SOURCE CAPITAL /DE/ — Interim / Quarterly Report 2008

Nov 14, 2008

N-Q 1 a08-23806_1nq.htm N-Q

*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: | September
30, 2008 |

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ITEM 1. Schedule of Investments.

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Source Capital, Inc.

Portfolio of Investments

September 30, 2008 (unaudited)

	Shares or
	Principal
COMMON STOCKS	Amount	Value
BUSINESS SERVICES & SUPPLIES —
23.8%
Brady Corporation (Class A)	498,800	$ 17,597,664
Charles River Laboratories
International, Inc.*	424,935	23,596,640
CLARCOR, Inc.	389,600	14,785,320
Copart, Inc.*	269,500	10,241,000
Invitrogen Corporation*	493,600	18,658,080
Manpower Inc.	285,600	12,326,496
ScanSource, Inc.*	820,963	23,635,525
		$ 120,840,725
PRODUCER DURABLE GOODS — 17.7%
Franklin Electric Co., Inc.	305,500	$ 13,610,025
Graco Inc.	470,400	16,750,944
HNI Corporation	628,433	15,924,492
IDEX Corporation	709,500	22,008,690
WABCO Holdings Inc.	225,000	7,996,500
Zebra Technologies Corporation
(Class A)*	499,200	13,902,720
		$ 90,193,371
RETAILING — 11.6%
CarMax, Inc.*	1,043,312	$ 14,606,368
O’Reilly Automotive, Inc.*	965,400	25,843,758
Signet Jewelers Limited	785,000	18,353,300
		$ 58,803,426
TECHNOLOGY — 10.0%
Cognex Corporation	677,600	$ 13,660,416
Maxim Integrated Products, Inc.	401,900	7,274,390
Microchip Technology Incorporated	486,951	14,330,968
Plantronics, Inc.	705,200	15,881,104
		$ 51,146,878
ENERGY — 9.0%
Helix Energy Solutions Group, Inc.*	677,700	$ 16,454,556
Noble Corporation	670,000	29,413,000
		$ 45,867,556
HEALTH CARE — 8.8%
AmSurg Corporation*	329,300	$ 8,387,271
Bio-Rad Laboratories, Inc.
(Class A)*	191,100	18,941,832
Lincare Holdings Inc.*	536,800	16,152,312
VCA Antech, Inc.*	43,600	1,284,892
		$ 44,766,307
TRANSPORTATION — 6.6%
Heartland Express, Inc.	1,082,300	$ 16,797,296
Knight Transportation, Inc.	997,800	16,932,666
		$ 33,729,962
ENTERTAINMENT — 3.6%
Carnival Corporation (Class A)	512,700	$ 18,123,945
FINANCIAL — 2.9%
Brown & Brown, Inc.	686,000	$ 14,831,320
TOTAL COMMON STOCKS — 94.0% (Cost
$337,971,914)		$ 478,303,490
PREFERRED STOCKS
REAL ESTATE INVESTMENT TRUST
CBL & Associates
Properties, Inc.	100,000	$ 1,530,000
ProLogis (Series G)	120,000	2,052,000
TOTAL PREFERRED STOCKS — 0.7% (Cost
$5,726,454)		$ 3,582,000

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| NON-CONVERTIBLE BONDS AND DEBENTURES CORPORATE
— 4.3% — Brown Shoe Company, Inc. — 8.75% 2012 | $ 3,000,000 | $ 2,912,760 |
| --- | --- | --- |
| Central Garden & Pet Company —
9.125% 2013 | 3,000,000 | 2,317,500 |
| Deluxe Corporation — 5% 2012 | 2,000,000 | 1,580,000 |
| Helix Energy Solutions Group, Inc. —
9.5% 2016 | 2,000,000 | 1,902,060 |
| Invacare Corporation — 9.75% 2015 | 3,000,000 | 2,965,290 |
| Nova Chemicals Corporation — 6.5% 2012 | 1,970,000 | 1,765,160 |
| PolyOne Corporation — 6.58% 2011 | 1,500,000 | 1,410,000 |
| Realty Income Corporation — 8.25% 2008 | 2,000,000 | 1,992,800 |
| Rock-Tenn Co. — 9.25% 2016† | 100,000 | 102,000 |
| Titan International, Inc. — 8% 2012 | 3,000,000 | 2,891,280 |
| Unisys Corporation — 6.875% 2010 | 2,000,000 | 1,860,000 |
| | | $ 21,698,850 |
| U.S. GOVERNMENT AND AGENCIES — 0.0% | | |
| Government National Mortgage Association
(Mobile Home) — 9.75% 2010 | $ 81,142 | $ 84,612 |
| TOTAL NON-CONVERTIBLE BONDS AND DEBENTURES —
4.3% (Cost $23,161,211) | | $ 21,783,462 |
| TOTAL INVESTMENT SECURITIES — 99.0% (Cost
$366,859,579) | | $ 503,668,952 |
| SHORT-TERM INVESTMENT — 1.0% (Cost
$4,884,000) | | |
| General Electric Capital Corporation — 1.75%
10/01/08 | $ 4,884,000 | 4,884,000 |
| TOTAL INVESTMENTS — 100.0% (Cost
$371,743,579) — Note 2 | | $ 508,552,952 |
| Other assets and liabilities, net — 0.0% | | 24,661 |
| TOTAL NET ASSETS — 100.0% | | $ 508,577,613 |

• Non-income producing security

† Restricted security purchased without registration under the Securities Act of 1933 pursuant to Rule 144A, which generally may be resold only to certain institutional investors prior to registration. The Rock-Tenn Co. 9.25% note due 2016 constituted less than 0.1% of total net assets at September 30, 2008.

| NOTE 1 —
Disclosure of Fair Value Measurements | |
| --- | --- |
| The Fund
adopted Statement of Financial Accounting Standards No. 157 (FAS 157),
Fair Value Measurements, on January 1, 2008. FAS 157 requires the Fund
to classify its assets based on valuation method, using three levels. Level 1
investment securities are valued based on quoted market prices in active
markets for identical assets. Level 2 investment securities are valued based
on significant observable market inputs, such as quoted prices for similar
assets and quoted prices in inactive markets or other market observable
inputs. Level 3 investment securities are valued using significant
unobservable inputs that reflect the Fund’s determination of assumptions that
market participants might reasonably use in valuing the assets. The valuation
levels are not necessarily an indication of the risk associated with
investing in those securities. The following table presents the valuation
levels of the Fund’s investments as of September 30, 2008: | |
| Level 1 – Quoted Prices | $ 483,878,290 |
| Level 2 – Other significant observable
inputs** | 24,674,662 |
| Level 3 – Significant unobservable inputs | — |
| Total investments | $ 508,552,952 |

** Includes $4,884,000 of short-term investments with maturities of 60 days or less that are valued at amortized cost.

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| NOTE 2 —
Federal Income Tax | | |
| --- | --- | --- |
| The cost
stated also approximates the aggregate cost for Federal income tax purposes.
Net unrealized appreciation consists of: | | |
| Gross unrealized appreciation: | $ 143,959,992 | |
| Gross unrealized depreciation: | (7,150,619 | ) |
| Net unrealized appreciation: | $ 136,809,373 | |

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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: | /s/
ERIC S. ENDE |
| Eric S. Ende, President | |
| (Principal Executive Officer) | |
| Date: | November 14,
2008 |

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.

| SOURCE
CAPITAL, INC. | |
| --- | --- |
| By: | /s/
ERIC S. ENDE |
| Eric S. Ende, President | |
| (Principal Executive Officer) | |
| Date: | November 14,
2008 |

By:
J. Richard Atwood, Treasurer
(Principal Financial Officer)
Date:	November 14,
2008

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