SOURCE CAPITAL /DE/ — Interim / Quarterly Report 2006

May 25, 2006

N-Q 1 a06-8317_2nq.htm QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

*UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549*

*FORM N-Q*

*QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY*

| Investment
Company Act file number | |
| --- | --- |
| Source
Capital, Inc. | |
| (Exact name of registrant as specified in charter) | |
| 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California | 90064 |
| (Address of principal executive offices) | (Zip code) |
| J. Richard Atwood, Treasurer, Source Capital, Inc., 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California
90064 | |
| (Name and address of agent for service) | |
| Registrant's
telephone number, including area code: | (310)
473-0225 |
| Date of
fiscal year end: | December 31 |
| Date of
reporting period: | March 31,
2006 |

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ITEM 1. Schedule of Investments.

Source Capital, Inc.

Portfolio of Investments

March 31, 2006 (unaudited)

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| | Shares
or | |
| --- | --- | --- |
| | Principal | |
| | Amount | Value |
| COMMON
STOCKS | | |
| BUSINESS
SERVICES & SUPPLIES — 16.5% | | |
| Brady
Corporation (Class A) | 280,000 | $ 10,488,800 |
| CDW
Corporation | 340,000 | 20,009,000 |
| Charles
River Laboratories International, Inc. | 430,000 | 21,078,600 |
| Copart,
Inc. | 16,300 | 447,435 |
| Invitrogen
Corporation | 212,500 | 14,902,625 |
| Manpower
Inc. | 300,000 | 17,154,000 |
| ScanSource
Inc. | 425,000 | 25,674,250 |
| | | $ 109,754,710 |
| PRODUCER
DURABLES — 15.5% | | |
| Franklin
Electric Co., Inc. | 1,600 | $ 87,440 |
| Graco Inc. | 495,000 | 22,487,850 |
| HNI
Corporation | 270,000 | 15,930,000 |
| IDEX
Corporation | 495,000 | 25,824,150 |
| Oshkosh
Truck Corporation | 360,000 | 22,406,400 |
| Zebra
Technologies Corporation (Class A) | 365,000 | 16,322,800 |
| | | $ 103,058,640 |
| ENERGY —
11.2% | | |
| Helix Energy
Solutions Group, Inc. | 695,000 | $ 26,340,500 |
| Noble
Corporation | 460,000 | 37,306,000 |
| Tidewater
Inc. | 200,000 | 11,046,000 |
| | | $ 74,692,500 |
| TECHNOLOGY
— 10.0% | | |
| Cognex
Corporation | 617,200 | $ 18,293,808 |
| Microchip
Technology Incorporated | 270,000 | 9,801,000 |
| Plantronics,
Inc. | 670,000 | 23,738,100 |
| SanDisk
Corporation | 250,000 | 14,380,000 |
| | | $ 66,212,908 |
| RETAILING
— 9.2% | | |
| CarMax,
Inc. | 750,006 | $ 24,510,196 |
| O’Reilly
Automotive, Inc. | 1,000,000 | 36,560,000 |
| | | $ 61,070,196 |
| FINANCIAL
— 9.1% | | |
| Brown &
Brown, Inc. | 580,000 | $ 19,256,000 |
| First
American Corporation | 235,000 | 9,202,600 |
| Arthur J.
Gallagher & Co. | 440,000 | 12,236,400 |
| North Fork
Bancorporation, Inc. | 682,500 | 19,676,475 |
| | | $ 60,371,475 |
| HEALTH
CARE — 7.6% | | |
| AmSurg
Corp. | 320,500 | $ 7,272,145 |
| Bio-Rad
Laboratories, Inc. | 200,300 | 12,488,705 |
| Health
Management Associates, Inc. | 575,800 | 12,420,006 |
| Lincare
Holdings, Inc.* | 465,000 | 18,116,400 |
| | | $ 50,297,256 |
| ENTERTAINMENT
— 3.8% | | |
| Carnival
Corporation | 536,600 | $ 25,418,742 |
| CONSUMER
DURABLES — 3.4% | | |
| Briggs &
Stratton Corporation | 370,000 | $ 13,086,900 |
| Polaris
Industries Inc. | 175,000 | 9,548,000 |
| | | $ 22,634,900 |
| TRANSPORATION
— 2.9% | | |
| Heartland
Express, Inc. | 670,000 | $ 14,599,300 |
| Knight
Transporation, Inc. | 255,000 | 5,036,250 |
| | | $ 19,635,550 |
| TOTAL
COMMON STOCKS — 89.2% (Cost$333,255,295) | | $ 593,146,877 |

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| PREFERRED
STOCKS | | |
| --- | --- | --- |
| REAL
ESTATE INVESTMENT TRUST | | |
| CBL &
Associates Properties, Inc. (Series C) | 100,000 | $ 2,551,000 |
| Duke-Weeks
Realty Corp. (Series B) | 40,000 | 2,080,000 |
| Pennsylvania
Real Estate Investment Trust (Series A) | 59,000 | 3,330,550 |
| ProLogis
Trust 6.75% (Series G) | 120,000 | 3,000,000 |
| TOTAL
PREFERRED STOCKS — 1.6% (Cost $10,179,446) | | $ 10,961,550 |
| CONVERTIBLE
BONDS AND DEBENTURES | | |
| TECHNOLOGY
— 0.9% | | |
| BEA Systems,
Inc. — 4% 2006 | $ 2,000,000 | $ 1,990,000 |
| International
Rectifier Corp. — 4.25% 2007 | 2,000,000 | 1,960,000 |
| LSI Logic
Corporation — 4% 2006 | 2,000,000 | 1,982,500 |
| | | $ 5,932,500 |
| BUSINESS
SERVICES & SUPPLIES — 0.3% | | |
| Pegasus
Solutions, Inc. — 3.875% 2023 | $ 2,000,000 | $ 1,920,000 |
| TOTAL
CONVERTIBLE BONDS & DEBENTURES — 1.2% (Cost $7,690,000) | | $ 7,852,500 |
| NON-CONVERTIBLE
BONDS AND DEBENTURES | | |
| CORPORATE
— 3.9% | | |
| Central
Garden & Pet Company — 9.125% 2013 | $ 2,000,000 | $ 2,110,000 |
| HMH
Properties, Inc. — 7.875% 2008 | 1,338,000 | 1,359,742 |
| Host
Marriott Corporation — 9.25% 2007 | 2,000,000 | 2,110,000 |
| JLG
Industries, Inc. — 8.25% 2008 | 2,000,000 | 2,095,000 |
| Manitowoc
Company, Inc., The — 10.5% 2012 | 1,300,000 | 1,433,250 |
| Metaldyne
Corporation — 11% 2012 | 2,000,000 | 1,600,000 |
| OM Group,
Inc. — 9.25% 2011 | 4,000,000 | 4,150,000 |
| Orbital
Sciences Corporation — 9% 2011 | 3,000,000 | 3,217,500 |
| PolyOne
Corporation — 10.625% 2010 | 950,000 | 1,031,938 |
| Realty
Income Corporation — 8.25% 2008 | 2,000,000 | 2,112,000 |
| Unisys
Corporation — 7.875% 2008 | 1,500,000 | 1,496,250 |
| Windmere
Durable Holdings Inc. — 10% 2008 | 3,000,000 | 2,880,000 |
| | | $ 25,595,680 |
| U.S.
GOVERNMENT AND AGENCIES — 0.0% | | |
| Federal Home
Loan Mortgage Corporation (Interest Only) — 6.5% 2023 | $ 47,048 | $ 2,713 |
| Government
National Mortgage Association (Mobile Home) — 9.75% 2010 | 225,695 | 238,249 |
| | | $ 240,962 |
| TOTAL
NON-CONVERTIBLE BONDS | | |
| AND DEBENTURES
— 3.9% (Cost $25,600,319) | | $ 25,836,642 |
| TOTAL
INVESTMENT SECURITIES — 95.9% (Cost $376,725,060) | | $ 637,797,569 |
| SHORT-TERM
INVESTMENTS — 4.1% (Cost $27,041,101) | | |
| Short-term Corporate
Notes: | | |
| ChevronTexaco Funding Corporation — 4.48%
4/3/06 | $ 15,500,000 | $ 15,496,142 |
| General Electric Capital Corporation —
4.74% 4/3/06 | 11,548,000 | 11,544,959 |
| TOTAL
SHORT-TERM INVESTMENTS | | $ 27,041,101 |
| TOTAL
INVESTMENTS — 100.0% (Cost $403,766,161)(A) | | $ 664,838,670 |
| Other assets
and liabilities, net — 0.0% | | 65,696 |
| TOTAL
NET ASSETS — 100% | | $ 664,904,366 |

*Non-income producing security

(A)
Gross unrealized
appreciation:	$ 264,564,779
Gross unrealized
depreciation:	3,492,270
Net unrealized
appreciation:	$ 261,072,509

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ITEM 2. CONTROLS AND PROCEDURES.

(a) The principal executive officer and principal financial officer of the registrant have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this report.

(b) There have been no significant changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.

ITEM 3. EXHIBITS.

(a) Separate certification for the registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the Investment Company Act of 1940. Attached hereto.

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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.

SOURCE CAPITAL, INC.

By:
Eric S. Ende, President

Date: May 25, 2006

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.

SOURCE CAPITAL, INC.

By:
J. Richard Atwood, Treasurer

Date: May 25, 2006

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