LOS ANGELES–(COMMERCIAL THREAD) – The Board of Directors of Source Capital, Inc. (NYSE: SOR) (the âFundâ) today announced that for the measurement period of the Fund’s Discount Management Program (the âProgramâ) From April 1, 2021 to December 31, 2021, the Fund traded at an average discount to the net asset value (NAV) of less than 10%, including that the Fund traded at a discount to NAV as low as 3.8% during this period, its lowest discount in over 10 years. As a result, the public tender offer for the calendar year 2021 under the Fund program will not take place.
In addition to the conditional takeover bid in place for the calendar year 2022 (as described in the press release of March 5, 2021), the Board approved a conditional takeover bid for the calendar year. 2023. Under the updated program, the Board approved the program extension until the year ending December 31, 2023. As part of the program extension, the Fund would make a takeover bid for 10% of the outstanding common shares of the Fund at a price equal to 98% of the net asset value per share if its shares are trading at an average discount to the net asset value of more than 10% during the valuation period from January 1, 2023 to December 31, 2023. If a take-over bid is required, it must be closed by June 30, 2024. In the future, the board may determine to extend the program beyond 2023.
The portfolio managers, officers and board of directors of the Fund do not intend to tender if a tender is required under the program for 2022 or 2023.
In addition to the program, the Fund will continue to implement its share buyback program to buy back shares at accretive prices to shareholders.
The portfolio managers also announced that as of November 30, 2021, approximately 22% of the Fund is invested or committed in the private credit / lending asset class. This is an increase from around 12% as of December 31, 2020.
Finally, the Fund will hold an investor call on February 16, 2022 at 1:00 p.m. PST. Details of the call and how to submit questions will be posted on 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 a maximum total return for shareholders from both capital appreciation and investment income as far as this is compatible with the protection of invested capital. The Fund may invest in longer duration assets such as dividend paying stocks and illiquid assets such as private loans in pursuit of its investment objective and is therefore intended only for investors with a long term investment horizon. (greater than or equal to ~ 5 years).
You should carefully consider the investment objectives, risks and charges and expenses of the Fund before investing.
This press release does not constitute an offer to sell or the solicitation of an offer to buy and there will be no sale of securities in any state in which such an offer, solicitation or sale would be illegal under the laws. on the securities of such a State. In the event of a takeover bid, there may be tax consequences for a shareholder. For example, a shareholder may owe capital gains taxes on any increase in the value of shares over your original cost.
As with any share, the price of the common shares of the Fund will fluctuate depending on market conditions and other factors. The shares of closed-end management investment companies frequently trade at a price lower (a “discount”) or higher (a “premium”) than their net asset value. If the shares of the Fund trade at a premium to the net asset value, there can be no assurance that such a premium will be sustained for a period of time and will not decrease, or that the shares will not trade at a discount to the net asset value. to net asset value thereafter. The Fund’s daily closing prices on the New York Stock Exchange, net asset values ââper share, as well as other information, including updated portfolio statistics and performance, are available by visiting the website at address https://fpa.com/funds/overview/source-capital, by email at [email protected], toll free by calling 1-800-279-1241 (option 1), or by contacting the Fund in writing.
Investments, including investments in closed-end funds, involve risk and investors may lose their principal value. Capital markets are volatile and may 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 that there is no guarantee that any investment or asset class will provide positive performance over time. Value-style investing presents the risk that the holdings or securities will never reach our estimate of intrinsic value because the market does not recognize what the portfolio management team considers to be true business value or because the portfolio management team misjudged these stocks. In addition, value style investing can fall out of favor and underperform growth or other styles of investing in particular time periods. Non-U.S. Investing presents additional risks, such as the potential for adverse political, monetary, economic, social, or regulatory developments in a country, including lack of liquidity, excessive taxation, and differing legal and accounting standards. Non-US securities, including American Depository Receipts (ADR) and other certificates of deposit, are also subject to interest rate and exchange rate risks.
Fixed income instruments are subject to interest rate, inflation and credit risks. These investments may be guaranteed, partially guaranteed or unsecured and may not be rated, and whether rated or not, 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. Usually, when interest rates rise, the value of fixed income instruments decreases, and vice versa. Certain fixed income instruments are subject to prepayment and / or default risk.
Private placements, including private credits and loans, are instruments that are not registered under federal securities laws and are generally only eligible for sale to certain eligible investors. Private placements can be illiquid, and therefore more difficult to sell, as there may be relatively few potential buyers for such investments, and in some cases, the sale of such investments may also be restricted under laws on securities. securities.
The Fund may use leverage. While the use of leverage can help increase the Fund’s distribution and return potential, it also increases the volatility of the Fund’s net asset value (NAV) and potentially increases the volatility of its distributions and price. of the market. There are costs associated with the use of leverage, including the costs of dividends and / or ongoing interest. There may also be expenses for the issuance or administration of leverage. The leverage effect modifies the capital structure of the Fund by issuing preferred shares and / or debt securities, both of which have priority over ordinary shares in priority over claims. If short-term interest rates rise, the cost of leverage will increase and likely reduce the returns earned by common shareholders of the Fund.
The Fund invests in ad hoc acquisition companies (âSPACSâ). SPACS involves risks, including, but not limited to: (i) having no operating history or ongoing activity other than seeking acquisitions; (ii) not be subject to the rigorous due diligence of an initial public offering (âIPOâ); (ii) investors may be exposed to speculative investments; (iv) provide sponsors with certain incentives not found in traditional IPOs which may result in potential conflicts of interest in the structure of PSPC; (v) the inability to identify an acquisition target or obtain shareholder approval of a target; and / or (vi) shareholders may not have sufficient voting power to disapprove a PSPC transaction. As with any investment, an investment in an after-sales service can lose value. SPACS may be considered illiquid, may be subject to resale restrictions, or may be diluted by additional offers.
This material has been distributed for informational purposes only and should not be construed 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 referenced in any other publication, without express written permission.