Item 5 – Fees and Compensation
A. Investment management fees are calculated as a percentage of net asset values of portfolios under
management. All fees are negotiated on a case by case basis. Rates are determined based upon the
size of the account, type of assets managed, and other factors determined by both the manager and
the client. Although all fees are negotiated individually, the base fees are typically 1.5% up to $2
million in assets and 1% over $2 million. The specific manner in which fees are charged by Source
Capital is established in a client’s written advisory agreement with Source Capital.
B. Source Capital bills its fees on a quarterly basis. Clients may elect to be billed in advance or arrears
each calendar quarter. Clients may also elect to be billed directly for fees or to authorize Source
Capital to directly debit fees from client accounts. Management fees shall be prorated for each
capital contribution and withdrawal made during the applicable calendar quarter (with the exception
of de minimis contributions and withdrawals). Accounts initiated or terminated during a calendar
quarter will be charged a prorated fee. In some cases Source Capital may charge hourly rates. A
contract will be utilized for hourly charges. For accounts managed by third party managers, all terms
for management by third party managers are disclosed to clients directly by the third party manager
or in their brochure (Form ADV Part 2A and its supplements), which are provided to clients before
entering into a third party management agreement.
C. Clients may incur certain charges imposed by custodians, brokers, third party investment managers,
and other third parties such as fees charged by managers, custodial fees, deferred sales charges, odd-
lot differentials, transfer taxes, wire transfer and electronic fund fees, and other fees and taxes on
brokerage accounts and securities transactions.
D. Clients have a choice as to whether they want to pay management fees in advance or in arrears.
Upon termination of any account, any prepaid, unearned fees will be promptly refunded, and any
earned, unpaid fees will be due and payable.
E. Mutual funds and exchange traded funds also charge internal management fees, which are disclosed
in a fund’s prospectus. Such charges, fees and commissions are exclusive of and in addition to
Source Capital’s management fee. Clients are free to use any broker of their choice, and therefore
are not required to use Source Capital’s affiliated FINRA broker-dealer as the executing broker for
any transaction in their account. Using Source Capital as the broker for transactions could present a
conflict of interest, which gives Source Capital and its agents an incentive to recommend investment
products based on the compensation received rather than the client’s needs. Source Capital has
procedures designed and implemented to ensure that all clients are treated fairly, and to disclose all
commissions charged on each transaction, or to inform clients as to where they can find information
describing the other fees Source Capital may receive from the sale of investment products. If
Source Capital also acts as the broker dealer for transactions in the account, Source Capital may
receive all, or a portion of these commissions, fees, and costs. If Source Capital does not act as the
broker-dealer for transactions in the account, Source Capital will not receive all or any portion of
these commissions, fees, and costs.
Item 12 further describes the factors that Source Capital considers in selecting or recommending broker-
dealers for client transactions and determining the reasonableness of their compensation (e.g.,
commissions).