-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q/kadgUtceNLOlgIKT1MkoV9NF5Vi2YFgDC2lhlTNhiFfT+XeGkfcwddWnCBXT8N UJu0NA3YNbEXh39d+DzhUg== 0000080249-06-000036.txt : 20060726 0000080249-06-000036.hdr.sgml : 20060726 20060726084214 ACCESSION NUMBER: 0000080249-06-000036 CONFORMED SUBMISSION TYPE: NSAR-B PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060531 FILED AS OF DATE: 20060726 DATE AS OF CHANGE: 20060726 EFFECTIVENESS DATE: 20060726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: T. Rowe Price New Income Fund, Inc. CENTRAL INDEX KEY: 0000080249 IRS NUMBER: 520980581 STATE OF INCORPORATION: MD FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: NSAR-B SEC ACT: 1940 Act SEC FILE NUMBER: 811-02396 FILM NUMBER: 06980401 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT STREET CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 410-345-2000 MAIL ADDRESS: STREET 1: 100 EAST PRATT STREET CITY: BALTIMORE STATE: MD ZIP: 21202 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE NEW INCOME FUND INC DATE OF NAME CHANGE: 19940727 0000080249 S000002136 T. Rowe Price New Income Fund, Inc. C000005529 T. Rowe Price New Income Fund, Inc. PRCIX C000005530 T. Rowe Price New Income Fund-Advisor Class PANIX C000005531 T. Rowe Price New Income Fund-R Class RRNIX NSAR-B 1 ans_nif.fil ANSWER FILE_NEW INCOME FUND PAGE 1 000 B000000 05/31/2006 000 C000000 0000080249 000 D000000 N 000 E000000 NF 000 F000000 Y 000 G000000 N 000 H000000 N 000 I000000 6.1 000 J000000 A 001 A000000 T. 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CARRIER TITLE TREASURER EX-99.77B ACCT LTTR 2 pwc_nif.htm PWC INTERNAL CONTROL LETTER -- Converted by SEC Publisher 4.1.0.0, created by BCL Technologies Inc., for SEC Filing

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
T. Rowe Price New Income Fund, Inc.

In planning and performing our audit of the financial statements of T. Rowe Price New Income Fund, Inc. (hereafter referred to as the “Company”) as of and for the year ended May 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States), we considered the Company’s internal control over financial reporting, including control activities for safeguarding securities, as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-SAR, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

The management of the Company is responsible for establishing and maintaining effective internal control over financial reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Such internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the company’s ability to initiate, authorize, record, process or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Our consideration of the Company’s internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily disclose all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses under standards established by the Public Company Accounting Oversight Board (United States). However, we noted no deficiencies in the Company’s internal control over financial reporting and its operation, including controls for safeguarding securities, that we consider to be material weaknesses as defined above as of May 31, 2006.

This report is intended solely for the information and use of management and the Board of Directors of T. Rowe Price New Income Fund, Inc. and the Securities and Exchange Commission and is not intended to be and should not be used by anyone other than these specified parties.

PricewaterhouseCoopers LLP
Baltimore, Maryland
July 12, 2006

2

 EX-99.77D POLICIES 3 cip_nif.htm INVESTMENT POLICY CHANGE -- Converted by SEC Publisher 4.1.0.0, created by BCL Technologies Inc., for SEC Filing

T. Rowe Price New Income Fund, Inc.

1) The third paragraph under the subheading, “What is the fund’s principal investment strategy?” has been revised as follows:

Eighty percent of the debt securities purchased by the fund will be rated investment grade (AAA, AA, A, BBB, or equivalent) by each of the major credit rating agencies (Standard & Poor’s, Moody’s, and Fitch IBCA, Inc.) that have assigned a rating to the security. If the security is unrated, it must be deemed to be of investment-grade quality by T. Rowe Price. Up to 15% of total assets may be invested in “split-rated securities,” or those rated investment grade by at least one rating agency but below investment grade by others. In addition, the fund may invest up to 5% of total assets in securities that have not received an investment grade rating by any major credit rating agency.

2) The convertible securities and warrants operating policy has been revised as follows:

Operating policy The fund may invest up to 20% of its total assets (not including cash) in preferred and common stocks and convertible securities, convertible into or which carry warrants for common stocks or other equity securities. These securities may or may not be rated.

3) The following disclosure regarding Inflation-linked Securities was added to the prospectus:

Inflation-Linked Securities

Inflation-linked securities are income-generating instruments whose interest and principal payments are adjusted for inflation—a sustained increase in prices that erodes the purchasing power of money. TIPS, or Treasury Inflation-Protected Securities, are inflation-linked securities issued by the U.S. government. Inflation-linked bonds are also issued by corporations, U.S. government agencies, and foreign countries. 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). A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. This can provide a hedge against inflation, as it helps preserve the purchasing power of an investment. Because of this inflation-adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds.

Inflation-protected bonds normally will decline in price when real interest rates rise. (A real interest rate is calculated by subtracting the inflation rate from a nominal interest rate. For example, if a 10-year Treasury note is yielding 5% and inflation is 2%, the real interest rate is 3%.) If inflation is negative, the principal and income of an inflation-protected bond will decline and could result in losses for the fund.

4) As approved by shareholder vote, the funds’ industry concentration fundamental policy is as follows:

The funds may not purchase the securities of any issuer if, as a result, more than 25% of the value of the fund’s total assets would be invested in the securities of issuers having their principal business activities in the same industry.

5) As approved by shareholder vote, the reference in each of the fund’s prospectuses to concentrating in particular industries has been deleted.

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