Price U.S. Treasury Funds / May 31, 1995
(AMOUNTS IN THOUSANDS)
<PAGE>
MONEY FUND
<S> <C> <C>
Amount Value
-------- --------
U.S. Government Guaranteed Obligations -- 99.2%
U.S. Government Mortgage-Backed Securities -- 15.3%
U.S. Treasury Bills, 5.545%, 6/1/95 ...................................................................... $ 33,206 $ 32,991
5.54 - 5.66%, 6/8/95 ................................................................................... 46,891 46,448
5.765%, 6/15/95 ........................................................................................ 25,000 24,636
5.69 - 5.795%, 6/22/95 ................................................................................. 105,000 104,143
5.52 - 5.65%, 7/6/95 ................................................................................... 12,849 12,705
5.60%, 7/20/95 ......................................................................................... 20,000 19,711
5.56 - 5.70%, 7/27/95 .................................................................................. 38,127 37,602
5.63 - 5.665%, 8/10/95 ................................................................................. 43,177 42,549
5.61 - 5.72%, 8/17/95 .................................................................................. 23,976 23,649
5.63 - 5.67%, 8/24/95 .................................................................................. 38,110 37,592
5.70%, 8/31/95 ......................................................................................... 25,000 24,443
U.S. Treasury Bonds, 8.375%, 8/15/95 ..................................................................... 59,775 60,055
U.S. Treasury Notes, 8.875%, 7/15/95 ..................................................................... 77,268 77,512
4.25%, 7/31/95 ......................................................................................... 35,000 34,896
4.625%, 8/15/95 ........................................................................................ 70,000 69,804
3.875%, 8/31/95 ........................................................................................ 25,000 24,867
3.875%, 9/30/95 ........................................................................................ 40,000 39,719
TOTAL INVESTMENTS IN SECURITIES -- 99.2% OF NET ASSETS (COST $713,383) ................................... 713,322
OTHER ASSETS LESS LIABILITIES ............................................................................ 5,893
--------
<PAGE>
NET ASSETS CONSIST OF: .................................................... Value
----------
Accumulated net investment income - net of distributions .................. 81
Accumulated net realized gain/loss - net of distributions ................. 58
Net unrealized gain (loss) ................................................ (61)
Paid-in-capital applicable to 719,216,537 shares of $0.01 par value capital
stock outstanding; 1,000,000,000 shares of the Corporation authorized ... 719,137
----------
NET ASSETS ................................................................ $ 719,215
--------
--------
NET ASSET VALUE PER SHARE.................................................. $1.00
-----
-----
INTERMEDIATE FUND
- --------------------------------------------------------------------------------
U.S. Government Guaranteed Obligations -- 98.9%
================================================================================
U.S. Government Obligations -- 84.9%
U.S. Treasury Notes, 5.125%, 3/31/98 ........................................... 11,100 10,867
5.375%, 5/31/98 .............................................................. 2,000 1,968
5.625%, 8/31/97 - 1/31/98 .................................................... 8,315 8,260
6.00%, 11/30 - 12/31/97 ...................................................... 7,925 7,939
6.375%, 1/15/00 .............................................................. 24,000 24,300
6.75%, 4/30/00 ............................................................... 3,875 3,985
6.875%, 7/31 - 8/31/99 ....................................................... 7,210 7,426
7.125%, 9/30/99 .............................................................. 420 437
7.50%, 2/29/96 - 5/15/02 ..................................................... 38,000 40,645
7.75%, 11/30/99 .............................................................. 6,000 6,393
7.875%, 8/15/01 .............................................................. 7,850 8,539
8.25%, 7/15/98 ............................................................... 19,950 21,234
8.50%, 7/15/97 - 11/15/00 .................................................... 1,595 1,683
8.75%, 10/15/97 .............................................................. 2,716 2,884
146,560
<PAGE>
U.S. Government Mortgage-Backed Securities -- 14.0%
Government National Mortgage Assn., I, 6.50%, 8/15 - 10/15/02 .............................. 577 571
7.00%, 7/15 - 9/15/16 .................................................................. 2,367 2,363
8.00%, 4/15 - 7/15/17 .................................................................. 1,907 1,985
8.50%, 8/15/04 - 4/15/23 ............................................................... 2,329 2,453
9.50%, 9/15/24 - 5/15/25 ............................................................... 2,935 3,097
10.00%, 8/15/19 ........................................................................ 329 359
10.50%, 2/15 - 11/15/14 ................................................................ 504 552
11.00%, 12/15/09 - 12/15/19 ............................................................ 2,155 2,386
11.50%, 3/15/10 - 11/15/18 ............................................................. 4,045 4,516
12.50%, 6/15/10 - 3/15/15 .............................................................. 349 395
II, 9.00%, 10/20/16 ...................................................................... 17 17
10.50%, 12/20/15 - 6/20/19 ............................................................. 1,823 1,961
11.00%, 9/20/99 ........................................................................ 18 20
GPM, I, 11.00%, 9/15/10 .................................................................. 257 281
Midget, I, 9.00%, 9/15/01 - 2/15/06 ...................................................... 1,116 1,169
9.50%, 1/15/98 - 12/15/05 ........................................................... 1,043 1,098
10.00%, 11/15/00 - 9/15/05 .......................................................... 364 383
10.50%, 11/15/97 - 9/15/04 .......................................................... 110 115
11.00%, 8/15/00 ..................................................................... 65 70
11.50%, 4/15/98 - 7/15/00 ........................................................... 289 309
II, 11.50%, 12/20/98 - 10/20/00 ........................................................ 49 52
24,152
TOTAL INVESTMENTS IN SECURITIES -- 98.9% OF NET ASSETS (COST $165,928) ....................................... 170,712
OTHER ASSETS LESS LIABILITIES ................................................................................ 1,954
-------
<PAGE>
NET ASSETS CONSIST OF: ................................................... Value
----------
Accumulated net investment income - net of distributions ................. 250
Accumulated net realized gain/loss - net of distributions ................ (2,496)
Net unrealized gain (loss) ............................................... 4,784
Paid-in-capital applicable to 32,879,761 shares of $0.01 par value capital
stock outstanding; 1,000,000,000 shares of the Corporation authorized .. 170,128
----------
NET ASSETS ............................................................... $ 172,666
----------
----------
NET ASSET VALUE PER SHARE ................................................ $ 5.25
----------
----------
LONG-TERM FUND
- --------------------------------------------------------------------------------
U.S. Government Guaranteed Obligations -- 98.4%
================================================================================
U.S. Government Obligations -- 84.1%
U.S. Treasury Bonds, 6.25%, 8/15/23 ............................................ $13,000 $12,196
7.125%, 2/15/23 .............................................................. 13,000 13,609
7.50%, 11/15/24 .............................................................. 12,000 13,198
7.625%, 2/15/25 .............................................................. 4,000 4,496
11.25%, 2/15/15 .............................................................. 5,000 7,448
12.00%, 8/15/13 .............................................................. 2,100 3,088
U.S. Treasury Notes, 7.50%, 2/29/96 ............................................ 870 880
54,915
<PAGE>
U.S. Government Mortgage-Backed Securities -- 14.3%
Government National Mortgage Assn., I, 6.50%, 12/15/23 ................................... 496 476
8.00%, 10/15/16 - 3/15/17 ............................................................ 359 374
8.50%, 3/15/17 ....................................................................... 868 915
9.00%, 7/15/16 - 5/15/21 ............................................................. 1,417 1,500
9.50%, 8/15/09 ....................................................................... 98 105
10.00%, 12/15/17 - 8/15/19 ........................................................... 758 826
10.50%, 1/15/98 - 7/15/19 ............................................................ 613 672
11.00%, 12/15/09 - 12/15/15 .......................................................... 316 350
11.50%, 10/15/10 - 8/15/15 ........................................................... 340 379
II, 11.50%, 1/20/14 - 6/20/15 .......................................................... 124 135
GPM, I, 9.25%, 12/15/16 ................................................................ 643 666
9.50%, 9/15 - 10/15/09 ............................................................... 363 383
10.25%, 1/15 - 3/15/18 ............................................................... 216 234
11.00%, 8/15/10 - 9/15/13 ............................................................ 56 61
11.25%, 11/15/15 ..................................................................... 23 25
11.50%, 2/15 - 6/15/13 ............................................................... 56 62
REMIC, 6.50%, 10/16/24 ................................................................. 2,000 1,810
Interest Only, 8.00%, 6/16/23** ...................................................... 1,834 363
9,336
TOTAL INVESTMENTS IN SECURITIES -- 98.4% OF NET ASSETS (COST $58,639) ....................................... 64,251
OTHER ASSETS LESS LIABILITIES ............................................................................... $ 1,033
--------
NET ASSETS CONSIST OF: ......................................................... Value
----------
Accumulated net investment income - net of distributions ....................... $ 12
Accumulated net realized gain/loss - net of distributions ...................... (1,841)
Net unrealized gain (loss) ..................................................... 5,612
Paid-in-capital applicable to 6,196,760 shares of $0.01 par value capital
stock outstanding; 1,000,000,000 shares of the Corporation authorized ........ 61,501
----------
NET ASSETS ..................................................................... $ 65,284
----------
----------
NET ASSET VALUE PER SHARE ...................................................... $ 10.54
----------
----------
<FN>
** For Interest Only securities, amount represents notional principal,
on which the fund receives interest.
GPM -- Graduated Payment Mortgage
REMIC -- Real Estate Mortgage Investment Conduit
</FN>
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
T. Rowe Price U.S. Treasury Funds / Year Ended May 31, 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Money Intermediate Long-Term
Fund Fund Fund
-------- -------- --------
INVESTMENT INCOME
Interest income ........................................................................ $ 34,632 $ 11,757 $ 4,460
-------- -------- --------
Expenses
Investment management ................................................................ 2,341 671 157
Shareholder servicing ................................................................ 1,212 290 130
Custody and accounting ............................................................... 126 128 94
Registration ......................................................................... 48 37 36
Prospectus and shareholder reports ................................................... 47 21 13
Legal and audit ...................................................................... 15 12 10
Proxy and annual meeting ............................................................. 15 5 4
Directors ............................................................................ 14 7 6
Organization ......................................................................... -- 3 3
Miscellaneous ........................................................................ 14 4 2
-------- -------- --------
Total expenses ....................................................................... 3,832 1,178 455
-------- -------- --------
Net investment income .................................................................. 30,800 10,579 4,005
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities ................................................. 58 (2,131) (1,278)
Change in net unrealized gain or loss on securities .................................... 148 6,381 5,910
-------- -------- --------
Net realized and unrealized gain (loss) ................................................ 206 4,250 4,632
-------- -------- --------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ...................................... $ 31,006 $ 14,829 $ 8,637
======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
T. Rowe Price U.S. Treasury Money Fund
(IN THOUSANDS)
<S> <C> <C> <C>
Three
Year Ended Months Ended Year Ended
May 31, 1995 May 31, 1994 Feb. 28, 1994
--------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income ............................................. $ 30,800 $ 4,754 $ 14,861
Net realized gain (loss) .......................................... 58 2 24
Change in net unrealized gain or loss ............................. 148 175 (532)
----------- ----------- -----------
Increase (decrease) in net assets from operations ................. 31,006 4,931 14,353
----------- ----------- -----------
Distributions to shareholders
Net investment income ............................................. (30,800) (4,754) (14,861)
----------- ----------- -----------
Capital share transactions*
Shares sold ....................................................... 1,001,307 283,665 789,286
Distributions reinvested .......................................... 28,102 4,306 13,619
Shares redeemed ................................................... (965,237) (246,894) (794,967)
----------- ----------- -----------
Increase (decrease) in net assets from capital
share transactions .............................................. 64,172 41,077 7,938
----------- ----------- -----------
Increase (decrease) in net assets ................................... 64,378 41,254 7,430
NET ASSETS
Beginning of period ................................................. 654,837 613,583 606,153
----------- ----------- -----------
End of period ....................................................... $ 719,215 $ 654,837 $ 613,583
=========== =========== ===========
*Share information
Shares sold ....................................................... 1,001,307 283,665 789,286
Distributions reinvested .......................................... 28,102 4,306 13,619
Shares redeemed ................................................... (965,237) (246,894) (794,967)
----------- ----------- -----------
Increase (decrease) in shares outstanding ......................... 64,172 41,077 7,938
=========== =========== ===========
<FN>
The fund's fiscal year-end was changed to May 31.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
T. Rowe Price U.S. Treasury Intermediate Fund
(IN THOUSANDS)
<S> <C> <C> <C>
Three
Year Ended Months Ended Year Ended
May 31, 1995 May 31, 1994 Feb. 28, 1994
--------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income ................................................... $ 10,579 $ 2,543 $ 9,225
Net realized gain (loss) ................................................ (2,131) 56 579
Change in net unrealized gain or loss ................................... 6,381 (6,123) (3,700)
---------- ---------- ----------
Increase (decrease) in net assets from operations ....................... 14,829 (3,524) 6,104
---------- ---------- ----------
Distributions to shareholders
Net investment income ................................................... (10,579) (2,500) (9,030)
Net realized gain ....................................................... -- (701) (495)
---------- ---------- ----------
Decrease in net assets from distributions to shareholders ............... (10,579) (3,201) (9,525)
---------- ---------- ----------
Capital share transactions*
Shares sold ............................................................. 59,454 30,910 81,914
Distributions reinvested ................................................ 8,775 2,667 7,837
Shares redeemed ......................................................... (81,044) (21,574) (73,857)
---------- ---------- ----------
Increase (decrease) in net assets from capital
share transactions ................................................... (12,815) 12,003 15,894
---------- ---------- ----------
Increase (decrease) in net assets ......................................... (8,565) 5,278 12,473
NET ASSETS
Beginning of period ....................................................... 181,231 175,953 163,480
---------- ---------- ----------
End of period ............................................................. $ 172,666 $ 181,231 $ 175,953
========== ========== ==========
*Share information
Shares sold ............................................................. 11,761 5,994 15,131
Distributions reinvested ................................................ 1,732 517 1,448
Shares redeemed ......................................................... (16,055) (4,169) (13,645)
---------- ---------- ----------
Increase (decrease) in shares outstanding ............................... (2,562) 2,342 2,934
========== ========== ==========
<FN>
The fund's fiscal year-end was changed to May 31.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
T. Rowe Price U.S. Treasury Long-Term Fund
(IN THOUSANDS)
<S> <C> <C> <C>
Three
Year Ended Months Ended Year Ended
May 31, 1995 May 31, 1994 Feb. 28, 1994
--------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income ...................................................... $ 4,005 $ 928 $ 3,739
Net realized gain (loss) ................................................... (1,278) (577) 1,368
Change in net unrealized gain or loss ...................................... 5,910 (2,955) (1,562)
-------- -------- --------
Increase (decrease) in net assets from operations .......................... 8,637 (2,604) 3,545
-------- -------- --------
Distributions to shareholders
Net investment income ...................................................... (4,005) (928) (3,739)
Net realized gain .......................................................... -- (55) (1,532)
-------- -------- --------
Decrease in net assets from distributions to shareholders .................. (4,005) (983) (5,271)
-------- -------- --------
Capital share transactions*
Shares sold ................................................................ 40,731 9,837 30,146
Distributions reinvested ................................................... 3,344 841 4,571
Shares redeemed ............................................................ (37,660) (9,486) (41,044)
-------- -------- --------
Increase (decrease) in net assets from capital
share transactions ...................................................... 6,415 1,192 (6,327)
-------- -------- --------
Increase (decrease) in net assets ............................................ 11,047 (2,395) (8,053)
NET ASSETS
Beginning of period .......................................................... 54,237 56,632 64,685
-------- -------- --------
End of period ................................................................ $ 65,284 $ 54,237 $ 56,632
======== ======== ========
*Share information
Shares sold ................................................................ 4,225 978 2,758
Distributions reinvested ................................................... 345 85 420
Shares redeemed ............................................................ (3,903) (947) (3,758)
-------- -------- --------
Increase (decrease) in shares outstanding .................................. 667 116 (580)
======== ======== ========
<FN>
The fund's fiscal year-end was changed to May 31.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
Notes to Financial Statements
T. Rowe Price U.S. Treasury Funds / May 31, 1995
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
================================================================================
T. Rowe Price U.S. Treasury Funds, Inc. (the Corporation) is registered
under the Investment Company Act of 1940. The U.S. Treasury Money Fund (the
Money Fund), the U.S. Treasury Intermediate Fund (the Intermediate Fund) and the
U.S. Treasury Long-Term Fund (the Long-Term Fund), diversified, open-end
management investment companies, are the three portfolios established by the
Corporation. A) Valuation - Debt securities are generally traded in the
over-the-counter market. Investments in securities with remaining maturities of
one year or more are stated at fair value as furnished by dealers who make
markets in such securities or by an independent pricing service, which considers
yield or price of bonds of comparable quality, coupon, maturity, and type, as
well as prices quoted by dealers who make markets in such securities.
Except with respect to certain securities held by the Money Fund,
securities with remaining maturities of less than one year are stated at fair
value, which is determined by using a matrix system that establishes a value for
each security based on money market yields. Securities held by the Money Fund
with remaining maturities of 60 days or less are valued at amortized cost.
Assets and liabilities for which the above valuation procedures are
inappropriate or 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 each
fund, as authorized by the Board of Directors. B) Premiums and Discounts -
Except for mortgage-backed securities, premiums and discounts on debt securities
are amortized for both financial and tax reporting purposes. In accordance with
federal income tax regulations, market discounts and premiums on mortgage-backed
securities are included in the gain or loss recorded upon principal repayment of
the security for financial reporting purposes and ordinary income for tax
purposes. C) 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 an identified cost basis. Distributions to shareholders
are recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
<PAGE>
- -------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
===============================================================================
Consistent with their investment objectives, the funds engage in the
following practices to manage exposure to certain risks and enhance performance.
The investment objective, policies, program, risk factors, and following
practices of each fund are described more fully in each fund's Prospectus and
Statement of Additional Information. A) Securities Lending - To earn additional
income, the Intermediate Fund lends its securities to approved brokers. At May
31,1995, the market value of securities on loan was $11,857,000, for which the
fund was fully collateralized by cash. Although the risk is mitigated by the
collateral, the fund could experience a delay in recovering its securities and a
possible loss of income or value if the borrower fails to return them. B) Other
- - Purchases and sales of U.S. Government securities, other than short-term
securities, for the year ended May 31, 1995, were as follows:
Intermediate Long-Term
Fund Fund
--------------- -------------
Purchases $138,397,000 $61,262,000
Sales 153,571,000 54,078,000
- -------------------------------------------------------------------------------
NOTE 3 - FEDERAL INCOME TAXES
===============================================================================
No provision for federal income taxes is required since each fund intends
to continue to qualify as a regulated investment company and distribute all of
its taxable income. The Intermediate Fund has an unused realized capital loss
carryforward for federal income tax purposes of $156,000, which expires in 2003.
The Long-Term Fund has unused realized capital loss carryforwards for federal
income tax purposes of $1,714,000, $530,000 of which expire in 2002 and
$1,184,000 in 2003. Each fund intends to retain gains realized in future periods
that may be offset by available capital loss carryforwards.
<PAGE>
In order for the Intermediate and Long-Term funds' capital accounts and
distributions to shareholders to reflect the tax character of certain
transactions, $2,000 of undistributed net investment income for each fund was
reclassified as a decrease to paid-in-capital during the year ended May 31,
1995. The results of operations and net assets were not affected by the
reclassifications.
At May 31, 1995, the aggregate cost of investments for the Money,
Intermediate and Long-Term funds for federal income tax and financial reporting
purposes was $713,383,000, $165,928,000, and $58,639,000, respectively. Net
unrealized gain (loss) on investments was as follows:
Money Intermediate Long-Term
Fund Fund Fund
------------- --------------- ------------
Appreciated
Investments $ 7,000 $ 5,094,000 $ 5,650,000
Depreciated
Investments (68,000) (310,000) (38,000)
------------ ------------ ------------
Net
Unrealized
Gain (Loss) $ (61,000) $ 4,784,000 $ 5,612,000
============ ============ ============
- -------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
===============================================================================
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management fee,
of which $204,000, $56,000, and $19,000 were payable at May 31, 1995 for the
Money, Intermediate, and Long-Term funds, respectively. The fee is computed
daily and paid monthly, and consists of an Individual Fund Fee equal to 0.05% of
average daily net assets for the Intermediate and Long-Term funds and a Group
Fee. The Money Fund does not have an Individual Fund Fee, only a Group Fee. The
Group Fee is based on the combined assets of certain mutual funds sponsored by
the Manager or Rowe-Price Fleming International, Inc. (the Group). The Group Fee
rate ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in
excess of $34 billion. At May 31, 1995 and for the year then ended, the
effective annual Group Fee rate was 0.34%. The fund pays a pro rata share of the
Group Fee based on the ratio of its net assets to those of the Group.
<PAGE>
LONG-TERM FUND:
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through May 31, 1997 which would cause the fund's
ratio of expenses to average net assets to exceed 0.80%. Thereafter through May
31, 1999, the fund is required to reimburse the Manager for these expenses,
provided that average net assets have grown or expenses have declined
sufficiently to allow reimbursement without causing the fund's ratio of expenses
to average net assets to exceed 0.80%. Pursuant to this agreement, $66,000 of
management fees were not accrued by the fund for the year ended May 31, 1995, of
which $58,000 are subject to reimbursement through February 28, 1997 and $8,000
are subject to reimbursement through May 31, 1999. Additionally, $89,000 of
unaccrued management fees related to a previous expense limitation are subject
to reimbursement through February 28, 1997. All Funds:
In addition, the funds have entered into agreements with the Manager and
two wholly owned subsidiaries of the Manager, pursuant to which the funds
receive certain other services. The Manager computes the daily share price and
maintains the financial records of the funds. T. Rowe Price Services, Inc.
(TRPS) is the funds' transfer and dividend disbursing agent and provides
shareholder and administrative services to the funds. T. Rowe Price Retirement
Plan Services, Inc. provides subaccounting and recordkeeping services for
certain retirement accounts invested in the funds. The Money, Intermediate, and
Long-Term funds incurred expenses pursuant to these related party agreements
totaling approximately $1,095,000, $304,000, and $174,000, respectively, for the
year ended May 31, 1995, of which $107,000, $33,000, and $19,000 were payable at
<PAGE>
<TABLE>
Financial Highlights
T. Rowe Price U.S. Treasury Funds
- -------------------------------------------------------------------------------
Money Fund
===============================================================================
For a share outstanding throughout each period
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three
Year Months Year Ended
Ended Ended
May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb.28,
1995 1994 1994 1993 1992 1991
--------- ---------- -------- -------- ----------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities
Net investment income ........................ 0.045 0.007 0.025 0.029 0.049 0.070
Distributions
Net investment income ........................ (0.045) (0.007) (0.025) (0.029) (0.049) (0.070)
--------- ---------- -------- -------- ----------- ---------
NET ASSET VALUE, END OF PERIOD ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= =========== =========== =========== =========== =========
RATIOS/SUPPLEMENTAL DATA
Total Return ......................................... 4.58% 0.73% 2.51% 2.97% 5.06% 7.19%
Ratio of Expenses to Average Net Assets .............. 0.56% 0.57% 0.64% 0.65% 0.68% 0.75%
Ratio of Net Investment Income
to Average Net Assets ............................. 4.51% 2.87% 2.48% 2.92% 4.93% 6.91%
Net Assets, End of Period (in thousands) ............. $719,215 $654,837 $613,583 $606,153 $562,664 $578,362
<FN>
Annualized.
The fund's fiscal year-end was changed to May 31.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
T. Rowe Price U.S. Treasury Funds
- -------------------------------------------------------------------------------
Intermediate Fund
===============================================================================
For a share outstanding throughout each period
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three
Year Months Year Ended
Ended Ended
May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb.28,
1995 1994 1994 1993 1992 1991
--------- ---------- -------- -------- ----------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 5.11 $ 5.32 $ 5.42 $ 5.28 $ 5.10 $ 4.98
Investment Activities
Net investment income .......................... 0.31 0.08 0.29 0.32 0.36* 0.40*
Net realized and unrealized gain (loss) ........ 0.14 (0.19) (0.09) 0.27 0.21 0.12
Total from Investment Activities ............... 0.45 (0.11) 0.20 0.59 0.57 0.52
Distributions
Net investment income .......................... (0.31) (0.08) (0.29) (0.32) (0.36) (0.40)
Net realized gain .............................. -- (0.02) (0.01) (0.13) (0.03) --
Total Distributions ............................ (0.31) (0.10) (0.30) (0.45) (0.39) (0.40)
NET ASSET VALUE, END OF PERIOD .................. $ 5.25 $ 5.11 $ 5.32 $ 5.42 $ 5.28 $ 5.10
RATIOS/SUPPLEMENTAL DATA
Total Return .................................... 9.29% (2.16)% 3.80% 11.77% 11.54%* 10.92%*
Ratio of Expenses to Average Net Assets ......... 0.69% 0.70% 0.79% 0.80% 0.80%* 0.80%*
Ratio of Net Investment Income
to Average Net Assets ....................... 6.19% 5.78% 5.41% 5.98% 6.80%* 7.71%*
Portfolio Turnover Rate ......................... 81.1% 45.5% 20.2% 22.8% 91.4% 174.8%
Net Assets, End of Period (in thousands) ........ $172,666 $181,231 $175,953 $163,480 $123,807 $68,341
<FN>
Annualized.
The fund's fiscal year-end was changed to May 31.
*Excludes expenses in excess of a 0.80% voluntary expense limitation in effect
through February 28, 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
T. Rowe Price U.S. Treasury Funds
- -------------------------------------------------------------------------------
Long-Term Fund
===============================================================================
For a share outstanding throughout each period
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three
Year Months Year Ended
Ended Ended
May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb.28,
1995 1994 1994 1993 1992 1991
--------- ---------- -------- -------- ----------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD ................. $ 9.81 $ 10.46 $ 10.79 $ 10.39 $ 10.03 $ 9.79
Investment Activities
Net investment income .............................. 0.68* 0.17* 0.68* 0.70* 0.78* 0.80*
Net realized and unrealized gain (loss) ............ 0.73 (0.64) (0.04) 0.68 0.36 0.24
Total from Investment Activities ................... 1.41 (0.47) 0.64 1.38 1.14 1.04
Distributions
Net investment income .............................. (0.68) (0.17) (0.68) (0.70) (0.78) (0.80)
Net realized gain .................................. -- (0.01) (0.29) (0.28) -- --
Total Distributions ................................ (0.68) (0.18) (0.97) (0.98) (0.78) (0.80)
NET ASSET VALUE, END OF PERIOD ...................... $ 10.54 $ 9.81 $ 10.46 $ 10.79 $ 10.39 $ 10.03
RATIOS/SUPPLEMENTAL DATA
Total Return ......................................... 15.24%* (4.50)%* 5.89%* 14.11%* 11.86%* 11.21%*
Ratio of Expenses to Average Net Assets .............. 0.80%* 0.80%* 0.80%* 0.80%* 0.80%* 0.80%*
Ratio of Net Investment Income
to Average Net Assets ............................. 7.05%* 6.75%* 6.17%* 6.75%* 7.66%* 8.01%*
Portfolio Turnover Rate .............................. 99.3% 246.9% 59.4% 165.4% 162.4% 158.5%
Net Assets, End of Period (in thousands) ............. $65,284 $54,237 $56,632 $64,685 $52,926 $43,260
<FN>
Annualized.
The fund's fiscal year-end was changed to May 31.
* Excludes expenses in excess of a 0.80% voluntary expense limitation in effect
through May 31, 1997.
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of the
T. Rowe Price U.S. Treasury Funds, Inc.
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the selected per share
data and information (which appears under the heading "Financial Highlights")
present fairly, in all material respects, the financial position of the U.S.
Treasury Money Fund, U.S. Treasury Intermediate Fund, and U.S. Treasury
Long-Term Fund (constituting the T. Rowe Price U.S. Treasury Funds, Inc.,
hereafter referred to as the "Funds") at May 31, 1995, and the results of their
operations, the changes in their net assets and the selected per share data and
information for the year ended May 31, 1995 for the U.S. Treasury Intermediate
Fund and U.S. Treasury Long-Term Fund and for each of the fiscal periods
presented for the U.S. Treasury Money Fund, in conformity with generally
accepted accounting principles. These financial statements and selected per
share data and information (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1995 by
correspondence with the custodian and brokers provide a reasonable basis for the
opinion expressed above. The financial statements of the U.S. Treasury
Intermediate Fund and the U.S. Treasury Long-Term Fund for the fiscal periods
presented prior to the year ended May 31, 1995 were audited by other independent
accountants whose report dated June 17, 1994 expressed an unqualified opinion on
those statements.
PRICE WATERHOUSE LLP
Baltimore, Maryland
June 19, 1995
