UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811-01528 |
(Exact name of registrant as specified in charter)
| 20 North Wacker Drive, Suite 2414 | Chicago, IL | 60606 |
(Address of principal executive offices) | (Zip code) | |
| | | | | |
William J. Murphy
Unified Fund Services, Inc.
2960 N. Meridian Street, Ste. 300
(Name and address of agent for service)
Registrant's telephone number, including area code: | 312-236-9160 |
Date of fiscal year end: | 06/30 |
Date of reporting period: | 12/31/07 |
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
BRUCE FUND, INC.
REPORT TO SHAREHOLDERS
_______________________
Semi-Annual Report
December 31, 2007
(Unaudited)
BRUCE FUND, INC.
20 North Wacker Drive
Suite 2414
Chicago, Illinois 60606
(312) 236-9160
BRUCE FUND, INC.
Management’s Discussion and Analysis |
The Bruce Fund (the “Fund”) shares produced a total return of -9.50% for the six months ended December 31, 2007, compared to a total return of -1.37% for the S&P 500 Index for the same period. Both stock and bond holdings contributed to the loss in the period with the stock holdings contributing a majority of the decline. Certain higher risk/reward investments in the period turned out adversely. The Fund managers attempt to invest for significant capital appreciation and again as stated in the prospectus the risks of this strategy are also significant. The Fund’s performance historically has been highly volatile and inconsistent versus the broader averages and the six month period was disappointingly another example of that.
Management screens all investment opportunities for their capital appreciation potential and profiles that against the risks the investment might present. Areas of interest continue to be out-of-favor, distressed and/or turnaround situations mixed with some emerging growth stories. We have used primarily various bonds selling at discounts to par value as well as small and micro-cap equities in the attempt to achieve capital appreciation. The bonds as well as the stocks in the portfolio encompass significant investment risks, which are again outlined in the prospectus. Many associated risks with distressed investing came to pass, chiefly many of the companies continuing to experience poor operating results, poor liquidity and increased volatility.
The cash position of the Fund remained at a high level as the Fund manager attempts to pursue reasonable long-term capital appreciation opportunities. Shareholders are invited to use the toll-free number (800) 872-7823 to obtain any Fund information (including the proxy voting record), or can visit www.thebrucefund.com, to obtain the same.
Investment Results
The performance quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. Performance data current to the most recent month end may be obtained by calling 1-800-872-7823.
* The Index is an unmanaged benchmark that assumes reinvestment of all distributions and excludes the effect of taxes and fees. The S&P 500 Index is a widely recognized unmanaged index of equity prices and is representative of a broader market and range of securities than is found in the Fund’s portfolio. Individuals cannot invest directly in the Index; however, an individual can invest in exchange traded funds or other investment vehicles that attempt to track the performance of a benchmark index.
The chart above assumes an initial investment of $10,000 made on December 31, 1997 and held through December 31, 2007. THE FUND’S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The returns shown do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment returns and principal values will fluctuate so that your shares, when redeemed, may be worth more or less than their original purchase price.
Current performance may be lower or higher than the performance data quoted. For more information on the Bruce Fund, and to obtain performance data current to the most recent month end, please call 1-800-872-7823. Investing in the Fund involves certain risks that are discussed in the Fund’s prospectus. Please read the prospectus carefully before you invest or send money.
FUND HOLDINGS – (Unaudited)
1As a percent of net assets.
Availability of Portfolio Schedule
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available at the SEC’s website at www.sec.gov. The Fund’s Form N-Qs are also available by calling the Fund at (800) 872-7823. The Fund’s Form N-Qs may be reviewed and copied at the Public Reference Room in Washington DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
ABOUT YOUR FUND’S EXPENSES – (Unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period (July1, 2007) and held for the entire period (through December 31, 2007).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Bruce Fund | Beginning Account Value July 1, 2007 | Ending Account Value December 31, 2007 | Expenses Paid During Period* July 1 – December 31, 2007 |
Actual | $1,000.00 | $905.03 | $3.72 |
Hypothetical** | $1,000.00 | $1,021.23 | $3.94 |
* Expenses are equal to the Fund’s annualized expense ratio of 0.78%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the partial year period).
** Assumes a 5% return before expenses.
BRUCE FUND, INC. |
SCHEDULE OF INVESTMENTS |
December 31, 2007 |
(Unaudited) |
| | | | | | | | |
COMMON STOCKS - (42.48%) | | | | | | |
No. of Shares | | | Issue | | | Cost | | Market Value |
| Automotive/Transportation (5.31%) | | | | |
166,500 | | (a) | AMERCO | | | $ 8,510,724 | | $ 10,935,720 |
125,900 | | (a) | Amerigon, Inc. | | 849,860 | | 2,661,526 |
74,291 | | | Noble International, Ltd. | | 1,396,361 | | 1,211,686 |
100,000 | | (a) | Rural/Metro Corp. | | 140,117 | | 214,000 |
| | | | | | 10,897,062 | | 15,022,932 |
| | | | | | | | |
| Biological Products (0.06%) | | | | | |
296,240 | | (a) | Vion Pharmaceuticals, Inc. | | 263,654 | | 163,228 |
| | | | | | | | |
| Business Services (1.90%) | | | | | |
100,684 | | | American Ecology Corp. | | 1,961,063 | | 2,364,060 |
210,000 | | (a) | Internet Capital Group, Inc. | 1,518,587 | | 2,465,400 |
358,200 | | (a) | OpenTV Corp. - Class A | | 1,016,594 | | 472,824 |
706,000 | | (a) | Sequiam Corp. | | 308,091 | | 68,482 |
| | | | | | 4,804,335 | | 5,370,766 |
| | | | | | | | |
| Chemicals (1.17%) | | | | | |
357,300 | | (a) | Omega Protein Corp. | | 2,869,009 | | 3,319,317 |
| | | | | | | | |
| Consumer Products (1.78%) | | | | | |
1,681,706 | | (a) | Alanco Technologies, Inc. | | 3,641,225 | | 2,270,303 |
395,400 | | (a) | American Italian Pasta Co. - Class A | 1,602,157 | | 2,767,800 |
| | | | | | 5,243,382 | | 5,038,103 |
| | | | | | | | |
| Electric Services (0.72%) | | | | | |
8,017,120 | | (a) | Calpine Corp. | | 11,013,020 | | 2,044,366 |
| | | | | | | | |
| Energy/Energy Services (11.71%) | | | | |
264,660 | | (a) | Arena Resources, Inc. | | 1,436,575 | | 11,038,969 |
256,500 | | (a) | ATP Oil & Gas Corp. | | 10,646,870 | | 12,963,510 |
202,424 | | (a) | Double Eagle Petroleum Co. | 4,094,387 | | 3,190,202 |
250,000 | | (a) | Hercules Offshore, Inc. | | 7,047,178 | | 5,945,000 |
| | | | | | 23,225,010 | | 33,137,681 |
| | | | | | | | |
| Guilded Missiles & Space Vehicles & Parts (0.75%) | | | |
1,344,073 | | (a) | SPACEHAB, Inc. | | 5,557,768 | | 2,110,195 |
| | | | | | | | |
| Health Services (4.62%) | | | | | |
488,768 | | (a) | America Service Group, Inc. | 6,245,491 | | 3,582,669 |
608,229 | | (a) | EDAP TMS S.A. (ADR) | | 5,106,685 | | 2,931,664 |
182,300 | | (a) | Health Grades, Inc. | | 156,028 | | 1,084,685 |
3,821,348 | | (a) | NexMed, Inc. | | 4,480,611 | | 5,464,528 |
| | | | | | 15,988,815 | | 13,063,546 |
| | | | | | | | |
| Manufacturing (2.01%) | | | | | |
1,731,500 | | | AirBoss of America Corp. (Canadian) | 5,706,705 | | 5,701,656 |
| | | | | | | | |
| Mineral Exploration (4.80%) | | | | | |
5,825,100 | | (a) | Admiral Bay Resources, Inc. | 4,153,315 | | 1,416,509 |
92,223 | | (a) | Edge Petroleum Corp. | | 1,758,520 | | 546,882 |
346,160 | | (a) | Kinross Gold Corp. | | 3,012,271 | | 6,369,344 |
199,270 | | (a) | Solitario Resources Corp. (Canadian) | 347,555 | | 1,056,131 |
347,364 | | (a) | TXCO Resources, Inc. | | 4,218,591 | | 4,189,210 |
| | | | | | 13,490,252 | | 13,578,076 |
| | | | | | | | |
| Pharmaceutical/Drug Delivery (3.79%) | | | | |
200,000 | | (a) | Elan Corp., plc (ADR) | | 1,362,857 | | 4,396,000 |
50,000 | | | Merck & Co., Inc. | | 2,130,679 | | 2,905,500 |
150,000 | | | Pfizer, Inc. | | | 3,890,680 | | 3,409,500 |
| | | | | | 7,384,216 | | 10,711,000 |
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC. |
SCHEDULE OF INVESTMENTS - continued |
December 31, 2007 |
(Unaudited) |
| | | | | | | | |
COMMON STOCKS - (42.48%) - continued | | | | | |
No. of Shares | | | Issue | | | Cost | | Market Value |
| Property-Casualty Insurance (2.72%) | | | | |
1,057,511 | | (a) | GAINSCO, Inc. | | $ 5,685,630 | | $ 4,282,920 |
60,000 | | | RLI Corp. | | | 2,767,668 | | 3,407,400 |
| | | | | | 8,453,298 | | 7,690,320 |
| | | | | | | | |
| Telecommunications (1.15%) | | | | | |
632,679 | | (a )iBasis, Inc. | | | 3,338,006 | | 3,245,643 |
| | | | | | | | |
| | | | Total Common Stocks | 118,234,532 | | 120,196,829 |
| | | | | | | | |
CONVERTIBLE PREFERRED STOCK (1.71%) | | | | | |
| Power Producers (1.71%) | | | | | |
10,000 | | | AES Trust III 6.75% | | 331,030 | | 467,500 |
129,900 | | | Edge Petroleum Corp., 5.750% | 6,340,213 | | 4,384,125 |
| | | | Total Convertible Preferred Stocks | 6,671,243 | | 4,851,625 |
| | | | | | | | |
BONDS (45.40%) | | | | | | | | |
Principal | | | Issue | | | | | |
| U.S. Government (11.99%) | | | | | |
$34,000,000 | | | U.S. Treasury "Strips", 0.00% due 8-15-2028 | 11,871,630 | | 13,256,022 |
40,000,000 | | | U.S. Treasury "Strips", 0.00% due 8-15-2029 | 14,419,895 | | 14,930,560 |
20,000,000 | | | U.S. Treasury "Strips", 0.00% due 2-15-2036 | 5,535,192 | | 5,737,420 |
| | | | | | 31,826,717 | | 33,924,002 |
| | | | | | | | |
| Municipal (0.03%) | | | | | |
1,000,000 | | (a) | Indianapolis Airport Authority 6.50% due 11-15-2031 | 167,935 | | 82,500 |
| | | | | | | | |
| Corporate (0.60%) | | | | | |
2,300,000 | | | Charter Communications LLC 9.92% due 4-1-2011 | 1,842,553 | | 1,707,750 |
| | | | | | | | |
| Corporate Convertibles (32.78%) | | | | |
9,179,000 | | | Antigenics, Inc. 5.25% due 2-1-2025 | 5,693,989 | | 5,461,505 |
2,000,000 | | | Atherogenics, Inc. 1.50% due 2-1-2012 | 1,692,139 | | 150,000 |
2,000,000 | | | Atherogenics, Inc. 4.50% due 9-1-2008 | 2,160,040 | | 850,000 |
7,700,000 | | | Atherogenics, Inc. 4.50% due 3-1-2011 | 5,623,789 | | 1,540,000 |
4,389,000 | | (d) | C&D Technologies, Inc. 5.25% due 11-1-2025 | 3,908,855 | | 4,608,450 |
2,250,000 | | | C&D Technologies, Inc. 5.25% due 11-1-2025 | 2,176,825 | | 2,362,500 |
200,000 | | (c) | Calpine Corp. 4.75% due 11-15-2023 | 162,000 | | 201,250 |
7,300,000 | | | Cell Genesys, Inc. 3.125% due 11-1-2011 | 6,075,263 | | 5,310,750 |
5,500,000 | | | Cell Therapeutics, Inc. 4.00% due 7-1-2010 | 3,962,644 | | 3,052,500 |
3,843,000 | | | Cell Therapeutics, Inc. 5.75% due 6-15-2008 | 3,316,911 | | 3,016,755 |
5,250,000 | | (d) | Cell Therapeutics, Inc. 5.75% due 12-15-2011 | 4,656,092 | | 3,937,500 |
1,000,000 | | (d) | Cell Therapeutics, Inc. 6.75% due 10-31-2010 | 1,000,000 | | 660,000 |
1,800,000 | | (d) | Ciphergen Biosystems, Inc. 7.00% due 9-1-2011 | 1,483,692 | | 1,503,000 |
5,000,000 | | | CV Therapeutics , Inc. 2.75% due 5-16-2012 | 4,896,569 | | 4,200,000 |
9,140,000 | | | deCODE genetics, Inc. 3.50% due 4-15-2011 | 7,376,825 | | 6,055,250 |
1,990,000 | | | Durect Corp. 6.25% due 6-15-2008 | 2,131,847 | | 4,057,113 |
2,000,000 | | (d) | Edap TMS S.A. 9.00% due 10-30-2012 | 2,000,000 | | 1,900,000 |
5,000,000 | | | Encysive Pharmaceuticals 2.50% due 3-15-2012 | 3,938,803 | | 2,506,250 |
6,600,000 | | | Endeavor International Corp. 6.00% due 1-15-2012 | 6,143,848 | | 5,593,500 |
3,500,000 | | | Epix Pharmaceuticals, Inc. 3.00% due 6-15-2024 | 2,492,462 | | 2,371,250 |
3,000,000 | | | Human Genome Sciences, Inc., 2.250% due 10-15-2011 | 2,710,715 | | 2,838,750 |
3,150,000 | | | Incyte Corp. 3.50% due 2/15/2011 | 2,737,317 | | 3,110,625 |
2,000,000 | | | Indevus Pharmaceuticals, Inc. 6.25% due 7-15-2009 | 1,831,835 | | 2,410,000 |
3,000,000 | | (d) | Isis Pharmaceuticals, Inc. 2.625% due 2-15-2027 | 2,751,364 | | 3,888,750 |
3,060,000 | | | Isis Pharmaceuticals, Inc. 2.625% due 2-15-2027 | 3,109,580 | | 3,966,525 |
2,466,638 | | (b) | Kellstrom Industries, Inc. 5.50% due 6/15/2003 | 143,750 | | 24,666 |
1,000,000 | | (b) | Kellstrom Industries, Inc. 5.75% due 10-15-2002 | 53,750 | | 10,000 |
2,700,000 | | | Midway Games, Inc. 6.00% due 9-30-2025 | 2,526,044 | | 2,311,875 |
8,819,000 | | | Oscient Pharmaceuticals 3.50% due 4-15-2011 | 7,000,947 | | 3,571,695 |
5,150,000 | | | Terremark Worldwide Inc. 9.00% due 6-15-2009 | 4,712,321 | | 5,253,000 |
2,000,000 | | | Viropharma, Inc. 2.00% due 3/15/2017 | 1,634,159 | | 1,482,500 |
7,000,000 | | (d) | Vion Pharmaceuticals, Inc. 7.75% due 2-15-2012 | 6,630,859 | | 4,550,000 |
| | | | Total Corporate Convertibles | 106,735,234 | | 92,755,959 |
| | | | | | | | |
| | | | Total Bonds | | 140,572,439 | | 128,470,211 |
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC. |
SCHEDULE OF INVESTMENTS - continued |
December 31, 2007 |
(Unaudited) |
| | | | | | | | |
Warrants (0.04%) | | | | | | |
No. of Shares | | | Issue | | | Cost | | Market Value |
168,000 | | | Edap Inc., expires 10-30-2013 | $ - | | $ 42,000 |
468,000 | | | Vion Pharmaceuticals, Inc., expires 2-20-2010 | - | | 70,200 |
| | | | Total Warrants | - | | 112,200 |
| | | | | | | | |
Money Market (10.18%) | | | | | | | |
No. of Shares | | | Issue | | | | | |
28,793,240 | | (e) | Fidelity Prime Fund Capital Resources, 4.22% | 28,793,240 | | 28,793,240 |
| | | | Total Money Market | 28,793,240 | | 28,793,240 |
| | | | | | | | |
| | | | | | | | |
| | | | Total Investments (99.81%) | $ 294,271,454 | | $ 282,424,105 |
| | | | | | | | |
| | | Cash and other assets less liabilities (0.19%) | | | 549,692 |
| | | | | | | | |
| | | | TOTAL NET ASSETS (100.00%) | | | $ 282,973,797 |
| | | | | | | | |
| | | | | | | | | | |
(a)Non-cash income producing security.
(b) In default.
(c) Private Placement and restricted security under Rule 144A of the Securities Act of 1933. In default.
(d) Private Placement and restricted security under Rule 144A of the Securities Act of 1933.
(e) Variable rate securities; the money market rate shown represents the rate at December 31, 2007.
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC. |
Statement of Assets and Liabilities |
December 31, 2007 |
(Unaudited) |
| | | | | | | | |
| | | | | | | | |
Assets | | | | | | | | |
Investments in securities, at market value (cost $294,271,454) | | | $ 282,424,105 |
Interest receivable | | | | | | | 1,546,736 |
Dividends receivable | | | | | | | 170,293 |
Receivable for Fund shares sold | | | | | | 188,563 |
Receivable for investments sold | | | | | | 699,008 |
Prepaid expenses | | | | | | | 17,292 |
Total Assets | | | | | | | 285,045,997 |
| | | | | | | | |
Liabilities | | | | | | |
Cash overdraft | | | | | | | 10,960 |
Accrued advisory fees | | | | | | | 139,650 |
Other accrued expenses | | | | | | 158,423 |
Payable for Fund shares redeemed | | | | | | 1,760,525 |
Accrued trustee expenses | | | | | | 2,642 |
Total Liabilities | | | | | | | 2,072,200 |
| | | | | | | | |
Net Assets | | | | | | $ 282,973,797 |
| | | | | | | | |
Net Assets consist of: | | | | | | | |
Capital stock (794,520 shares of $1 par value | | | | | |
capital stock issued and outstanding: 2,000,000 | | | | |
shares authorized) | | | | | | | $ 794,520 |
Paid in capital | | | | | | | 290,882,067 |
Accumulated undistributed net investment income | | | | 4,551 |
Accumulated undistributed net realized gain on investments | | | | 3,140,008 |
Net unrealized depreciation on investments | | | | | (11,847,349) |
| | | | | | | | |
Net Assets | | | | | | $ 282,973,797 |
| | | | | | | | |
Shares outstanding (2,000,000 shares authorized) | | | | 794,520 |
| | | | | | | | |
Net asset value, offering and redemption price per share | | | | $ 356.16 |
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC. |
Statement of Operations |
For the six months ended December 31, 2007 |
(Unaudited) |
| | | | | | | | |
Investment Income | | | | | | | |
Interest income | | | | | | | $ 8,036,618 |
Dividend income | | | | | | | 2,513,293 |
Total Income | | | | | | | 10,549,911 |
| | | | | | | | |
Expenses | | | | | | | | |
Investment adviser fee | | | | | | | 953,168 |
Transfer agent expense | | | | | | | 125,815 |
Administration expense | | | | | | | 104,551 |
Fund accounting expense | | | | | | 39,878 |
Custodian expense | | | | | | | 27,221 |
Report printing expense | | | | | | | 24,557 |
Audit expense | | | | | | | 20,902 |
Registration expense | | | | | | | 19,865 |
Postage expense | | | | | | | 8,265 |
Non-income tax expense | | | | | | 3,064 |
Director expense | | | | | | | 1,223 |
Miscellaneous expense | | | | | | | 920 |
Insurance expense | | | | | | | 679 |
Legal expense | | | | | | | 528 |
Total Expenses | | | | | | | 1,330,636 |
Net Investment Income | | | | | | | 9,219,275 |
| | | | | | | | |
| | | | | | | | |
Realized & Unrealized Gain (Loss) | | | | | | |
Net realized gain on investment securities | | | | | 3,387,829 |
Change in unrealized appreciation (depreciation) | | | | |
on investment securities | | | | | | (46,115,751) |
Net realized and unrealized gain (loss) on investment securities | | | (42,727,922) |
Net increase (decrease) in net assets resulting from operations | | | $ (33,508,647) |
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC. |
Statements of Changes in Net Assets |
| | | | | | | | |
| | | | | | For the six | | |
| | | | | | months ended | | |
| | | | | | December 31, 2007 | | Fiscal Year ended |
| | | | | | (Unaudited) | | June 30, 2007 |
Operations | | | | | | | |
Net investment income | | | | | $ 9,219,275 | | $ 11,606,308 |
Net realized gain on investment securities | | | 3,387,829 | | 4,620,812 |
Change in unrealized appreciation (depreciation) on investment securities | (46,115,751) | | 13,846,431 |
Net increase (decrease) in net assets resulting from operations | | (33,508,647) | | 30,073,551 |
| | | | | | | | |
Distributions | | | | | | | |
From net investment income | | | | (16,226,178) | | (7,419,641) |
From net realized gain | | | | | (4,414,700) | | (9,462,178) |
Total distributions | | | | | (20,640,878) | | (16,881,819) |
| | | | | | | | |
Capital Share Transactions | | | | | | |
Proceeds from shares sold | | | | 19,284,203 | | 170,848,346 |
Reinvestment of distributions | | | | 19,628,826 | | 15,996,527 |
Amount paid for shares repurchased | | | | (82,669,738) | | (44,745,119) |
Net increase (decrease) in net assets resulting | | | | | |
from capital share transactions | | | | (43,756,709) | | 142,099,754 |
| | | | | | | | |
Total Increase (Decrease) in Net Assets | | | (97,906,234) | | 155,291,486 |
| | | | | | | | |
Net Assets | | | | | | | |
Beginning of period | | | | | 380,880,031 | | 225,588,545 |
| | | | | | | | |
End of period | | | | | $ 282,973,797 | | $ 380,880,031 |
| | | | | | | | |
Accumulated undistributed net investment income | | | | | |
included in net assets at end of year | | | $ 4,551 | | $ 7,011,454 |
| | | | | | | | |
Capital Share Transactions | | | | | | |
Shares sold | | | | | 47,434 | | 414,394 |
Shares issued in reinvestment of distributions | | | 55,958 | | 39,452 |
Shares repurchased | | | | | (206,876) | | (107,602) |
| | | | | | | | |
Net increase (decrease) from capital share transactions | | (103,484) | | 346,244 |
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC. |
Financial Highlights |
Selected data for each share of capital stock outstanding through each year is presented below |
| | | | | | | | | | | | | | | |
| | | | Six months ended | | | | | | | | | | | |
| | | | December 31, 2007 | | | | Fiscal years ended June 30, | | | |
| | | | (Unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| | | | | | | | | | | | | | | |
Selected Per Share Data | | | | | | | | | | | | | |
Net asset value, beginning of year | $ 424.14 | | $ 408.85 | | $ 350.35 | | $ 283.34 | | $ 184.27 | | $ 145.67 | |
| | | | | | | | | | | | | | | |
Income from investment operations: | | | | | | | | | | | | | |
Net investment income | | 13.64 | | 12.86 | | 8.14 | | 5.67 | 1 | 4.41 | 1 | 6.19 | 1 |
Net realized and unrealized gain (loss) | (54.34) | | 25.57 | | 60.55 | | 73.01 | | 107.66 | | 50.11 | |
Total from investment operations | | (40.70) | | 38.43 | | 68.69 | | 78.68 | | 112.07 | | 56.30 | |
| | | | | | | | | | | | | | | |
Less Distributions to Shareholders: | | | | | | | | | | | | | |
From net investment income | | (21.45) | | (10.17) | | (5.41) | | (5.19) | | (5.35) | | (5.30) | |
From net realized gain | | | (5.83) | | (12.97) | | (4.78) | | (6.48) | | (7.65) | | (12.40) | |
Total distributions | | | (27.28) | | (23.14) | | (10.19) | | (11.67) | | (13.00) | | (17.70) | |
| | | | | | | | | | | | | | | |
Net asset value, end of year | | $ 356.16 | | $ 424.14 | | $ 408.85 | | $ 350.35 | | $ 283.34 | | $ 184.27 | |
| | | | | | | | | | | | | | | |
Total Return4 | | | -9.50% | 5 | 9.66% | | 19.98% | | 27.80% | | 62.52% | | 41.99% | |
| | | | | | | | | | | | | | | |
Ratios and Supplemental Data | | | | | | | | | | | | | |
Net assets, end of year ($ millions) | $ 282.97 | | $ 380.88 | | $ 225.59 | | $ 81.54 | | $ 14.88 | | $ 5.34 | |
Ratio of expenses to average net assets2 | 0.77% | 6 | 0.78% | | 0.94% | | 1.03% | | 1.17% | | 1.41% | |
Ratio of net investment income to | | | | | | | | | | | | | |
average net assets3 | | | 5.35% | 6 | 3.72% | | 2.89% | | 1.73% | | 1.81% | | 4.11% | |
Portfolio turnover rate | | | 15.45% | | 14.69% | | 29.02% | | 10.05% | | 22.01% | | 30.72% | |
1 Figures are based on average daily shares outstanding during the year.
2 Ratio of expenses to average net assets before reimbursement for 2004 and 2003 was 1.27% and
1.62%, respectively. There were no expense reimbursements in 2005, 2006 and 2007. |
3 Ratio of net investment income to average net assets before reimbursement for 2004 and 2003 was 1.70% and
3.90%, respectively. There were no expense reimbursements in 2005, 2006 and 2007. |
4 Total return in the above table represents the rate that the investor would have earned
or lost on an investment in the Fund, assuming reinvestment of dividends. |
5 Not Annualized.
6 Annualized.
*See accompanying notes which are an integral part of these financial statements.
BRUCE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2007 (Unaudited)
NOTE A - ORGANIZATION
Bruce Fund, Inc. (the “Fund”) is a Maryland corporation incorporated on June 20, 1967. The Fund’s only business during the past five years has been as an investment company. The name of the Fund was changed to Bruce Fund, Inc., in October 1983. The Fund is an open end, diversified, management investment company and the Fund’s primary investment objective is long-term capital appreciation. The investment adviser to the Fund is Bruce and Co., Inc. (the “Adviser”).
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Bruce Fund, Inc. have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP") and reporting practices prescribed for the mutual fund industry. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
A description of the significant accounting policies follows: |
1. Equity securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. Securities that are traded on any stock exchange are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange-traded security is generally valued by the pricing service at its last bid price. Securities traded in the NASDAQ over-the-counter market are generally valued by the pricing service at the NASDAQ Official Closing Price or bid. When market quotations are not readily available, when the Adviser determines that the market quotation or the price provided by the pricing service does not accurately reflect the current market value, or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Directors of the Fund.
Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the Adviser decides that a price provided by the pricing service does not accurately reflect the fair market value of the securities, when prices are not readily available from a pricing service or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Directors. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board of Directors has determined will represent fair value.
2. Federal income taxes: The Fund’s policy is to continue to comply with the requirements of the Internal Revenue code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required.
BRUCE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2007 (Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
3. Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded as earned, and discounts on investments are accreted into income using the effective interest method. Realized gains or losses from securities transactions are recorded on the specific identification method for both book and tax purposes.
4. Accounting for uncertainty in income taxes: The Fund adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. The implementation of FIN 48 resulted in no material liability for unrecognized tax benefits and no material change to the beginning net assets of the Fund.
As of and during the period ended December 31, 2007, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expenses in the statement of operations. During the period, the Fund did not incur any interest or penalties.
As of December 31, 2007, the net unrealized appreciation on investments for financial reporting purpose was
as follows:
At December 31, 2007 the aggregate cost of securities for financial reporting purposes was $294,271,454.
NOTE C - PURCHASES AND SALES OF SECURITIES
For the six months ended December 31, 2007, purchases and sales of securities, other than short-term investments and short-term U.S. Government obligations were as follows:
BRUCE FUND, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2007 (Unaudited)
NOTE D - RELATED PARTIES
Bruce and Co., an Illinois corporation, is the investment adviser of the Fund and furnishes investment advice. In addition, it provides office space and facilities and pays the cost of all prospectuses and financial reports (other than those mailed to current shareholders). Compensation to the Adviser for its services under the Investment Advisory Contract is paid monthly based on the following:
Annual Percentage Fee | Applied to Average Net Assets of Fund | |
| 1.00% | Up to $20,000,000; plus |
| 0.60% | $20,000,000 to $100,000,000; plus | |
| 0.50% | over $100,000,000. | |
| | | | | | | |
As of December 31, 2007, Robert B. Bruce was the beneficial owner of 15,121 shares, R. Jeffrey Bruce was the beneficial owner of 2,523 shares and Robert DeBartolo was the beneficial owner of 154 shares. Robert B. Bruce and Robert DeBartolo are directors of the Fund; both Robert B. Bruce and R. Jeffrey Bruce are officers of the Fund and are officers, directors and owners of the Adviser.
NOTE E - DIVIDEND DISTRIBUTION
The tax character of distributions paid during fiscal years 2007 and 2006 was as follows:
During December 2007, the Fund announced a dividend from net investment income of $21.4461 per share, a short-term capital gain distribution of $0.7879, and a long-term capital gain distribution of $5.0470 per share. These distributions were payable December 17, 2007 to shareholders of record on December 14, 2007.
As of June 30, 2007, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
NOTE F - RESTRICTED SECURITIES
The Fund has acquired several securities, the sale of which is restricted, through private placements. At December 31, 2007, the aggregate value of such securities amounted to $15,411,450 or 5.45% of the Fund’s net assets. The securities have been valued using quoted market prices. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material.
Approval of Management Agreement (Unaudited)
The Board approved and renewed the Investment Advisory Agreement at a meeting held on December 6, 2007 using the following as their basis as transcribed from the minutes:
“The independent directors were provided with Investment performance of the Fund and comparison with the performance of the S&P 500 from year-to-date through the life of the Fund annualized. It set forth annual expense reimbursements and advisory fees paid to Bruce and Co., operating expenses of, and commissions paid by the Fund from 2000 through YTD 2007, total returns for YTD, 5 years and 10 years, a Lipper Report on performance over a 10-year period, and a comparison of Bruce Fund with 59 other "moderate allocation funds" for periods ranging from one month to ten years. Each director expressed approval of the performance shown by the Fund. The cost of services and the payments to Bruce and Co. were reviewed and approved. The independent directors expressed their approval of the Fund performance over the life of the Fund and recent years. Advisory fees were deemed to be most reasonable. A vote was taken, in which each independent director each voted in favor of renewal of the Investment Advisory Agreement with Bruce and Co. through December 31, 2008.”
PROXY VOTING
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted those proxies during the most recent twelve month period ended June 30 are available without charge upon request by (1) calling the Fund at (800) 872-7823 and (2) from Fund documents filed with the Securities and Exchange Commission ("SEC") on the SEC's website at www.sec.gov.
BRUCE FUND
OFFICERS AND
DIRECTORS
Robert B. Bruce
President and Treasurer
R. Jeffrey Bruce
Vice President and Secretary
Robert DeBartolo
Director
W. Martin Johnson
Director
Investment Adviser
Bruce and Co., Inc.
Chicago, Illinois
Custodian
Huntington National Bank
Columbus, Ohio
Transfer Agent
Unified Fund Services, Inc.
Indianapolis, Indiana
Counsel
Thomas P. Ward
Lake Forest, Illinois
Independent Registered Public Accounting Firm
Grant Thornton LLP
Chicago, Illinois
This report is intended only for the information of shareholders or those who have received the Fund’s prospectus which contains information about the Fund’s management fees and expenses. Please read the prospectus carefully before investing.
Item 2. Code of Ethics. Not Applicable
Item 3. Audit Committee Financial Expert. Not Applicable
Item 4. Principal Accountant Fees and Services. Not Applicable
Item 5. Audit Committee of Listed Companies. Not Applicable
Item 6. Schedule of Investments. | Not Applicable – schedule filed with Item 1. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not Applicable
Applies to closed-end funds only.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable –
Applies to closed-end funds only.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable – Applies to closed-end funds only.
Item 10. Submission of Matters to a Vote of Security Holders. Not Applicable
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant’s board of directors.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant’s disclosure controls and procedures as of December 6, 2007, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) | Not Applicable – File with Annual Report |
(a)(2) | Certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 and required by Rule 30a-2under the |
(a)(2) | Certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 and required by Rule 30a-2under the |
Investment Company Act of 1940 are filed herewith. |
(a)(3) | Not Applicable – there were no written solicitations to purchase securities under Rule 23c-1 |
during the period
(b) | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith. |
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.
(Registrant) | Bruce Fund, Inc. |
By /s/ Robert B. Bruce
Robert B. Bruce, President |
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.
By | /s/ Robert B. Bruce | |
| Robert B. Bruce, President |
| | | |
R. Jeffery Bruce, Principal Accounting Officer
