SOR Source Capital Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 2, 2024

 

SOURCE CAPITAL, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation)

 

811-1731	95-2559370
(Commission File Number)	(I.R.S. Employer Identification No.)

 

235 West Galena Street

Milwaukee, WI 53212-3948

(Address of principal executive offices, zip code)

 

Registrant’s telephone number, including area code: (626) 385-5777

 

11601 Wilshire Blvd., Suite 1200

Los Angeles, CA 90025

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

 

 

Item 8.01 Other Events

 

The Board of Directors of Source Capital, Inc. (the “Fund”) announced that for the Fund’s Discount Management Program (the “Program”) measurement period from January 1, 2023 through December 31, 2023, the Fund traded at an average discount to net asset value (NAV) of less than 10%. As a result, the tender offer for calendar year 2023 under the Fund’s Program will not occur. Further, the Board approved a contingent tender offer for calendar year 2025 in addition to the contingent tender offer currently in place for 2024. The Fund has also announced that, effective today, the Fund’s investment adviser, First Pacific Advisors, LP, has updated the description of the Fund’s strategy to read, “Generally, under normal conditions, up to 70% of the Fund’s assets will be allocated to equities, with the remaining assets allocated to public and private credit of varying quality.” These matters are more fully described in the press release published on January 2, 2024, which is attached to this Current Report on Form 8-K as Exhibit 99.1.

 

Item 9.01 Financial Statements and Exhibits

 

Exhibit No.		Description
99.1		Press release dated January 2, 2024

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Source Capital, Inc.

(Registrant)

 

/s/ Diane Drake

Name: Diane Drake

Title: Secretary

 

Dated: January 2, 2024

 

 

Exhibit No.		Description
99.1		Press release dated January 2, 2024

 

 

 

Exhibit 99.1 

 

 

Source Capital, Inc. Provides Update on Discount Management Program

and Announces Updated Investment Guidelines and Q4 Webcast

 

LOS ANGELES, January 2, 2024---The Board of Directors of Source Capital, Inc. (NYSE: SOR) (the “Fund”), today announced that for the Fund’s Discount Management Program (the “Program”) measurement period from January 1, 2023 through December 31, 2023, the Fund traded at an average discount to net asset value (NAV) of less than 10%. As a result, the tender offer for calendar year 2023 under the Fund’s Program will not occur.

 

In addition to the contingent tender offer in place for calendar year 2024 (as described in the January 3, 2023 press release), the Board approved a contingent tender offer for calendar year 2025. Under the terms of the updated Program, the Board approved extending the Program through the year ending December 31, 2025. Under the Program’s extension, the Fund will conduct a tender offer for 10% of the Fund’s outstanding shares of common stock at a price equal to 98% of NAV per share if its shares trade at an average discount to NAV of more than 10% during the measurement period from January 1, 2025 through December 31, 2025. Should a tender offer be required it shall close no later than June 30, 2026. In the future, the Board may determine to extend the Program beyond 2025.

 

The Fund’s portfolio managers, officers and Board of Directors do not intend to tender their shares if a tender is required under the Program for 2024 or 2025.

 

In addition to the Program, the Fund will continue to implement its Stock Repurchase Program to repurchase stock at prices that are accretive to shareholders.

 

First Pacific Advisors, LP, the Fund’s investment adviser, also announced in an 8-K filing today that, effective today, it has updated the description of the Fund’s strategy to read:

 

Generally, under normal conditions, up to 70% of the Fund’s assets will be allocated to equities, with the remaining assets allocated to public and private credit of varying quality.

 

The prior strategy description that read as follows is removed in its entirety:

 

Generally, under normal conditions, 50-70% of the Fund’s assets will be allocated to equities, and 30-50% allocated to public and private credit of varying quality.

 

Finally, the Fund will host an investor call on February 15, 2024, at 1pm PST. Details of the call and how to submit questions will be posted at https://fpa.com/funds/overview/source-capital.

 

About Source Capital, Inc.

 

Source Capital, Inc. is a closed-end investment company managed by First Pacific Advisors, LP. Its shares are listed on the New York Stock Exchange under the symbol “SOR.” The investment objective of the Fund is to seek maximum total return for shareholders from both capital appreciation and investment income to the extent consistent with protection of invested capital. The Fund may invest in longer duration assets like dividend paying equities and illiquid assets like private loans in pursuit of its investment objective and is thus intended only for those investors with a long-term investment horizon (greater than or equal to ~5 years).

 

You can obtain additional information by visiting the website at www.fpa.com, by email at crm@fpa.com, toll free by calling 1-800-982-4372, or by contacting the Fund in writing.

 

 

For investor questions, please contact:

 

Ryan Leggio, Partner

rleggio@fpa.com

310-996-5484

Important Disclosures

 

You should consider the Fund’s investment objectives, risks, and charges and expenses carefully before you invest.

 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful under the securities laws of any such state. In the event of a tender offer, there may be tax consequences for a stockholder. For example, a stockholder may owe capital gains taxes on any increase in the value of the shares over your original cost.

 

As with any stock, the price of the Fund’s common shares will fluctuate with market conditions and other factors. Shares of closed-end management investment companies frequently trade at a price that is less than (a “discount”) or more than (a “premium”) their net asset value. If the Fund’s shares trade at a premium to net asset value, there is no assurance that any such premium will be sustained for any period of time and will not decrease, or that the shares will not trade at a discount to net asset value thereafter. The Fund’s daily New York Stock Exchange closing market prices, net asset values per share, as well as other information, including updated portfolio statistics and performance are available by visiting the website at https://fpa.com/funds/overview/source-capital, by email at crm@fpa.com, toll free by calling 1-800-279-1241 (option 1), or by contacting the Fund in writing.

 

Investments, including investments in closed-end funds, carry risks and investors may lose principal value. Capital markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. It is important to remember that there are risks inherent in any investment and there is no assurance that any investment or asset class will provide positive performance over time. Value style investing presents the risk that the holdings or securities may never reach our estimate of intrinsic value because the market fails to recognize what the portfolio management team considers the true business value or because the portfolio management team has misjudged those values. In addition, value style investing may fall out of favor and underperform growth or other style investing during given periods. Non-U.S. investing presents additional risks, such as the potential for adverse political, currency, economic, social or regulatory developments in a country, including lack of liquidity, excessive taxation, and differing legal and accounting standards. Non-U.S. securities, including American Depository Receipts (ADRs) and other depository receipts, are also subject to interest rate and currency exchange rate risks.

 

Fixed income instruments are subject to interest rate, inflation and credit risks. Such investments may be secured, partially secured or unsecured and may be unrated, and whether or not rated, may have speculative characteristics. The market price of the Fund’s fixed income investments will change in response to changes in interest rates and other factors. Generally, when interest rates rise, the values of fixed income instruments fall, and vice versa. Certain fixed income instruments are subject to prepayment risk and/or default risk.

 

Private placements, including private credit and loans, are instruments that are not registered under the federal securities laws, and are generally eligible for sale only to certain eligible investors. Private placements may be illiquid, and thus more difficult to sell, because there may be relatively few potential purchasers for such investments, and in certain cases, the sale of such investments may also be restricted under securities laws.

 

The Fund may use leverage. While the use of leverage may help increase the distribution and return potential of the Fund, it also increases the volatility of the Fund’s net asset value (NAV), and potentially increases volatility of its distributions and market price. There are costs associated with the use of leverage, including ongoing dividend and/or interest expenses. There also may be expenses for issuing or administering leverage. Leverage changes the Fund’s capital structure through the issuance of preferred shares and/or debt, both of which are senior to the common shares in priority of claims. If short-term interest rates rise, the cost of leverage will increase and likely will reduce returns earned by the Fund’s common stockholders.

 

The Fund invests in Special Purpose Acquisition Companies (“SPACS”). SPACS involve risks, including but not limited to: (i) having no operating history or ongoing business other than seeking acquisitions; (ii) not being required to undergo the rigorous due diligence of a traditional initial public offering (“IPO”); (iii) investors may become exposed to speculative investments; (iv) providing sponsors certain incentives not found in traditional IPOs which may cause potential conflicts of interest in the structure of the SPAC; (v) inability to identify an acquisition target or obtain approval for a target by shareholders; and/or (vi) shareholders may not have sufficient voting power to disapprove a SPAC transaction. As with any investment, an investment in a SPAC may lose value. SPACS may be considered illiquid, may be subject to restrictions on resale, or may be diluted by additional offerings.

 

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

 

 

v3.23.4

Cover	Jan. 02, 2024
Document Information [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jan. 02, 2024
Entity File Number	811-1731
Entity Registrant Name	SOURCE CAPITAL INC /DE/
Entity Central Index Key	0000091847
Entity Tax Identification Number	95-2559370
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	235 West Galena Street
Entity Address, City or Town	Milwaukee
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53212-3948
City Area Code	626
Local Phone Number	385-5777
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Former Address [Member]
Document Information [Line Items]
Entity Address, Address Line One	11601 Wilshire Blvd.
Entity Address, Address Line Two	Suite 1200
Entity Address, City or Town	Los Angeles
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90025

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