June 30, 2004
Management Discussion and Analysis
The Bruce Fund shares produced a total return of 62.52% for the year
ended June 30, 2004, compared to a total return of 19.11% for the S&P 500
Index for the same period. Both stock and bond holdings performed well in
the period.
Fund management concentrates its efforts at finding what it sees as
the best opportunities for capital appreciation. Recent areas of interest have
been small-cap or micro-cap equities, equally divided between value, growth
and turnaround plays. Other areas of interest continue to be restructuring
companies, and high yielding debt securities. We have attempted to find
securities, whether they are stocks or bonds, which offer a potential for
capital appreciation, in our opinion. We look for situations where ideally we
can hold the securities for a long period of time.
As stated in the Prospectus, the Fund's objective is long-term capital
appreciation from stocks and/or bonds. Shareholders are invited to use the
toll-free number (800) 347-8607 to obtain any Fund information (including
the proxy voting record), or can visit www.thebrucefund.com, to obtain the
same.
Actual Fund expenses for a $1,000 investment for the year period
would have been $19.01. Assuming a 5% total return for the period, the
expenses for a $1,000 investment would have been $12.28.
Chart
Bruce Fund S&P 500
Year 1 $12,578 $12607
2 15195 15884
3 16126 21396
4 20927 27850
5 18111 34188
6 18371 36667
7 24298 31229
8 26305 25611
9 37351 25678
10 60703 30585
Bruce Fund Average Annual Total Return
One Year Five Years Ten Years
Untaxed 62.52% 27.37% 19.76%
Maximum Tax Rate 60.48% 24.49% 17.55%
MTR & Liquidated 46.54% 22.55% 16.46%
After-tax returns are calculated using the historical highest
individual federal marginal income tax rates, and do not
reflect the impact of state and local taxes; and actual
after-tax returns depend on the investor's tax situation
and are not relevant in tax deferred accounts. Past
performance is not predictive of future results.
BRUCE FUND, INC.
BALANCE SHEET
JUNE 30, 2004
ASSETS
Investments, at Market Value
(Cost $8,827,673) $13,292,115
Cash 1,681,478
Dividends Receivable 650
Interest Receivable 62,604
Prepaid Insurance 493
TOTAL ASSETS $15,037,340
LIABILITIES
SecuritiesPayable $ 105,250
Accrued Expenses 43,294
TOTAL LIABILITIES 148,544
CAPITAL
Capital Stock (52,548 Shares of $1 Par Value
Capital Stock Issued and Outstanding; 200,000
Shares Authorized) 52,548
Paid-in Surplus 9,515,454
Accumulated Undistributed Net
Investment Income 296,932
Accumulated Net Realized Gains on
Investments 559,420
Net Unrealized Appreciation on
Investments 4,464,442
TOTAL CAPITAL (NET ASSETS) $14,888,796
TOTAL LIABILITIES AND CAPITAL $15,037,340
NET ASSET VALUE (Capital) Per Share $ 283.34
The accompanying notes are an integral part
of this statement.
BRUCE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2004
INVESTMENT INCOME
Dividends $ 36,348
Interest 222,948
$ 259,296
EXPENSES
Management Fees $ 85,923
Custodian/Security Transaction 2,262
Directors 200
Transfer Agent Fees 10,000
Audit and Accounting Fees 10,220
Insurance 1,004
Printing 156
Total Expenses Before Expense Reimbursement 109,765
Expense Reimbursement (8,868)
Net Expenses 100,897
NET INVESTMENT INCOME 158,399
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net Realized Gains on Investments 632,624
Net Change in Unrealized Appreciation
on Investments 2,994,863
NET GAIN ON INVESTMENTS 3,627,487
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 3,785,886
The accompanying notes are an integral part
of this statement.
BRUCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements of Bruce Fund, Inc. (the "Fund") 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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
A description of the significant accounting policies follows:
1. Portfolio valuation: Market value of investments
is based on thelast sales price reported on each valuation
date. If there were no reported sales on that day, the
investments are valued using the mean of the closing bid
and asked quotations obtained from published sources.
NASDAQ and unlisted securities for which quotations are
available are valued at the closing bid price.
2. 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. At June 30, 2004, the cost of
investments held was $8,827,673 for both financial
reporting and federal income tax purposes. At June
30, 2004, gross unrealized appreciation on investments
was $4,776,337 and gross unrealized depreciation on
investments was $(311,895) for both financial reporting
and federal income tax purposes.
3. In preparing financial statements in conformity
with accounting principles generally accepted in the United
States of America, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the
reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - CAPITAL STOCK:
During the years ended June 30, 2004 and June 30, 2003,
there were 458 and 1,545 shares redeemed; 22,207 and
2,053 shares issued and 1,798 and 3,071shares issued
through dividend reinvestment, respectively.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the year ended June 30, 2004, purchases and sales
of securities with original maturities of greater than one year
were $6,074,847 and $1,801,498 respectively.
NOTE D - RELATED PARTIES
Bruce and Company, an Illinois corporation, is the investment
advisor 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). During 2004 the investment adviser
also voluntarily absorbed certain transfer agent expenses of the
Fund that the investment adviser felt exceeded the amount that
would have been charged to the Fund, based on its size.
These expenses approximated $8,868 in 2004.
Compensation to Bruce and Company 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
1.0% Up to $20,000,000;
plus 0.6% $20,000,000 to $100,000,000; plus
0.5% over $100,000,000.
As of June 30, 2004, Robert B. Bruce owned 12,525 shares
and R. Jeffrey Bruce owned 1,794 shares. Robert B. Bruce
is a director of the Fund; both Robert B. Bruce and R. Jeffrey
Bruce are officers of the Fund and are officers, directors
and owners of the investment advisor, Bruce and Company.
NOTE E - TAXES:
The Fund has made distributions to its shareholders so as
to be relieved of all Federal income tax under provisions of
current tax regulations applied to regulated investment
companies, and personal holding companies.
NOTE F - DIVIDEND DISTRIBUTION:
During December 2003, the Fund announced a dividend
from net investment income of $5.35 per share, aggregating
$170,748 and a long-term capital gain distribution of $7.65
per share aggregating $244,153. These distributions were
payable December 31, 2003 to shareholders of record on
December30,2003.
BRUCE FUND, INC.
REPORT TO SHAREHOLDERS
_______________________
Fiscal Year Ended
June 30, 2004
BRUCE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
OPERATIONS
Net Investment Income $ 158,399 $ 167,338
Net Realized Gains on Investments 632,624 344,104
Net Change in Unrealized Appreciation
on Investments 2,994,863 1,076,501
Net Increase in Net Assets
Resulting from Operations 3,785,886 1,587,943
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net Investment Income (170,748) (134,178)
Distributions from Net Capital Gains (244,153) (313,925)
Decrease in Net Assets Resulting from
Distributions to Shareholders (414,901) (448,103)
CAPITAL STOCK TRANSACTIONS
Proceeds from Shares Issued 5,883,514 316,408
Increase from Shares Issued in Reinvested
Distributions 410,090 443,898
Cost of Shares Redeemed (119,655) (259,373)
Increase in Net Assets Resulting from
Capital Stock Transactions 6,173,949 500,933
TOTAL INCREASE 9,544,934 1,640,773
NET ASSETS
Beginning of Year 5,343,862 3,703,089
End of Year (including accumulated undistributed
net investment income of $296,932 and $263,772,
respectively) $14,888,796 $5,343,862
The accompanying notes are an integral part
of these statements.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Shareholders and Board of
Directors of Bruce Fund, Inc.:
We have audited the accompanying balance sheet of Bruce
Fund, Inc. (a Maryland corporation), including the schedule
of investments, as of June 30, 2004, and the related statement
of operations for the year then ended, the statements of
changes in net assets for the years ended June 30, 2004
and June 30, 2003, and thefinancial highlights included in
Note G for the four years ended June 30, 2004.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial
statements and financial highlights based on our audits.
The financial highlights included in Note G for the year
ended June 30, 2000 were audited by other
auditors, who issued unqualified opinions on these highlights.
We conducted our audits in accordance with standards
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures
included confirmation of securities owned as of June 30,
2004, by correspondence with the custodian. An
audit also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Bruce Fund, Inc. as of
June 30, 2004, the results of its operations for the year
then ended, the changes in its net assets for the years
ended June 30, 2004 and June 30, 2003, and
the financial highlights for the four years ended June 30,
2004, in conformity with accounting principles generally
accepted in the United States of America.
GRANT THORNTON LLP
Chicago, Illinois
July 23, 2004
NOTE G - FINANCIAL HIGHLIGHTS:
Selected data for each share of capital stock outstanding through
each year is presented below :
2004 2003 2002 2001 2000
Net Asset Value,
Beginning of Period (B)
184.27 $145.67 $157.42 $128.15 $135.51
Net Investment Income
4.41 6.19 6.76 4.74 4.41
Net Gains or (Losses)
on Investments
107.66 50.11 6.74 35.43 (3.77)
(both realized and unrealized)
Total From Investment Operations
112.07 56.30 13.50 40.17 0.64
Distribution (from net investment
income) (A)
(5.35) (5.30) (8.00) (1.90) (4.50)
Distribution (from net
capital gain) (A)
(7.65) (12.40) (17.25) (9.00) (3.50)
Total Distributions
(13.00) (17.70) (25.25) (10.90) (8.00)
Net Asset Value,
End of Period (C)
$283.34 $184.27 $145.67 $ 157.42 $ 128.15
Total Return
62.52% 41.99% 8.26% 32.26% 1.44%
Ratios/Supplemental Data
Net Assets, End of
Period ($ million)
$14.88 $ 5.34 $ 3.70 $ 3.29 $ 2.52
Ratio of Expenses to
Average Net Assets
1.17% 1.41% 1.46% 1.60% 1.71%
Ratio of Net Income
to Average Net Assets
1.81% 4.11% 4.27% 3.28% 3.55%
Portfolio Turnover Rate
22.01% 30.72% 28.59% 49.42% 22.26%
Figures are based on average daily shares outstanding
during year, with thefollowing exceptions: (A) number
of shares at dividend payment date, (B) number of
shares at beginning of year, (C) number of shares at
end of year.
Ratio of expenses to average net assets before
reimbursement for
2004, 2003, 2002, 2001,and 2000 was
1.27%,1.62%, 1.67%, 1.85% and 2.18% respectively.
Ratio of net income to average net assets before
reimbursement for
2004, 2003, 2002, 2001, and 2000 was
1.70%, 3.90%, 4.07%, 3.03%,and 3.08% respectively.
BRUCE FUND
OFFICERS AND
DIRECTORS
Robert B. Bruce
President and Treasurer
R. Jeffrey Bruce
Vice President and Secretary
John R. Nixon
Director
W. Martin Johnson
Director
Investment Adviser
Bruce and Co., Inc.
Chicago, Illinois
Custodian
Fifth Third Bank
Cincinnati, 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