UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM N-CSR 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED 

MANAGEMENT INVESTMENT COMPANIES 

Investment Company Act File Number: 811-5860 

T. Rowe Price U.S. Treasury Funds, Inc. 

(Exact name of registrant as specified in charter) 

100 East Pratt Street, Baltimore, MD 21202 

(Address of principal executive offices) 

David Oestreicher 

 100 East Pratt Street, Baltimore, MD 21202 

 (Name and address of agent for service) 

Registrant’s telephone number, including area code: (410) 345-2000 

Date of fiscal year end: May 31 

Date of reporting period: November 30, 2009 

Item 1: Report to Shareholders

 U.S. Treasury Long-Term Fund November 30, 2009 

The views and opinions in this report were current as of November 30, 2009. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.

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Manager’s Letter

Fellow Shareholders

U.S. Treasury securities produced mixed results over the last six months. In large part, this was a consequence of investors turning away from the safe haven of U.S. government securities and seeking higher yields in riskier securities. After rising somewhat early in the year, however, longer-term Treasury yields remained contained due to concerns over the strength and viability of the economic recovery and subdued inflation pressures. Short-term Treasury yields decreased over the past six months as investors appeared to accept the Fed’s assurance that economic conditions were “likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

ECONOMY AND INTEREST RATES

The steep recession that started in December 2007 finally began to ease over the past six months. Gross domestic product (GDP), which had contracted at an annualized rate of 6.4% in the first quarter of 2009, declined by only 0.7% in the second quarter and grew by 2.8% in the third quarter. While national unemployment has increased to 10% and consumer spending has been restrained, job losses in recent months have been significantly lower than they were at the beginning of 2009. In addition, there are signs of stabilizing residential real estate markets in some cities, and equities have rebounded sharply from their early-March lows.

The massive stimulus response by the Federal Reserve to combat the recession remained firmly in place through the final months of 2009 and continued to push short-term rates to historic lows. With a target fed funds rate of 0.00% to 0.25%, along with quantitative easing in the form of unprecedented open market purchases of Treasury and mortgage-backed securities, the Fed remains committed to reviving an economy that is still reeling from the aftereffects of the financial turmoil of the past two years. Credit markets also rebounded strongly due to aggressive actions taken by the Fed and the Treasury Department. The influence of the Treasury’s Troubled Asset Relief Program (TARP) was the key to the financial system’s recovery in late 2008 and early 2009 but began to wane over the past six months. As their losses on bad loans moderated and as their balance sheets began to improve, several of the largest financial institutions began to repay funds loaned to them at the height of the financial crisis. Wall Street avoided the collapse of another major financial institution, and some major banks even recorded large profits in the third quarter.

As capital injections in the banks wound down, measures to bolster particular credit markets ramped up. Among the most prominent of these was the Fed’s Term Asset-Backed Securities Loan Facility (TALF), which began operations in March. The program’s parameters were steadily expanded to support the market for bundled student, auto, credit card, small business, and eventually commercial real estate loans. In March, the Fed also announced its intention to begin buying long-term Treasury securities in an effort to keep a lid on long-term interest rates and increase liquidity—a policy known as “quantitative easing.” Additionally, the central bank continued its purchases of mortgage-backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae, which helped keep mortgage rates near multi-decade lows.

As shown in the interest rate graph on page 1, intermediate- and long-term U.S. Treasury yields remained contained over the past six months despite signs of economic improvement and heavy new issuance by the Treasury Department. Short-term yields declined considerably as inflationary fears receded due to the economic slowdown. With limited room for short-term rates to decline further, the Treasury yield curve—which illustrates the relationship between the yields and maturities of government securities—remained steep.

MARKET NEWS

Treasury securities, which proved the most sought-after investment in the world in late 2008, have recorded more modest gains in 2009. In large part, this has been a consequence of investors turning away from the safe haven of U.S. government securities and seeking higher yields in riskier securities. As the year progressed, however, long-term yields may also have risen in response to worries about the federal deficit, which promised to result in massive amounts of new supply coming into the market. Investors wondered in particular if foreign buyers, including central banks, would continue to purchase Treasuries as the dollar fell.

PORTFOLIO REVIEW

U.S. Treasury Money Fund
Your fund returned 0.00% for the six-month period ended November 30, 2009, in line with its Lipper benchmark. It is important to note that Treasury bill yields have remained at such low levels that it has been impossible to buy any eligible investment within the fund’s investment horizon that produces income sufficient to offset the fund’s expenses. As a result, T. Rowe Price is voluntarily waiving its management fee as needed to support the fund’s yield.

Despite rates that have progressively ground lower, investors continued to show a preference for the safety and liquidity of the Treasury market. Overall supply of Treasury bills is up for 2009, which would normally place upward pressure on rates. But a contraction in supply in other types of money market issues—most notably corporate and financial-backed commercial paper—has meant that demand for Treasury bills remains very strong. As the Treasury looks to shift the overall maturity of its outstanding debt to longer maturities, future bill supply is expected to contract. Meanwhile, overall demand for very short-dated investments remains extremely high.

This combination of factors has pushed Treasury rates to all-time lows. The four-week bill yielded 0.015% at the end of November, while the 90-day bill ended at 0.038%. Longer bill rates saw similar downward pressure in yields; the six-month bill began the period yielding 0.27% and ended at 0.14%, while the one-year bill yielded 0.44% six months ago but now yields 0.24%. Safety and liquidity concerns seem to be overriding investor needs for income.

Our investment strategy is one of continually looking for opportunities to improve fund yield—a task that has proved particularly difficult lately. A significant portion of the portfolio is invested in Treasury collateralized overnight repurchase agreements, where yields offer a significant pickup over short-dated bills. These “repos” are essentially overnight investments backed by Treasury-only collateral that has a market value of 102% of the value of the loan. For added assurance, we enter into these agreements only with counterparties whom we deem acceptable and where we have a standardized agreement in place and the collateral is held at a third-party custodian.

In addition, we continue to expand our positions in debt issued under the Temporary Loan Guarantee Program (TLGP), which is guaranteed by the Federal Deposit Insurance Corporation (FDIC). These securities will not exceed 20% of assets for the U.S. Treasury Money Fund. In addition, the U.S. Treasury Money Fund invests only in those issuers that are on the T. Rowe Price-approved list of high-quality short-term debt issuers.

With rates expected to remain unchanged for some time, we continue to maintain a longer weighted average maturity on the portfolio, ending the period with an average maturity of 68 days, down from 77 at the end of the last reporting period.

U.S. Treasury Intermediate Fund
Your fund returned a solid 3.97% in the first half of our fiscal year. As shown in the table, the fund performed in line with the Barclays Capital index but lagged the Lipper benchmark. Fund returns in the six-month period reflected $0.09 of dividend income. The net asset value (NAV) increased to $6.04 from $5.90 six months ago.

Credit markets improved dramatically in 2009 as investors withdrew money from money market funds and increased exposure to bonds. Liquidity was provided by many types of investors including the Federal Reserve, which purchased agency- and mortgage-backed securities. Treasury yields declined over the past six months as the Fed continued to keep the funds rate at a historically low level of 0.00% to 0.25%. The best-performing maturity was the seven-year Treasury, which declined almost 60 basis points (0.60%). Yields on longer-dated maturities declined less, with the 30-year Treasury down by 35 basis points. Yields declined in the wake of many factors that would typically result in higher yields: a higher budget deficit, better economic data, a weaker dollar, increased U.S. Treasury supply, and increased investor risk appetite. Yet, demand for U.S. Treasuries did not dissipate over this period. At the end of our reporting period, the 2-, 5-, and 10-year U.S. Treasury yields were 0.65%, 2.0%, and 3.2%, respectively. We expect the Fed to continue its low-rate policy for some time.

Fund performance relative to the benchmark was hurt by a slight underweight in intermediate bonds and our defensive duration posture relative to the Barclays Capital index. (Duration measures a portfolio’s sensitivity to interest rate changes.)

Our allocation to Treasury inflation-protected securities (TIPS) added the most value relative to the benchmark as a dovish Fed, weaker dollar, and higher commodity prices heightened inflation expectations. We decreased our position in TIPS from 9% of the fund at the end of May to 5% at the end of the period. The fund’s position in Government National Mortgage Association (GNMA) securities also helped performance as investors sought higher yields beyond the safety of U.S. Treasuries. We slightly lowered our exposure to GNMA securities, from 6.0% to 5.0% during the period. The fund also purchased securities issued under the government TLGP, which added additional yield to the portfolio. These securities will not exceed 20% of assets for the U.S. Treasury Intermediate Fund.

U.S. Treasury Long-Term Fund
Your fund returned a solid 5.70% in the first half of our fiscal year. As shown in the table, the fund outperformed its Lipper peer group average and the Barclays Capital benchmark. Fund performance in the last six months reflected $0.24 of dividend income and a $0.44 increase in the NAV, from $12.10 to $12.54. As we noted in our previous shareholder report, economic improvements would reduce the size of gains in U.S. Treasury securities, and that has continued to occur over the last two cycles. This is a result of investors seeking higher returns from other asset classes, which have sent yields on Treasuries up and prices down. (Bond prices move in the opposite direction of yields.)

As with the U.S. Treasury Intermediate Fund, we kept the fund’s duration, or interest rate sensitivity, slightly defensive relative to our Barclays Capital benchmark, based on a large Federal Reserve balance sheet, a weaker dollar, increased Treasury supply, higher commodity prices, and heightened investor concern regarding inflation. The position proved beneficial during the period.

The fund also benefited from its allocation to TIPS due to the Fed’s policy of quantitative easing and heightened inflation expectations. We reduced our position in the securities from 7% of the fund in May to 3.5% at the end of the period. The fund’s position in GNMA securities also benefited performance as investors sought higher yields beyond the safety of U.S. Treasuries. We maintained our exposure to GNMA securities at about 5.5% of the fund during the period. The fund had a smaller allocation to the government-guaranteed AAA rated securities issued through the TLGP than the U.S. Treasury Intermediate Fund, as these securities mature in three years and are less suitable for the long-term fund. We maintained our 2% allocation to TLGP securities over the six-month period.

OUTLOOK

We believe that the economy is bottoming, but outright job creation and a falling unemployment rate may be prerequisites for the Fed to begin raising short-term rates. The Fed’s massive expansion of its balance sheet through direct purchases of Treasury and agency debt has complicated the central bank’s task of ending its extraordinary support of the credit markets and the economy—the so-called “exit strategy.” How the Fed will shift from its current policy stance to one less accommodative remains uncertain, but we will be watching closely in the months to come. In the meantime, we expect all money market rates, and Treasury bill rates, to remain closely anchored to the 0% fed funds target rate for some time.

The safety of investments backed by the U.S. Treasury will be offset by a historically low level of income for the near term. Our primary objective for the U.S. Treasury Money Fund is to provide liquidity and protect shareholders’ principal.

We expect that Treasury yields will be largely dependent on the developments in inflation and inflation expectations, which the Fed anticipates to remain benign over the near term. Longer term, we anticipate higher yields and a flattening of the yield curve as accommodative policy is removed from the system. The question remains as to when the path to higher yields begins.

As always, thank you for investing with T. Rowe Price.

Respectfully submitted,

Joseph K. Lynagh
Chairman of the Investment Advisory Committee
U.S. Treasury Money Fund

Brian J. Brennan
Chairman of the Investment Advisory Committee
U.S. Treasury Intermediate Fund and U.S. Treasury Long-Term Fund

December 9, 2009

The committee chairmen have day-to-day responsibility for managing the portfolios and work with committee members in developing and executing the funds’ investment programs.

RISKS OF INVESTING IN FIXED INCOME SECURITIES

Funds that invest in fixed income securities are subject to price declines due to rising interest rates, with long-term securities generally most sensitive to rate fluctuations. Other risks include credit rating downgrades and defaults on scheduled interest and principal payments, but these are highly unlikely for securities backed by the full faith and credit of the U.S. government. Mortgage-backed securities are subject to prepayment risk, particularly if falling rates lead to heavy refinancing activity, and extension risk, which is an increase in interest rates that causes a fund’s average maturity to lengthen unexpectedly due to a drop in mortgage prepayments. This would increase the fund’s sensitivity to rising interest rates and its potential for price declines.

RISKS OF INVESTING IN MONEY MARKET SECURITIES

Since money market funds are managed to maintain a constant $1.00 share price, there should be little risk of principal loss. However, there is no assurance the fund will avoid principal losses if fund holdings default or are downgraded—which are highly unlikely for securities backed by the full faith and credit of the U.S. government—or if interest rates rise sharply in an unusually short period. In addition, the fund’s yield will vary; it is not fixed for a specific period like the yield on a bank certificate of deposit. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in it.

GLOSSARY

Average maturity: The average of the stated maturity dates of a bond or money market portfolio’s securities. The average maturity for a money market fund is measured in days, whereas a bond fund’s average maturity is measured in years. In general, the longer the average maturity, the greater the fund’s sensitivity to interest rate changes, which means greater price fluctuation.

Barclays Capital U.S. Treasury 4-10 Year Index: An index that includes all Treasuries in the Barclays Capital U.S. Aggregate Index that mature in four to 10 years.

Barclays Capital U.S. Treasury Long Index: An index that includes all Treasuries in the Barclays Capital U.S. Treasury Long Index that mature in 10 years or more.

Basis point: One one-hundredth of a percentage point, or 0.01%.

Consumer price index (CPI): A measure of the average price of consumer goods and services purchased by households.

Duration: The average time (expressed in years) needed for an investor to receive the present value of the future cash flows on a fixed income investment. It is used to measure a bond or bond fund’s sensitivity to interest rate changes. For example, a fund with a five-year duration would fall about 5% in price in response to a one-percentage-point increase in interest rates, and vice versa.

Fed funds target rate: An overnight lending rate set by the Federal Reserve and used by banks to meet reserve requirements. Banks also use the fed funds target rate as a benchmark for their prime lending rates.

Gross domestic product (GDP): Total market value of all goods and services produced in a country in a given year.

Inflation: A sustained increase in prices throughout the economy.

Lipper average: Consists of all the mutual funds in a particular category as tracked by Lipper Inc.

Repurchase agreements: Repurchase agreements, also known as “repos” or “sale and repurchase agreements,” allow the fund to lend its cash to banks or other financial intermediaries at a fixed rate of interest.

Treasury inflation-protected securities (TIPS): Income-generating bonds that are issued by the federal government and whose interest and principal payments are adjusted for inflation. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index (CPI).

Yield curve: A graphic depiction of the relationship between yields and maturity dates for a set of similar securities, such as Treasuries or municipal securities. Yield curves typically slope upward, indicating that longer maturities offer higher yields. When the yield curve is flat, there is little or no difference between the yields offered by shorter- and longer-term securities.

Performance and Expenses

GROWTH OF $10,000 

This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes.

AVERAGE ANNUAL COMPOUND TOTAL RETURN 

This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate.

GROWTH OF $10,000 

This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes.

AVERAGE ANNUAL COMPOUND TOTAL RETURN 

This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate.

GROWTH OF $10,000 

This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes.

AVERAGE ANNUAL COMPOUND TOTAL RETURN 

This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate.

FUND EXPENSE EXAMPLE 

As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period.

Actual Expenses
The first line of the following table (“Actual”) provides information about actual account values and expenses based on the fund’s actual returns. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes
The information on the second line of the table (“Hypothetical”) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Note: T. Rowe Price charges an annual small-account maintenance fee of $10, generally for accounts with less than $2,000 ($500 for UGMA/UTMA). The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $25,000 or more, accounts employing automatic investing, and IRAs and other retirement plan accounts that utilize a prototype plan sponsored by T. Rowe Price (although a separate custodial or administrative fee may apply to such accounts). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.

Unaudited

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

Unaudited

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

Unaudited

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

Unaudited

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

Unaudited

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

Unaudited

NOTES TO FINANCIAL STATEMENTS 

T. Rowe Price U.S. Treasury Funds, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The U.S. Treasury Long-Term Fund (the fund), a diversified, open-end management investment company, is one portfolio established by the corporation. The fund commenced operations on September 29, 1989. The fund seeks the highest level of income consistent with maximum credit protection.

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), which require the use of estimates made by fund management. Fund management believes that estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the accompanying financial statements may differ from the value the fund ultimately realizes on the securities. Further, fund management believes that no events have occurred between November 30, 2009, the date of this report, and January 22, 2010, the date of issuance of the financial statements, that require adjustment of, or disclosure in, the accompanying financial statements.

Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as interest income. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Paydown gains and losses are recorded as an adjustment to interest income. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared daily and paid monthly. Capital gain distributions, if any, are generally declared and paid by the fund, annually.

Credits The fund earns credits on temporarily uninvested cash balances held at the custodian, which reduce the fund’s custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits.

NOTE 2 - VALUATION

The fund’s investments are reported at fair value as defined under GAAP. The fund determines the values of its assets and liabilities and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business.

Valuation Methods Debt securities are generally traded in the over-the-counter (OTC) market. Securities with remaining maturities of one year or more at the time of acquisition are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers the 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. Securities with remaining maturities of less than one year at the time of acquisition generally use amortized cost in local currency to approximate fair value. However, if amortized cost is deemed not to reflect fair value or the fund holds a significant amount of such securities with remaining maturities of more than 60 days, the securities are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service.

Investments in mutual funds are valued at the mutual fund’s closing net asset value per share on the day of valuation. Financial futures contracts are valued at closing settlement prices.

Other investments, including restricted securities, and those financial instruments 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 the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors.

Valuation Inputs Various inputs are used to determine the value of the fund’s financial instruments. These inputs are summarized in the three broad levels listed below:

Level 1 – quoted prices in active markets for identical securities

Level 2 – observable inputs other than Level 1 quoted prices (including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, credit risk)

Level 3 – unobservable inputs

Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund’s own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. The following table summarizes the fund’s financial instruments, based on the inputs used to determine their values on November 30, 2009:

NOTE 3 - DERIVATIVE INSTRUMENTS

During the six months ended November 30, 2009, the fund invested in derivative instruments. As defined by GAAP, a derivative is a financial instrument whose value is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable; it requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the expected risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its prospectus and Statement of Additional Information. The fund may use derivatives for a variety of purposes, such as seeking to hedge against declines in principal value, increase yield, invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, or to adjust portfolio duration and credit exposure. The risks associated with the use of derivatives are different from, and potentially much greater than, the risks associated with investing directly in the instruments on which the derivatives are based. Investments in derivatives can magnify returns positively or negatively; however, the fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover the settlement obligations under its open derivative contracts. During the six months ended November 30, 2009, the fund’s exposure to derivatives, based on underlying notional amounts, was generally between 10% and 12% of net assets.

The fund values its derivatives at fair value, as described below and in Note 2, and recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting, even for derivatives employed as economic hedges. As of November 30, 2009, the fund held interest rate futures with cumulative unrealized gain of $239,000 and cumulative unrealized loss of $118,000; the value reflected on the accompanying Statement of Assets and Liabilities is the related unsettled variation margin.

Additionally, during the six months ended November 30, 2009, the fund recognized $387,000 of realized loss on Futures and a $174,000 change in unrealized loss on Futures related to its investments in interest rate derivative; such amounts are included on the accompanying Statement of Operations.

Counterparty risk related to exchange-traded derivatives, including futures and options contracts, is minimal because the exchange’s clearinghouse provides protection against defaults. Additionally, for exchange-traded derivatives, each broker, in its sole discretion, may change margin requirements applicable to the fund.

Futures Contracts The fund is subject to interest rate risk in the normal course of pursuing its investment objectives and uses futures contracts to help manage such risk. The fund may enter into futures contracts to manage exposure to interest rate and yield curve movements, security prices, foreign currencies, credit quality, and mortgage prepayments; as an efficient means of adjusting exposure to all or part of a target market; to enhance income; as a cash management tool; and/or to adjust portfolio duration and credit exposure. A futures contract provides for the future sale by one party and purchase by another of a specified amount of a particular underlying financial instrument at an agreed-upon price, date, time, and place. The fund currently invests only in exchange-traded futures, which generally are standardized as to maturity date, underlying financial instrument, and other contract terms. Upon entering into a futures contract, the fund is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract value (initial margin deposit); the margin deposit must then be maintained at the established level over the life of the contract. Subsequent payments are made or received by the fund each day to settle daily fluctuations in the value of the contract (variation margin), which reflect changes in the value of the underlying financial instrument. Variation margin is recorded as unrealized gain or loss until the contract is closed. The value of a futures contract included in net assets is the amount of unsettled variation margin; net variation margin receivable is reflected as an asset, and net variation margin payable is reflected as a liability on the accompanying Statement of Assets and Liabilities. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in hedged security values and/or interest rates, and potential losses in excess of the fund’s initial investment.

NOTE 4 - OTHER INVESTMENT TRANSACTIONS

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.

TBA Purchase Commitments During the six months ended November 30, 2009, the fund entered into to be announced (TBA) purchase commitments, pursuant to which it agrees to purchase mortgage-backed securities for a fixed unit price, with payment and delivery at a scheduled future date beyond the customary settlement period for that security. With TBA transactions, the particular securities to be delivered are not identified at the trade date; however, delivered securities must meet specified terms, including issuer, rate, and mortgage term, and be within industry-accepted “good delivery” standards. The fund generally enters into TBA transactions with the intention of taking possession of the underlying mortgage securities. Until settlement, the fund maintains cash reserves and liquid assets sufficient to settle its TBA commitments.

Other Purchases and sales of portfolio securities other than short-term and U.S. government securities aggregated $0 and $999,000, respectively, for the six months ended November 30, 2009. Purchases and sales of U.S. government securities aggregated $75,118,000 and $90,817,000, respectively, for the six months ended November 30, 2009.

NOTE 5 - FEDERAL INCOME TAXES

No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Distributions determined in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not adjusted for temporary differences. The amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of November 30, 2009.

At November 30, 2009, the cost of investments for federal income tax purposes was $259,040,000. Net unrealized gain aggregated $26,667,000 at period-end, of which $28,009,000 related to appreciated investments and $1,342,000 related to depreciated investments.

NOTE 6 - RELATED PARTY TRANSACTIONS

The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The investment management agreement between the fund and the manager provides for an annual investment management fee, which is computed daily and paid monthly. The fee is determined by applying a group fee rate to the fund’s average daily net assets. The group fee rate is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.285% for assets in excess of $220 billion. At November 30, 2009, the effective annual group fee rate was 0.31%.

The fund is also subject to a contractual expense limitation through September 30, 2012. During the limitation period, the manager is required to waive its management fee and reimburse the fund for any expenses, excluding interest, taxes, brokerage commissions, and extraordinary expenses, that would otherwise cause the fund’s ratio of annualized total expenses to average net assets (expense ratio) to exceed its expense limitation of 0.55%. The fund is required to repay the manager for expenses previously reimbursed and management fees waived to the extent the fund’s net assets have grown or expenses have declined sufficiently to allow repayment without causing the fund’s expense ratio to exceed its expense limitation. However, no repayment will be made more than three years after the date of any reimbursement or waiver or later than September 30, 2014. Pursuant to this agreement, management fees in the amount of $3,000 were waived during the six months ended November 30, 2009. Including these amounts, management fees waived in the amount of $3,000 remain subject to repayment at November 30, 2009.

In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates computes the daily share price and provides certain other administrative services to the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund’s transfer and dividend disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. For the six months ended November 30, 2009, expenses incurred pursuant to these service agreements were $25,000 for Price Associates; $121,000 for T. Rowe Price Services, Inc.; and $77,000 for T. Rowe Price Retirement Plan Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.

The fund is also one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum Funds) may invest. The Spectrum Funds do not invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to a special servicing agreement, expenses associated with the operation of the Spectrum Funds are borne by each underlying Price fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by the Spectrum Funds. Expenses allocated under this agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the six months ended November 30, 2009, the fund was allocated $12,000 of Spectrum Funds’ expenses, of which $8,000 related to services provided by Price. The amount payable at period-end pursuant to this agreement is reflected as Due to Affiliates in the accompanying financial statements. At November 30, 2009, approximately 8% of the outstanding shares of the fund were held by the Spectrum Funds.

The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds), open-end management investment companies managed by Price Associates and considered affiliates of the fund. The T. Rowe Price Reserve Investment Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates and are not available for direct purchase by members of the public. The T. Rowe Price Reserve Investment Funds pay no investment management fees.

INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS 

A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC’s Web site, www.sec.gov. The description of our proxy voting policies and procedures is also available on our Web site, www.troweprice.com. To access it, click on the words “Our Company” at the top of our corporate homepage. Then, when the next page appears, click on the words “Proxy Voting Policies” on the left side of the page.

Each fund’s most recent annual proxy voting record is available on our Web site and through the SEC’s Web site. To access it through our Web site, follow the directions above, then click on the words “Proxy Voting Records” on the right side of the Proxy Voting Policies page.

HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS 

The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s Web site (www.sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.

Item 2. Code of Ethics.

A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions is filed as an exhibit to the registrant’s annual Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the registrant’s most recent fiscal half-year.

Item 3. Audit Committee Financial Expert.

Disclosure required in registrant’s annual Form N-CSR.

Item 4. Principal Accountant Fees and Services.

Disclosure required in registrant’s annual Form N-CSR.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.

(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is filed with the registrant’s annual Form N-CSR.

    (2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

    (3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.

(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

SIGNATURES
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
T. Rowe Price U.S. Treasury Funds, Inc.
By	/s/ Edward C. Bernard
	Edward C. Bernard
	Principal Executive Officer
Date	January 22, 2010
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By	/s/ Edward C. Bernard
	Edward C. Bernard
	Principal Executive Officer
Date	January 22, 2010
By	/s/ Gregory K. Hinkle
	Gregory K. Hinkle
	Principal Financial Officer
Date	January 22, 2010