Bruce Fund N-CSRS Certified semi-annual shareholder report (management investment company)

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

Bruce Fund, Inc.

(Exact name of registrant as specified in charter)

20 North Wacker Drive, Suite 2414	Chicago, IL 60606
(Address of principal executive offices)	(Zip code)

R. Jeffrey Bruce

Bruce & Co.

20 North Wacker Drive, Suite 2414

Chicago, IL 60606

(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: 12/31/11

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.

2011

BRUCE FUND, INC.

SEMI-ANNUAL

REPORT

Report to Shareholders

December 31, 2011

20 North Wacker Drive  —  Suite 2414  —  Chicago, Illinois 60606  —  (312) 236-9160

Management’s Discussion and Analysis (Unaudited)

The Bruce Fund (the “Fund”) shares produced a total return of -1.90% for the six months ended December 31, 2011, compared to a total return of -3.70% for the S&P 500^® Index for the same period. Stock markets declined in the period and the Fund also declined for the six month period. The Government bonds had a positive effect, advancing sharply in the period but the Fund’s convertible bonds, straight corporate bonds, common and preferred stocks pushed the Fund’s performance in the period to the negative.

We believe that the recovery in the economy is fragile and prone to weaker than expected activity. Likewise, the financial markets continue to entertain high degree of risk and caution is warranted. While longer term inflationary pressures are inevitable, currently we feel asset deflation remains a distinct risk. Thus, the Fund’s investment posture, our Treasury positions and cash, is still warranted.

Management continues to screen investment opportunities for their long-term capital appreciation potential versus the risks that investment might present. Areas of recent interest have been special situations, larger capitalization and dividend paying stocks. The bonds as well as the stocks in the portfolio encompass significant investment risks, which are again outlined in the prospectus.

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.

1

Investment Results (Unaudited)

Returns for the Periods Ended December 31, 2011

	Cumulative				Average Annual
Fund/Index	Six Months		1 Year		5 Year		10 Year
Bruce Fund		-1.90%		7.24%		3.94%		15.98%
S&P 500® Index*		-3.70%		2.11%		-0.25%		2.92%
The gross expense ratio as of the most recent prospectus dated October 28, 2011 was 0.84%, which represented the fiscal year ended June 30, 2011.

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 Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company and may be obtained by calling the same number as above. Please read it carefully before investing.

The chart above assumes an initial investment of $10,000 made on December 31, 2001 and held through December 31, 2011. 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.

The Fund is distributed by Unified Financial Securities, Inc. Member FINRA.

2

Fund Holdings (Unaudited)

¹ As a percent of net assets.

² Ratio rounds to less than 0.005%.

Investment Objective

The investment objective of the Bruce Fund is long-term capital appreciation.

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 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 D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

3

Shareholder Expense Example (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 (July 1, 2011) and held for the entire period (through December 31, 2011).

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 the 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.

	Beginning Account Value		Ending Account Value		Expenses Paid During Period*
	July 1, 2011		December 31, 2011		July 1 - December 31, 2011
Bruce Fund
Actual	$	1,000.00	$	981.00	$	3.93
Hypothetical**	$	1,000.00	$	1,021.17	$	4.01

* Expenses are equal to the Fund’s annualized expense ratio of 0.79%, 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.

4

Schedule of Investments (Unaudited)

December 31, 2011

Shares			Value
	COMMON STOCKS – 40.8%
		Consumer Discretionary 1.3%
	75,000	DIRECTV, Class A(a)	$	3,207,000
	130,000	ICG Group, Inc.(a)		1,003,600
				4,210,600
		Consumer Staples 1.5%
	640,270	Omega Protein Corp.(a)		4,565,125
		Energy 1.3%
	291,255	Admiral Bay Resources, Inc.(a)(b)		21,370
	156,919	Double Eagle Petroleum Co.(a)		1,079,603
	382,168	SandRidge Energy, Inc.(a)		3,118,491
				4,219,464
		Financials 3.1%
	200,000	Allstate Corp./The		5,482,000
	211,502	GAINSCO, Inc.(a)		1,144,226
	45,000	RLI Corp.		3,278,700
				9,904,926
		Health Care 8.2%
	124,500	Abbott Laboratories		7,000,635
	155,677	Agenus, Inc.(a)		311,354
	631,746	Durect Corp.(a)		745,460
	594,886	EDAP TMS S.A. (ADR)(a)		1,005,357
	130,000	Elan Corp., PLC (ADR)(a)		1,786,200
	200,000	Merck & Co., Inc.		7,540,000
	350,000	Pfizer, Inc.		7,574,000
				25,963,006
		Industrials 15.4%
	1,985,000	AirBoss of America Corp.		9,571,670
	205,000	AMERCO(a)		18,122,000
	1,070,073	Astrotech Corp.(a)		629,096
	1,402,692	C&D Technologies, Inc.(a)		13,648,193
	300,000	Titan International, Inc.		5,838,000
	67,987	US Ecology, Inc.		1,276,796
				49,085,755
		Information Technology 1.7%
	30,000	International Business Machines Corp.		5,516,400
		Materials 3.3%
	690,671	Flotek Industries, Inc.(a)		6,879,083
	280,000	Kinross Gold Corp.		3,192,000
	199,270	Solitario Exploration & Royalty Corp.(a)		280,971
				10,352,054

See accompanying notes which are an integral part of these financial statements.

5

Schedule of Investments (Unaudited) (continued)

December 31, 2011

Shares			Value
	COMMON STOCKS – (continued)
		Utilities 5.0%
	296,212	Calpine Corp.(a)	$	4,837,142
	20,000	Integrys Energy Group, Inc.		1,083,600
	100,000	NextEra Energy, Inc.		6,088,000
	50,000	Pepco Holdings, Inc.		1,015,000
	78,300	UniSource Energy Corp.		2,890,836
				15,914,578
		Total Common Stocks (Cost $119,265,720)		129,731,908
	CONVERTIBLE PREFERRED STOCKS – 2.5%
		Energy 2.3%
	101,000	ATP Oil & Gas Corp., 8.000%		3,838,000
	29,200	SandRidge Energy, Inc., 8.500%		3,642,700
				7,480,700
		Utilities 0.2%
	10,000	AES Trust III, 6.750%		493,125
		Total Convertible Preferred Stocks (Cost $11,162,591)		7,973,825
Principal
	CORPORATE BONDS – 12.0%
		Consumer Discretionary 2.7%
$	1,500,000	Land O'Lakes Capital Trust I, 7.450%, 3/15/28(c)		1,443,750
	6,200,000	XM Satellite Radio, Inc., 13.000%, 8/1/13(c)		7,068,000
				8,511,750
		Energy 4.1%
	8,850,000	ATP Oil & Gas Corp., 11.875%, 5/1/15		5,863,125
	2,000,000	Hercules Offshore LLC 10.500%, 10/15/17(c)		1,955,000
	3,000,000	McMoRan Exploration Co., 11.875%, 11/15/14		3,195,000
	2,000,000	Whiting Petroleum Corp., 7.000%, 2/1/14		2,140,000
				13,153,125
		Financials 1.8%
	6,000,000	Security Benefit Life Insurance Co., 7.450%, 10/1/33(c)		5,617,578
		Utilities 3.4%
	4,000,000	Constellation Energy Group, Inc., 7.600%, 4/1/32		5,169,316
	5,000,000	Mirant Americas Genr., Inc., 9.125%, 5/1/31		4,550,000
	1,000,000	ONEOK, Inc., 6.000%, 6/15/35		1,073,798
				10,793,114
		Total Corporate Bonds (Cost $31,035,976)		38,075,567

See accompanying notes which are an integral part of these financial statements.

6

Schedule of Investments (Unaudited) (continued)

December 31, 2011

Principal Amount			Value
	CONVERTIBLE CORPORATE BONDS – 10.6%
		Consumer Discretionary 1.0%
$	2,700,000	Midway Games, Inc., 6.000%, 9/30/25(a)(b)(d)(e)	$	67,500
	2,500,000	XM Satellite Radio, Inc., 7.000%, 12/1/14(c)		3,243,750
				3,311,250
		Energy 1.3%
	3,000,000	BPZ Resources, Inc., 6.500%, 3/1/15		2,486,250
	2,000,000	Endeavour International Corp., 5.500%, 7/15/16(c)		1,667,500
				4,153,750
		Health Care 6.9%
	1,705,000	Cell Genesys, Inc., 3.125%, 5/1/13(b)(d)		1,364,000
	14,887,000	deCODE Genetics, Inc., 3.500%, 4/15/11(a)(d)(e)		93,044
	2,000,000	EDAP TMS SA, 9.000%, 10/30/12(b)(d)(f)		1,800,000
	500,000	InterMune, Inc., 5.000%, 3/1/15		504,375
	3,000,000	Isis Pharmaceuticals, Inc., 2.625%, 2/15/27(c)		2,692,500
	4,060,000	Isis Pharmaceuticals, Inc., 2.625%, 2/15/27		3,643,850
	11,675,000	MannKind Corp., 3.750%, 12/15/13		6,143,969
	4,000,000	MannKind Corp., 5.750%, 8/15/15(c)		2,450,000
	1,762,892	Oscient Pharmaceuticals Corp., 12.500%, 1/15/11(a)(b)(d)(e)		88,144
	2,000,000	ViroPharma, Inc., 2.000%, 3/15/17		3,175,000
				21,954,882
		Industrials 0.7%
	1,000,000	Titan International, Inc., 5.625%, 1/15/17(c)		2,175,000
		Utilities 0.7%
	2,000,000	UniSource Energy Corp., 4.500%, 3/1/35		2,162,500
		Total Convertible Corporate Bonds (Cost $49,412,840)		33,757,382
		U.S. Government Bonds 16.3%
	30,000,000	U.S. Treasury "Strips", 0.000%, 8/15/28		19,280,280
	30,000,000	U.S. Treasury "Strips", 0.000%, 8/15/29		18,642,420
	20,000,000	U.S. Treasury "Strips", 0.000%, 2/15/36		9,896,080
	10,000,000	U.S. Treasury "Strips", 0.000%, 2/15/41		4,138,300
		Total U.S. Government Bonds (Cost $35,182,998)		51,957,080
		U.S. Municipal Bonds 0.0%
	994,188	Indianapolis Airport Authority, 6.500%, 11/15/31(a)(d)(e)		13,918
		Total U.S. Municipal Bonds (Cost $165,996)		13,918
Shares
	WARRANTS – 0.0%
	168,000	EDAP TMS S.A., expires 10/30/2013(a)(b)(d)		126,000
		Total Warrants (Cost $0)		126,000

See accompanying notes which are an integral part of these financial statements.

7

Schedule of Investments (Unaudited) (continued)

December 31, 2011

Shares			Value
	MONEY MARKET – 17.2%
	54,896,934	Fidelity Institutional Money Market Treasury Only - Class I, 0.010%(g)	$	54,896,934
		Total Mutual Funds (Cost $54,896,934)		54,896,934
		Total Investments (Cost $301,123,055) 99.4%	$	316,532,614
		Other Assets in Excess of Liabilities 0.6%		1,803,847
		NET ASSETS 100.0%	$	318,336,461

(a) Non-cash income producing security.

(b) This security is currently valued according to the fair value procedures approved by the Board of Directors.

(c) Private Placement and restricted security under Rule 144A of the Securities Act of 1933.

(d) Illiquid Security.

(e) In default.

(f) Private placement restricted security.

(g) Rate disclosed is the seven day yield as of December 31, 2011.

ADR – American Depositary Receipt.

PLC – Public Liability Company.

See accompanying notes which are an integral part of these financial statements.

8

Statement of Assets and Liabilities (Unaudited)

December 31, 2011

Assets:
Investments in securities, at market value (cost $301,123,055)	$	316,532,614
Dividends receivable		599,792
Interest receivable		1,379,841
Receivable for Fund shares sold		226,781
Prepaid expenses and other assets		15,596
Total Assets		318,754,624
Liabilities:
Payable for Fund shares redeemed		210,670
Accrued advisory fees		147,923
Accrued transfer agent fees		27,465
Other accrued expenses		32,105
Total Liabilities		418,163
Net Assets	$	318,336,461
Net Assets consist of:
Capital stock (838,428 shares of $1 par value capital stock issued and outstanding)	$	838,428
Paid in capital		314,779,676
Accumulated undistributed net investment income		1,279,052
Accumulated net realized loss on investments		(13,970,254	)
Net unrealized appreciation on investments		15,409,559
Net Assets	$	318,336,461
Shares Outstanding: 2,000,000 shares authorized		838,428
Net asset value, offering and redemption price per share	$	379.68

9

See accompanying notes which are an integral part of these financial statements.

Statement of Operations (Unaudited)

For the six months ended December 31, 2011

Investment Income
Interest income	$	5,501,927
Dividend income (Net foreign withholding taxes of $25,178)		2,336,113
Total Investment Income		7,838,040
Expenses:
Investment advisor fee		855,334
Transfer agent expense		120,989
Administration expense		98,677
Fund accounting expense		37,920
Report printing expense		26,330
Custodian expense		22,280
Audit expense		17,406
Registration expense		16,699
Postage expense		11,130
Trustee expense		814
Insurance expense		626
Total Expenses		1,208,205
Net Investment Income		6,629,835
Realized & Unrealized Loss
Net realized loss on investment securities		(1,375,992	)
Change in unrealized depreciation on investment securities		(10,672,753	)
Net realized and unrealized loss on investment securities		(12,048,745	)
Net decrease in net assets resulting from operations	$	(5,418,910	)

10

See accompanying notes which are an integral part of these financial statements.

Statements of Changes in Net Assets

	For the Six Months Ended December 31, 2011 (Unaudited)			Year Ended June 30, 2011
Operations
Net investment income	$	6,629,835		$	10,572,166
Net realized gain (loss) on investment securities		(1,375,992	)		16,705,732
Change in unrealized appreciation (depreciation) on investment securities		(10,672,753	)		32,798,065
Net increase (decrease) in net assets resulting from operations		(5,418,910	)		60,075,963
Distributions
From net investment income		(11,722,087	)		(10,716,379	)
Total distributions		(11,722,087	)		(10,716,379	)
Capital Transactions
Proceeds from shares sold		35,696,335			40,315,589
Reinvestments of distributions		10,898,153			9,935,907
Amount paid for shares redeemed		(10,803,765	)		(20,491,411	)
Net increase in net assets resulting from capital transactions		35,790,723			29,760,085
Total Increase in Net assets		18,649,726			79,119,669
Net Assets
Beginning of period		299,686,735			220,567,066
End of period	$	318,336,461		$	299,686,735
Accumulated undistributed net investment income included in net assets at end of period	$	1,279,052		$	6,371,304
Share Transactions
Shares sold		92,023			106,973
Shares issued in reinvestment of distributions		29,126			27,390
Shares redeemed		(28,159	)		(55,644	)
Net increases in shares outstanding resulting from share transactions		92,990			78,719

11

See accompanying notes which are an integral part of these financial statements.

Financial Highlights

Selected data for each share of capital stock outstanding through each period is presented below

	Six Months Ended December 31, 2011 (Unaudited)			Fiscal Year Ended June 30,
				2011			2010			2009			2008			2007
Selected Per Share Data
Net asset value, beginning of period		$402.03			$330.82			$285.69			$342.22			$424.14			$408.85
Income from investment operations:
Net investment income		7.49			14.62			14.28			14.44			18.48			12.86
Net realized and unrealized gain (loss)		(15.33	)		72.43			43.18			(55.37	)		(73.12	)		25.57
Total from investment operations		(7.84	)		87.05			57.46			(40.93	)		(54.64	)		38.43
Less Distributions to Shareholders:
From net investment income		(14.51	)		(15.84	)		(12.33	)		(11.52	)		(21.45	)		(10.17	)
From net realized gain		–			–			–			(4.08	)		(5.83	)		(12.97	)
Total distributions		(14.51	)		(15.84	)		(12.33	)		(15.60	)	��	(27.28	)		(23.14	)
Net asset value, end of period		$379.68			$402.03			$330.82			$285.69			$342.22			$424.14
Total Return 1		-1.90	%2		26.83	%		20.44	%		-11.20	%		-13.04	%		9.66	%
Ratios and Supplemental Data
Net assets, end of period ($ millions)		$318.34			$299.69			$220.57			$185.71			$234.12			$380.88
Ratio of expenses to average net assets		0.79	%3		0.82	%		0.88	%		0.93	%		0.82	%		0.78	%
Ratio of net investment income to average net assets		4.32	%3		4.07	%		4.48	%		5.29	%		4.22	%		3.72	%
Portfolio turnover rate		4.61	%2		20.64	%		11.41	%		15.61	%		20.80	%		14.69	%

¹ 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.

²  Not annualized.

³  Annualized.

12

See accompanying notes which are an integral part of these financial statements.

Notes to Financial Statements (Unaudited)

December 31, 2011

NOTE A – ORGANIZATION

Bruce Fund, Inc. (the “Fund”) is a Maryland corporation incorporated on June 20, 1967. 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 following is a summary of significant accounting policies followed by the Fund in preparation of their financial statements. These policies are in conformity with the generally accepted accounting principles in the United States of America (“GAAP”).

Estimates – The preparation of financial statements in conformity with 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.

Securities Valuation – All investments in securities are recorded at their estimated fair value as described in Note C.

Federal Income Taxes – The Fund makes no provision for federal income or excise tax. The Fund intends to qualify each year as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended, by complying with the requirements applicable to RICs and by distributing substantially all of its taxable income. The Fund also intends to distribute sufficient net investment income and net capital gains, if any, so that it will not be subject to excise tax on undistributed income and gains. If the required amount of net investment income or gains is not distributed, the Fund could incur a tax expense.

As of and during the period ended December 31, 2011, 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 expense in the statement of operations. During the period, the Fund did not incur any interest or penalties. The Fund is subject to examination by U.S. federal tax authorities for tax year 2007 through 2010.

Security Transactions and Related Income – Investment transactions are accounted for no later than the first calculation of the Net Asset Value (“NAV”) on the business day following the trade date. For financial reporting purposes, however, security transactions are accounted for on the trade date on the last business day of the reporting period. The specific identification method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized or accreted using the effective interest method. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic and political development in specific country or region.

Dividends and Distributions – Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The Fund intends to

13

Notes to Financial Statements (Unaudited) (continued)

December 31, 2011

distribute substantially all of its net investment income as dividends to its shareholders on at least an annual basis. The Fund intends to distribute its net realized long-term capital gains and its net realized short-term capital gains at least once a year. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income tax purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expenses or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset values per share of the Fund.

New Accounting Pronouncements – In May 2011, the FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU 2011-04 will require reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-04 and its impact on the financial statements has not been determined.

Subsequent Events – In accordance with GAAP, management has evaluated subsequent events through the date these financial statements were issued and determined there were no material subsequent events, except as otherwise noted in these notes.

NOTE C – SUMMARY OF SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS

In accordance with Accounting Standards Codification 820, “Fair Value Measurements and Disclosures” (“ASC 820”), fair value is defined as the price that the trust would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. ASC 820 established a three-tier hierarchy to maximize the use of the observable market data and minimize the use of unobservable inputs and to establish classification of the fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk (the risk inherent in a particular valuation technique used to measure fair value such as pricing model and/or the risk inherent in the inputs to the valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances.

14

Notes to Financial Statements (Unaudited) (continued)

December 31, 2011

The three-tier hierarchy of inputs is summarized in the three broad levels listed below:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including, but not limited to, quoted prices for an identical security in an inactive market, quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining fair value of investments based on the best information available)

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Equity securities, including common stocks, American Depositary Receipts (ADR’s), and warrants, are generally 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 more accurately reflect the fair 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. When using the market quotations or close prices provided by the pricing service and when the market is considered active, the security will be classified as a Level 1 security. Sometimes, an equity security owned by the Fund will be valued by the pricing service with factors other than market quotations or when the market is considered inactive. When this happens, the security will be classified as a Level 2 security. 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 fair value, or when restricted or illiquid 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 by the Board. These securities will be categorized as Level 3 securities.

Investments in mutual funds, including money market mutual funds, are generally priced at the ending NAV provided by the service agent of the funds. These securities will be categorized as Level 1 securities.

Fixed income securities, including convertible preferred stocks, corporate bonds, corporate convertible bonds, U.S. Treasury obligations, and U.S. municipal bonds are valued using market quotations in an active market, will be categorized as Level 1 securities. However, they may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices more accurately reflect the fair 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. These securities will generally be categorized as Level 2 securities. If the Adviser decides that a price provided by the pricing service does not accurately reflect the fair value of the securities, when prices are not readily

15

Notes to Financial Statements (Unaudited) (continued)

December 31, 2011

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. These securities will be categorized as Level 3 securities. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic and political developments in a specific country or region.

Short-term investments in fixed income securities, (those 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 has determined will represent fair value. These securities will be classified as Level 2 securities.

The following is a summary of the inputs used to value the Fund’s assets as of December 31, 2011:

	Valuation Inputs
Assets	Level 1 - Quoted Prices in Active Markets		Level 2 - Other Significant Observable Inputs		Level 3 - Significant Unobservable Inputs		Total
Common Stocks*	$	129,710,538	$	–	$	21,370	$	129,731,908
Convertible Preferred Stocks		–		7,973,825		–		7,973,825
Corporate Bonds		–		38,075,567		–		38,075,567
Corporate Convertible Bonds		–		30,437,738		3,319,644		33,757,382
U.S. Government Bonds		–		51,957,080		–		51,957,080
U.S. Municipal Bonds		–		13,918		–		13,918
Warrants		–		–		126,000		126,000
Money Market		54,896,934		–		–		54,896,934
Total	$	184,607,472	$	128,458,128	$	3,467,014	$	316,532,614

* Refer to the Schedule of Investments for industry classifications.

The Fund did not hold any securities during the reporting period which transferred between Level 1 and 2.

In the absence of a listed price quote, or a supplied price quote which is deemed to be unrepresentative of the actual market price, the Adviser shall use any or all of the following criteria to value Level 3 securities:

• Last sales price

• Price given by pricing service

• Last quoted bid & asked price

• Third party bid & asked price

• Indicated opening range

16

Notes to Financial Statements (Unaudited) (continued)

December 31, 2011

	Balance as of June 30, 2011		Realized gain (loss)		Amortization/ Accretion		Change in unrealized appreciation		Purchases		Sales			Transfer in of Level 3*(a)		Transfer out of Level  3*(b)			Balance as of December 31, 2011
Common Stock	$	–	$	–	$	–	$	–	$	–	$	–		$	21,370	$	–		$	21,370
Convertible Corporate     Bonds		7,635,645		–		192,391		311,350		1,686,870		(6,250,000	)		1,410,888		(1,667,500	)		3,319,644
Warrants		126,000		–		–		–		–		–			–		–			126,000
Rights		20,000		–		–		–		–		–			–		(20,000	)		–
Total	$	7,781,645	$	–	$	–	$	311,350	$	1,686,870	$	(6,250,000	)	$	1,410,888	$	(1,687,500	)	$	3,467,014

* The amount of transfers in and/or out are reflected at the reporting period end.

^(a) Transfers in relate primary to securities for which observable inputs became unavailable during the period. Therefore, the securities were valued at fair value by the Adviser, in conformity with guidelines adopted by and subject to review by the Board, and are categorized as Level 3 inputs as of December 31, 2011.

^(b) Transfer out relate primary to securities for which observable inputs became available during the period, and as of December 31, 2011, the Fund was able to obtain quotes from its pricing service. These quotes represent Level 2 inputs, which is the level of the fair value hierarchy in which these securities are included as of December 31, 2011.

The total change in unrealized depreciation included in the Statement of Changes in Net Assets attributable to Level 3 investments still held at December 31, 2011 was $(105,839).

	Total Change in Unrealized Depreciation
Common Stock	$	(25,339	)
Convertible Corporate Bonds		(80,500	)
Total	$	(105,839	)

NOTE D – PURCHASES AND SALES OF SECURITIES

For the period ended December 31, 2011, purchases and sales of securities, other than short-term investments and short-term U.S. Government obligations were as follows:

	Purchases		Sales
U.S. Government Obligations	$	–	$	–
Other		36,201,696		11,925,135

NOTE E – 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.

At December 31, 2011, Robert B. Bruce was the beneficial owner of 16,354 Fund shares, R. Jeffrey Bruce was the beneficial owner of 5,471 Fund shares, Robert DeBartolo was the beneficial owner of

17

Notes to Financial Statements (Unaudited) (continued)

December 31, 2011

240 Fund shares, and W. Martin Johnson was the beneficial owner of 4 Fund shares. Robert B. Bruce, Robert DeBartolo, and W. Martin Johnson 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 F – DISTRIBUTION TO SHAREHOLDERS

On December 21, 2011, the Fund paid a dividend from net investment income of $14.508 per share or $11,722,087 for shareholders of record on December 20, 2011.

NOTE G – FEDERAL INCOME TAXES

At December 31, 2011, the breakdown of net unrealized appreciation and tax cost of investments for federal income tax purpose is as follows:

Gross Unrealized Appreciation	$	58,342,673
Gross Unrealized (Depreciation)		(43,105,101	)
Net Appreciation on Investments*	$	15,237,572
Tax Cost	$	301,295,072

* At December 31, 2011, the difference between book basis and tax basis unrealized appreciation (depreciation) is attributable to the deferral of post-October losses in the amount of $171,987.

At June 30, 2011, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

Undistributed Ordinary Income	$	6,371,304
Capital Loses Carryforward		(12,422,275	)
Unrealized Appreciation*		25,910,325
Total Accumulated Earnings	$	19,859,354

* At June 30, 2011, the difference between book basis and tax basis unrealized appreciation (depreciation) is attributable to the deferral of post-October losses in the amount of $171,987.

At June 30, 2011, the Fund has available for federal tax purposes an unused capital loss carryforward of $12,422,275, which is available for offset against future taxable net capital gains. This loss carryforward expires on June 30, 2017 through June 30, 2019 as shown in the table below. To the extent these carryforwards are used to offset future capital gains, it is probable that the amount, which is offset will not be distributed to shareholders.

Amount	Expires June 30,
$(1,832,182)		2017
(8,005,795)		2018
(2,584,298)		2019

The tax character of distributions paid during fiscal years 2011 and 2010 was as follows:

	2011		2010
Distributions paid from:
Ordinary Income	$	10,716,379	$	7,993,838
Short-Term Capital Gain		–		–
Long-Term Capital Gain		–		–
	$	10,716,379	$	7,993,838

18

Notes to Financial Statements (Unaudited) (concluded)

December 31, 2011

NOTE H – RESTRICTED SECURITIES

The Fund has acquired several securities, the sale of which is restricted, through private placement. At December 31, 2011, the aggregate market value of such securities listed below amounted to $33,951,078 or 11% of the Fund’s net assets. 94% of the restricted securities are valued using quoted market prices, while the other 6% are valued according to fair value procedures approved by the Board of Directors. 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.

The chart below shows the restricted securities held by the Fund as of December 31, 2011.

Issuer Description	Acquisition Date	Share Amount/Principal Amount		Cost		Value
Convertible Preferred Stock
ATP Oil & Gas Corp., 8.00%	(a)	$	101,000	$	8,105,280	$	3,838,000
Corporate Bonds
Land O' Lakes Capital Trust I, 7.450%, 3/15/2028	1/23/09		1,500,000		985,367		1,443,750
XM Satellite Radio, Inc., 13.000%, 8/1/2013	(b)		6,200,000		3,802,102		7,068,000
Hercules Offshore LLC 10.50%, 10/15/2017	10/29/10		2,000,000		1,627,501		1,955,000
Security Benefit Life Insurance Co., 7.450%, 10/1/33	(c)		6,000,000		5,464,994		5,617,578
Corporate Convertible Bonds
XM Satellite Radio, Inc., 7.00%, 12/1/2014	(d)		2,500,000		2,818,589		3,243,750
Endeavor International Corp., 5.500%, 7/15/16	(e)		2,000,000		1,703,682		1,667,500
EDAP TMS S.A., 9.00%, 10/30/12	10/30/07		2,000,000		2,000,000		1,800,000
Isis Pharmaceuticals, Inc., 2.625%, 2/15/2027	(f)		3,000,000		2,791,261		2,692,500
MannKind Corp., 5.750%, 8/15/2015	(g)		4,000,000		4,117,036		2,450,000
Titan International, Inc., 5.625%, 1/15/2017	2/5/10		1,000,000		992,076		2,175,000

(a) Purchased on various dates beginning on 11/24/09.

(b) Purchased on various dates beginning on 1/28/09.

(c) Purchased on various dates beginning on 4/21/11.

(d) Purchased on various dates beginning on 10/22/10.

(e) Purchased on various dates beginning on 8/18/11.

(f) Purchased on various dates beginning on 2/28/07.

(g) Purchased on various dates beginning on 10/20/10.

19

Approval of Management Agreement (Unaudited)

The Board approved and renewed the Investment Advisory Agreement at a meeting held on February 10, 2012 using the following as their basis as transcribed from the minutes:

“Management summarized the services provided by Bruce & Co. to the Fund, including the management of commissions paid. Each outside director agreed the services so provided to have been superior. While the S&P 500 index was up 7.5%, the directors unanimously agreed the performance of the Fund was most satisfactory; the Fund’s 3-year and 10-year performance was near the top. Fund expenses have declined as the Fund has grown, and continues to decline as a percentage.

An independent director moved to approve and extend the existing Management Advisory Contract. The motion was duly seconded and unanimously approved by the independent directors.”

20

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

Administrator, Transfer Agent and Fund Accountant

Huntington Asset Services, Inc.

Indianapolis, Indiana

Distributor

Unified Financial Securities, 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.

21

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.

(a) Not Applicable.

(b) Not Applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. 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) The registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-2 under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing of this report on Form N-CSR.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are 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 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

Date 2/28/12

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

Date 2/28/12

By	/s/ R. Jeffrey Bruce
	R. Jeffrey Bruce, Principal Accounting Officer

Date 2/28/12