----------------------
SEMIANNUAL 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
Despite giving back some gains during the summer, the bond market continued
its yearlong rally over the last six months, buoyed by subdued inflation and the
renewed vigor of budget-balancing efforts in Washington. The market's surge in
the first half of 1995 was driven by an inventory correction that pushed
economic growth down to an annualized rate of 1.3% in the second calendar
quarter, well below the robust 4.1% pace of 1994. The economy's anemic
performance sparked concern that the Federal Reserve's long period of monetary
tightening, with seven hikes in the key federal funds target between February
1994 and February 1995, had perhaps gone too far.
Responding to indications of softness, the Fed lowered the fed funds target
to 5.75% in July, its first reduction in nearly three years. The bond rally
sputtered briefly in the summer when the economy appeared stronger than the Fed
had anticipated. Indeed, growth surged to a robust 4.2% rate in the third
calendar quarter. The bond market quickly rebounded, however, on continued signs
of subdued inflation and a belief that federal deficit reduction will lead to a
more stimulative Fed policy over the next few years. That view sparked a drop in
interest rates, with the benchmark 30-year Treasury bond yield falling from 6.8%
at the end of May to 6.2% on November 30.
[Edgar description: A 3-line chart showing interest rates on the 30-Year
Treasury bond, 5-Year Treasury note, and the 90-Day treasury bill from 11/30/94
through 11/30/95.]
The economic expansion is now into its fifth year, but there are few, if
any, signs of an impending recession. If the federal government reduces
spending, the slack will have to be taken up by the private sector to maintain
full employment, probably compelling the Fed to ease. That should produce a
favorable environment for the bond market.
Optimism over a balanced budget and a looser Fed policy is reflected in the
virtually flat Treasury yield curve (which measures the difference in yields
among Treasuries of various maturities). At the end of November, as the chart
shows, Treasuries of less than 10 years were yielding less than the 5.75%
federal funds rate on overnight loans. The curve illustrates the market's belief
that interest rates will continue to fall, despite the economy's underlying
strength.
[Edgar description: A 3-line chart showing yields on 3-month to 30-Year
Treasuries on 11/30/94, 5/31/95, and 11/30/95.]
<PAGE>
U.S. TREASURY MONEY FUND
The sharp drop in short-term rates was reflected in your fund's yield,
which slid from 5.46% at the end of May to 5.16% on November 30. Over the last
six months, we maintained a slightly longer maturity posture than our peers,
with a weighted average maturity (WAM) generally around 60 days, to enhance
yield in a falling rate environment. These moves were beneficial, enabling the
fund to provide strong results in both reporting periods that essentially
matched its benchmark.
- -------------------------------------------------------------------------------
Performance Comparison
===============================================================================
Periods Ended 11/30/95
6 Months 12 Months
----------------------
U.S. Treasury Money Fund 2.58% 5.23%
Donoghue 100% U.S. Treasury
Money Funds Average 2.54 5.14
===============================================================================
Your investment in the U.S. Treasury Money Fund is neither insured nor
guaranteed by the U.S. government.
In our view, the market has fully discounted upcoming reductions in the
federal funds rate, with our peers lengthening their average maturities.
Therefore, we adopted a neutral posture relative to our peers, with a WAM of 68
days on November 30. Since we believe the Fed is unlikely to raise short-term
interest rates in the near future, we expect to maintain this posture.
U.S.TREASURY INTERMEDIATE FUND
Your fund produced strong results for both the 6- and 12-month periods
ended November 30, mostly because of our consistent strategy of lengthening
maturities as rates fell. We got off to a quicker start than our competitors
last year, extending the fund's maturity before intermediate Treasury yields
began their descent in January.
In the last six months, as intermediate rates fell, we raised the fund's
WAM to 5 years, up from 4.7 years at the end of May. Meanwhile, your fund's
effective duration (a more precise measure of sensitivity to interest rate
changes than average maturity) climbed to 3.9 years, up from 3.7 years in May.
As a result, the fund experienced good price appreciation, which, together with
income, provided a 5.09% return.
The fund edged out its peer group average in the six-month period and
outperformed it over the last 12 months because of our earlier anticipation of
falling interest rates.
<PAGE>
- -------------------------------------------------------------------------------
Performance Comparison
===============================================================================
Periods Ended 11/30/95
6 Months 12 Months
----------------------
U.S. Treasury
Intermediate Fund 5.09% 14.82%
Lipper Average of Intermediate
U.S. Treasury Funds 4.92 13.86
===============================================================================
U.S. TREASURY LONG-TERM FUND
While long-term interest rates were volatile over the last six months, the
general trend was downward. The long Treasury bond yield began the period at
6.8%, rose slightly in August after the economy showed signs of strength, but
dropped back to 6.2% by the end of November.
Since interest rates fell on average, we continued to extend the fund's
WAM, from 23.9 years at the end of May to 25.1 years on November 30. Similarly,
duration was extended from 10.6 years to 11.4. These maneuvers reflected our
belief that the economy would slow and the Fed would ease short-term rates,
sparking further reductions in long-term rates.
Our GNMA position was again anchored by a long-maturity CMO (collateralized
mortgage obligation) backed by GNMA certificates, which provided attractive
income as well as price appreciation when rates fell. However, we reduced our
mortgage securities position from 14% of assets to 11%, replacing it with
long-term Treasuries to further extend the fund's WAM. Your fund outperformed
the Lipper average of similar funds and produced excellent results for both the
6- and 12-month periods ended November 30, as shown on the next page.
- -------------------------------------------------------------------------------
Performance Comparison
===============================================================================
Periods Ended 11/30/95
6 Months 12 Months
----------------------
U.S. Treasury
Long-Term Fund 8.55% 26.67%
Lipper Average of General
U.S. Treasury Funds 6.60 21.29
===============================================================================
<PAGE>
OUTLOOK
If Congress and the Clinton administration can rise above their rancorous
debate to achieve meaningful steps toward deficit reduction, interest rates are
likely to edge lower in 1996. Although progress could still evaporate, as it did
with the Gramm-Rudman-Hollings proposals in the 1980s, we remain cautiously
optimistic on the prospects for a balanced budget by 2002. In our view,
inflation will remain subdued, and the economy will grow in real terms at its
historical pace of approximately 2.5%.
Respectfully submitted,
[signature]
George J. Collins
President
December 15, 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>
- -------------------------------------------------------------------------------
Portfolio Highlights
T. Rowe Price U.S. Treasury Funds / November 30, 1995
- -------------------------------------------------------------------------------
<TABLE>
- -------------------------------------------------------------------------------
Financial Summary
===============================================================================
<S> <C> <C> <C>
Net Asset Value Dividend Per Share Dividend Yield*
Per Share 6 Months Ended 6 Months Ended
- -----------------------------------------------------------------------------------------------------------------------------------
5/31/95 11/30/95 5/31/95 11/30/95 5/31/95 11/30/95
------------------ ------------------ -----------------
U.S. Treasury Money Fund $1.00 $1.00 $0.026 $0.026 5.46% 5.16%
U.S. Treasury Intermediate Fund 5.25 5.35 0.16 0.16 6.49 6.25
U.S. Treasury Long-Term Fund 10.54 11.10 0.34 0.32 7.10 6.17
===============================================================================
<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>
<TABLE>
- -------------------------------------------------------------------------------
Quality, Duration, and Maturity
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted Weighted Average Weighted Average
Average Quality* Effective Duration (years) Maturity (years)
- -----------------------------------------------------------------------------------------------------------------------------------
5/31/95 11/30/95 5/31/95 11/30/95 5/31/95 11/30/95
------------------ ------------------ -----------------
U.S. Treasury Money Fund 1.0 1.0 -- -- 55** 68**
U.S. Treasury Intermediate Fund 1.0 1.0 3.7 3.9 4.7 5.0
U.S. Treasury Long-Term Fund 1.0 1.0 10.6 11.4 23.9 25.1
===============================================================================
<FN>
* On a T. Rowe Price scale of 1 to 10, with Grade 1 representing
highest quality.
** Maturity is in days.
</FN>
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
Average Annual Compound Total Return
===============================================================================
<S> <C> <C> <C> <C>
Periods Ended November 30, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years From Inception
------ ------- -------- --------------
U.S. Treasury Money Fund 5.23% 3.99% 5.32% --
U.S. Treasury Intermediate Fund 14.82 8.36 -- 8.57%(9/29/89)
U.S. Treasury Long-Term Fund 26.67 10.77 -- 10.19(9/29/89)
===============================================================================
<FN>
Note: For the above periods ended 9/30/95, the Money Fund's returns were 5.10%,
4.07%, and 5.35%, respectively; the Intermediate Fund's returns were 11.10%,
8.38%, and 8.33%; the Long-Term Fund's returns were 20.02%, 10.76%, and 9.54%.
Investment return represents past performance and will vary. Shares of the bond
funds may be worth more or less at redemption than at original purchase. The
Money Fund's $1.00 share price is not guaranteed.
</FN>
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
Portfolio of Investments
T. Rowe Price U.S. Treasury Money Fund / November 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
Amount Value
-------- -------
- -------------------------------------------------------------------------------
U.S. Government Guaranteed Obligations -- 99.7%
- -------------------------------------------------------------------------------
U.S. Treasury Bills, 5.64%, 12/14/95 .................... $ 45,000 $ 44,908
5.52 - 5.635%, 12/21/95 ............................. 196,291 195,374
5.29 - 5.31%, 1/11/96 ............................... 72,747 71,784
5.24 - 5.255%, 1/18/96 .............................. 12,426 12,262
5.345%, 1/25/96 ..................................... 5,147 5,093
5.28 - 5.305%, 2/1/96 ............................... 23,220 22,905
5.315%, 2/8/96 ...................................... 50,000 49,483
5.34%, 2/22/96 ...................................... 50,000 49,332
U.S. Treasury Notes, 9.25%, 1/15/96 ..................... 20,000 20,085
4.00%, 1/31/96 ...................................... 55,000 54,854
4.625%, 2/15 - 2/29/96 .............................. 105,000 104,768
9.375%, 4/15/96 ..................................... 20,000 20,273
5.50%, 4/30/96 ...................................... 30,000 30,000
7.375%, 5/15/96 ..................................... 75,000 75,576
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES - 99.7% OF NET ASSETS(COST $759,697) 756,697
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES ........................... 2,054
--------
NET ASSETS .............................................. $758,751
--------
--------
NET ASSET VALUE PER SHARE ............................... $1.00
========
The accompanying notes are an integral part of these financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price U.S. Treasury Intermediate Fund / November 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
Amount Value
-------- -------
- -------------------------------------------------------------------------------
U.S. Government Guaranteed Obligations -- 99.7%
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 87.4%
U.S. Treasury Notes, 5.125%, 3/31/98 .................... $ 5,200 $ 5,169
5.375%, 5/31/98 ..................................... 2,000 1,998
6.25%, 2/15/03 ...................................... 25,260 26,093
6.375%, 1/15/00 - 8/15/02 ........................... 31,550 32,589
6.50%, 9/30/96 ...................................... 785 792
6.75%, 4/30/00 ...................................... 3,875 4,056
6.875%, 7/31 - 8/31/99 .............................. 7,210 7,534
7.125%, 9/30/99 ..................................... 720 759
7.50%, 10/31/99 - 5/15/02 ........................... 39,275 42,976
7.75%, 11/30/99 ..................................... 6,000 6,471
7.875%, 8/15/01 ..................................... 7,850 8,708
U.S. Treasury Notes, 8.25%, 7/15/98 ..................... 19,950 21,312
158,457
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 12.3%
Government National Mortgage Assn., I, 6.50%,
8/15 - 10/15/02 ....................................... 529 534
7.00%, 7/15 - 9/15/16 ............................. 2,263 2,306
8.00%, 4/15 - 7/15/17 ............................. 1,816 1,906
8.50%, 8/15/04 - 4/15/23 .......................... 2,194 2,314
9.50%, 12/15/24 - 5/15/25 ......................... 2,615 2,801
10.00%, 8/15/19 ................................... 263 289
10.50%, 2/15 - 11/15/14 ........................... 382 424
11.00%, 12/15/09 - 12/15/19 ....................... 1,977 2,225
11.50%, 3/15/10 - 11/15/18 ........................ 3,684 4,200
12.50%, 6/15/10 - 3/15/15 ......................... 337 396
II, 9.00%, 10/20/16 ................................. 16 17
10.50%, 12/20/15 - 6/20/19 ........................ 1,540 1,700
11.00%, 9/20/99 ................................... 16 18
GPM, I, 11.00%, 9/15/10 ............................... 253 279
Midget, I, 9.50%, 1/15/98 - 12/15/05 .................. 948 997
10.00%, 11/15/00 - 9/15/05 ........................ 334 352
10.50%, 11/15/97 - 9/15/04 ........................ 77 81
11.00%, 8/15/00 ................................... 61 64
11.50%, 4/15/98 - 7/15/00 ......................... 248 262
TBA, 9.00%, 2/15/01 ................................. 1,000 1,056
II,11.50%, 12/20/98 - 10/20/00 ...................... 44 45
22,266
<PAGE>
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES - 99.7% OF NET ASSETS (COST $172,699) 180,723
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES ............................. 557
---------
NET ASSETS CONSIST OF: Value
-------
Accumulated net investment income - net of distributions... $ 250
Accumulated net realized gain/loss - net of distributions.. (2,502)
Net unrealized gain (loss) ................................ 8,024
Paid-in-capital applicable to 33,899,705 shares of $0.01
par value capital stock outstanding; 1,000,000,000
shares of the Corporation authorized .................... 175,508
-------
NET ASSETS ................................................ $181,280
=========
NET ASSET VALUE PER SHARE ................................. $5.35
=========
GPM Graduated Payment Mortgage
TBA To be announced security was purchased on a forward commitment basis.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price U.S. Treasury Long-Term Fund / November 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
Amount Value
-------- -------
- -------------------------------------------------------------------------------
U.S. Government Guaranteed Obligations -- 98.9%
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 87.8%
U.S. Treasury Bonds, 6.25%, 8/15/23 ..................... $ 6,500 $ 6,502
6.875%, 8/15/25 ..................................... 8,600 9,460
7.125%, 2/15/23 ..................................... 13,000 14,471
7.50%, 11/15/24 ..................................... 12,000 14,031
7.625%, 2/15/25 ..................................... 6,000 7,137
11.25%, 2/15/15 ..................................... 4,225 6,634
U.S. Treasury Notes, 6.50%, 9/30/96 ..................... 650 655
7.25%, 11/15/96 ..................................... 110 112
59,002
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 11.1%
Government National Mortgage Assn., I, 6.50%, 12/15/23 .. 493 484
8.00%, 10/15/16 - 3/15/17 ........................... 331 348
9.00%, 7/15/16 - 5/15/21 ............................ 1,200 1,281
9.50%, 8/15/09 ...................................... 86 93
10.00%, 12/15/17 - 8/15/19 .......................... 673 739
10.50%, 1/15/98 - 7/15/19 ........................... 579 642
11.50%, 10/15/10 - 8/15/15 .......................... 293 334
GPM, I, 9.25%, 12/15/16 ............................... 597 631
9.50%, 9/15 - 10/15/09 .............................. 347 373
10.25%, 1/15 - 3/15/18 .............................. 215 236
11.00%, 8/15/10 - 9/15/13 ........................... 36 39
11.25%, 11/15/15 .................................... 23 26
11.50%, 2/15 - 6/15/13 .............................. 56 63
REMIC, 6.50%, 10/16/24 ................................ 2,000 1,842
Interest Only, 8.00%, 6/16/23** ..................... 1,671 301
7,432
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 98.9% OF NET ASSETS (COST $59,024) 66,434
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES ........................... 719
---------
<PAGE>
NET ASSETS CONSIST OF: Value
-------
Accumulated net investment income - net of distributions... $12
Accumulated net realized gain/loss - net of distributions.. (312)
Net unrealized gain (loss) ................................ 7,410
Paid-in-capital applicable to 6,050,681 shares of $0.01
par value capital stock outstanding; 1,000,000,000
shares of the Corporation authorized. 60,043
-------
NET ASSETS ................................................ $ 67,153
=========
NET ASSET VALUE PER SHARE ................................. $11.10
=========
** For Interest Only securities,amount represents notional principal, on
which the fund receives interest.
GPM Graduated Payment Mortgage
REMIC Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of these financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
T. Rowe Price U.S. Treasury Money Fund / November 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
(IN THOUSANDS)
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $756,697) ........... $ 756,697
Receivable for investment securities sold ..................... 44,860
Other assets .................................................. 7,543
---------
Total assets .................................................. 809,100
---------
LIABILITIES
Payable for investment securities purchased ................... 44,908
Other liabilities ............................................. 5,441
---------
Total liabilities ............................................. 50,349
---------
NET ASSETS .................................................... $758,751
=========
NET ASSETS CONSIST OF:
Accumulated net investment - net of distributions ............. $81
Accumulated net realized gain/loss - net of distributions ..... 123
Paid-in-capital applicable to 758,626,352 shares of $0.01
par value capital stock outstanding; 1,000,000,000 shares
of the Corporation authorized ............................... 758,547
---------
NET ASSETS .................................................... $758,751
=========
NET ASSET VALUE PER SHARE ..................................... $1.00
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations
T. Rowe Price U.S. Treasury Funds/Six Months Ended November 30,1995 (Unaudited)
- -------------------------------------------------------------------------------
(IN THOUSANDS)
- -------------------------------------------------------------------------------
Money Intermediate Long-Term
Fund Fund Fund
--------------------------------------
INVESTMENT INCOME
Interest income ....................... $20,873 $ 5,974 $ 2,098
------- ------- -------
Expenses
Investment management ............... 1,253 339 111
Shareholder servicing ............... 570 140 63
Custody and accounting .............. 66 64 47
Registration ........................ 37 16 11
Prospectus and shareholder reports .. 19 7 3
Directors ........................... 6 3 3
Miscellaneous ....................... 6 3 2
Legal and audit ..................... 4 4 4
------- ------- -------
Total expenses ...................... 1,961 576 244
Expenses paid indirectly ............ -- (2) (1)
------- ------- -------
Net expenses ........................ 1,961 574 243
------- ------- -------
Net investment income ................. 18,912 5,400 1,855
------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain(loss)on securities .. 65 (6) 1,529
Change in net unrealized gain or
loss on securities................... 61 3,240 1,798
------- ------- -------
Net realized and unrealized
gain (loss) ......................... 126 3,234 3,327
------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ..................... $19,038 $ 8,634 $ 5,182
======= ======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
T. Rowe Price U.S. Treasury Funds (Unaudited)
- -------------------------------------------------------------------------------
(IN THOUSANDS)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Fund Intermediate Fund Long-Term Fund
------------------------------ ---------------------------- ------------------------------
Six Months Six Months Six Months
Ended Year Ended Ended Year Ended Ended Year Ended
Nov. 30, 1995 May 31, 1995 Nov. 30,1995 May 31,1995 Nov. 30, 1995 May 31, 1995
------------- ------------ ------------ ----------- ------------- ------------
INCREASE (DECREASE) IN
NET ASSETS FROM
Operations
Net investment income ....... $ 18,912 $ 30,800 $ 5,400 $ 10,579 $ 1,855 $ 4,005
Net realized gain (loss) .... 65 58 (6) (2,131) 1,529 (1,278)
Change in net unrealized
gain or loss .............. 61 148 3,240 6,381 1,798 5,910
-------- -------- -------- -------- -------- --------
Increase (decrease) in net
assets from operations .... 19,038 31,006 8,634 14,829 5,182 8,637
-------- -------- -------- -------- -------- --------
Distributions to shareholders
Net investment income ....... (18,912) (30,800) (5,400) (10,579) (1,855) (4,005)
-------- -------- -------- -------- -------- --------
Capital share transactions*
Shares sold ................. 487,207 1,001,307 27,316 59,454 22,037 40,731
Distributions reinvested .... 17,728 28,102 4,458 8,775 1,511 3,344
Shares redeemed ............. (465,525) (965,237) (26,394) (81,044) (25,006) (37,660)
-------- -------- -------- -------- -------- --------
Increase (decrease) in net
assets from capital share
transactions .............. 39,410 64,172 5,380 (2,815) (1,458) 6,415
-------- -------- -------- -------- -------- --------
Increase (decrease) in net
assets .................... 39,536 64,378 8,614 (8,565) 1,869 11,047
NET ASSETS
Beginning of period ........... 719,215 654,837 172,666 181,231 65,284 54,237
-------- -------- -------- -------- -------- --------
End of period ................. $758,751 $719,215 $181,280 $172,666 $67,153 $65,284
======== ======== ======== ======== ======== ========
*Share information
Shares sold ................. 487,207 1,001,307 5,187 11,761 2,071 4,225
Distributions reinvested .... 17,728 28,102 845 1,732 142 345
Shares redeemed ............. (465,525) (965,237) (5,012) (16,055) (2,359) (3,903)
-------- -------- -------- -------- -------- --------
Increase (decrease) in shares
outstanding ............... 39,410 64,172 1,020 (2,562) (146) 667
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
T. Rowe Price U.S. Treasury Funds / November 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
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 - Except for securities held by the Money Fund, securities are
valued based upon market quotations. When market quotations are not readily
available, these securities are valued at a representative bid price or yield
equivalent as quoted by dealers who make markets in such securities. Securities
held by the Money Fund 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 - Premiums and discounts on debt securities,
other than mortgage-backed securities, are amortized for both financial
reporting and tax purposes. Premiums and discounts on mortgage-backed securities
are recognized upon principal repayment as gain or loss for financial reporting
purposes and as ordinary income for tax purposes.
C) Other - Income and expenses are recorded on the accrual basis. Expenses
paid indirectly are custody fees paid by float credits earned on daily residual
cash balances at the custodian. 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 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, and risk factors 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 and
Long-Term funds lend securities to approved brokers. At November 30, 1995, the
market value of securities on loan by the Intermediate and Long-Term funds was
$12,693,000 and $2,101,000, respectively, which was fully collateralized with
cash and U.S. Treasury securities. Although the risk is mitigated by the
collateral, each 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, excluding
short-term securities, for the six months ended November 30, 1995, were as
follows:
Intermediate Long-Term
Fund Fund
------------ -----------
U.S. Government
Securities
Purchases $36,231,000 $21,772,000
Sales 29,053,000 22,730,000
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, of which $530,000 expires 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.
At November 30, 1995, the aggregate cost of investments for the Money,
Intermediate, and Long-Term funds for federal income tax and financial reporting
purposes was $756,697,000, $172,699,000, and $59,024,000, respectively. For the
Money Fund, amortized cost is equivalent to value; and for the Intermediate and
Long-Term funds, net unrealized gain (loss) on investments was as follows:
Intermediate Long-Term
Fund Fund
------------ ----------
Appreciated
Investments $8,084,000 $7,420,000
Depreciated
Investments (60,000) (10,000)
--------- ----------
Net Unrealized
Gain (Loss) $8,024,000 $7,410,000
========= ==========
<PAGE>
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 $209,000, $57,000 and $22,000 was payable at November 30, 1995 by
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 November 30, 1995, and for the six months then ended,
the effective annual Group Fee rate was 0.34%. Each fund pays a pro rata share
of the Group Fee based on the ratio of its net assets to those of the Group.
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 ratio
of net 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 net
expenses to average net assets to exceed 0.80%. Pursuant to this agreement,
$8,000 of management fees were not accrued by the fund for the six months ended
November 30, 1995 and are subject to reimbursement through May 31, 1999.
Additionally, $147,000 and $8,000 of unaccrued management fees related to
previous agreements are subject to reimbursement through February 28, 1997 and
May 31, 1999, respectively.
ALL FUNDS:
In addition, each fund has entered into agreements with the Manager and two
wholly owned subsidiaries of the Manager, pursuant to which each fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc., is each fund's
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 each fund. The Money, Intermediate and Long-Term funds
incurred expenses pursuant to these related party agreements totaling
approximately $519,000, $147,000 and $80,000, respectively, for the six months
ended November 30, 1995, of which $105,000, $30,000 and $15,000, respectively,
were payable at period-end.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
Financial Highlights
T. Rowe Price U.S. Treasury Money Fund (Unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For a share outstanding throughout each period
--------------------------------------------------------------------------------------
Three
Six Months Year Months
Ended Ended Ended Year Ended
------------------------------------------------
Nov. 30, May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1995 1995 1994^ 1994 1993 1992 1991
--------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD ............................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------
Investment activities
Net investment income ................... 0.026 0.045 0.007 0.025 0.029 0.049 0.070
Distributions
Net investment income ................... (0.026) (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 $1.000
====== ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Total return .............................. 2.58% 4.58% 0.73% 2.51% 2.97% 5.06% 7.19%
Ratio of expenses to average net assets ... 0.53%** 0.56% 0.57%** 0.64% 0.65% 0.68% 0.75%
Ratio of net investment income
to average net assets ................... 5.10%** 4.51% 2.87%** 2.48% 2.92% 4.93% 6.91%
Net assets, end of period (in thousands) .. $758,751 $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 Intermediate Fund (Unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For a share outstanding throughout each period
--------------------------------------------------------------------------------------
Three
Six Months Year Months
Ended Ended Ended Year Ended
------------------------------------------------
Nov. 30, May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1995 1995 1994^ 1994 1993 1992 1991
--------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD ............................... $5.25 $5.11 $5.32 $5.42 $5.28 $5.10 $4.98
------ ------ ------ ------ ------ ------ ------
Investment activities
Net investment income ................... 0.16 0.31 0.08 0.29 0.32 0.36* 0.40*
Net realized and unrealized gain (loss).. 0.10 0.14 (0.19) (0.09) 0.27 0.21 0.12
------ ------ ------ ------ ------ ------ ------
Total from investment activities ........ 0.26 0.45 (0.11) 0.20 0.59 0.57 0.52
------ ------ ------ ------ ------ ------ ------
Distributions
Net investment income ................... (0.16) (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 ..................... (0.16) (0.31) (0.10) (0.30) (0.45) (0.39) (0.40)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ............ $5.35 $5.25 $5.11 $5.32 $5.42 $5.28 $5.10
====== ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Total return .............................. 5.09% 9.29% (2.16)% 3.80% 11.77% 11.54%* 10.92%*
Ratio of expenses to average net assets ... 0.66%**~ 0.69% 0.70%** 0.79% 0.80% 0.80%* 0.80%*
Ratio of net investment income
to average net assets ................... 6.17%** 6.19% 5.78%** 5.41% 5.98% 6.80%* 7.71%*
Portfolio turnover rate ................... 33.7%** 81.1% 45.5%** 20.2% 22.8% 91.4% 174.8%
Net assets, end of period (in thousands) .. $181,280 $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.
~ Beginning in fiscal 1995, includes expenses paid indirectly.
</FN>
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
Financial Highlights
T. Rowe Price U.S. Treasury Long-Term Fund (Unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For a share outstanding throughout each period
--------------------------------------------------------------------------------------
Three
Six Months Year Months
Ended Ended Ended Year Ended
------------------------------------------------
Nov. 30, May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1995 1995 1994^ 1994 1993 1992 1991
--------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD ............................... $10.54 $ 9.81 $10.46 $10.79 $10.39 $10.03 $ 9.79
------ ------ ------ ------ ------ ------ ------
Investment activities
Net investment income ................... 0.32* 0.68* 0.17* 0.68* 0.70* 0.78* 0.80*
Net realized and unrealized gain (loss).. 0.56 0.73 (0.64) (0.04) 0.68 0.36 0.24
------ ------ ------ ------ ------ ------ ------
Total from investment activities ........ 0.88 1.41 (0.47) 0.64 1.38 1.14 1.04
------ ------ ------ ------ ------ ------ ------
Distributions
Net investment income ................... (0.32) (0.68) (0.17) (0.68) (0.70) (0.78) (0.80)
Net realized gain ....................... -- -- (0.01) (0.29) (0.28) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions ..................... (0.32) (0.68) (0.18) (0.97) (0.98) (0.78) (0.80)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ............ $11.10 $10.54 $ 9.81 $10.46 $10.79 $10.39 $10.03
====== ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Total return .............................. 8.55%* 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%* 0.80%*
Ratio of net investment income
to average net assets ................... 6.08%*** 7.05%* 6.75%*** 6.17%* 6.75%* 7.66%* 8.01%*
Portfolio turnover rate ................... 72.4%** 99.3% 246.9%** 59.4% 165.4% 162.4% 158.5%
Net assets, end of period (in thousands) .. $67,153 $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.
~ Beginning in fiscal 1995, includes expenses paid indirectly.
</FN>
</TABLE>
During fiscal 1995, Price Waterhouse LLP succeeded Coopers & Lybrand, L.L.P.
as independent accountants for the T. Rowe Price U.S. Treasury Intermediate and
U.S. Treasury Long-Term funds, a decision that was approved by the funds' Board
of Directors. During the last two fiscal years, the funds have received
unqualified opinions and have had no disagreements with Coopers & Lybrand,
L.L.P. or reportable events that caused the change.
