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SIGNATURE J. RICHARD ATWOOD
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000091847
<NAME> SOURCE CAPITAL INC
<S> <C>
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<PERIOD-START> JAN-01-1999
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</TABLE>
Report Of Independent Auditors
To the Board of Directors of
Source Capital, Inc.
In planning and performing our audit of the financial statements of Source
Capital, Inc. (the "Company") for the year ended December 31, 1999, we
considered its internal control,including control activities for
safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial
statements and to comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of the Company is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
controls. Generally, controls that are relevant to an audit pertain to the
entity's objective of preparing financial statements for external purposes
that are fairly presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud may
occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or
more of the internal control components does not reduce to a relatively low
level the risk that misstatements caused by errors or fraud in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal control and its operation, including controls for
safeguarding securities, that we consider to be material weaknesses as defined
above as of December 31, 1999.
This report is intended solely for the information and use of management, the
Board of Directors of the Company, and the Securities and Exchange Commission
and is not intended to be and should not be used by anyone other than these
specified parties.
/s/Ernst & Young LLP
Los Angeles, California
January 21, 2000
