BRUCE FUND, INC.
20 N. Wacker Drive
Suite 2414
Chicago, Illinois 60606
(312) 236-9160
BRUCE FUND, INC. / PROSPECTUS
Management of the Bruce Fund, a diversified, open-end no-load
management company, attempts to achieve the Fund's objective of
long-term capital appreciation primarily through investments in
common stock and debt securities; income is a secondary
consideration. The Fund may also invest in other securities.
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.
___________________________
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 12, 2000
BRUCE FUND, INC - INVESTMENT SUMMARY
Investment Objective
Bruce Fund's primary investment objective is long-term capital
appreciation. There can be no assurance that the Fund will be
able to achieve its investment objective. Except as otherwise
indicated, the Fund's investment objective and policies may be
changed without a vote of shareholders.
Principal Investment Strategies
The Fund manager (Bruce & Co., Inc.) seeks to achieve the
objective by investing primarily in domestic common stocks, and
bonds, including "zero coupon" government bonds.
The Fund may invest, without restriction, in future interest and
principal of U. S. Government securities, commonly known as "zero
coupon" bonds. The Fund manager attempts to position the Fund
where it sees the best capital appreciation opportunity. Other
debt securities, traded on exchanges or over-the-counter, may be
acquired at substantial discounts from the principal amount,
again if the Fund manager believes a capital appreciation
opportunity is presented. 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.
The Fund invests in domestic common stocks of any capitalization
where the overriding strategy is long-term capital appreciation.
Both growth and value criteria are used to determine and select
those stocks affording capital appreciation potential.
Securities of unseasoned companies may also be acquired from time
to time.
Principal Investment Risks
The Fund is subject to the following principal investment risks:
Interest Rate Risk. The issuers of debt securities, including
"zero coupon" government bonds, are expected to redeem the
securities by payment to the investor of the principal amount at
maturity. However, market interest rates change, causing the
current market value of debt securities at any time to fluctuate.
The value of the Fund's debt securities portfolio may decline
when market interest rates rise. The Fund being able to invest,
without restriction, in future interest and principal of U. S.
Government securities, commonly known as "zero coupon" bonds,
would be primarily sensitive to and affected by interest rate
risk.
Maturity Risk. The longer the maturity of a debt security the
more it fluctuates with changes in interest rates. When interest
rates rise, you can expect the value of long-term bonds to fall
more than those of short-term bonds.
Credit Risk. The risk of loss on a debt security is less than on
an equity security of the same issuer, but there is a risk that
the market price of the debt security may decline below the price
at which it was acquired. There is also a risk 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.
Debt securities, are many times, rated by various credit rating
firms, and the lowering of such ratings can cause the value
of the debt securities to decline.
Liquidity Risk. Securities can become difficult to sell, or less
liquid, for a variety of reasons, such as lack of an active
trading market. The Fund being able to invest in unseasoned
companies, defaulted bonds and debt securities, traded over-the-
counter or at substantial discounts, will be subject to liquidity
issues and risk. The urgency to sell these securities might
result in receiving a price substantially less than anticipated.
Small Cap Investing. The value of securities of smaller, less
well-known issuers, can be more volatile than that of larger
issuers.
Issuer-Specific Changes. The value of an individual security or
particular type of security can be more volatile than the market
as a whole and can perform differently from the value of the
market as a whole.
Stock Market Volatility. Stock markets are volatile and can
decline significantly in response to adverse issuer, political,
regulatory, market, or economic developments. Different parts of
the market can react differently to these developments.
An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Investors must recognize there is a risk of loss of money in
investing in Fund shares, as there is in any investment seeking
capital appreciation, including securities issued by the U.S.
Treasury.
Investor Profile
The Fund is intended for those investors who have a high
tolerance for risk and a long-term time horizon. Shareholders
should be comfortable with fluctuating share prices as well as
the Funds' other investment risks.
Performance
The following chart and table provide some indication of the
risks of investing in the Fund by illustrating how the Fund has
performed from year to year, and comparing this information to a
broad measure of market performance. Past performance is not
necessarily an indication of future performance.
Total Returns for Years Ending December 31
1990 -1.07%
1991 1.42%
1992 10.62%
1993 19.44%
1994 -16.08% (chart)
1995 64.78%
1996 -2.32%
1997 30.24%
1998 -6.02%
1999 -19.78%
For the period included in the bar chart, the Fund's highest
return for a calendar quarter was 25.05% (the 2nd fiscal quarter
of 1996), and the Fund's lowest return for a calendar quarter
was -26.00% (the 1st fiscal quarter of 1991). The return for the
quarter ended September 30, 2000 was 8.62%.
Average Annual Total Returns Lehman Long-
Term Treasury Russell 2000
For periods ended December 31, 1999 Fund Bond Index Growth Index
One Year -19.78% -8.74% 43.09%
Five Years 9.59% 9.14% 18.99%
Ten Years 5.81% 8.64% 13.51%
The Lehman Long-Term Treasury Bond Index is an unmanaged index of
U.S. Treasury issues with maturities greater than 10 years.
The Russell 2000 Growth Index is an unmanaged index comprised of
common stocks of 2000 small U.S. companies with higher than
average forecasted growth orientation. Index returns assume
reinvestment of dividends and, unlike the Fund's returns, do not
reflect any fees or expenses.
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 2000 fiscal year.
Shareholder Transaction Expenses
Sales Load Imposed on
Purchases0.00%
Sales Load Imposed on
Reinvested Dividends0.00%
Contingent Deferred Sales
Load0.00%
Redemption Fees0.00%
Exchange Fees0.00%
Annual Fund Operating Expenses
Management Fees
1.00%
12b-1 Fees
0.00%
Other Expenses
0.71%
Total Operating Expenses
1.71%
This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual
funds.
This Example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares at
the end of those periods. The Example also assumes that your
investment has a 5% return each year, that dividends and
distributions are reinvested, and that the Fund's operating
expenses remain the same each year. Although the actual expenses
may be higher or lower, based on these assumptions your costs
would be:
1 year
3 years
5 years
10 years
$175
$543
$936
$2,038
Investment Details
The investment objective and principal strategies described above
may be changed at any time without shareholder approval. There is
no minimum or maximum percentage of Fund assets required to be
invested in any type of security. 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). When the Fund is
so invested it may not achieve its objective. 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.
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, such as "zero coupon"
bonds). Management may, by reason of the exception to this
restriction, invest assets of the Fund without limit in such
Government securities.
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.
Management, Organization and Capital Structure
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. Bruce
and Co., presently manages no other mutual fund or investment
company. 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 is president, treasurer and portfolio manager of
the Fund, which he has managed since October 1983. Mr. Bruce has
worked as an independent investment manager since 1974.
Bruce and Co.'s compensation for its services to the Fund are
calculated 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 $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. The
adviser, Bruce and Co., received $24,272 during the 2000 fiscal
year (1.00% of average net assets)
The Fund 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
"Redemption of Fund 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.
Determination of Net Asset Value (NAV)
Fund shares are priced at net asset value (NAV), which management
determines 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.
Purchasing Fund Shares
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 Advisers, Inc.,
431 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. Shares will be bought at the next NAV, as
applicable, calculated after the investment is received in
proper form. 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 no longer
issued.
Redemption of Fund Shares
Shareholders have the right to request the Fund to redeem their
shares by depositing their certificates at Unified Advisers, Inc.
with a written request addressed to Unified Advisers, Inc. 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.
Shares will be sold at the next NAV calculated after the
redemption request is received in proper form. It is suggested
that all redemption requests by mail be sent Certified Mail with
return receipt.
The redemptionprice is the net asset value per share determined
as described previously. 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.
Dividends, Distributions and Tax Consequences
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. The
dividends and long-term capital gains distributions are
taxable to the recipient whether received in cash or reinvested
in additional shares. Long-term capital gains distributions will
be taxed to the individual Fund shareholder as such, regardless
of the length of time the Fund shares have been held.
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.
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.
Pending Legal Proceedings
There are no legal proceedings to which the Fund or the adviser
is a party.
Financial Highlights
The financial highlights table is intended to help you
understand the Fund's financial performance for the past five
years. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the
rate that an investor would have earned [or lost] on an
investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by
Arthur Andersen L.L.P., whose report, along with the Fund's
financial statements, are included in the Statement of Additional
Information and in the annual report to shareholders, either or
both of which are available upon request.
Selected data for each share of capital stock outstanding
through each year is presented below :
2000 1999 1998 1997 1996
Net Asset Value, Beginning of Period (B)
$135.51 $175.27 38.35 $134.23 $113.94
Income From Investment Operations
Net Investment Income 4.41 4.02 4.32 4.42 3.77
Net Gains or(Losses)on Invest(3.77)(26.18) 36.88 3.80 20.22
(both realized and unrealized)
Total From Investment Operations0.64 (22.16) 41.20 8.22 23.99
Less Distributions
Distribution (from net investment
income) (A) (4.50) (4.40) (4.28) (4.10) (3.70)
Distribution(from net capital gain(A)
(3.50) (13.20) - - -
Total Distributions (8.00) (17.60) (4.28) (4.10) (3.70)
Net Asset Value, End of Period (C)
$128.15 $135.51 $175.27 $138.35 $134.23
Total Return 1.44% (13.46%) 29.77% 6.13% 20.81%
Ratios/Supplemental Data
Net Assets, End of Period ($ million)
$2.52 $2.60 $3.25 $2.63 $2.56
Ratio of Expenses to Average Net Assets
1.71% 1.64% 1.59% 1.69% 1.78%
Ratio of Net Income to Average Net Assets
3.55% 2.59% 2.60% 3.29% 2.98%
Portfolio Turnover Rate
22.26% 34.78% 2.60% 4.22% 11.83%
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.
The 1996 ratio is based upon total expenses excluding the loss
on defaulted bonds. Ratio of
expenses to average net assets before reimbursement for 1999 and
2000 was 2.01% and 2.18%,
respectively.
ORDER FORM FOR PURCHASING BRUCE FUND SHARES
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 ADVISERS, INC.
ORDER FORM FOR PURCHASING BRUCE FUND SHARES
(Minimum initial investment of $1,000; $500, thereafter)
Unified Advisers, Inc. Date:
431 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 Advisers, Inc..
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:
_________________________________
(please print)
Name:
_________________________________
Street:
_________________________________
Street:
_________________________________
City: ___________ State: _________
Zip:_____
City: ___________ State: _________
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 12, 2000
BRUCE FUND, INC.
BRUCE FUND, INC.
20 North Wacker Drive
Chicago, Illinois 60606
Additional information about the Fund may be found in the
Statement of Additional Information, and in shareholder reports.
Shareholder inquiries may be made by calling the Bruce Fund at 1-
800-347-8607. The Statement of additional Information contains
more information on Fund investments and operations. The
semiannual and annual shareholder reports contain a discussion of
the market conditions and the investment strategies that
significantly affected the Fund's performance during the last
fiscal year, as well as a listing of portfolio holdings and
financial statements. These and other fund documents may be
obtained without charge from the following sources:
BY PHONE: Call Bruce Fund at 1-800-347-8607
BY MAIL: Bruce Fund, Inc. at the above address
or
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-0102
(a duplication fee is charged)
IN PERSON: Public Reference Room
Securities and Exchange Commission
Washington, D.C.
(call 1-202-942-8090 for more information)
BY ELECTRONIC REQUEST: at the following email address:
[email protected] (a duplication fee is
charged)
The Statement of Additional Information is incorporated by
reference into this prospectus (is legally a part of this
prospectus).
Investment Company Act File Number: 811-1528
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. Certain information is incorporated
by reference to the Report to Shareholders dated July 31, 2000.
The Report to Shareholders is available, without charge, upon
request by calling 1-800-347-8607. This Statement of
Additional Information relates to the Prospectus dated October
12, 2000.
Date: October 12, 2000
TABLE OF CONTENTS
Fund History 1
Classification: 1
Investment Strategies and Risk 1
Fund Policies 1
Management of the Fund 3
Code of Ethics 4
Control Persons and Principal Holders of Securities: 4
Investment Advisory and Other Services: 4
Brokerage Allocation: 6
Capital Stock and Other Securities: 8
Purchase, Redemption and Pricing of Shares: 8
Taxation of the Fund 8
Underwriters: 9
Financial Statements as of June 30, 2000 9
STATEMENT OF ADDITIONAL INFORMATION
Fund History: Bruce Fund, Inc. is a Maryland corporation
incorporated on June 20, 1967. The Fund's only business during
the past five years has been an investment company. The name of
the Fund was changed to BRUCE FUND, INC. in October 1983.
Classification: The Fund is an open end, diversified,
management investment company.
Investment Strategies and Risks: The principal strategies
followed in seeking to achieve the Fund's primary investment
objective of long term capital appreciation are described in the
prospectus. 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 if the Fund
management believes such investments offer possibilities of
capital appreciation. The Fund may also invest in securities
convertible into common stocks, preferred stocks, other debt
securities and warrants. The Investment Restrictions, to which
the Fund is subject, limit the percentage of total fund assets
that 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.
Fund 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.
MANAGEMENT OF THE FUND
The Fund is managed by its officers and directors. It has no
advisory board.
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
(1) *Robert B. Bruce
Age 68
Business Experience
for Last Five Years
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) Ward M. Johnson
Age 63
l998 to present - Publisher "Florida
Golfer"magazine; 1995 to 1998-
Manufacturer's agent representing
manufacturers of housewares, home
furnishings, consumer electronics
products, and office equipment.
(3) John R. Nixon
Age 59
Member, Chicago Board Options
Exchange, Trader
Mr. Bruce has been a director since l983; Mr. Ward M.
Johnson was elected in December, l985 and Mr. Nixon was elected
in December, 1999.
*R. Jeffrey Bruce is Vice President and Secretary of the
Fund, and is Vice President of Bruce and Co., the Fund manager.
He has held these positions since 1983. R. Jeffrey Bruce is the
son of Robert B. Bruce. (* Indicates Affiliated Person)
Compensation Table: No director or officer receives
compensation from the Fund. Robert B. Bruce and R. Jeffrey Bruce
are officers and stockholders of the Fund manager, Bruce and Co.,
which is paid a management fee by the Fund. There are no
concessions to directors or affiliated persons who invest in Fund
shares.
Ward M. Johnson $100.00
John R. Nixon $100.00
Code of Ethics
The Fund and the Fund manager have adopted a Code of Ethics
designed to ensure that the interests of fund shareholders come
before the interests of the people who manage the fund. Among
other provisions, the Code of Ethics requires all investment
personnel with access to information about the purchase or sale
of securities by the fund to report to the Board of Directors all
transactions in covered securities, which is reviewed quarterly.
Control Persons and Principal Holders of Securities
(a) Robert B. Bruce is believed by management to be the only
person who owns 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. 3-601
through 3-603.
(b) Robert B. Bruce owned 42.5%, and R. Jeffrey Bruce owned
5.9%, of the outstanding shares of the Fund at June 30, 2000. No
other person is known to the Board of Directors of the Fund to be
the beneficial owner of more than 5%.
(c) Robert B. Bruce, President of the Fund and principal owner
of Bruce and Co., investment adviser to the Fund, presently owns
8,384 shares of the Fund, and his wife owns 538 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 the son of Robert B. 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 2000 was
$24,272, during 1999 was $29,779, and during 1998 was $29,366.
(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, 38 Fountain Square
Plaza, Cincinnati, Ohio 45263. 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
Advisers, Inc., 431 N. Pennsylvania Street, Indianapolis, Indiana
46204-1897; 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 Advisers, Inc. 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, 2000.
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:
2000
$2,000
1999
$ 500
1998
$4,000
The Fund frequently purchases and sell securities from
dealers acting as principals; no commissions are paid on such
transactions but do include mark-ups (or mark-downs).
(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 Shares
See Prospectus, "Purchasing Fund Shares " and "Redemption of
Fund Shares". 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.
Taxation of the Fund
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, 2000,
including:
(1) Report of independent public accountants, dated July 31,
2000.
(2) Schedule of Investments.
(3) Balance Sheet.
(4) Statement of Operations, for year ended June 30, 2000.
(5) Statement of Changes in Net Assets, years ended June 30,
2000 and 1999.
(6) Notes to Financial Statements.
Other information respecting Bruce Fund, Inc. is included in Part
C, filed heretowith.
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, 2000, 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 auditing
standards generally accepted in the 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, 2000, 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, 2000, 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
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 31, 2000
July 31, 2000
Management Discussion and Analysis
The Bruce Fund shares produced a total return of 1.44% for
the year ended June 30, 2000, compared to a total return of 5.97%
for the S&P 500 Index for the same period.
Stocks in the portfolio were down slightly overall, while
the bonds were up slightly for the year. Interest rates declined
in the period, resulting in gains for the bonds held throughout
the entire year. Two corporate convertible notes were added to
take advantage of their high current yields and yield to
maturities. The stock market indices proved to be very volatile
and we believe still to present unacceptable levels of risk.
Management would like to make clear that, as stated in the
Prospectus, the Fund's objective is long-term capital
appreciation from stocks and/or bonds. Out-of-favor, turnaround,
and distressed situations are emphasized, as well as growth
stocks.
Shareholders are invited to use the toll-free number (800)
347-8607 to obtain any Fund information.
Graph
Year Bruce Fund S&P 500
0 10,000 10,000
1 7,497 10739
2 8220 12179
3 10320 13039
4 9408 14034
5 11833 17607
6 14295 22282
7 15172 30014
8 19688 39064
9 17038 46589
10 17282 49476
Bruce Fund Average Annual Total Return
One Year 1.44%
Five Years 7.87%
Ten Years 5.62%
BRUCE FUND, INC.
BALANCE SHEET
JUNE 30, 2000
ASSETS
Investments, at Market Value (Cost $2,370,167) $2,479,967
Cash 78,943
Dividends Receivable 442
Interest Receivable 6,428
Prepaid Insurance 522
TOTAL ASSETS $2,566,302
LIABILITIES
Accrued Expenses $ 20,663
Payable for Securities Purchased 20,725
TOTAL LIABILITIES $41,388
CAPITAL
Capital Stock (19,703 Shares of $1 Par Value
Capital Stock Issued and Outstanding; 200,000
Shares Authorized) $ 19,703
Paid-in Surplus 1,998,431
Accumulated Undistributed Net Investment Income 220,911
Accumulated Net Realized Gains on Investments 179,069
Net Unrealized Appreciation on Investments 109,800
TOTAL CAPITAL (NET ASSETS) $2,524,914
TOTAL LIABILITIES AND CAPITAL $2,566,302
NET ASSET VALUE (Capital) Per Share $ 128.15
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, 2000
INVESTMENT INCOME
Dividends $ 1,446
Interest 127,190
$ 128,636
EXPENSES
Management Fees $ 24,272
Custodian/Security Transaction 1,825
Directors 193
Transfer Agent Fees 10,755
Legal Fees 548
Audit and Accounting Fees 14,150
Insurance 1,051
Printing 342
Total Expenses Before Expense Reimbursement 53,136
Expense Reimbursement (11,242)
Net Expenses 41,894
NET INVESTMENT INCOME 86,742
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net Realized Gains on Investments 239,399
Net Change in Unrealized Appreciation on Investments
(296,221)
NET LOSS ON INVESTMENTS (56,822)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $29,920
The accompanying notes to financial statements are an integral
part of this statement.
BRUCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
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 ("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, 2000, the cost of investments held was $2,370,167 for both
financial reporting and federal income tax purposes. At June 30,
2000, gross unrealized appreciation on investments was $390,822
and gross unrealized depreciation on investments was $(281,022)
for both financial reporting and federal income tax purposes.
NOTE B - CAPITAL STOCK:
During the years ended June 30, 2000 and June 30, 1999,
there were 990 and 1,950 shares redeemed; 232 and 398 shares
issued and 1,320 and 2,145 shares issued through dividend
reinvestment, respectively.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the year ended June 30, 2000, purchases and sales of
securities with original maturities of greater than one year were
$529,728 and $729,922 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 2000 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 $11,242
in 2000. 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, 2000, Robert B. Bruce owned 8,384 shares and
R. Jeffrey Bruce owned 1,166 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 1999, the Fund announced a dividend from net
investment income of $4.50 per share, aggregating $82,619 and a
long term capital gain distribution of $3.50 per share
aggregating $64,259. These distributions were payable December
31, 1999 to shareholders of record on December 30, 1999.
BRUCE FUND, INC.
SCHEDULE OF INVESTMENTS
June 30, 2000
Common Stocks (19.72%)
No. of Market
Shares Issue Cost Value
Property-Casualty Insurance (2.15%)
1,562 RLI Corp. $ 14,495 $ 54,280
Cosmetics (0.11%)
282,000 *Chantal Pharm. 23,620 2,820
Medical Services (12.95%)
23,137 *InSight Health 73,762 151,835
16,100 *Atrix Labs. 128,214 150,938
5,000 *Serologicals 20,725 24,063
Energy Services (2.97%)
37,500 *Team, Inc. 105,895 75,000
Utilities (1.54%)
2,600 Unisource Energy 47,480 39,000
Total Common
Stocks $414,191 $497,936
Bonds (78.50%)
Market
Principal Cost Value
U.S. Government (70.89%)
$2,000,000 U.S. Treasury
"STRIPS", Bond
Principal, due
5-15-2018 $429,021 $661,875
$4,000,000 U.S. Treasury
"STRIPS", Bond
Principal, due
11-15-2026 1,011,035 825,000
$1,500,000 U.S. Treasury
"STRIPS",
Coupon, due
2-15-2027 289,233 303,281
Corporate Convertibles (7.61%)
$200,000 Res-Care 6% due
12-1-2004 125,750 100,000
$250,000 Viropharma 6%
due 3-1-2007 100,937 91,875
Total Bonds $1,955,976 $1,982,031
Total Investments (98.22%) $2,370,167 $2,479,967
Cash and Other Assets, Less
Liabilities (1.78%) $44,947
TOTAL NET ASSETS (100%) $2,524,914
The accompanying notes to financial statements are an
integral part of this schedule.
*Non-cash income producing.
BRUCE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
2000 1999
OPERATIONS
Net Investment Income $ 86,742 $ 77,091
Net Realized Gains on Investments 239,399 377,850
Net Change in Unrealized Appreciation
on Investments (296,221) (882,797)
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 29,920 $(427,856)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net Investment Income (82,619) $ (79,767)
Distributions from Net Capital Gains (64,259) (239,302)
Decrease in Net Assets Resulting from
Distributions to Shareholders $(146,878) $(319,069)
CAPITAL STOCK TRANSACTIONS
Proceeds from Shares Issued $ 30,650 $ 59,311
Increase from Shares Issued in Reinvested
Distributions 145,440 316,024
Cost of Shares Redeemed (128,037) (285,467)
Increase in Net Assets Resulting from
Capital Stock Transactions $ 48,053 $ 89,868
TOTAL INCREASE (DECREASE) $ (68,905) $ (657,057)
NET ASSETS
Beginning of Year 2,593,819 3,250,876
End of Year (including accumulated undistributed
net investment income of $220,911 and $216,788,
respectively) $2,524,914 $2,593,819
The accompanying notes to financial statements are an integral
part of these statements.
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, 2000, 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 auditing
standards generally accepted in the 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, 2000, 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, 2000, 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
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 31, 2000
NOTE G - FINANCIAL HIGHLIGHTS:
Selected data for each share of capital stock outstanding
through each year is presented below(2) :
2000 1999 1998 1997 1996
Net Asset Value, Beginning of Period ( B)
$135.51 $175.27 $138.35 $134.23 $113.94
Income From Investment Operations
Net Investment Income 4.41 4.02 4.32 4.42 3.77
Net Gains or (Losses) on Investments
(3.77) (26.18) 36.88 3.80 20.22
(both realized and unrealized)
Total From Investment Operations
0.64 (22.16) 41.20 8.22 23.99
Less Distributions
Distribution (from net investment income) (A)
(4.50) (4.40) (4.28) (4.10) (3.70)
Distribution (from net capital gain(A)
(3.50) (13.20) --- --- ---
Total Distributions (8.00) (17.60) (4.28) (4.10) (3.70)
Net Asset Value, End of Period (C)
$ 128.15 $ 135.51 $ 175.27 $ 138.35 $134.23
Total Return 1.44% (13.46%) 29.77% 6.13% 20.81%
Ratios/Supplemental Data
Net Assets, End of Period ($ million)
$ 2.52 $ 2.60 $ 3.25 $ 2.63 $ 2.56
Ratio of Expenses to Average Net Assets(3)
1.71% 1.64% 1.59% 1.69% 1.78%
Ratio of Net Income to Average Net Assets
3.55% 2.59% 2.60% 3.29% 2.98%
Portfolio Turnover Rate
22.26% 34.78% 2.60% 4.22% 11.83%
(2)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.
(3)The 1996 ratio is based upon total expenses excluding
the loss on defaulted bonds. Ratio of expenses to
average net assets before reimbursement for 1999 and 2000 was
2.01% and 2.18%, 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 Advisers, Inc.
Indianapolis, Indiana
Counsel
McBride Baker & Coles
Chicago, Illinois
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
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 12th day of October, 2000.
BRUCE FUND, INC.
By: __Robert B. Bruce_____________
Its President and Treasurer
By:__R. Jeffrey Bruce_______________
Its Vice President and Secretary
By:___W. Martin Johnson_____________________________
A Director
By:___John R. Nixon_____________________________
A Director
ARTHUR ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
of our report dated July 31, 2000, and to all references to our
Firm included in or made a part of this Registration Statement on
Form N-lA of Bruce Fund, Inc.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 10, 2000
