December 31, 2004
Management Q & A:
Q:How did the Bruce Fund do for the six-month period
ended December 31,
2004?
A:The Fund shares produced a total return of 26.56%
for the six months,
compared to a total return of 7.19% for the S&P 500
Index and 10.83% for
the Russell 2000 for the same period.
Q:What attributed to the performance?
A:The common stock holdings provided the large part
of the increase along with
the bond holdings contributing as well. A majority of
the gains came from
securities considered to be small or micro-cap issues.
Q:Why is the Fund holding 53% in stocks, 34% in
bonds and 13% in cash?
A:Fund management concentrates its efforts at finding
what it sees as the best
opportunities for capital appreciation. Recent areas
of interest have been
restructuring companies; small/micro cap equities
and high yield or distressed
debt securities. We attempt to find securities,
whether they are stocks or
bonds, which we feel offer a reasonable opportunity
for appreciation.
Q:Some services categorize the Fund as an asset
allocation or balanced or hybrid
fund. Is this correct?
A:As stated in the Prospectus, the Fund's objective
is long-term capital
appreciation from stocks and/or bonds.
Q:Why is the Fund so small and not available
through any brokers?
A:All purchases and sales are through the mail,
directly with us. The Fund is
designed for long-term investors and we have
elected not to affiliate with any
platforms or electronic brokers.
Q: How long has the present management
team been in place?
A: For over 21 years, since October of 1983.
Q: Are there any plans to close the Fund
at the present time?
A: There are no plans currently to close the
Fund at a particular asset level.
Q:Where do I find further information on the Fund,
seeing that it is not listed in
any papers?
A Shareholders are invited to use the toll-free
number (800) 872-7823 to obtain
any Fund information, or can visit
www.thebrucefund.com, to obtain the
same. The Fund files its complete schedule
of portfolio holdings for the first
and third quarters on Form N-Q, which is also
available at the above sources.
The Fund's symbol is BRUFX.
Actual expenses for a $1,000 investment for the
six month period would have
been $6.96. Assuming a 5% total return for the
period, the expenses for a $1,000
investment would have been $5.78. These figures
are based on an expense ratio
calculated by using the unaudited expense figures
contained herein divided by the
average net assets during the period.
BRUCE FUND, INC.
BALANCE SHEET
DECEMBER 31, 2004
(Unaudited)
ASSETS
Investments, at Market Value (Cost $21,252,677 )$31,184,906
Cash 4,244,185
Dividends Receivable 3,700
Interest Receivable 298,193
TOTAL ASSETS $35,730,984
LIABILITIES
Accrued Expenses $ 93,118
TOTAL LIABILITIES 93,118
CAPITAL
Capital Stock (102,741 Shares of $1 Par Value
Capital Stock Issued and Outstanding; 200,000
Shares Authorized) 102,741
Paid-in Surplus 25,226,412
Accumulated Undistributed Net Investment Income 69,160
Accumulated Net Realized Gains on Investments 307,324
Net Unrealized Appreciation on Investments 9,932,229
TOTAL CAPITAL (NET ASSETS) $35,637,866
TOTAL LIABILITIES AND CAPITAL $35,730,984
NET ASSET VALUE (Capital) Per Share $ 346.87
The accompanying notes are an integral part of this statement.
BRUCE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(Unaudited)
INVESTMENT INCOME
Dividends $ 33,775
Interest 364,530
$ 398,305
EXPENSES
Management Fees $ 101,383
Custodian/Security Transaction 1,734
Directors 375
Transfer Agent Fees 5,770
Legal Fees 315
Audit and Accounting Fees 6,671
Insurance 503
Printing/Postage 1,570
Total Expenses 118,321
NET INVESTMENT INCOME 279,984
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net Realized Gains on Investments 386,121
Net Change in Unrealized Appreciation on Investments
5,467,787
NET GAIN ON INVESTMENTS 5,853,908
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 6,133,892
The accompanying notes are an integral part
of this statement.
BRUCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
(Unaudited)
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: Securities listed on a stock exchange are
valued on the basis of the last sale on that day or, lacking any sales, at
the last reported sales price. 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 December 31,
2004, the cost of investments held was $21,252,677 for both financial
reporting and federal income tax purposes. At December 31, 2004,
gross unrealized appreciation on investments was $10,872,410 and gross
unrealized depreciation on investments was $(940,181) 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 six months ended December 31, 2004, there were 975
shares redeemed; 49,530 shares issued and 3,043 shares issued through
dividend reinvestment.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the six months ended December 31, 2004, purchases and
sales of securities with original maturities of greater than one year were
$14,015,604 and $1,871,719 respectively.
NOTE D - RELATED PARTIES
The Fund has entered into an Investment Advisory Agreement
employing Bruce and Co. to manage the Fund and furnish 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 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 December 31, 2004, Robert B. Bruce owned 12,941 shares
and R. Jeffrey Bruce owned 1,915 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 - ADVISORY CONTRACT APPROVAL
he Board approved and renewed the Investment Advisory
Agreement at a meeting held on November 11, 2004 using the following
as their basis as transcribed from the minutes: "The directors noted the
portfolio management produced a YTD percentage gain of the Fund that
exceeded ten times the gain of the S&P 500 Index. The investment
performance of the Fund, computed for one, three, five and ten-year
periods, greatly exceeded the Index for each such period. The Fund
expenses for the most recent fiscal year of 1.17% are lower than the
Morningstar figures for each of the three categories of funds most
similar to the Bruce Fund. The directors noted that the dollar expenses
of the Fund (exclusive of advisory fees) were lower in fiscal 2004 than
in any of the previous five fiscal years. This suggests that present
management practices are likely to achieve economies of scale as the
Fund grows."
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 2004, the Fund announced a dividend from net
investment income of $5.19 per share, aggregating $510,278 and a long-
term capital gain distribution of $6.48 per share aggregating $637,110.
These distributions were payable December 30, 2004 to shareholders of
record on December 29, 2004.
BRUCE FUND, INC.
REPORT TO SHAREHOLDERS
_______________________
Six Months Ended
December 31, 2004
BRUCE FUND, INC.
20 North Wacker Drive
Suite 2414
Chicago, Illinois 60606
(312)236-9160
BRUCE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(Unaudited)
2004
OPERATIONS
Net Investment Income $ 279,984
Net Realized Gains on Investments 386,181
Net Change in Unrealized Appreciation
on Investments 5,467,787
Net Increase in Net Assets
Resulting from Operations 6,133,892
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net Investment Income (510,278)
Distributions from Net Capital Gains (637,100)
Decrease in Net Assets Resulting from
Distributions to Shareholders (1,147,378)
CAPITAL STOCK TRANSACTIONS
Proceeds from Shares Issued 15,014,228
Increase from Shares Issued in Reinvested
Distributions 1,050,969
Cost of Shares Redeemed (302,641)
Increase in Net Assets Resulting from
Capital Stock Transactions 15,762,556
TOTAL INCREASE 20,749,070
NET ASSETS
Beginning of Six Month Period 14,888,796
End of Six Months (including accumulated
undistributed net investment income of $69,160)
$ 35,637,866
The accompanying notes are an integral part of these statements.
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 Advisers, Inc.
Indianapolis, Indiana
Counsel
Thomas P. Ward
Lake Forest, Illinois
Independent Registered Public Accounting Firm
Grant Thornton LLP
Chicago, Illinois