N-Q 1 bal.htm N-Q~T. ROWE PRICE BALANCED FUND, INC. T. Rowe Price Balanced Fund, Inc.

ITEM 1. SCHEDULE OF INVESTMENTS




T. ROWE PRICE BALANCED FUND    
Unaudited  
March 31, 2006 
Portfolio of Investments †
Shares/$ Par 
Value 
(Cost and value in $000s)    

COMMON STOCKS 64.8%     
CONSUMER DISCRETIONARY 6.8%     
Auto Components 0.2%     
Autoliv GDR (SEK)  71,100  4,046 
GKN ADR (GBP)  222,107  1,284 
    5,330 
Automobiles 0.6%     
Bayerische Motoren Werke (EUR)  58,492  3,227 
GM (1)  133,781  2,846 
Honda (JPY) (1)  25,000  1,551 
Honda ADR  42,000  1,300 
Toyota Motor (JPY)  135,400  7,410 
    16,334 
Distributors 0.2%     
Genuine Parts (1)  83,858  3,675 
Pacific Brands (AUD)  357,848  613 
    4,288 
Hotels, Restaurants & Leisure 0.6%     
Carnival  147,883  7,005 
Hilton  102,318  2,605 
McDonald's  159,803  5,491 
Starbucks (2)  40,300  1,517 
    16,618 
Household Durables 0.4%     
Fortune Brands  40,920  3,299 
Goldcrest Company (JPY)  35,620  1,722 
Persimmon (GBP)  60,838  1,405 
Philips Electronics (EUR) (1)  39,211  1,328 
Sony (JPY) (1)  84,600  3,924 
    11,678 
Internet & Catalog Retail 0.1%     
Expedia (2)  60,331  1,223 
    1,223 
Leisure Equipment & Products 0.2%     
Hasbro  81,811  1,726 
Nikon (JPY) (1)  118,000  2,119 
    3,845 
Media 2.5%     
Aegis Group (GBP)  1,117,781  2,659 
CBS, Class A (1)  4,075  98 
Clear Channel Communications  102,312  2,968 
Comcast, Class A (2)  350,764  9,176 
Discovery Holding, Series A (1)(2)  20,000  300 
Disney  370,981  10,347 
EchoStar Communications, Class A (2)  96,300  2,876 
Gannett  28,235  1,692 
Liberty Media, Class A (2)  529,900  4,350 
Live Nation (2)  12,789  254 
McGraw-Hill  146,922  8,466 
Omnicom  42,022  3,498 
Publicis (EUR) (1)  115,100  4,499 
Time Warner  296,156  4,972 
Tribune  40,951  1,123 
Viacom, Class A (1)(2)  4,075  158 
Viacom, Class B (2)  155,278  6,025 
WPP Group (GBP)  202,371  2,430 
WPP Group ADR (1)  18,400  1,104 
    66,995 
Multiline Retail 0.7%     
Lotte Shopping GDR (2)(3)  52,400  1,057 
Marui (JPY)  54,100  1,071 
Target  330,590  17,194 
    19,322 
Specialty Retail 1.1%     
CarMax (2)  55,192  1,804 
Esprit Holdings (HKD)  225,500  1,755 
GAP  212,030  3,961 
Home Depot  318,128  13,457 
RadioShack  81,824  1,573 
Staples  81,577  2,082 
TJX  148,078  3,675 
    28,307 
Textiles, Apparel, & Luxury Goods 0.2%     
Adidas-Salomon (EUR)  11,485  2,275 
Nike, Class B  21,200  1,804 
    4,079 
Total Consumer Discretionary    178,019 
CONSUMER STAPLES 5.4%     
Beverages 1.2%     
Anheuser-Busch  100,360  4,292 
Cia Cervecerias Unidas ADR (1)  35,400  881 
Coca-Cola  234,560  9,821 
Diageo (GBP)  214,438  3,381 
Kirin Brewery ADR (JPY) (1)  190,000  2,591 
PepsiCo  178,379  10,309 
    31,275 
Food & Staples Retailing 2.1%     
Casino Guichard-Perrachon (EUR) (1)  19,213  1,346 
Coles Myer (AUD) (1)  274,299  2,103 
Costco Wholesale  121,864  6,600 
CVS  102,278  3,055 
Kroger (2)  228,024  4,643 
Matsumotokiyoshi (JPY) (1)  49,200  1,411 
METRO (EUR)  82,434  4,233 
Organizacion Soriana, Series B (MXN) (1)(2)  153,000  648 
Sysco  128,867  4,130 
Tesco (GBP)  464,710  2,667 
Wal-Mart  370,775  17,515 
Wal-Mart de Mexico, Series V (MXN) (2)  566,000  1,496 
Walgreen  106,038  4,573 
    54,420 
Food Products 0.5%     
Campbell Soup  82,850  2,684 
General Mills  74,159  3,759 
Goodman Fielder (AUD) (2)  349,700  546 
Nestle (CHF) (1)  17,921  5,324 
RHM (GBP)  239,944  1,130 
Unilever (GBP)  129,198  1,324 
    14,767 
Household Products 1.2%     
Colgate-Palmolive  68,822  3,930 
Kimberly-Clark  77,105  4,457 
Procter & Gamble  386,941  22,295 
    30,682 
Tobacco 0.4%     
Altria Group  164,495  11,656 
    11,656 
Total Consumer Staples    142,800 
ENERGY 6.4%     
Energy Equipment & Services 1.5%     
Baker Hughes  81,906  5,602 
BJ Services  201,460  6,970 
FMC Technologies (2)  73,947  3,788 
Grant Prideco (2)  56,100  2,403 
Halliburton  57,122  4,171 
Saipem (EUR)  95,578  2,215 
Schlumberger  105,023  13,293 
Transocean (2)  2  — 
    38,442 
Oil, Gas & Consumable Fuels 4.9%     
BP (GBP)  417,148  4,796 
BP ADR  236,064  16,274 
Chevron  227,489  13,188 
China Shenhua Energy (HKD) (2)  710,500  1,245 
ConocoPhillips  102,358  6,464 
Eni S.p.A. (EUR)  86,593  2,468 
Eni S.p.A. ADR  30,150  1,718 
ExxonMobil  701,353  42,684 
Murphy Oil  204,660  10,196 
Nippon Mining (JPY)  108,000  913 
Oil Search (AUD)  592,577  1,677 
Petroleo Brasileiro ADR (1)  48,800  3,897 
Royal Dutch Shell, Series B (GBP)  43,248  1,408 
Royal Dutch Shell ADR  30,701  1,911 
Royal Dutch Shell ADR, Class B (1)  63,077  4,109 
Statoil ASA (NOK)  448,465  12,943 
Total (EUR)  11,935  3,154 
    129,045 
Total Energy    167,487 
FINANCIALS 14.7%     
Capital Markets 2.7%     
Ameriprise Financial  36,006  1,622 
Close Brothers Group (GBP)  62,334  1,156 
Franklin Resources  100,238  9,446 
Goldman Sachs  80,495  12,635 
Lehman Brothers  51,143  7,392 
Macquarie Bank (AUD)  47,206  2,187 
Mellon Financial  176,543  6,285 
Morgan Stanley  209,247  13,145 
State Street  200,485  12,115 
UBS (CHF)  37,839  4,160 
    70,143 
Commercial Banks 5.2%     
ABN AMRO (EUR)  79,717  2,394 
Allied Irish Banks (EUR)  45,360  1,085 
Australia & New Zealand Banking (AUD)  132,948  2,524 
Australia & New Zealand Banking ADR (1)  20,200  1,917 
Banco Santander Central Hispano (EUR)  332,023  4,856 
Bank of America  515,699  23,485 
Bank of Fukuoka (JPY) (1)  208,000  1,758 
Barclays (GBP)  554,766  6,498 
Barclays ADR (1)  6,500  304 
BNP Paribas (EUR) (1)  64,786  6,027 
DBS Group (SGD)  260,000  2,623 
EFG International (CHF) (1)(2)  53,300  1,473 
Fifth Third Bancorp  96,800  3,810 
Grupo Financiero Banorte (MXN)  1,334,688  3,172 
HBOS (GBP)  164,828  2,755 
Mitsubishi UFJ Financial (JPY)  452  6,925 
NORDEA (SEK)  438,319  5,431 
Royal Bank of Scotland (GBP)  206,155  6,716 
S-E-Banken (SEK) (1)  142,187  3,533 
Societe Generale (EUR)  13,098  1,973 
Sumitomo Trust & Banking (JPY)  475,000  5,506 
Svenska Handelsbanken, Series A (SEK) (1)  138,434  3,858 
The Bank of Yokohama (JPY)  377,000  3,093 
U.S. Bancorp  491,457  14,989 
UniCredito Italiano (EUR)  507,949  3,678 
Wachovia  230,724  12,932 
Westpac Bank (AUD)  186,441  3,182 
    136,497 
Consumer Finance 0.4%     
American Express  180,031  9,461 
SLM Corporation  35,200  1,828 
    11,289 
Diversified Financial Services 2.2%     
Babcock & Brown (AUD)  157,209  2,084 
Banca Italease (EUR) (2)  58,123  2,873 
Citigroup  736,283  34,775 
ING Groep, GDS (EUR)  73,579  2,912 
JPMorgan Chase  300,611  12,517 
Moody's  28,846  2,061 
    57,222 
Insurance 2.7%     
American International Group  384,380  25,404 
Aviva (GBP)  158,445  2,203 
AXA (EUR)  86,910  3,055 
CNP Assurances (EUR)  29,686  2,998 
Friends Provident (GBP)  508,457  1,844 
Genworth Financial, Class A  124,954  4,177 
Insurance Australia (AUD)  447,238  1,753 
Marsh & McLennan  114,084  3,349 
Mitsui Sumitomo Insurance (JPY)  142,000  1,935 
Prudential Financial  65,449  4,962 
QBE Insurance (AUD)  176,594  2,768 
SAFECO  51,156  2,568 
St. Paul Travelers Companies  251,126  10,495 
Toro Assicurazioni (EUR)  101,047  2,165 
UnumProvident (1)  150,000  3,072 
    72,748 
Real Estate 0.7%     
China Overseas Land & Investment (HKD)  3,376,000  2,306 
Equity Office Properties, REIT  163,686  5,496 
GPT Group, Equity Units (AUD)  240,322  711 
Mirvac Group (AUD) (1)  155,043  472 
ProLogis, REIT  180,450  9,654 
    18,639 
Thrifts & Mortgage Finance 0.8%     
Bradford Bingley (GBP)  258,306  2,243 
Countrywide Credit  159,359  5,848 
Fannie Mae  88,886  4,569 
Freddie Mac  55,444  3,382 
Hypo Real Estate Holding (EUR)  27,796  1,909 
Radian  51,149  3,082 
    21,033 
Total Financials    387,571 
HEALTH CARE 7.0%     
Biotechnology 0.4%     
Amgen (2)  133,981  9,747 
CSL Limited (AUD)  29,184  1,144 
    10,891 
Health Care Equipment & Supplies 0.9%     
Baxter International  114,047  4,426 
Becton, Dickinson  61,382  3,780 
Boston Scientific (2)  201,670  4,648 
Guidant  43,375  3,386 
Medtronic  143,566  7,286 
    23,526 
Health Care Providers & Services 1.7%     
Aetna  137,082  6,736 
Alliance UniChem (GBP)  54,590  851 
Cardinal Health  99,073  7,383 
Celesio (EUR)  17,937  1,700 
Health Management  83,114  1,793 
Medco (2)  59,990  3,432 
UnitedHealth Group  402,178  22,466 
    44,361 
Pharmaceuticals 4.0%     
Abbott Laboratories  144,928  6,155 
Bristol Myers Squibb  158,281  3,895 
Eisai (JPY) (1)  35,500  1,550 
Eli Lilly  102,292  5,657 
Forest Laboratories (2)  51,118  2,281 
GlaxoSmithKline (GBP)  64,784  1,696 
GlaxoSmithKline ADR (1)  262,979  13,756 
Johnson & Johnson  259,492  15,367 
Kobayashi Pharmaceutical (JPY) (1)  45,800  1,633 
Merck  200,536  7,065 
Novartis (CHF)  143,156  7,967 
Pfizer (1)  600,261  14,959 
Sanofi-Aventis (EUR) (1)  60,738  5,787 
Schering-Plough  204,560  3,885 
Takeda Chemical Industries (JPY)  47,500  2,713 
Wyeth  215,658  10,464 
    104,830 
Total Health Care    183,608 
INDUSTRIALS & BUSINESS SERVICES 8.3%     
Aerospace & Defense 1.4%     
Boeing  98,104  7,645 
General Dynamics  60,000  3,839 
Honeywell International  181,969  7,783 
Lockheed Martin  138,878  10,434 
Qinetiq (GBP) (2)  245,000  832 
Rolls-Royce (GBP) (2)  199,817  1,592 
Rolls-Royce, Class B (GBP)  10,750,154  19 
United Technologies  98,992  5,738 
    37,882 
Air Freight & Logistics 0.3%     
UPS, Class B  94,071  7,467 
Yamato Transport (JPY) (1)  79,000  1,621 
    9,088 
Airlines 0.1%     
Qantas Airways (AUD)  220,317  559 
Southwest Airlines  156,100  2,808 
    3,367 
Building Products 0.1%     
Masco (1)  102,091  3,317 
    3,317 
Commercial Services & Supplies 0.3%     
Downer EDI (AUD)  199,763  1,269 
Waste Management  180,333  6,366 
    7,635 
Construction & Engineering 0.3%     
Acciona (EUR) (1)  51,192  7,988 
    7,988 
Electrical Equipment 0.1%     
Sumitomo Electric Industries (JPY) (1)  102,700  1,630 
    1,630 
Industrial Conglomerates 2.8%     
DCC (EUR)  170,359  3,970 
GE  1,576,171  54,819 
Hutchison Whampoa (HKD)  118,000  1,080 
Sembcorp (SGD)  1,110,060  2,405 
Tomkins (GBP)  182,302  1,066 
Tyco International  371,455  9,985 
    73,325 
Machinery 1.7%     
Cargotec (EUR)  99,300  4,074 
Caterpillar  76,195  5,471 
Danaher (1)  196,618  12,495 
Deere  134,575  10,638 
Fanuc (JPY)  28,100  2,710 
Illinois Tool Works  39,400  3,795 
ITT Industries  78,944  4,438 
    43,621 
Marine 0.1%     
Nippon Yusen (JPY) (1)  377,000  2,307 
    2,307 
Road & Rail 0.8%     
Arriva (GBP)  227,803  2,439 
CSX  71,058  4,249 
Landstar Systems  163,630  7,219 
Union Pacific  80,825  7,545 
    21,452 
Trading Companies & Distributors 0.2%     
Mitsubishi Corporation (JPY) (1)  230,000  5,246 
    5,246 
Transportation Infrastructure 0.1%     
Hopewell Holdings (HKD)  323,000  937 
Macquarie Infrastructure, Equity Units (AUD)  291,440  795 
    1,732 
Total Industrials & Business Services    218,590 
INFORMATION TECHNOLOGY 7.7%     
Communications Equipment 1.1%     
Cisco Systems (2)  433,375  9,391 
Motorola  284,971  6,529 
Nokia (EUR) (1)  297,859  6,175 
Nokia ADR  55,100  1,142 
QUALCOMM  89,995  4,555 
Uniden (JPY) (1)  38,000  610 
    28,402 
Computers & Peripherals 1.4%     
Acer (TWD)  141,000  259 
Dell (2)  385,760  11,480 
Hewlett-Packard  302,521  9,953 
Hitachi Maxell (JPY)  58,700  973 
IBM  147,404  12,156 
Toshiba (JPY) (1)  574,000  3,342 
    38,163 
Electronic Equipment & Instruments 0.3%     
Flextronics (2)  184,057  1,905 
Hamamatsu Photonics (JPY) (1)  40,500  1,255 
Jabil Circuit (2)  124,552  5,338 
    8,498 
Internet Software & Services 0.2%     
IAC/InterActiveCorp (1)(2)  60,331  1,778 
VeriSign (2)  132,943  3,189 
    4,967 
IT Services 0.7%     
Accenture, Class A  65,800  1,979 
Automatic Data Processing  134,574  6,147 
DST Systems (1)(2)  51,144  2,963 
Fidelity National Information  8,900  361 
First Data  25,000  1,171 
Paychex  96,709  4,029 
TietoEnator (EUR) (1)  60,720  2,376 
    19,026 
Office Electronics 0.1%     
Canon (JPY)  48,000  3,183 
    3,183 
Semiconductor & Semiconductor Equipment 1.6%     
Altera (2)  155,464  3,209 
Analog Devices  152,395  5,835 
Applied Materials  163,675  2,866 
Intel  519,954  10,061 
KLA-Tencor  61,363  2,968 
Linear Technology  168,022  5,894 
Maxim Integrated Products  114,055  4,237 
Texas Instruments  102,251  3,320 
Tokyo Electron (JPY)  30,100  2,080 
Xilinx  51,566  1,313 
    41,783 
Software 2.3%     
Adobe Systems (2)  204,546  7,142 
Electronic Arts (2)  30,680  1,679 
Intuit (2)  171,006  9,096 
Microsoft  1,071,528  29,156 
Oracle (2)  743,158  10,174 
Symantec (2)  132,195  2,225 
    59,472 
Total Information Technology    203,494 
MATERIALS 3.6%     
Chemicals 1.0%     
Asahi Kasei (JPY) (1)  122,000  871 
BASF (EUR)  40,427  3,175 
Chemtura  55,580  655 
Dow Chemical  91,111  3,699 
DuPont (1)  147,018  6,206 
Mitsubishi Gas Chemical (JPY)  146,000  1,784 
Potash Corp./Saskatchewan  95,732  8,433 
Sumitomo Bakelite (JPY) (1)  81,000  735 
    25,558 
Construction Materials 0.2%     
Cemex (MXN)  313,100  2,040 
Holcim (CHF)  21,587  1,720 
    3,760 
Metals & Mining 2.0%     
Alcoa  171,800  5,250 
Anglo American (GBP)  105,074  4,053 
BlueScope Steel (AUD) (1)  567,324  2,918 
Corus Group (GBP)  1,715,687  2,626 
Inco (1)  204,735  10,214 
Newmont Mining  61,412  3,187 
Nippon Steel (JPY) (1)  1,163,000  4,514 
Nucor  60,000  6,288 
Phelps Dodge  66,000  5,315 
Sims Group (AUD) (1)  232,900  2,923 
SSAB Svenskt Stal, Series A (SEK)  106,176  5,098 
ThyssenKrupp (EUR)  42,318  1,224 
    53,610 
Paper & Forest Products 0.4%     
International Paper  253,670  8,769 
MeadWestvaco  30,000  819 
Weyerhaeuser  12,700  920 
    10,508 
Total Materials    93,436 
TELECOMMUNICATION SERVICES 2.4%     
Diversified Telecommunication Services 1.4%     
AT&T  258,362  6,986 
Deutsche Telekom (EUR)  251,136  4,243 
Telefonica (EUR)  196,002  3,081 
Telus (CAD)  120,800  4,745 
Telus (Non-voting shares)  143,336  5,547 
Verizon Communications  364,889  12,428 
    37,030 
Wireless Telecommunication Services 1.0%     
Alltel  91,137  5,901 
America Movil ADR, Series L (1)  68,000  2,330 
Bouygues (EUR)  67,611  3,598 
KDDI (JPY) (1)  390  2,088 
Sprint Nextel  233,738  6,040 
Starhub (SGD)  831,000  1,116 
Vodafone (GBP)  225,607  473 
Vodafone ADR  239,700  5,010 
    26,556 
Total Telecommunication Services    63,586 
UTILITIES 2.5%     
Electric Utilities 1.5%     
E.ON AG (EUR)  53,568  5,905 
Entergy  83,277  5,741 
Exelon  257,980  13,647 
FirstEnergy  142,204  6,954 
Iberdrola (EUR)  106,922  3,457 
Pinnacle West Capital  51,148  2,000 
TEPCO (JPY)  97,300  2,430 
    40,134 
Gas Utilities 0.1%     
Alinta (AUD) (1)  211,336  1,662 
    1,662 
Independent Power Producers & Energy Traders 0.7%     
Duke Energy (1)  313,403  9,136 
TXU  213,000  9,534 
    18,670 
Multi-Utilities 0.2%     
Centrica (GBP)  648,318  3,174 
NiSource  153,431  3,103 
    6,277 
Total Utilities    66,743 
Total Common Stocks (Cost $1,042,127)    1,705,334 
PREFERRED STOCKS 0.0%     
CONSUMER DISCRETIONARY 0.0%     
Media 0.0%     
ProSieben Sat Media (EUR)  48,702  1,270 
Total Preferred Stocks (Cost $1,152)    1,270 
CORPORATE BONDS 10.8%     
Abbey National, 7.95%, 10/26/29  1,000,000  1,229 
Alcan Aluminum, 5.00%, 6/1/15  700,000  658 
Ambac Financial, 5.95%, 12/5/35  1,000,000  967 
America Movil, 5.50%, 3/1/14  1,545,000  1,479 
America Movil, 6.375%, 3/1/35  1,000,000  942 
American Electric Power, 5.375%, 3/15/10  1,180,000  1,169 
American General Finance, 5.40%, 12/1/15  1,000,000  970 
Ameriprise Financial, 5.35%, 11/15/10  425,000  421 
Amgen, 4.00%, 11/18/09  410,000  392 
Arden Realty, 5.25%, 3/1/15  225,000  219 
Associates Corporation of North America, 6.95%, 11/1/18  100,000  111 
AT&T, 6.45%, 6/15/34  1,000,000  987 
AT&T Broadband, 8.375%, 3/15/13  3,400,000  3,817 
AT&T Wireless, 7.875%, 3/1/11  1,000,000  1,095 
Baker Hughes, 6.25%, 1/15/09  1,000,000  1,024 
Bank of America, 4.875%, 9/15/12  500,000  486 
Bank of America, 5.25%, 2/1/07  100,000  100 
Bank of America, 6.25%, 4/15/12  1,500,000  1,566 
Bank of America, 6.625%, 8/1/07  3,000,000  3,056 
Bank of Boston Capital Trust, 8.25%, 12/15/26  1,000,000  1,057 
BB&T, 4.75%, 10/1/12  935,000  901 
Bear Stearns, 3.25%, 3/25/09  1,500,000  1,418 
Bear Stearns, 4.00%, 1/31/08  750,000  734 
Bell Atlantic Maryland, 8.00%, 10/15/29  100,000  108 
BHP Finance, 4.80%, 4/15/13  255,000  245 
BHP Finance, 5.00%, 12/15/10  1,000,000  984 
BNP Paribas (NY), 6.875%, 3/1/09  1,000,000  1,041 
Boardwalk Pipelines, 5.50%, 2/1/17  1,380,000  1,330 
Boeing, 8.75%, 8/15/21  500,000  655 
Boeing Capital, 6.10%, 3/1/11  1,000,000  1,027 
Boston Properties, 5.00%, 6/1/15  100,000  94 
Bottling Group, 4.625%, 11/15/12  450,000  429 
Bristol-Myers Squibb, 5.75%, 10/1/11  1,000,000  1,012 
British Sky Broadcasting, 8.20%, 7/15/09  1,000,000  1,078 
British Telecommunications, 8.375%, 12/15/10 (4)  1,000,000  1,116 
Bunge Limited Financial, 5.10%, 7/15/15  1,145,000  1,070 
Burlington Northern Santa Fe, ETC, 7.33%, 6/23/10  364,200  378 
Canadian National Railway, 4.25%, 8/1/09  500,000  484 
Canadian Natural Resources, 6.45%, 6/30/33  500,000  516 
Capital One Bank, 6.50%, 6/13/13  1,475,000  1,533 
Caterpillar Financial Services, 3.10%, 5/15/07  500,000  488 
Caterpillar Financial Services, 4.50%, 9/1/08  750,000  736 
Caterpillar Financial Services, 5.05%, 12/1/10  1,000,000  987 
Centerpoint Energy Houston, 5.70%, 3/15/13  1,000,000  1,000 
Chevron Phillips Chemical, 5.375%, 6/15/07  560,000  560 
Cisco Systems, 5.50%, 2/22/16  1,000,000  985 
CIT Group, 4.00%, 5/8/08  100,000  97 
CIT Group, 5.00%, 2/1/15  2,500,000  2,359 
CIT Group, 5.40%, 1/30/16  985,000  949 
Citigroup, 5.00%, 9/15/14  1,534,000  1,471 
Citigroup, 6.50%, 1/18/11  2,250,000  2,352 
Citigroup, 6.625%, 6/15/32  3,000,000  3,240 
Clorox, 4.20%, 1/15/10  600,000  575 
Coca Cola Bottling, 5.00%, 6/15/16  5,000,000  4,598 
Comcast Cable Communications, 6.75%, 1/30/11  1,750,000  1,822 
Consolidated Edison Company of New York, 5.375%, 12/15/15  1,625,000  1,603 
Consolidated Natural Gas, 5.00%, 3/1/14  1,500,000  1,410 
Countrywide Home Loans, 4.125%, 9/15/09  1,500,000  1,435 
Cox Communications, 7.125%, 10/1/12  1,850,000  1,942 
Credit Suisse First Boston (USA), 6.125%, 11/15/11  1,800,000  1,855 
Credit Suisse First Boston (USA), 6.50%, 1/15/12  1,175,000  1,231 
Credit Suisse First Boston (USA), 7.125%, 7/15/32  1,250,000  1,443 
CRH America, 6.40%, 10/15/33  750,000  754 
CVS, 4.00%, 9/15/09  500,000  478 
DaimlerChrysler, 4.05%, 6/4/08  100,000  97 
DaimlerChrysler, 6.50%, 11/15/13  2,000,000  2,034 
DaimlerChrysler, 7.20%, 9/1/09  1,000,000  1,044 
Developers Diversified Realty, 4.625%, 8/1/10  1,000,000  958 
Devon Financing, 6.875%, 9/30/11  1,000,000  1,060 
Dow Chemical, 5.97%, 1/15/09  740,000  753 
Duke Capital, 7.50%, 10/1/09  1,000,000  1,060 
Eksportfinans, 4.75%, 12/15/08  1,500,000  1,486 
Enbridge, 4.90%, 3/1/15  500,000  477 
Energy East, 6.75%, 9/15/33  1,000,000  1,051 
Enron Oil & Gas, 6.50%, 12/1/07  4,000,000  4,055 
EOP Operating, 6.80%, 1/15/09  1,350,000  1,393 
Erac USA Finance, 8.00%, 1/15/11 (3)  2,500,000  2,733 
ERP Operating, 6.95%, 3/2/11  710,000  752 
Exelon Generation, 6.95%, 6/15/11  2,075,000  2,196 
Federal Express, 9.95%, 8/15/06  500,000  508 
Florida Power & Light, 5.95%, 10/1/33  400,000  398 
Food Lion, 8.05%, 4/15/27  1,900,000  1,988 
Fortune Brands, 5.125%, 1/15/11  605,000  592 
FPL Group Capital, 7.625%, 9/15/06  100,000  101 
France Telecom, 7.75%, 3/1/11 (5)  1,590,000  1,736 
GE, 5.00%, 2/1/13  850,000  828 
GE Capital, 3.125%, 4/1/09  6,000,000  5,650 
GE Capital, 5.45%, 1/15/13  3,250,000  3,241 
GE Global Insurance, 7.75%, 6/15/30  100,000  119 
Genentech, 4.40%, 7/15/10  180,000  174 
Georgia Power, 5.25%, 12/15/15  2,000,000  1,960 
Golden West Financial Corporation, 4.125%, 8/15/07  100,000  99 
Goldman Sachs, 5.15%, 1/15/14  1,200,000  1,155 
Goldman Sachs, 6.60%, 1/15/12  4,000,000  4,199 
Goldman Sachs Capital I, 6.345%, 2/15/34  900,000  887 
Halliburton, 5.50%, 10/15/10  1,000,000  1,003 
Harrah's Operating, 5.50%, 7/1/10  1,250,000  1,236 
Hartford Life Global Funding Trust, 5.20%, 2/15/11  925,000  915 
Hewlett Packard, 5.50%, 7/1/07  1,000,000  1,003 
Home Depot, 5.40%, 3/1/16  1,025,000  1,014 
Hospira, 4.95%, 6/15/09  750,000  735 
Household Finance, 6.375%, 10/15/11  3,200,000  3,320 
HSBC Bank, 3.875%, 9/15/09  100,000  96 
HSBC Bank USA, 5.875%, 11/1/34  1,950,000  1,906 
HSBC Holdings, 5.25%, 12/12/12  2,250,000  2,208 
Hutchison Whampoa, 6.50%, 2/13/13 (3)  1,100,000  1,130 
Hydro Quebec, 8.40%, 1/15/22  200,000  260 
IBM, 3.80%, 2/1/08  625,000  609 
IBM, 5.875%, 11/29/32  1,500,000  1,484 
IBM, 6.45%, 8/1/07  500,000  508 
IBM, 6.50%, 1/15/28  100,000  106 
ING Capital Funding Trust III, 8.439%, 12/31/49     
(Tender 12/31/10)  1,000,000  1,113 
International Lease Finance, 4.875%, 9/1/10  2,500,000  2,434 
iStar Financial, 6.05%, 4/15/15  500,000  498 
Jefferies Group, 6.25%, 1/15/36  250,000  236 
Jefferson-Pilot Capital Trust, 8.14%, 1/15/46 (3)  1,500,000  1,579 
John Deere Capital, 4.375%, 3/14/08  1,000,000  983 
John Deere Capital, 4.625%, 4/15/09  1,000,000  980 
JPMorgan Chase, 4.875%, 3/15/14  3,800,000  3,605 
JPMorgan Chase, 5.75%, 1/2/13  1,200,000  1,211 
JPMorgan Chase, 6.75%, 2/1/11  2,500,000  2,631 
Kimberly-Clark, 6.375%, 1/1/28  5,000,000  5,448 
Kinder Morgan, 5.70%, 1/5/16  1,000,000  974 
Kinder Morgan, 7.25%, 3/1/28  100,000  107 
Kraft Foods, 5.625%, 11/1/11  1,000,000  1,001 
Kroger, 8.05%, 2/1/10  2,500,000  2,695 
Lehman Brothers, 3.95%, 11/10/09  1,000,000  954 
Lehman Brothers, 4.80%, 3/13/14  1,525,000  1,448 
Lennar, 5.60%, 5/31/15  500,000  475 
Lockheed Martin, 7.65%, 5/1/16  1,000,000  1,146 
Lowes Companies, 5.00%, 10/15/15  1,000,000  966 
Lubrizol, 5.50%, 10/1/14  1,000,000  967 
M & I Marshall & Ilsley Bank, 4.85%, 6/16/15  1,000,000  949 
Manufacturers and Traders Trust, 5.585%, 12/28/20  1,834,000  1,770 
Masco, 4.80%, 6/15/15  1,000,000  904 
May Department Stores, 5.75%, 7/15/14  1,500,000  1,495 
Mcdonnell Douglas, 6.875%, 11/1/06  100,000  101 
Medtronic, 4.375%, 9/15/10  550,000  528 
Mellon Funding, 5.00%, 12/1/14  1,000,000  961 
Merrill Lynch, 4.125%, 1/15/09  500,000  486 
Merrill Lynch, 5.00%, 1/15/15  1,500,000  1,437 
Merrill Lynch, 6.50%, 7/15/18  1,000,000  1,062 
Merrill Lynch, 6.75%, 6/1/28  1,700,000  1,837 
MidAmerican Energy, 6.125%, 4/1/36 (3)  820,000  803 
Morgan Stanley, 6.75%, 4/15/11  100,000  106 
Morgan Stanley, 6.875%, 3/1/07  2,500,000  2,531 
Motorola, 8.00%, 11/1/11  1,000,000  1,118 
National Rural Utilities, 7.25%, 3/1/12  1,600,000  1,732 
New England Telephone & Telegraph, 7.875%, 11/15/29  100,000  106 
Newmont Mining, 5.875%, 4/1/35  350,000  328 
News America, 6.20%, 12/15/34  1,000,000  935 
News America Holdings, 9.25%, 2/1/13  1,090,000  1,282 
Noram Energy, 6.50%, 2/1/08  521,000  530 
Norfolk Southern, 5.257%, 9/17/14  750,000  734 
Norfolk Southern, 5.64%, 5/17/29  481,000  455 
Norfolk Southern, 7.80%, 5/15/27  19,000  23 
Northrop Grumman, 7.125%, 2/15/11  750,000  798 
Northrop Grumman, 7.875%, 3/1/26  500,000  599 
Norwest Corporation, 6.55%, 12/1/06  100,000  101 
NYNEX, 9.55%, 5/1/10  403,408  433 
Oracle, 5.00%, 1/15/11 (3)  1,300,000  1,268 
Pacific Gas & Electric, 3.60%, 3/1/09  500,000  476 
Pacific Gas & Electric, 4.80%, 3/1/14  1,000,000  946 
Panhandle Eastern Pipeline, 4.80%, 8/15/08  335,000  329 
Pemex Project Funding Master Trust, 6.625%, 6/15/35 (3)  875,000  850 
Pemex Project Funding Master Trust, 7.375%, 12/15/14  2,500,000  2,678 
Pemex Project Funding Master Trust, 9.125%, 10/13/10  100,000  112 
Pepsi Co, 5.75%, 1/15/08  1,000,000  1,009 
Petro Canada, 5.95%, 5/15/35  1,000,000  960 
Petrobras International, 9.875%, 5/9/08  750,000  810 
Pfizer, 4.65%, 3/1/18  740,000  680 
Pharmacia, 5.875%, 12/1/08 (5)  100,000  101 
Phillips Petroleum, 7.00%, 3/30/29  4,000,000  4,537 
PNC Funding, 5.125%, 12/14/10  1,075,000  1,063 
PNC Funding, 5.25%, 11/15/15  1,000,000  969 
PPL Energy Supply, 6.40%, 11/1/11  940,000  969 
Procter & Gamble, 4.85%, 12/15/15  500,000  478 
Procter & Gamble, 4.95%, 8/15/14  1,625,000  1,575 
Progress Energy, 7.10%, 3/1/11  1,200,000  1,272 
Prudential Financial, 5.40%, 6/13/35  1,000,000  908 
Public Service Company of Colorado, 7.875%, 10/1/12  940,000  1,060 
Pulte Homes, 5.20%, 2/15/15  750,000  691 
Raytheon, 6.55%, 3/15/10  200,000  207 
Reckson Operating, 6.00%, 3/31/16  500,000  495 
Royal Bank of Canada, 3.875%, 5/4/09  350,000  336 
Royal Bank of Scotland Group, 4.70%, 7/3/18  1,000,000  916 
Royal Bank of Scotland Group, 5.00%, 10/1/14  1,000,000  963 
Ryland Group, 5.375%, 1/15/15  500,000  458 
Safeco, 4.875%, 2/1/10  750,000  732 
Safeway, 7.50%, 9/15/09  100,000  105 
SBC Communications, 5.10%, 9/15/14  4,100,000  3,895 
SBC Communications, 6.25%, 3/15/11  1,100,000  1,126 
Simon Property Group, 6.35%, 8/28/12  1,000,000  1,032 
SLM Corporation, 5.625%, 8/1/33  1,500,000  1,416 
SLM Corporation, 4.00%, 1/15/09  1,000,000  964 
Southern California Edison, 4.65%, 4/1/15  500,000  467 
Southern California Edison, 6.00%, 1/15/34  1,000,000  990 
Southern California Gas, 5.75%, 11/15/35  680,000  661 
Southwest Airlines, 6.50%, 3/1/12  1,750,000  1,806 
Sovereign Bancorp, 4.80%, 9/1/10 (3)  750,000  724 
Sprint Capital, 6.875%, 11/15/28  1,600,000  1,660 
Sprint Capital, 6.90%, 5/1/19  2,600,000  2,767 
St. Paul Travelers Companies, 5.75%, 3/15/07  1,525,000  1,530 
State Street, 7.65%, 6/15/10  1,000,000  1,082 
Sumitomo Mitsui Bank, 8.00%, 6/15/12  2,100,000  2,357 
Sunoco, 4.875%, 10/15/14  750,000  708 
Suntrust Banks, 7.75%, 5/1/10  1,600,000  1,737 
Synovus Financial, 4.875%, 2/15/13  390,000  372 
Target, 5.375%, 6/15/09  2,000,000  2,010 
Telecom Italia Capital, 5.25%, 11/15/13  2,000,000  1,891 
Telefonos de Mexico, 4.75%, 1/27/10  415,000  401 
Telefonos de Mexico, 5.50%, 1/27/15  1,000,000  952 
Telus, 7.50%, 6/1/07  400,000  409 
Telus, 8.00%, 6/1/11  600,000  662 
THOMSON Multimedia, 6.20%, 1/5/12  1,400,000  1,445 
Time Warner, 6.875%, 6/15/18  1,000,000  1,036 
Time Warner, 7.48%, 1/15/08  1,600,000  1,649 
Transocean, 7.50%, 4/15/31  900,000  1,060 
U.S. Bancorp, 4.50%, 7/29/10  1,450,000  1,402 
U.S. Bancorp, 6.875%, 9/15/07  200,000  204 
Unilever Capital, 7.125%, 11/1/10  430,000  457 
Union Pacific, 6.50%, 4/15/12  2,000,000  2,095 
United Health Group, 3.75%, 2/10/09  1,000,000  959 
United Technologies, 5.40%, 5/1/35  340,000  322 
Verizon Communications, 5.55%, 2/15/16  2,100,000  2,025 
Verizon Global Funding, 6.875%, 6/15/12  130,000  136 
Verizon Global Funding, 7.75%, 12/1/30  2,500,000  2,755 
Virginia Electric & Power, 6.00%, 1/15/36  875,000  828 
Virginia Electric & Power, 4.75%, 3/1/13  100,000  94 
Vodafone Group, 5.375%, 1/30/15  600,000  577 
Wachovia Bank, 4.875%, 2/1/15  3,600,000  3,406 
Wal-Mart, 6.875%, 8/10/09  2,050,000  2,148 
Wal-Mart Stores, 5.25%, 9/1/35  1,250,000  1,130 
Washington Mutual, 4.375%, 1/15/08  1,250,000  1,230 
Wellpoint, 5.00%, 1/15/11  660,000  645 
Wells Fargo, 4.20%, 1/15/10  1,000,000  961 
Wells Fargo Bank, 6.45%, 2/1/11  100,000  105 
Wells Fargo Financial, 5.50%, 8/1/12  2,000,000  2,005 
Weyerhaeuser, 5.95%, 11/1/08  750,000  757 
Willamette Industries, 7.85%, 7/1/26  1,000,000  1,103 
WMX Technologies, 7.00%, 10/15/06  200,000  202 
World Savings Bank, F.S.B., 4.125%, 12/15/09  750,000  720 
XTO Energy, 4.90%, 2/1/14  1,000,000  947 
Yum! Brands, 7.70%, 7/1/12  700,000  762 
Total Corporate Bonds (Cost $287,772)    282,917 
ASSET-BACKED SECURITIES 0.1%     
California Infrastructure PG&E     
Series 1997-1, Class A7     
6.42%, 9/25/08  24,415  25 
Capital Auto Receivables Asset Trust     
Series 2006-1, Class B     
5.26%, 10/15/10  345,000  342 
New Century Home Equity Loan Trust     
Series 2005-A, Class A6     
4.95%, 8/25/35 (4)  1,350,000  1,281 
Peco Energy Transition Trust     
Series 2001-A, Class A1     
6.52%, 12/31/10  450,000  471 
Total Asset-Backed Securities (Cost $2,211)    2,119 
NON-U.S. GOVERNMENT MORTGAGE-BACKED     
SECURITIES 0.7%     
Bank of America Mortgage Securities, CMO     
Series 2004-I, Class 3A2     
4.93%, 10/25/34 (4)  789,817  773 
DLJ Commercial Mortgage, CMO     
Series 1999-CG2, Class A1B     
7.30%, 6/10/32  2,850,000  2,989 
GMAC Commercial Mortgage Securities, CMO     
Series 2001-C2, Class A2     
6.70%, 4/15/34  4,200,000  4,417 
Greenwich Capital Commercial Funding, CMO     
Series 2004-GG1A, Class A2     
3.835%, 6/10/36  1,311,313  1,280 
JPMorgan Chase Commercial Mortgage Securities, CMO     
Series 2001-CIBC, Class A3     
6.26%, 3/15/33  2,325,000  2,393 
LB-UBS Commercial Mortgage Trust, CMO     
Series 2004-C2, Class A2     
3.246%, 3/15/29  2,625,000  2,476 
Morgan Stanley Dean Witter Capital, CMO     
Series 2002-TOP7, Class A2     
5.98%, 1/15/39  2,800,000  2,856 
Total Non-U.S. Government Mortgage-Backed Securities (Cost $18,040)    17,184 
U.S. GOVERNMENT & AGENCY MORTGAGE-BACKED     
SECURITIES 2.7%     
U.S. Government Agency Obligations 2.1%     
Federal Home Loan Mortgage     
       4.50%, 9/1/35  5,284,118  4,889 
       5.50%, 3/1/18 - 12/1/18  2,184,405  2,174 
       6.00%, 9/1/17 - 12/1/33  799,355  804 
       6.50%, 11/1/09 - 8/1/32  346,490  354 
       7.00%, 6/1/32  450,303  463 
Federal Home Loan Mortgage, CMO     
       3.50%, 4/15/17  97,082  96 
       6.00%, 12/15/08  73,207  73 
Federal National Mortgage Assn.     
       4.00%, 5/1/19  301,845  283 
       4.50%, 5/1/18 - 9/1/34  20,507,165  19,401 
       5.00%, 4/1/18 - 7/1/35  581,043  564 
       5.50%, 1/1/17 - 4/1/34  10,338,914  10,169 
       6.00%, 8/1/14 - 11/1/34  12,241,799  12,262 
       6.50%, 5/1/14 - 12/1/32  1,027,089  1,051 
       7.00%, 9/1/25 - 4/1/32  439,543  453 
       7.50%, 9/1/26  4,803  5 
       8.00%, 8/1/24 - 7/1/26  28,564  30 
Federal National Mortgage Assn., CMO, 6.00%, 10/25/08  1,849,899  1,857 
U.S. Department of Veteran Affairs, CMO, 9.60%, 3/15/25 (4)  137,405  146 
    55,074 
U.S. Government Obligations 0.6%     
Government National Mortgage Assn.     
       5.00%, 9/20/33  2,062,584  2,001 
       5.50%, 2/20/34 - 8/15/35  3,218,841  3,183 
       6.00%, 11/15/08 – 1/20/35  3,222,165  3,257 
       6.50%, 9/15/08 - 4/15/29  417,259  433 
       7.00%, 12/15/23 – 3/15/31  844,141  881 
       7.50%, 9/15/22 - 1/15/27  480,224  507 
       8.00%, 11/15/17 - 11/15/25  379,366  399 
       8.50%, 6/15/08 - 6/20/26  283,393  303 
       9.00%, 2/15 - 6/20/20  84,507  91 
       9.50%, 8/15/09 - 8/20/22  63,340  69 
       10.00%, 11/15/09 - 1/20/22  4,305  5 
       11.00%, 3/15/10 – 1/15/16  102,374  111 
       11.50%, 3/15/10 – 3/15/16  135,254  147 
Government National Mortgage Assn., TBA, 6.50%, 1/1/36  482,000  499 
Government National Mortgage Assn., ARM, 4.75%, 8/20/23  10,579  11 
Government National Mortgage Assn., CMO, 5.50%, 5/20/31  5,000,000  4,914 
    16,811 
Total U.S. Government & Agency Mortgage-Backed Securities (Cost $73,535)  71,885 
U.S. GOVERNMENT AGENCY OBLIGATIONS (EXCLUDING     
MORTGAGE- BACKED) 15.3%     
U.S. Government Agency Obligations 4.7%     
Federal Farm Credit Banks, 5.75%, 1/18/11  1,930,000  1,975 
Federal Home Loan Bank, 3.25%, 12/17/07  (1)  10,000,000  9,697 
Federal Home Loan Bank, 3.375%, 2/23/07  (1)  4,000,000  3,942 
Federal Home Loan Bank, 5.25%, 6/18/14 (1)  7,000,000  7,024 
Federal Home Loan Bank, 5.75%, 5/15/12  6,375,000  6,561 
Federal Home Loan Mortgage, 2.75%, 3/15/08 (1)  150,000  143 
Federal Home Loan Mortgage, 2.875%, 5/15/07  (1)  5,000,000  4,882 
Federal Home Loan Mortgage, 4.00%, 8/17/07 (1)  8,000,000  7,881 
Federal Home Loan Mortgage, 4.125%, 10/18/10 (1)  5,000,000  4,789 
Federal Home Loan Mortgage, 4.50%, 1/15/14 (1)  310,000  296 
Federal Home Loan Mortgage, 4.50%, 1/15/15 (1)  4,000,000  3,813 
Federal Home Loan Mortgage, 5.125%, 7/15/12  (1)  582,000  580 
Federal Home Loan Mortgage, 6.625%, 9/15/09  (1)  22,500,000  23,549 
Federal National Mortgage Assn., 3.25%, 11/15/07  (1)  175,000  170 
Federal National Mortgage Assn., 5.00%, 1/15/07  (1)  50,000  50 
Federal National Mortgage Assn., 5.25%, 4/15/07  (1)  5,000,000  5,007 
Federal National Mortgage Assn., 5.25%, 8/1/12  (1)  3,310,000  3,280 
Federal National Mortgage Assn., 6.00%, 5/15/08  (1)  12,500,000  12,721 
Federal National Mortgage Assn., 6.375%, 6/15/09  (1)  13,200,000  13,685 
Federal National Mortgage Assn., 6.47%, 9/25/12  3,000,000  3,199 
Federal National Mortgage Assn., 6.625%, 9/15/09  (1)  7,500,000  7,852 
Tennessee Valley Auth., 6.25%, 12/15/17  1,975,000  2,125 
    123,221 
U.S. Treasury Obligations 10.6%     
U.S. Treasury Bonds, 6.25%, 8/15/23  (1)  21,475,000  24,344 
U.S. Treasury Bonds, 6.25%, 5/15/30  (1)  575,000  672 
U.S. Treasury Bonds, 6.50%, 11/15/26 (1)  16,000,000  18,895 
U.S. Treasury Bonds, 7.125%, 2/15/23 (1)  6,650,000  8,174 
U.S. Treasury Bonds, 7.25%, 5/15/16  (1)  9,000,000  10,642 
U.S. Treasury Bonds, 8.125%, 8/15/19 (1)  25,700,000  33,338 
U.S. Treasury Bonds, 8.75%, 5/15/20  (1)  1,000,000  1,370 
U.S. Treasury Bonds, 9.25%, 2/15/16  (1)  3,000,000  4,006 
U.S. Treasury Bonds, 13.875%, 5/15/11 (1)  190,000  192 
U.S. Treasury Notes, 3.00%, 11/15/07 (1)  14,700,000  14,273 
U.S. Treasury Notes, 3.125%, 5/15/07 (1)  18,000,000  17,654 
U.S. Treasury Notes, 3.25%, 8/15/07  (1)  6,500,000  6,360 
U.S. Treasury Notes, 3.375%, 2/28/07 (1)  15,200,000  14,993 
U.S. Treasury Notes, 3.375%, 2/15/08 (1)  31,000,000  30,196 
U.S. Treasury Notes, 3.50%, 5/31/07  (1)  7,500,000  7,382 
U.S. Treasury Notes, 4.00%, 3/15/10  (1)  18,025,000  17,496 
U.S. Treasury Notes, 4.00%, 4/15/10  (1)  550,000  533 
U.S. Treasury Notes, 4.00%, 2/15/15  (1)  23,700,000  22,208 
U.S. Treasury Notes, 4.25%, 8/15/14  (1)  2,850,000  2,727 
U.S. Treasury Notes, 4.25%, 11/15/14 (1)  8,000,000  7,644 
U.S. Treasury Notes, 4.25%, 8/15/15  (1)  1,000,000  952 
U.S. Treasury Notes, 4.375%, 5/15/07 (1)  8,300,000  8,253 
U.S. Treasury Notes, 4.375%, 11/15/08 (1)  15,000,000  14,831 
U.S. Treasury Notes, 4.75%, 11/15/08 (1)  13,119,000  13,092 
U.S. Treasury Notes, 5.00%, 8/15/11  (1)  385,000  388 
    280,615 
Total U.S. Government Agency Obligations (Excluding Mortgage- Backed)   
(Cost $409,792)    403,836 
FOREIGN GOVERNMENT OBLIGATIONS &     
MUNICIPALITIES 1.3%     
Asian Development Bank, 4.875%, 2/5/07  200,000  200 
Asian Development Bank, 6.64%, 5/27/14  1,000,000  1,092 
Canada Mortgage & Housing, 2.95%, 6/2/08  1,500,000  1,435 
Canada Mortgage & Housing, 4.80%, 10/1/10 (1)  1,500,000  1,475 
European Investment Bank, 2.70%, 4/20/07  500,000  488 
European Investment Bank, 3.375%, 3/16/09  2,600,000  2,489 
European Investment Bank, 3.375%, 6/12/13  1,000,000  904 
European Investment Bank, 4.125%, 9/15/10  750,000  720 
Export Import Bank of Korea, 5.25%, 2/10/14 (3)  500,000  486 
Government of Malaysia, 7.50%, 7/15/11  420,000  457 
Hydro-Quebec, 7.50%, 4/1/16  1,000,000  1,152 
International Bank For Reconstruction & Dev., 7.625%, 1/19/23  1,800,000  2,284 
Inter-American Dev. Bank, 6.375%, 10/22/07  1,100,000  1,123 
Kreditanstalt Fur Wiederaufbau, 3.25%, 3/30/09  1,500,000  1,429 
Kreditanstalt Fur Wiederaufbau, 4.25%, 6/15/10  2,000,000  1,934 
Province of Manitoba, 7.50%, 2/22/10 (1)  5,600,000  6,048 
Province of Ontario, 5.50%, 10/1/08 (1)  2,850,000  2,874 
Republic of Chile, 5.50%, 1/15/13 (1)  115,000  115 
Republic of Italy, 3.25%, 5/15/09 (1)  1,000,000  947 
Republic of Italy, 3.75%, 12/14/07  3,000,000  2,937 
Republic of Italy, 4.50%, 1/21/15  330,000  311 
Republic of Italy, 5.375%, 6/15/33 (1)  330,000  317 
Republic of Korea, 8.875%, 4/15/08 (1)  424,000  457 
Republic of South Africa, 6.50%, 6/2/14 (1)  250,000  262 
United Mexican States, 7.50%, 1/14/12  2,000,000  2,164 
Total Foreign Government Obligations & Municipalities (Cost $33,938)    34,100 
BOND MUTUAL FUNDS 3.2%     
T. Rowe Price Institutional High Yield Fund 7.28% (6)(7)  8,269,772  84,103 
Total Bond Mutual Funds (Cost $86,297)    84,103 
SHORT-TERM INVESTMENTS 0.9%     
Money Market Funds 0.9%     
T. Rowe Price Reserve Investment Fund, 4.71% (7)(8)  23,194,329  23,194 
Total Short-Term Investments (Cost $23,194)    23,194 
SECURITIES LENDING COLLATERAL 20.7%     
MONEY MARKET POOLED ACCOUNT 3.2%     
Investment in money market pooled account managed by JP     
Morgan Chase Bank, London, 4.741% (8)  84,654,369  84,655 
    84,655 
MONEY MARKET TRUST 17.5%     
State Street Bank and Trust Company of New Hampshire N.A.     
Securites Lending Quality Trust units, 4.663% (8)  461,332,266  461,332 
Total Securities Lending Collateral (Cost $545,987)    545,987 
Total Investments in Securities     
120.5% of Net Assets (Cost $2,524,045)  $ 3,171,929 



†  Denominated in U.S. dollars unless otherwise noted 
(1)  All or a portion of this security is on loan at March 31, 2006 - see Note 2 
(2)  Non-income producing 
(3)  Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and 
  may be resold in transactions exempt from registration only to qualified 
  institutional buyers -- total value of such securities at period end amounts to 
  $10,630 and represents 0.4% of net assets. 
(4)  Variable Rate; rate shown is effective rate at period-end 
(5)  Stepped coupon bond for which the coupon rate of interest will adjust on specified 
  future date(s) 
(6)  SEC Yield 
(7)  Affiliated company - see Note 4 
(8)  Seven-day yield 
ADR  American Depository Receipts 
ARM  Adjustable Rate Mortgage 
AUD  Australian Dollar 
CAD  Canadian Dollar 
CHF  Swiss Franc 
CMO  Collateralized Mortgage Obligation 
ETC  Equipment Trust Certificate 
EUR  Euro 
GBP  British Pound 
GDR  Global Depository Receipts 
GDS  Global Depository Shares 
HKD  Hong Kong Dollar 
JPY  Japanese Yen 
MXN  Mexican Peso 
NOK  Norwegian Krone 
REIT  Real Estate Investment Trust 
SEK  Swedish Krona 
SGD  Singapore Dollar 
TBA  To Be Announced purchase commitment; TBAs totaled $499 (0.0% of net assets) at 
  period end; see Note 2 
TWD  Taiwan Dollar 



The accompanying notes are an integral part of this Portfolio of Investments.





T. ROWE PRICE BALANCED FUND    
Unaudited  
March 31, 2006 
Notes To Portfolio of Investments


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

T. Rowe Price Balanced Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund seeks to provide capital growth, current income, and preservation of capital through a portfolio of stocks and fixed-income securities.

The accompanying portfolio of investments was prepared in accordance with accounting principles generally accepted in the United States of America, 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 portfolio of investments may differ from the value the fund receives upon sale of the securities.

Valuation

The fund values its investments 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. Equity securities listed or regularly traded on a securities exchange or in the over-the-counter market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the latest bid and asked prices for domestic securities and the last quoted sale price for international securities.

Debt securities are generally traded in the over-the-counter market. Securities with original maturities of one year or more are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Securities with original maturities of less than one year are valued at amortized cost in local currency, which approximates fair value when combined with accrued interest.

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

Other investments and those 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.

Most foreign markets close before the close of trading on the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, which in turn will affect the fund's share price, the fund will adjust the previous closing prices to reflect the fair value of the securities as of the close of the NYSE, as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. In deciding whether to make fair value adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U. S. markets that represent foreign securities and baskets of foreign securities. The fund uses outside pricing services to provide it with closing market prices and information used for adjusting those prices. The fund cannot predict when and how often it will use closing prices and when it will adjust those prices to reflect fair value. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next day's opening prices in the same markets, and adjusted prices.

Investment Transactions

Investment transactions are accounted for on the trade date.



NOTE 2 - INVESTMENT TRANSACTIONS

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or 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.

Restricted Securities

The fund may invest in securities that are subject to legal or contractual restrictions on resale. Although certain of these securities may be readily sold, for example, under Rule 144A, others may be illiquid, and their sale may involve substantial delays and additional costs, and prompt sale at an acceptable price may be difficult.

TBA Purchase Commitments

The fund may enter into TBA (to be announced) 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 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 TBAs 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 TBAs.

Dollar Rolls

The fund may enter into dollar roll transactions, pursuant to which it sells a mortgage-backed TBA or security and simultaneously purchases a similar, but not identical, TBA with the same issuer, rate, and terms. The fund may execute a “roll” to obtain better underlying mortgage securities or to enhance returns. The fund generally enters into dollar roll transactions with the intention of taking possession of the underlying mortgage securities, but may close a contract prior to settlement or “roll” settlement to a later date if deemed in the best interest of shareholders. Actual mortgages received by the fund may be less favorable than those anticipated.

Securities Lending

The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and U.S. government securities valued at 102% to 105% of the value of the securities on loan. Cash collateral is invested in money market pooled accounts managed by the fund's lending agents in accordance with investment guidelines approved by fund management. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund the next business day. Although risk is mitigated by the collateral, the fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. At March 31, 2006, the value of loaned securities was $529,211,000; aggregate collateral consisted of $545,987,000 in money market pooled accounts and U.S. government securities valued at $2,241,000.



NOTE 3 - FEDERAL INCOME TAXES

At March 31, 2006, the cost of investments for federal income tax purposes was $2,524,045,000. Net unrealized gain aggregated $647,877,000 at period-end, of which $701,114,000 related to appreciated investments and $53,237,000 related to depreciated investments.



NOTE 4 - RELATED PARTY TRANSACTIONS

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 Funds), open-end management investment companies managed by Price Associates and affiliates of the fund. The T. Rowe Price Reserve 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 Funds pay no investment management fees. During the three months ended March 31, 2006, dividend income from the T. Rowe Price Reserve Funds totaled $1,315,000, and the value of shares of the T. Rowe Price Reserve Funds held at March 31, 2006 and December 31, 2005 was $23,194,000 and $938,000, respectively.

The fund may invest in the T. Rowe Price Institutional High Yield Fund, Inc. (High Yield Fund) as a means of gaining efficient and cost-effective exposure to the high-yield bond markets. The High Yield Fund is an open-end management investment company managed by Price Associates, and an affiliate of the fund. The High Yield Fund pays an annual all-inclusive management and administrative fee to Price Associates equal to 0.50% of average daily net assets. To ensure that Balanced Fund does not incur duplicate fees for its assets invested in High Yield Fund, Price Associates has agreed to reduce its management fee to the fund. During the three months ended March 31, 2006, purchases and sales of High Yield Fund were $9,719,000 and $0, respectively. Investment income during the period was $1,503,000 At March 31, 2006 and December 31, 2005 the value of shares of High Yield Fund held were $84,103,000 and $74,141,000, respectively.





Item 2. 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-Q 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 most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

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.





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 Balanced Fund, Inc.

By  /s/ Edward C. Bernard 
  Edward C. Bernard 
  Principal Executive Officer 
 
Date  May 19, 2006 


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  May 19, 2006 
 
 
By  /s/ Joseph A. Carrier 
  Joseph A. Carrier 
  Principal Financial Officer 
 
Date  May 19, 2006