SOURCE CAPITAL /DE/ — Interim / Quarterly Report 2013

Nov 27, 2013

N-Q 1 a13-22857_2nq.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, 2013

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ITEM 1. Schedule of Investments.

Source Capital, Inc.

Portfolio of Investments

September 30, 2013 (unaudited)

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	Shares or — Principal	Fair
COMMON STOCKS	Amount	Value
PRODUCER DURABLE GOODS — 25.5%
Franklin Electric Co., Inc.	451,200	$ 17,777,280
Graco Inc.	395,800	29,312,948
HNI Corporation	513,733	18,586,860
IDEX Corporation	427,100	27,868,275
Nordson Corporation	93,200	6,862,316
Rotork plc (Great Britain)	72,200	3,187,442
WABCO Holdings Inc.*	383,000	32,271,580
Zebra Technologies Corporation (Class A)*	384,400	17,501,732
		$ 153,368,433
RETAILING — 22.2%
CarMax, Inc.*	762,200	$ 36,943,834
L’Occitane International S.A. (Luxembourg)	2,567,050	6,702,311
O’Reilly Automotive, Inc.*	425,900	54,340,581
Signet Jewelers Limited (Bermuda)	498,200	35,696,030
		$ 133,682,756
BUSINESS SERVICES & SUPPLIES — 17.9%
Aggreko plc (Great Britain)	488,200	$ 12,677,187
CLARCOR, Inc.	252,700	14,032,431
Copart, Inc.*	687,100	21,842,909
Domino Printing Sciences plc (Great Britain)	711,600	7,372,888
Halma PLC (Great Britain)	1,325,000	12,151,707
ScanSource Inc.*	736,263	25,474,700
Spirax-Sarco Engineering plc (Great Britain)	295,153	14,406,359
		$ 107,958,181
HEALTH CARE — 10.7%
Bio-Rad Laboratories, Inc.*	147,700	$ 17,363,612
bioMerieux S.A. (France)	118,887	11,515,454
Life Technologies Corporation*	279,198	20,892,386
Sonova Holding AG (Switzerland)	68,000	8,452,060
Varian Medical Systems, Inc.*	85,300	6,374,469
		$ 64,597,981
ENERGY — 6.2%
FMC Technologies, Inc.*	307,800	$ 17,058,276
Noble Corporation (Switzerland)	529,200	19,987,884
		$ 37,046,160
TECHNOLOGY — 6.1%
EVS Broadcast Equipment S.A. (Belgium)	187,150	$ 12,073,982
Maxim Integrated Products, Inc.	309,600	9,226,080
Microchip Technology Incorporated	374,951	15,106,776
		$ 36,406,838
TRANSPORTATION — 5.5%
Heartland Express, Inc.	1,134,300	$ 16,095,717
Knight Transportation, Inc.	1,021,200	16,870,224
		$ 32,965,941
OTHER COMMON STOCKS — 0.3%		$ 1,664,216
TOTAL COMMON STOCKS — 94.4% (Cost $298,568,924)		$ 567,690,506
NON-CONVERTIBLE BONDS AND DEBENTURES
CORPORATE
OMNOVA Solutions Inc. — 7.875% 2018	$ 275,000	$ 291,500
Quality Distribution LLC — 9.875% 2018	2,700,000	2,938,599
Stanadyne Corporation — 10% 2014	3,000,000	2,865,000
TOTAL NON- CONVERTIBLE BONDS AND DEBENTURES — 1.0% (Cost $5,634,312)		$ 6,095,099
TOTAL INVESTMENT SECURITIES — 95.4% (Cost $304,203,236)		$ 573,785,605
SHORT-TERM INVESTMENTS
State Street Bank Repurchase Agreement — 0.00% 10/01/13 (Dated 9/30/13, repurchase price of $8,817,000, collateralized by $7,590,000 principal amount U.S. Treasury Bond — 4.625% 2040, fair value $8,994,150)	$ 8,817,000	$ 8,817,000
ExxonMobil Corporation — 0.05% 10/02/13	12,146,000	12,145,983
Toyota Motor Credit Corporation — 0.04% 10/03/13	7,000,000	6,999,985
TOTAL SHORT-TERM INVESTMENTS — 4.6% (Cost $27,962,968)		$ 27,962,968
TOTAL INVESTMENTS — 100.0% (Cost $332,166,204) — Note 2		$ 601,748,573
Other assets and liabilities, net — 0.0%		(133,223	)
TOTAL NET ASSETS — 100.0%		$ 601,615,350

*Non-income producing security

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*NOTE 1 — Disclosure of Fair Value Measurements*

The Fund uses the following methods and inputs to establish the fair value of its assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.

Equity securities are generally valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Securities that are unlisted and fixed-income and convertible securities listed on a national securities exchange for which the over-the-counter market more accurately reflects the securities’ value in the judgment of the Fund’s officers, are valued at the most recent bid price. Short-term corporate notes with maturities of 60 days or less at the time of purchase are valued at amortized cost, which approximates fair value.

Securities for which representative market quotations are not readily available or are considered unreliable by the Adviser are valued as determined in good faith under procedures adopted by authority of the Fund’s Board of Directors. Various inputs may be reviewed in order to make a good faith determination of a security’s value. These inputs include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations of investments that would have been used had greater market activity occurred.

The Fund classifies its assets based on three valuation methodologies. Level 1 values are based on quoted market prices in active markets for identical assets. Level 2 values are 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 values are based on 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, 2013:

	Level 1 (3)	Level 2 (3)	Level 3 (3)	Total
Investments
Common Stocks	$ 567,690,506	—	—	$ 567,690,506
Non-Convertible Bonds & Debentures	—	$ 6,095,099	—	6,095,099
Short-Term Investments	—	27,962,968	—	27,962,968
Total Investments	$ 567,690,506	$ 34,058,067	—	$ 601,748,573

(1) All common stocks are classified under Level 1. The Portfolio of Investments provides further information on major security types.

(2) Comprised of high-yield corporate bonds and short-term investments with maturities of 60 days or less that are valued at amortized cost.

(3) Transfers of investments between different levels of the fair value hierarchy are recorded at market value as of the end of the reporting period. There were no transfers between Levels 1, 2, or 3 during the period ended September 30, 2013.

*NOTE 2 — Federal Income Tax*

The aggregate cost of investment securities was $304,372,756 for Federal income tax purposes. Net unrealized appreciation consists of:

Gross unrealized appreciation:	$
Gross unrealized depreciation:	—
Net unrealized appreciation:	$ 269,412,849

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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 27, 2013

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 27, 2013
By:	/s/ J. RICHARD ATWOOD
	J. Richard Atwood, Treasurer
	(Principal Financial Officer)
Date:	November 27, 2013

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