Bruce Fund, Inc.
20 North Wacker Dr., Suite 2414
Chicago, IL 60606
(312) 236_9160
Securities and Exchange Commission
December 8, 1998
Edgar Filing
Anthony Bertuno
Re: Bruce Fund, Inc. SEC
File Nos: 2_27183
CIK: 0000047071
811_1528
Gentlemen:
Bruce Fund, Inc. files herewith its annual
amendment to Form N_lA. This filing is being made
pursuant to Rule 485(b), bringing the financial
statements and other information up to date as of
the end of the Fund's most recent fiscal year, and
in conjunction therewith making other non_material
changes which the registrant deems appropriate.
The registrant represents that no material
event requiring disclosure in the prospectus has
occurred since the filing date of its most recent
post_effective amendment. In the opinion of the
undersigned, this amendment does not contain
disclosures which would render it ineligible to
become effective pursuant to paragraph (b) of Rule
485.
Sincerely,
R.Jeffrey Bruce, Secretary
Bruce Fund, Inc.
20 North Wacker Dr., Suite 2414
Chicago, IL 60606
(312) 236_9160
Securities and Exchange Commission December
8, 1998
Edgar Filing
Anthony Bertuno
Re: Bruce Fund, Inc. SEC File Nos:
2_27183
CIK: 0000047071 811_1528
Dear Anthony:
Bruce Fund, Inc. hereby requests that the
following submissions be redesignated as 485BP0S
filings rather then the incorrect N-lA type
designation:
Accession #0000047071_98_000006 (date 11-
18-98)
Accession #0000047071_97_000014 (date 10-
29-97)
Sincerely,
R. Jeffrey
Bruce, Secretary
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER SECURITIES
ACT OF 1933
Pre-Effective Amendment No. ____ ____
Post-Effective Amendment No. 21 X
SEC File No. 2-27183
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 17
SEC File No. 811-1528
BRUCE FUND, INC.
[Exact Name of Registrant as Specified in Charter]
20 North Wacker Drive
Suite 2414
Chicago, Illinois 60606
[Address of Principal Executive Offices]
(312) 236-9160
[Registrant's Telephone Number, including Area
Code]
Robert B. Bruce
20 North Wacker Drive
Suite 2414
Chicago, Illinois 60606
[Name and Address of Agent for Service]
Approximate Date of Proposed Public Offering
It is proposed that this filing will become
effective
(check appropriate box)
Immediately upon filing pursuant to paragraph (b)
On October 30, 1998 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
On (date) pursuant to paragraph (a) of Rule 485
BRUCE
FUND, INC.
20 North Wacker
Drive
Suite 2414
Chicago, Illinois
60606
(312)236-9160
BRUCE FUND, INC. / PROSPECTUS
A diversified, open-end no-load management
company, whose objective is long-term capital
appreciation through investments in common stock
primarily; income is a secondary consideration.
The Fund may also invest in other securities as
described in this Prospectus under "General
Description of Bruce Fund, Inc."
This Prospectus sets forth concise information
about Bruce Fund, Inc. (the "Fund") that a
prospective investor ought to know before
investing. Investors should read and retain this
Prospectus for future reference. Additional
information has been filed with the Securities and
Exchange Commission. Such statement of additional
information may be obtained without charge by
written request directed to Bruce Fund, Inc., 20
North Wacker Drive, Suite 2414, Chicago, Illinois
60606.
___________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
___________________________
October 30, 1998
TABLE OF CONTENTS
General Description 2
Fund Expenses 2
Condensed Financial Information 3
Investment Restrictions 5
Risk Factors 5
Management of the Fund 6
Capital Stock 8
Purchase of Securities Being Offered 9
Determination of Net Asset Value 10
Redemption or Repurchase 10
Pending Legal Proceedings 8
General Terms 9
Dividend Election 9
GENERAL DESCRIPTION OF BRUCE FUND, INC.
Bruce Fund, Inc., incorporated under the laws
of Maryland, is a diversified open-end management
investment company. The primary investment
objective of the Fund is long term capital
appreciation; income, in the form of dividends or
interest, is a secondary consideration. There can
be no assurance the objectives can be achieved.
The investment policies pursued in seeking to
achieve this objective involve investment
primarily in common stocks and bonds, but also
permit investment in securities convertible into
common stocks, preferred stocks, other debt
securities and warrants. Securities of unseasoned
companies, where the risks are considerably
greater than common stocks of more established
companies, may also be acquired from time to time
by the Fund, if the Fund management (Bruce and
Co.) believes such investments offer possibilities
of capital appreciation; however, the Investment
Restrictions to which the Fund is subject limit
the percentage of total fund assets which may be
invested in the securities of any one issuer.
These restrictions do not apply to securities
representing ownership interest in United States
Government securities. The Fund may invest,
without restriction, in future interest and
principal of U.S. Government securities, commonly
known as "zero coupon" bonds.
FUND EXPENSES
The following table illustrates all expenses
and fees that a shareholder of the Fund will
incur. The expenses set forth below are for the
1998 fiscal year.
Shareholder Transaction Expenses
Sales Load Imposed on 0.00%
Purchases
Sales Load Imposed on 0.00%
Reinvested Dividends
Contingent Deferred 0.00%
Sales Load
Redemption Fees 0.00%
Exchange Fees 0.00%
Annual Fund Operating Expenses
Management Fees 1.00%
12b-1 Fees 0.00%
Other Expenses 0.59%
Total Operating 1.59%
Expenses
The purpose of this table is to assist the
investor in understanding the various expenses
that an investor in the fund will bear directly or
indirectly.
The following example illustrates the
expenses that you would pay on a $1,000 investment
over various time periods assuming (1) a 5% annual
rate of return and (2) redemption at the end of
each time period:
1 year 3 5 10
years year years
s
$16.00 $51.00 $88. $190.0
00 0
This example should not be considered a
representation of past or future expenses or
performance. Actual expenses may be greater or
lesser than these shown.
CONDENSED FINANCIAL INFORMATION
(for a share outstanding throughout the year)
The following Condensed Financial Information
of the Fund is for the ten years ended June 30,
1998. The Condensed Financial Information set
forth below should be read in conjunction with the
financial statements and related notes included in
the Fund's Annual Report which is incorporated
herein by reference.
For Fiscal Years Ending June 30(1)
1 1997 1 1995 1994 1993 1992 1 1 1989
9 9 9 9
9 9 9 9
8 6 1 0
Net Asset $ $ $113 $ $ $ $ $ $ $
Value, 1 1 .94 9 1 89.5 83.5 1 8 93.0
Beginning 3 3 4 0 2 3 1 9 4
of Period 8 4 . 9 3 .
(B) . . 0 . . 8
3 2 4 6 7 9
5 3 1 9
Income
From
Investmen
t
Operation
s
Net 4 4 3.77 3.40 2.91 6.22 2.22 2 1 2.57
Investmen . . . .
t Income 3 4 0 5
2 2 2 3
Net Gains 3 3 2 19.9 ( 1 5 ( 2 (
or Losses 6 . 0 7 1 6 . 3 5 3
on . 8 . 1 . 7 0 . .
Securitie 8 0 2 . 3 4 . 1 2
s (both 8 2 5 7 3 3 0
realized 3 3 )
and ) )
unrealize
d)
Total 4 8 2 23.3 ( 2 7 ( 2 (
from 1 . 3 7 8 2 . 2 6 0
Investmen . 2 . . . 9 8 . .
t 2 2 9 6 5 6 . 6 6
Operation 0 9 2 9 3 6 3
s ) 1 )
)
Less
Distribut
ions
Dividends ( ( (3.7 (3.4 (6.9 (2.5 (1.9 ( ( (2.5
(from net 4 4 0) 7) 5) 0) 7) 1 2 2)
investmen . . . .
t income) 2 1 9 7
(A) 8 0 5 6
) ) ) )
Distribut - --. - - --.- - ---.-- - ---.-
ions - -- - - - -- - -- -- -
(from . . .- .- .- .-
capital -- -- - - - -
gains)
(A)
Total ( (4.1 (3.7 (3.4 (6.9 (2.5 (1.9 (1.9 (2.7 (2.5
Distribut 4 0) 0) 7) 5) 0) 7) 5) 6) 2)
ions .
2
8
)
Net Asset $ $ 134. $113 9 $ $ $ $ $
Value, 1 1 23 .94 4 1 89.5 8 1 8
End of 7 3 . 0 2 3 1 9
Period 5 8 0 9 . 3 .
(C) . . 4 . 5 . 8
2 3 6 3 7 9
7 5 1 9
Total 2 6 2 25.7 ( 2 9 ( 3 (
Return 9 . 0 8% 8 5 . 2 0 0
. 1 . . . 6 5 . .
7 3 8 8 5 4 . 4 5
7 % 1 4 5 % 0 0 5
% % % % 3 % %
) % )
)
Ratios/Su
pplementa
l Data
Net 3 2 2.56 2.25 2.06 2.42 2.12 2 3 3
Assets, . . . . .
End of 2 6 3 3 4
Period ($ 5 3 6 9 7
million)
Ratio of 1 1 1.78 2.04 1.90 2.12 2.17 2 2 1.83
Expenses . . % % % % % . . %
to 5 6 4 2
Average 9 9 7 5
Net % % % %
Assets(2)
Ratio of 2 3.29 2.98 3.48 2.64 6.22 2.49 2 1 2.92
Net . % % % % % % . . %
Income to 6 2 5
Average 0 5 8
Net % % %
Assets(3)
Portfolio 2 4 1 19.3 2 1 3 4 2 6
Turnover . . 1 4% . 3 . 0 0 .
Rate 6 2 . 4 . 9 . . 0
0 2 8 8 6 2 9 3 9
% % 3 % 3 % 6 7 %
% % % %
____________________________________
1For 1990 and prior years, figures are based on
average month-end shares outstanding during year,
with the following exceptions: (A) number of
shares at last dividend payment date, (B) number
of shares at beginning of year, (C) number of
shares at end of year. For 1991 through 1998
figures are based on average daily shares
outstanding during year, with the same exceptions.
2If the Fund had paid all of its expenses and
there had been no management fee waiver by the
investment advisor, this ratio would have been
2.36% and 2.05% for the years ended June 30, 1994
and 1989 respectively. The 1996 ratio is based
upon total expenses excluding the loss on
defaulted bonds.
3If the Fund had paid all of its expenses and
there had been no management fee waiver by the
investment advisor, this ratio would have been
2.18% and 2.70% for the years ended June 30, 1994
and 1989 respectively.
There is no minimum or maximum percentage of
Fund assets required to be invested in any type of
security. Cash and equivalents are retained by
the Fund in amounts deemed adequate for current
needs, including without limitation the ability to
redeem Fund shares, and pay current fees, costs
and expenses of the Fund. The Fund reserved the
right, as a temporary defensive measure when
general economic (including market) conditions are
believed by management to warrant such action, to
invest any portion of its assets in conservative
fixed-income securities such as United States
Treasury Bills, Notes, Bonds, certificates of
deposit, prime-rated commercial paper and
repurchase agreements with banks (agreements under
which the seller of a security agrees at the time
of sale to repurchase it at an agreed time and
price). Securities are not generally purchased
with a view to rapid turnover to obtain short-term
profits, but rather are purchased because
management believes they will appreciate in value
over the long-term. The investment objectives and
the other policies described in this paragraph may
be changed without shareholder approval.
Investment Restrictions: The Fund has
adopted certain investment restrictions, which are
matters of fundamental policy and cannot be
changed without the approval of the holders of a
majority of its outstanding shares, as defined by
the Investment Company Act. Such investment
restrictions are set forth in the Fund's
"Statement of Additional Information".
The right, as a defensive measure (see
above), to invest Fund assets in conservative
fixed-income securities mandates that not more
than 5% of the total assets of the Fund, taken at
market value, will be invested in the securities
of any one issuer (other than securities issued by
the United States Government or an agency thereof,
or a security evidencing ownership in future
interest and principal of U.S. Treasury
securities, such as "zero coupon" bonds). The
exception to this restriction, relating to such
Government securities permits management to invest
assets of the Fund without limit in the
instruments described above.
Risk Factors: In seeking capital
appreciation, the Fund will invest some of its
assets in common stock of small and medium size
companies whose stock prices often fluctuate more
than prices of common stocks of larger companies.
To the extent Fund assets should become so
invested, such fluctuations would likely cause the
Fund's price per share to be more volatile in both
"up" and "down" markets than most of the popular
stock averages. The Fund is intended for long-
term investors and not for those who hope to
profit from favorable short term swings in stock
market prices. Further, the Fund is not intended
to provide a balanced investment program to meet
all requirements of every investor. It is also
intended only for those financially able to assume
the risks inherent in investing for long-term
capital appreciation. Investors must recognize
there is a risk of loss in any investment seeking
capital appreciation, including securities issued
by the U.S. Treasury.
While debt securities are expected to be
redeemed by payment to the investor of the
principal amount thereof when such securities
mature, they may provide opportunities to
contribute to the realization of the Fund's
paramount objective, capital appreciation. Many
such securities outstanding are traded on
exchanges or over-the-counter and may, from time
to time, be acquired at substantial discounts from
the principal amount which the issuer has promised
to pay at maturity. The investment advisor may
invest in such debt securities of any grade or
quality, subject to the limitation on percentage
of total Fund assets which may be invested in the
securities of any one issuer. (See "Investment
Restrictions"). Investments may be made in
defaulted bonds, and management has invested in
such defaulted bonds, which sell at a great
discount from face redemption value. In most
cases, the risk of loss or opportunity for gain on
a debt security is less than on an equity security
of the same issuer because in the case of
corporate issuers, debt obligations must normally
be satisfied before stockholders may participate
in earnings or distributions of the issuer.
Notwithstanding, there is risk that the market
price of the debt security may decline below the
price at which it was acquired, that the issuer
may become insolvent and unable to meet interest
payments or to repay principal at maturity, and
that defaulted bonds may remain in default
resulting in no repayment to the holder at
maturity.
The investment adviser to the Bruce Fund,
Bruce and Co., presently manages no other mutual
fund or investment company.
MANAGEMENT OF THE FUND
The Fund has entered into an Investment
Advisory Agreement employing Bruce and Co. to
manage the investment and reinvestment of the
Fund's assets and to otherwise administer the
Fund's affairs to the extent requested by the
Board of Directors. Under the Agreement Bruce and
Co. is, subject to the authority of the Fund's
board of directors, responsible for the overall
management of the Fund's business affairs. This
Agreement is subject to annual review and will
continue in force if specifically approved
annually by the stockholders.
The advisor, Bruce and Co., is an Illinois
corporation, controlled by Robert B. Bruce; it is
located at Suite 2414, 20 North Wacker Drive,
Chicago, Illinois 60606.
Robert B. Bruce, President of the Fund, and
R. Jeffrey Bruce, Vice President-Secretary of the
Fund, are the only stockholders, and Robert B.
Bruce is the only control person of Bruce and Co.
Robert B. Bruce has been an investment advisor
since l954, following his graduation from the
University of Wisconsin. He is a Chartered
Financial Analyst. Since 1974, Mr. Bruce, through
Bruce and Co., has been an investment advisor
continuously serving both individuals and
institutions. In August, l998, Bruce was managing
assets with an approximate value of $28.5 million
for such clients. Mr. Bruce is responsible for
making investment decisions for the Fund, and is
assisted by R. Jeffrey Bruce who graduated from
the University of Colorado in l982. R. Jeffrey
Bruce is the son of Robert B. Bruce.
Bruce and Co.'s compensation for its services to
the Fund are calculated as follows:
Annual Applied to Average
Percentage Fee Net Assets of Fund
1.0% Up to $20,000,000; plus
0.6% $20,000,000 through
$l00,000,000;plus
0.5% over $l00,000,000
The fee is calculated and paid each calendar
month based on the average of the daily closing
net asset value of the Fund for each business day
of that month. Since the rates above are annual
rates, the amount payable to the adviser for each
calendar month is l/l2th of the amount calculated
as described. The annual percentage fee of l.0%
is higher than the fee charged to a majority of
open-end investment companies. The Fund also
bears certain fees and expenses
including, but not limited to, fees of directors
(not affiliated with Bruce and Co.), custodian
fees, costs of personnel to perform clerical,
accounting and office services for the Fund, fees
of independent auditors, counsel, transfer
agencies and brokers' commissions. These fees are
fully described in the Investment Advisory
Agreement. For the most recent fiscal year, the
total expenses of the Fund were l.59% of the
average net assets. The adviser, Bruce and Co.,
received $29,366 during the l998 fiscal year
(1.00% of average net assets)
DIRECTORS AND OFFICERS
Directors are elected at the annual meeting and serve
until the next annual meeting of stockholders, and
until the successor of each shall have been duly
elected and shall have qualified. The board of
directors is:
Directors Business Experience
for Last Five Years
(1) *Robert B. Bruce
Age 66 l974 to present -
principal, Bruce and
Co. (investment
advisor); l982 to
present - Chairman of
Board of Directors,
Treasurer,
Professional Life &
Casualty Company (life
insurance issuer),
previously Assistant
Treasurer.
(2) James S. VanPelt, Jr. l983 to present -
Age 62 President, Grundy
Industries, Inc.
(roofing material
manufacturer) was
assistant to President
prior to l985.
(3) Ward M. Johnson l978 to present -
Age 61 Manufacturer's agent
representing
manufacturers of
housewares, home
furnishings, consumer
electronics products,
and office equipment.
Two of the present directors have been
serving since l983; Mr. Ward M. Johnson was
elected in December, l985 to fill a vacancy.
As of September 10, l998, Robert B. Bruce
owned 6,983 shares, R. Jeffrey Bruce owned 878
shares, and James S. Van Pelt owned 52 shares.
The above-named directors and officers elected by
them, who are employees of Bruce and Co. will
receive no fees or salaries from the Fund for
services rendered as directors or officers of the
Fund.
Officers of the Fund, duly elected and
presently serving, are:
President Robert B.
Bruce
Vice-President, Secretary
R. Jeffrey Bruce
Treasurer Robert B.
Bruce
The transfer agent and dividend paying agent
of the Fund is Unified Management Corporation, 429
North Pennsylvania Street, Indianapolis, Indiana
46204-l897. The Fifth Third Bank, Cincinnati,
Ohio serves as custodian of the securities and
cash of the Fund. All dividend shares will be
held by the transfer agent. Customer Account
Service telephone numbers at Unified Management
Corporation are (800) 872-7823 or (800) 87-BRUCE.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The annual report to shareholders of the Fund
contains performance information in addition to
that included in this prospectus. The Bruce Fund
will make available the annual report to any
recipient of its prospectus upon request and
without charge.
CAPITAL STOCK
Bruce Fund, Inc. is a Maryland corporation
incorporated on June 20, 1967. It has only one
class of authorized stock: Capital Stock, $1.00
par value. Stockholders are entitled to one vote
per full share, to such distributions as may be
declared by the Fund's Board of Directors out of
funds legally available, and upon liquidation to
participate ratably in the assets available for
distribution. There are no conversion or sinking
fund provisions applicable to the shares, and the
holders have no preemptive rights and may not
cumulate their votes in the election of directors.
The shares are redeemable (as described under "How
to Redeem Shares" and "Determination of Net Asset
Value") and are transferable. All shares issued
and sold by the Fund will be fully paid and non-
assessable. There are no material obligations or
potential liability associated with ownership of
Fund stock.
No person is believed by Management to own
beneficially, except Robert B. Bruce, either
directly or indirectly, more than 25% of the
voting securities of the Fund. Mr. Bruce owed
38.6% of such securities at September 10, 1998.
Shareholder inquiries should be addressed to
Bruce Fund, Inc., Suite 2414, 20 North Wacker
Drive, Chicago, Illinois 60606.
The Fund intends to distribute substantially
all of its net income and net realized capital
gains, if any, less any available capital loss
carryover, to its shareholders annually and to
comply with the provisions of the Internal Revenue
Code applicable to investment companies, which
will relieve the Fund of Federal income taxes on
the amounts so distributed.
Unless a shareholder otherwise directs, all
income dividends and capital gains distribution
are automatically reinvested in full and
fractional shares of the Fund. Shares are
purchased at the net asset value (see
"Determination of Net Asset Value") next
determined after the dividend declaration and are
credited to the shareholder's account. Stock
certificates are not issued. A shareholder may
elect to receive all income dividends and capital
gains distributions in cash or to reinvest capital
gains distributions and receive income dividends
in cash. An election to reinvest or receive
dividends and distributions in cash will apply to
all shares of the Fund registered in the same
name, including those previously purchased. A
shareholder wishing to make such election must
notify the transfer agent in writing of such
election. The dividends and long-term capital
gains distributions are taxable to the recipient
whether received in cash or reinvested in
additional shares.
Shareholders may elect not to continue in the
dividend reinvestment program at any time.
Following such election, the shareholder will
receive income dividends or all distributions in
cash. Any shareholder who is not participating in
the dividend reinvestment program may elect to do
so by giving written notice to the transfer agent.
If an election to withdraw from or participate in
the dividend reinvestment program is received
between a dividend declaration date and payment
date, it will become effective on the day
following the payment date. The Board of
Directors of the Fund, when it declares a
dividend, must fix in advance a recognized date
for the determination of the stockholders entitled
to receive such dividend. The record date must
not be more than forty days preceding any dividend
payment.
PURCHASE OF SECURITIES BEING OFFERED
Shares are issued by the Fund itself. The
price per share is the next determined net asset
value after acceptance of an application. See
"Determination of Net Asset Value".
To invest in Fund shares, the investor should
complete the Order Form enclosed at page 9 of this
Prospectus. The completed and signed application,
accompanied by payment to Bruce Fund, Inc., should
be mailed to Bruce Fund, Inc., c/o Unified
Management Corporation, 429 North Pennsylvania
Street, Indianapolis, Indiana 46204-1897. All
applications must be accompanied by payment.
Applications are subject to acceptance by the
Fund, and are not binding until so accepted. The
Fund does not accept telephone orders for purchase
of shares and reserves the right to reject
applications in whole or in part. The Board of
Directors of the Fund has established $1,000 as
the minimum initial purchase and $500 as the
minimum for any subsequent purchase (except
through dividend reinvestment), which minimum
amounts are subject to change at any time.
Shareholders will be notified in the event such
minimum purchase-amounts are changed. Stock
certificates are not issued.
Determination of Net Asset Value: The per
share net asset value is determined as of 3:00
P.M. Central Time each business day by dividing
the value of the Fund's securities, plus any cash
and other assets (including dividends and interest
accrued but not collected) less all liabilities
(including accrued-expenses), by the number of
shares outstanding. 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 sale price. Unlisted securities for
which quotations are available are valued at the
closing bid price.
Short-term securities are valued at amortized
cost. Any securities for which there are no
readily available market quotations and other
assets will be valued at their fair value as
determined in good faith by the Board of
Directors. Odd lot differentials and brokerage
commissions will be excluded in calculating
values. The net asset value would also be
determined at the close of business on any other
day on which there is a sufficient degree of
trading in the Fund's portfolio securities that
the current net asset value of the Fund's shares
might be materially affected by changes in the
value of the portfolio securities, provided that
such day is a business day on which shares were
tendered for redemption or orders to purchase
shares were received by the Fund. Except under
extraordinary conditions, the Fund's business days
will be the same as those of the New York Stock
Exchange.
REDEMPTION OR REPURCHASE
Shareholders have the right to request the Fund to
redeem their shares by depositing their
certificates at Unified Management Corporation
with a written request addressed to Unified
Management Corporation that the shares be
redeemed. Redemption may be accomplished by a
signed written request to the transfer agent that
the Fund redeem the shares. Requests for
redemption of Fund shares must be signed by each
shareholder and EACH SIGNATURE MUST BE GUARANTEED
by a bank or trust company in, or having a
correspondent in New York City, or by a member
firm of a national securities exchange.
Signatures on endorsed certificates submitted for
redemption must also be similarly guaranteed.
Redemption requests received by the transfer agent
before the close of business on the New York Stock
Exchange on any day on which that Exchange is open
will be effected at the redemption price
calculated as of such close. Requests received
after that time will be entered at the redemption
price calculated as of such close on the next day
on which that Exchange is open. It is suggested
that all redemption requests by mail be sent
Certified Mail with return receipt.
The redemption price is the net asset value
per share determined as described above.
See, "Determination of Net Asset Value". Payment
for shares redeemed, except as described
hereafter, is made by the Fund to the shareholder
within seven days after the certificates are
received, but the Fund may suspend the right of
redemption, subject to rules and regulations of
the Securities and Exchange Commission, at any
time when (a) The New York Stock Exchange is
closed, (b) trading on such exchange is
restricted, (c) an emergency exists as a result of
which it is not reasonably practicable for the
Fund to dispose of securities owned by it or to
determine fairly the value of its net assets, or
(d) the Commission by order permits such
suspension for the protection of shareholders.
If in the opinion of the Board of Directors,
conditions exist which make cash payments
undesirable, payment may be made in securities or
other property in whole or in part. Securities
delivered in payment of redemptions are valued at
the same value of the Fund's assets. Shareholders
receiving such securities or redemption will incur
brokerage costs on the sale thereof. Long-term
capital gains distribution will be taxed to the
individual Fund shareholder as such, regardless of
the length of time the Fund shares have been held.
PENDING LEGAL PROCEEDINGS
There are no legal proceedings to which the Fund
or the adviser is a party.
GENERAL TERMS
This application is subject to acceptance by
the Fund in Chicago, Illinois. This application
will not be accepted unless accompanied by
payment. The passage of title to and delivery of
shares purchased (including shares hereafter
purchased through dividend reinvestment or
otherwise), whether or not certificates are
issued, shall be deemed to take place in Illinois.
The applicant certifies that he or she has full
capacity to enter into this subscription
agreement. The purchase price shall be the net
asset value in effect at the time this application
is accepted by the Fund.
DIVIDEND ELECTION
Unless a shareholder otherwise directs, all
income dividends and capital gains distributions
are automatically reinvested in full and
fractional shares of the Fund. If you do NOT wish
your dividends and capital gains distributions
reinvested in shares of the Fund but wish instead
to receive the full amount of dividends and
capital gains distributions in cash, or to receive
income dividends only in cash (reinvesting capital
gains distributions in shares of the Fund), you
should check the choice you wish to make, and sign
at the place indicated.
( ) I (We) elect to receive the full amount
of all dividends and capital gains distributions
hereafter paid on shares of Bruce Fund, Inc.
registered in the name(s) of the undersigned in
cash, until contrary written instructions are
received by the Fund.
( ) I (We) elect to receive the full amount
of all income dividend distributions hereafter
paid on shares of Bruce Fund, Inc. registered in
the name(s) of the undersigned in cash, and
approve the automatic reinvestment of all capital
gains distributions in full and fractional shares
of the Fund, until contrary written instructions
are received by the Fund.
_______________
_______________
______
Signature
_______________
_______________
______
Signature of Co-
Owner, if any.
If shares are
to be registered. jointly, all
owners must
sign.
(NOTE: If this election is not signed, dividends
and capital gains distributions will be reinvested
in Fund shares, as described on the Order Form.
If you elect to receive dividends/capital gains in
cash, this signed Dividend Election must be
returned with your Order Form for Purchasing Bruce
Fund Shares).
MAIL THIS ORDER FORM AND CHECK DIRECTLY TO UNIFIED
MANAGEMENT CORPORATION
ORDER FORM FOR PURCHASING BRUCE FUND SHARES
(Minimum initial investment of $1,000; $500,
thereafter)
Unified Management Corporation
Date:
429 North Pennsylvania Street
Indianapolis, Indiana 46204-1897
Attn: Bruce Fund, Inc.
Gentlemen:
Enclosed is my check in the amount of
$_____________ (make check payable to Bruce Fund,
Inc.) for the purchase of shares of Bruce Fund,
Inc. Capital Stock. The undersigned subscribes
for:
( ) Exactly
______________________________________________
shares,
OR
( ) The maximum number of full and fractional
shares which may be purchased with the enclosed
amount.
The minimum initial purchase is $1,000, and
the minimum for any subsequent purchase is $500,
except through dividend reinvestment. All
applications must be accompanied by payment.
Differences between amounts submitted and actual
cost of shares purchased will be refunded or
billed to the registered owner designated below,
unless otherwise specified.
I have received and read the latest
prospectus of the Bruce Fund.
AUTOMATIC DIVIDEND REINVESTMENT - I
understand that all dividends and capital gains
will be automatically reinvested unless the
Dividend Election on the reverse side is signed or
until contrary written instructions are received
by the Fund, as set forth in the prospectus.
STOCK CERTIFICATES - All shares purchased
(including reinvestments) will be credited to the
stockholder's account; no stock certificates will
be issued.
All dividend shares will be held by Unified
Management Corporation.
Shares of the Bruce Fund are to be registered as
follows:______________________________________
(Name)
This section must be completed to open your
account. Failure to complete this section
and sign the Order Form may result in backup
withholding.
SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION
NUMBER
Individual accounts. Specify the Social
Security number of the owner.
Joint accounts. Specify the Social Security
number of the first named owner.
Uniform Gifts/Transfers to Minors account.
Specify minor's Social Security number.
Corporations, Partnerships, Estates, Other
Entities or Trust accounts. Specify the
Taxpayer Identification Number of the legal
entity or organization that will report
income and/or gains resulting from your
investments in the Fund.
In addition to the above, Joint accounts must
also specify the Social Security number of
the second named owner here.
Taxpayer Identification Number Certification
The IRS requires all taxpayers to write their
Social Security Number or Taxpayer Identification
Number in this Order Form, and sign this
Certification. Failure by a non-exempt taxpayer
to give us the correct Social Security Number or
Taxpayer Identification Number will result in the
withholding of 31% of all taxable dividends paid
to your account and/or the withholding of certain
other payments to you (referred to as "backup
withholding").
Under penalties of perjury, you certify that:
1. The Social Security or Taxpayer
Identification Number on this Application is
correct; and
2. You are not subject to backup withholding
because a) you are exempt from backup
withholding; or b) you have not been notified
by the Internal Revenue Service that you are
subject to backup withholding; or c) the IRS
has notified you that you are no longer
subject to backup withholding.
Cross out item 2 above if it does not apply to
you.
The Internal Revenue Service does not require
your consent to any provision of this
document other than the certifications
required to avoid backup withholding.
Name: Name:
____________________________ ________________________
_____ _________
(please print)
Street: Street:
____________________________ ________________________
_____ _________
City: ___________ State: City: ___________ State:
_________ Zip:_____ _________ Zip:_____
____________________________ ________________________
___________ _______________
Signature Signature
If shares are to be registered jointly, all owners
must sign. Any registration in the names of two
or more co-owners will, unless otherwise
specified, be as joint tenants with right of
survivorship and not as tenants in common. Shares
may be registered in the name of a custodian for a
minor under applicable state law. In such cases,
the name of the state should be indicated, and the
taxpayer identification or social security number
should be that of the minor.
PROSPECTUS
October 30, 1998
BRUCE FUND, INC.
BRUCE FUND, INC.
20 North Wacker Drive
Chicago, Illinois 60606
Investment Adviser
Bruce and Co.
Chicago, Illinois
Custodian
Fifth Third Bank
Cincinnati, Ohio
Shareholder Service and Transfer Agent
Unified Management Corporation
429 North Pennsylvania Street
Indianapolis, Indiana 46204-1897
Counsel
McBride Baker & Coles
Chicago, Illinois
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
STATEMENT OF ADDITIONAL INFORMATION
BRUCE FUND, INC.
20 North Wacker Drive
Suite 2414
Chicago, Illinois 60606
(312) 236-9160
This Statement of Additional Information is
not a Prospectus, but it should be read in
conjunction with the Prospectus. The Prospectus
may be obtained by writing or calling BRUCE FUND,
INC. This Statement of Additional Information
relates to the Prospectus dated October 30, 1998.
Date: October 30, 1998
TABLE OF CONTENTS
PART B
General
Description..................................... 1
Investment Objectives and Policies: 1
Management of the Fund 3
Control Persons and Principal Holders of
Securities: 4
Investment Advisory and Other Services: 4
Brokerage Allocation: 5
Capital Stock and Other Securities: 6
Purchase, Redemption and Pricing of Stock Being
Offered: 7
Tax Status: 7
Underwriters: 7
Financial Statements as of June 30, 1998 7
General Information and History:
Bruce Fund, Inc.'s (the "Fund") only business
during the past five years has been an open-end no-
load investment company. The name of the Fund was
changed in October 1983, following stockholder
approval of such change, to BRUCE FUND, INC. at a
special meeting held October 17, 1983. At all
times prior thereto, from the Fund's formation in
1967, its name was THE HEROLD FUND, INC. Other
general information and history is set forth in
the Prospectus.
Investment Objectives and Policies:
The Fund has adopted certain investment
restrictions which are matters of fundamental
policy and cannot be changed without the approval
of the holders of a majority of the outstanding
shares of the Fund as defined by the Investment
Company Act. These fundamental policies are:
1. Securities of other investment companies
will not be purchased, except the Fund may
purchase securities issued by money market funds.
2. The Fund will not acquire or retain any
security issued by a company if one or more
officers or directors of the Fund or any
affiliated persons of its investment adviser
beneficially own more than one-half of one percent
(0.5%) of such company's stock or other
securities, and all of the foregoing persons
owning more than one-half of one percent (0.5%)
together own more than 5% of such stock or
security.
3. The Fund will not borrow money or pledge
any of its assets.
4. Investments will not be made for the
purpose of exercising control or management of any
company. The Fund will not purchase securities of
any issuer if, as a result of such purchase, the
Fund would hold more than 10% of the voting
securities of such issuer.
5. The Fund will not sell short, buy on
margin or engage in arbitrage transactions.
6. The Fund will not lend money, except for
the purchase of a portion of an issue of
publicly-distributed debt securities.
7. The Fund will not buy or sell
commodities, commodity futures contracts or
options on such contracts.
8. The Fund will not act as an underwriter
or distributor of securities, other than its own
capital stock, except as it may be considered a
technical "underwriter" as to certain securities
which may not be publicly sold without
registration under the Securities Act of 1933.
9. The Fund will not purchase or write any
puts, calls or combinations thereof. The Fund
may, however, purchase warrants for the purchase
of securities of the same issuer issuing such
warrants, or of a subsidiary of such issuer. The
investment in warrants, valued at the lower of
cost or market, may not exceed 5.0% of the value
of the Fund's net assets. Included within that
amount, but not to exceed 2.0% of the value of the
Fund's net assets, may be Warrants which are not
listed on the New York or American Stock Exchange.
Warrants acquired by the Fund in units or attached
to securities may be deemed to be without value.
10. The Fund will not purchase or own real
estate or interests in real estate, except in the
marketable securities of real estate investment
trusts.
11. The Fund will not purchase any
securities which would cause more than 10% of the
Fund's net assets at the time of purchase to be
invested in securities which may not be publicly
sold without registration under the Securities Act
of 1933.
12. Not more than 25% of the value of the
Fund's total assets (exclusive of government
securities) will be invested in companies of any
one industry or group of related industries. The
Fund will not issue senior securities.
13. The Fund will be required to have at
least 75% of the value of its total assets
represented by (i) cash and cash items (including
receivables), (ii) government securities as
defined in the Investment Company Act of 1940, and
(iii) other securities, limited in respect of any
one issuer to an amount not greater in value than
5% of the value of the total assets of the Fund
and to not more than 10% of the outstanding voting
securities of the issuer.
14. The Fund will not invest in oil, gas or
other mineral leases.
It is the policy of the Fund not to invest
more than 5% of the value of the Fund's total
assets in securities of issuers, including their
predecessor, which have been in operation less
than three years. Registrant does not presently
invest in foreign securities and has no present
plans to make such investments. There is no
restriction against making investments in the
securities of unseasoned issuers or of foreign
Issuers and such Investments may be made in
management's discretion, without approval of a
majority of the Fund's outstanding voting
securities. Management has no present intention
of changing either policy described.
Portfolio turnover rate was 2.60% in 1998,
4.22% in 1997, and 11.83% in 1996. Portfolio
turnover rate is the percentage relationship
between the value of the lesser of purchases or
sales of the Fund's portfolio securities during
the year and the average monthly value of
portfolio securities owned by the Fund during such
year. The shareholders receive distributions of
income and taxable gains (see, "Tax Status"); if
capital gains result from portfolio securities
sold, it may increase the income tax liability of
the shareholder.
Management of the Fund:
(a) The Fund is managed by its officers
and directors. It has no advisory board. The
persons serving are:
Principal
Name and Address Positions Held Occupation
With During the
Registrant1 Past Five
Years
Robert B. Bruce2 Director, See
1340 Asbury Chairman of Prospectus,
Avenue the Board, "Management of
Winnetka, IL President, Fund"
60093 Treasurer
Ward M. Johnson Director See Prospectus
Savannah, GA
31406
James S. Van Director See Prospectus
Pelt, Jr.
1393
Edgewood
Lane
Winnetka, IL
60093
R. Jeffrey Bruce Vice 1983 to
2,3 President, present - Vice
1049 W. Secretary President of
Montana Bruce and Co.
Chicago, IL
60614
Control Persons and Principal Holders of
Securities
(a) One person is believed by management to
own beneficially, either directly or indirectly,
more than 25% of the voting securities of the
Fund. (See, (b) below). Bruce Fund, Inc. is a
Maryland corporation. In that no major corporate
measure requires approval by more than 75% of all
outstanding shares, no person voting alone could
permit:
(1) the consolidation, merger, share
exchange or transfer of assets to another person;
(2) the distribution of a portion of
the assets of the Fund to its stockholders in
partial liquidation;
(3) the voluntary dissolution of the
Fund;
(4) the "business combination" of the
Fund with another person as described in Maryland
General Corporation Law, Sec.E3-601 through 3-603.
(b) The following table sets forth
information as to all persons known to the Board
of Directors of the Fund to be the beneficial
owners of more than 5% of the outstanding shares
of the Fund at June 30, 1998: Robert B. Bruce,
37.6%.
(c) Robert B. Bruce, President of the Fund
and principal owner of Bruce and Co., investment
adviser to the Fund, presently owns 6,983 shares
of the Fund, and his wife owns 450 shares; Mr.
Bruce disclaims any beneficial ownership in Mrs.
Bruce's shares. All other officers and directors
of the Fund own less than 10% of the outstanding
shares.
Investment Advisory and Other Services
(a) Bruce and Co., an Illinois corporation
controlled by Robert B. Bruce, is the only
investment adviser to the Fund. Mr. Bruce is in
control of the adviser, and is Chairman of the
Board of Directors, President and Treasurer of the
Fund. R. Jeffrey Bruce is employed by, and a
stockholder, officer and director of, Bruce and
Co. and is Vice-President and Secretary of the
Fund.
The advisory fee payable by the Fund to Bruce
and Co. is a percentage applied to the average net
assets of the Fund as follows:
Annual Percentage Fee Applied to Average Net
Assets of Fund
1.0% Up to $20,000,000; plus
0.6% $20,000,000 through
$100,000,000; plus
0.5% over $100,000,000
A fee installment will be paid in each month
and will be computed on the basis of the average
of the daily closing net asset values for each
business day of the previous calendar month for
which the fee is paid (e.g., 1/12% of such average
will be paid in respect to each month in which
such average is less than $20 million).
(1) The advisory fee paid to Bruce and
Co. during 1998 was $29,366 and in 1997 was
$25,720.
(2) The Fund is not subject to any
expense limitation provision.
(b) The following services furnished for and
on behalf of the Fund are supplied and paid for
wholly or in substantial part by the investment
adviser in connection with the Investment Advisory
Contract:
The adviser provides suitable office space
in its own offices and all necessary
office facilities and equipment for
managing the assets of the Fund; members
of the adviser's organization serve
without salaries from the Fund as
directors, officers or agents of the Fund,
if duly elected or appointed to such
positions by the shareholders or by the
Board of Directors; the adviser bears all
sales and promotional expenses of the
Fund, other than expenses incurred in
complying with laws regulating the issue
or sale of securities.
(c) There are no fees, expenses, and costs
of the Fund which are to be paid by persons other
than the investment adviser or the Fund.
(d) There are no management related service
contracts under which services are provided to the
Fund.
(e) No person other than a director,
officer, or employee of the Fund or person
affiliated with Bruce and Co. regularly furnishes
advice to the Fund and to Bruce and Co. with
respect to the desirability of the Fund's
investing in, purchasing and selling securities or
other property or is empowered to determine what
securities or other property should be purchased
or sold by the Fund and no other person receives,
directly or indirectly, remuneration for such
advice, etc.
(f) There is no plan pursuant to which the
Fund incurs expenses related to the distribution
of its shares and there are no agreements relating
to the implementation of such a plan.
(g) The Fund's custodian is Fifth Third
Bank, Cincinnati, Ohio. The Fund's independent
public accountant is Arthur Andersen LLP, 33 West
Monroe Street, Chicago, Illinois 60603.
The above named custodian has custody of all
the Fund's securities. It accepts delivery and
makes payment for securities purchased and makes
delivery and receives payment for securities sold.
The Fund's Shareholder and Transfer Agent is
Unified Management Corp., Indianapolis, Indiana;
it receives and processes all orders by investors
to purchase and to redeem Fund's shares,
maintaining a current list of names and addresses
of all stockholders and their respective holdings.
Upon receipt of authorization to make payment of
Fund expenses from the investment adviser, the
above named custodian makes such payments from
deposits of the Fund, and sends confirmation of
all bills paid. Unified Management Corp. pays
dividends, makes capital gain distributions and
mails annual reports and proxy statements to
stockholders.
Certified independent public accountants
performed an annual audit of Fund's financial
statements for each of the ten years ended June
30, 1998.
Brokerage Allocation
(a) Decisions to buy and sell securities for
the Fund, the selection of brokers and negotiation
of the commission rates to be paid, or mark-ups
(or mark-downs) on principal transaction, are made
by Bruce and Co. Robert B. Bruce, an employee of
the Fund and owner of Bruce and Co., is primarily
responsible for making the Fund's portfolio
decisions, subject to direction by the Board of
Directors of the Fund. He is also primarily
responsible for placing the Fund's brokerage
business and, where applicable, negotiating the
amount of the commission rate paid taking into
account factors described in paragraph (c) below.
It is the adviser's policy to obtain the best
security price and execution of transactions
available. During each of the last three fiscal
years, the total brokerage commissions on the
purchases and sales of portfolio securities by the
Fund were:4
1998 $4,0
00
1997 $2,0
00
1996 $2,0
00
(b) None of the brokers with whom the Fund
dealt in the last three years was affiliated in
any manner with the Fund, or with any affiliated
person of the Fund, including the investment
adviser.
(c) Brokers are selected to effect
securities transactions for the Fund based on the
adviser's overall evaluation of the commission
rates charged, the reliability and quality of the
broker's services and the value and expected
contribution of such services to the performance
of the Fund. Where commissions paid reflect
services furnished in addition to execution, the
adviser will stand ready to demonstrate that such
services were bona fide and rendered for the
benefit of the Fund. Such commissions may, on
occasion, be somewhat higher than could be
obtained from brokers not supplying such services.
The adviser considers the supplementary research
and statistical or other factual information
provided by dealers in allocating portfolio
business to dealers. Such allocation is not on
the basis of any formula, agreement or
understanding.
It is not possible to place a dollar value on
such research and other information and it is not
contemplated that the receipt and study of such
research and other information will reduce the
cost to Bruce and Co. of performing duties under
the Advisory Agreement. The Board of Directors of
the Fund has permitted the Fund to pay brokerage
commissions which may be in excess of those which
other brokers might have charged for effecting the
same transactions, in recognition of the value of
the brokerage and research services provided by
the executing brokers. The research which is
received from brokers includes such matters as
information on companies, industries, areas of the
economy and market factors. The information
received may or may not be useful to the Fund, and
may or may not be useful to the investment adviser
in servicing other of its accounts.
Bruce and Co. attempts to evaluate the
overall reasonableness of the commissions paid by
the Fund by attempting to negotiate commissions
which are within a reasonable range, in the light
of any knowledge available as to the levels of
commissions being charged, but keeping in mind the
brokerage and research services provided. Bruce
and Co. will not execute portfolio transactions
for the Fund and does not expect to receive
reciprocal business from dealers who do so.
Purchases and sales of securities which are not
listed or traded on a securities exchange will
ordinarily be executed with primary market makers,
acting as principals, except where better prices
or execution may otherwise be obtained.
(d) Bruce and Co. is not aware that any of
the Fund's brokerage transactions during the last
fiscal year were placed pursuant to an agreement
or understanding with a broker or otherwise
through an internal allocation procedure because
of research services provided.
Capital Stock and Other Securities
Bruce Fund, Inc. has only one class of
authorized stock, Capital Stock, $1.00 par value;
its Articles of Incorporation authorize the
Issuance of 200,000 such shares. Stockholders are
entitled to one vote per full share, to such
distributions as may be declared by the Fund's
Board of Directors out of funds legally available,
and upon liquidation to participate ratably in the
assets available for distribution. The holders
have no preemptive rights. All shares have
non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for
the election of directors can elect 100% of such
directors if they choose to do so, and, in such
event, the holders of the remaining shares so
voting will not be able to elect any directors.
The shares are redeemable (as described in the
Prospectus) and are transferable. All shares
issued and sold by the Fund will be fully paid and
non-assessable. There are no material obligations
or potential liabilities associated with ownership
of Fund stock. There are no conversion rights and
no sinking fund provisions.
Purchase, Redemption and Pricing of Stock Being
Offered
See Prospectus, "Purchase of Securities Being
Offered" and "Redemption or Repurchase". There
are no underwriters and no distribution of
expenses of offering price over the net amount
invested. There is no difference in the price at
which securities are offered to public and
individual groups and the directors, officers and
employees of the Fund or its adviser.
Tax Status
The Fund intends to distribute all taxable
income to its shareholders and otherwise comply
with the provisions of the Internal Revenue Code
applicable to regulated investment companies.
Therefore, no provision will be made for Federal
income taxes since the Fund has elected to be
taxed as a "regulated investment company".
On dividends from ordinary income and
short-term gains the stockholders pay income tax
in the usual manner. The dividend-received
exclusion does not apply to capital gains
distributions. The dividend-received exclusion is
subject to proportionate reduction if the
aggregate dividends received by the Fund from
domestic corporations in any year is less than 75%
of the Fund's gross income exclusive of capital
gains. Statements will be mailed to shareholders
in January of the year after the close of the
fiscal year showing the amounts paid and the tax
status of the year's dividends and distribution.
The dividends and long term capital gains are
taxable to the recipient whether received in cash
or reinvested in additional shares. Federal
legislation requires the Fund to withhold and
remit to the Treasury a portion (20%) of dividends
payable if the shareholder fails to furnish his
taxpayer identification number to the Fund, if the
Internal Revenue Service notifies the Fund that
such number, though furnished, is incorrect, or if
the shareholder is subject to withholding for
other reasons set forth in Sec. 3406 of the
Internal Revenue Code.
Underwriters
The Fund will continuously offer public
distribution of its securities. There are no
underwriters with respect to such public
distributions.
Financial Statements:
The Financial Statements filed herewith consist
of:
A. Audited Financial Statements as of June
30, 1998, including:
(1) Report of independent public
accountants, dated August 15, 1998.
(2) Schedule of Investments, at
JuneE30, 1998.
(3) Balance Sheet at JuneE30, 1998.
(4) Statement of Operations, for year
ended JuneE30, 1998.
(5) Statement of Changes in Net Assets,
for years ended JuneE30, 1998 and 1997.
(6) Notes to Financial Statements.
Other information respecting Bruce Fund, Inc.
is included in Part C, filed heretofore.
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby
consent to the use of our report dated August 15,
1997, and to all references to our firm included
in or made a part of this Registration Statement
on Form N-1A of Bruce Fund, Inc.
ARTHUR ANDERSEN
LLP
Chicago, Illinois,
October 26, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the 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, 1998, and the related
statement of operations for the year then ended,
the statements of changes in net assets for each
of the two years in the period then ended, and the
financial highlights included in Note G for each
of the five years in the period then ended. 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.
We conducted our audits in accordance with
generally accepted auditing standards. 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,
1998, 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, 1998,
the results of its operations for the year then
ended, the changes in its net assets for each of
the two years in the period then ended, and the
financial highlights for each of the five years in
the period then ended, in conformity with
generally accepted accounting principles.
ARTHUR
ANDERSEN LLP
Chicago, Illinois
August 15, 1998
BRUCE FUND, INC.
SCHEDULE OF INVESTMENTS
June 30, 1998
Common Stocks
(28.48%) 5,000 *Cellular
Tech.
No. of 40,625
Market 2,344
Shares Issue Services
Cost Value
Real Estate
Property- Inv. Trust (1.56%)
Casualty Insurance
(8.21%) 6,000 Capstead
Mortgage 57,320
6,562 RLI Corp. $ 60,900 $50,625
267,012
Cosmetics Total Common
(0.83%) Stocks $551,645
$925,780
514,000 *Chantal
Pharm.
99,944
26,985
Medical
Services (11.21%)
18,137 *InSight
Health
47,294 197,240
12,500 *Atrix
Labs.
92,187
167,187
Energy
Services (5.34%)
37,500 *Team,
Inc.
105,895
173,437
Utilities
(1.26%)
2,600 *Unisource
Energy
47,480
40,950
Telecommunciations
(0.07%)
Bonds (69.17%)
Market
Principal
Cost Value
U.S.
Government (69.17%)
$7,000,000 U.S.
Treasury
"STRIPS",
Bond
Principal,
due
5-15-2018 $1,334,068 $2,248,750
Total Bonds $1,334,068
$2,248,750
Total Investments
(97.65%)
$1,885,713
$3,174,530
Cash and Other
Assets, Less
Liabilities (2.35%)
$76,346
TOTAL NET ASSETS
(100%)
$3,250,876
The accompanying
notes to financial
statements are an
integral part of
this schedule.
*Non-cash income
producing
BRUCE FUND, INC.
BALANCE SHEET
JUNE 30, 1998
ASSETS
Investments, at Market Value (Cost
$1,885,713) $3,174,530
Cash 87,854
Dividends Receivable 3,853
Interest Receivable 736
TOTAL ASSETS $3,266,973
LIABILITIES
Accrued Expenses $ 16,097
TOTAL LIABILITIES 16,097
CAPITAL
Capital Stock (18,548 Shares of $1 Par Value
Capital Stock Issued and Outstanding;
200,000
Shares Authorized) 18,548
Paid-in Surplus 1,862,469
Accumulated Undistributed Net Investment
Income 219,464
Accumulated Net Realized Losses on
Investments ( 138,422)
Net Unrealized Appreciation on Investments 1,288,817
TOTAL CAPITAL (NET ASSETS) 3,250,876
TOTAL LIABILITIES AND CAPITAL $3,266,973
NET ASSET VALUE (Capital) Per Share $ 175.27
The accompanying notes to financial statements are
an integral part of this statement.
BRUCE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
INVESTMENT INCOME
Dividends $ 17,176
Interest 109,845
$ 127,021
EXPENSES
Management Fees $ 29,366
Custodian/Security Transaction 2,335
Directors 200
Transfer Agent Fees 1,822
Legal Fees 502
Audit and Accounting Fees 11,496
Insurance 949
Printing
730
47,400
NET INVESTMENT INCOME 79,621
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net Realized Gains on Investments 116,718
Net Change in Unrealized Appreciation on
Investments 555,931
NET GAIN ON INVESTMENTS 672,649
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $752,270
The accompanying notes to financial statements are
an integral part of this statement.
BRUCE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
OPERATIONS
Net Investment Income $79,621 $84,084
Net Realized Gains (Losses) on Investments 116,718 (87,700)
Net Change in Unrealized Appreciation
on Investments 555,931 158,364
Net Increase in Net Assets Resulting
from Operations $752,270 $154,748
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net Investment Income $(77,341) $(77,188)
CAPITAL STOCK TRANSACTIONS
Proceeds from Shares Issued $39,570 $30,450
Increase from Shares Issued in Reinvested
Distributions 76,550 75,880
Cost of Shares Redeemed (166,035) (121,037)
Decrease in Net Assets Resulting from Capital
Stock Transactions $(49,915) $(14,707)
TOTAL INCREASE $625,014 $62,853
NET ASSETS
Beginning of Year 2,625,862 2,563,009
End of Year (including accumulated undistributed
net investment income of $219,464 and
$217,184,
respectively) $3,250,876$2,625,862
The accompanying notes to financial statements are
an integral part of this statement.
BRUCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
The financial statements of Bruce Fund, Inc.
(the "Fund") have been prepared in conformity with
generally accepted accounting principles ("GAAP")
and reporting practices prescribed for the mutual
fund industry. 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 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 the last 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, 1998, the cost of
investments held was $1,885,713 for both financial
reporting and federal income tax purposes. At
June 30, 1998, gross unrealized appreciation on
investments was $1,413,282 and gross unrealized
depreciation on investments was $(124,465) for
both financial reporting and federal income tax
purposes.
NOTE B - CAPITAL STOCK:
During the years ended June 30, 1998 and June
30, 1997, there were 1,101 and 891 shares
redeemed; 233 and 228 shares were issued and 436
and 550 shares were issued through dividend
reinvestment, respectively.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the year ended June 30, 1998,
purchases and sales of securities with original
maturities of greater than one year were $78,694
and $307,063 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, pays the
compensation of all officers and employees of the
Fund, and pays the cost of all prospectuses and
financial reports (other than those mailed to
current shareholders). During 1998 the investment
adviser also voluntarily absorbed certain
accounting, transfer agent and legal 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 $15,700 in 1998. 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 Net Average 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, 1998, Robert B. Bruce owned
6,983 shares, R. Jeffrey Bruce owned 878 shares,
and James S. Van Pelt, Jr., owned 52 shares of the
Fund. 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. James S. Van Pelt, Jr. is a director of
the Fund.
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.
As of June 30, 1998, the Fund had available
for Federal income tax purposes an unused capital
loss carryover of approximately $138,422 which
expires beginning in the year 2001.
NOTE F - DIVIDEND DISTRIBUTION:
During December 1997, the Fund announced a
dividend from net investment income of $4.28 per
share, aggregating $77,341. These distributions
were payable December 31, 1997 to shareholders of
record on December 30, 1997.
NOTE G - FINANCIAL HIGHLIGHTS:
Selected data for each share of capital stock
outstanding through each year is presented below5:
1998 1997 1996 1995 1994
Net Asset Value, Beginning of Period (B)$138.35$1
34.23 $113.94 $94.04$109.61
Income From Investment Operations
Net Investment Income 4.32 4.42
3.773.402.91
Net Gains or (Losses) on Investments36.88
3.8020.2219.97(11.53)
(both realized and unrealized)
Total From Investment Operations 41.20
8.2223.9923.37(8.62)
Less Distributions
Distribution (from net investment
income) (A) (4.28) (4.10)
(3.70)(3.47)(6.95)
______ ______
______ ______ _____
Total Distributions (4.28) (4.10)
(3.70)(3.47)(6.95)
Net Asset Value, End of Period (C) $175.27
$138.35 $134.23$113.94
$94.04
Total Return 29.77%
6.13%20.81%25.78%(8.84)%
Ratios/Supplemental Data
Net Assets, End of Period ($ million) 3.25
2.632.562.252.06
Ratio of Expenses to Average Net Assets61.59%
1.69%1.78%2.04%1.90%
Ratio of Net Income to Average Net Assets7
2.60%3.29%2.98%3.48%
2.64%
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940
the Registrant certifies that it meets all of the
requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on
its behalf by the undersigned, thereto duly
authorized, in the City of Chicago and State of
Illinois on the 30th day of October, 1998.
BRUCE FUND, INC.
By: _______________________________
Its President and Treasurer
By:________________________________
Its Vice President and Secretary
By:________________________________
A Director
By:________________________________
A Director
_______________________________
1 All persons named in this paragraph (a) assumed the
position held with Fund at either Ocober 17 or 18, 1983
except Mr. Johnson, who was elected to the board of
directors in December 1985.
2 Interested person as defined in the Investment
Company Act of 1940.
3 R. Jeffrey Bruce is the son of Robert B. Bruce.
4In addition to commissions, the Fund
frequently purchases securities from dealers
acting as principals; no commissions are paid on
such transactions which include mark-ups
determined by the seller.
5 Figures are based on average daily shares
outstanding during year, with the following
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.
6 If the Fund had paid all of its expenses
and there had been no management fee waiver by
the investment advisor, this ratio would have
been 2.36% for the year ended June 30, 1994.
The 1996 ratio is based upon total expenses
excluding the loss on defaulted bonds.
7 If the Fund had paid all of its expenses
and there had been no management fee waiver by
the investment advisor, this ratio would
have been 2.18% for the year ended June 30,
1994.
