<PAGE>
- ----------------------------------
BERGSTROM
CAPITAL
CORPORATION
- ----------------------------------
1996 ANNUAL REPORT
AND NOTICE OF
STOCK REPURCHASE PROGRAM
Listed: American Stock Exchange (Ticker symbol: BEM)
Transfer Agent, Registrar and Custodian: State Street Bank and Trust
Company, Boston, Massachusetts
Independent Auditors: Deloitte & Touche LLP, Boston, Massachusetts
Legal Counsel: Howard, Rice, Nemerovski, Canady, Falk & Rabkin PC,
San Francisco, California
- --------------------------------------------------------------
[LOGO OF RECYCLED PAPER APPEARS HERE]
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTICE TO STOCKHOLDERS OF 1997 STOCK REPURCHASE PROGRAM
FEBRUARY 10, 1997
On February 10, 1997, the Board of Directors authorized Bergstrom Capital
Corporation to purchase, on the American Stock Exchange, up to 100,000 shares
of its capital stock, or 9.0% of the outstanding shares. Purchases will be
made at market prices prevailing at the time of purchase, but in no event will
purchases be made at prices in excess of the then current net asset value per
share. The decision to authorize the repurchase of a limited number of shares
was made because of the discount from net asset value at which the Company's
capital stock is currently trading. On February 7, 1997 the Company's capital
stock had a net asset value per share of $144.93, and the closing price on the
American Stock Exchange was $119.50. There is no assurance that the Company
will make any repurchases, or if made, that any repurchases will reduce any
market discount.
The February 1997 authorization is in addition to the authorization by the
Board of Directors in February 1996 (previously reported to stockholders) to
purchase up to 50,000 shares of the Company's capital stock. At February 7,
1997 purchases of 43,400 shares for an aggregate price of $5,115,404 had been
made under the 1996 authorization. Purchases under the 1996 authorization will
be completed before purchases under the 1997 authorization commence.
As a consequence of the Company repurchasing shares (which will be retired
and restored to the status of authorized but unissued shares), the remaining
outstanding shares of capital stock of the Company will have an increased net
asset value per share and any earnings or loss per share will increase.
Repurchases by the Company will decrease the total assets of the Company and,
therefore, will likely have the effect of increasing the Company's expense
ratio. Interest on any borrowings made to finance such purchases will increase
the Company's expenses.
Repurchases will reduce the assets of the Company available for investment
and the number of shares outstanding for trading in the market. Repurchases by
the Company will also increase the equity interest held by officers and
directors of the Company and their associates (currently approximately 31.0%
of the outstanding capital stock of the Company). The influence and control of
such officers and directors over the Company will thus increase, particularly
that of Erik E. Bergstrom and his associates, who own approximately 29.4% of
the Company's capital stock. Erik E. Bergstrom controls the Company's
investment adviser.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTICE OF IMPORTANT FEDERAL INCOME TAX INFORMATION
It is the presently declared policy of the Board of Directors, which is
subject to review by the Board of Directors from time to time, that in any
year in which the Company is taxed as a regulated investment company all or a
portion of the net long-term capital gains of the Company for such year may be
retained by the Company, and if such gains are retained taxes thereon would be
paid by the Company and appropriate credit therefore allowed to the
stockholders of the Company, all as provided in Section 852(b)(3)(D) of the
Internal Revenue Code. Stockholders of record on December 31 of such year
would be required to include in their income tax returns their share of the
Company's net long-term capital gains retained and take credit for the tax
paid on their behalf by the Company. Stockholders of record on December 31 of
such year should increase the tax basis of their stock by the excess of their
share of the net long-term capital gains retained over the tax paid on their
behalf. On or about February 1 following the end of such year the Company
would send Form 2439, Notice to Shareholders of Undistributed Capital Gains,
to stockholders of record on December 31 of such year. For the years 1980
through 1984, 1986, 1987, 1989, and 1991 through 1995, the Company retained
all or a portion of the net long-term capital gains realized. For the years
1985, 1988 and 1990 all of the net long-term capital gains realized were
distributed.
For the year 1996 the Company has retained a portion of the net long-term
capital gains realized ($9.14813 per share) and has paid the federal income
tax thereon ($3.20185 per share) on behalf of its stockholders of record on
December 31, 1996. The Company has sent Form 2439, Notice to Shareholders of
Undistributed Capital Gains, to stockholders of record on December 31, 1996.
If you owned shares on December 31, 1996 registered in the name of a broker or
nominee you should contact the broker or nominee for your copies of Form 2439
which they are required to send to you.
The portion of the net long-term capital gains realized during the year 1996
which was not retained was distributed as a part of the dividend paid on
September 20, 1996.
A Form 1099 was mailed in January 1997 to all stockholders of record on the
dividend record date in 1996 setting forth the specific amounts to be included
in their 1996 tax returns.
NOTICE OF DIVIDENDS PAID DURING THE YEAR 1996
<TABLE>
<CAPTION>
DIVIDEND DIVIDEND FROM
FROM NET LONG-TERM TOTAL
1996 NET CAPITAL GAINS PAYMENTS
PAYMENT INVESTMENT REALIZED IN PER
RECORD DATE DATE INCOME 1996 SHARE
----------- ------- ---------- ------------- --------
<S> <C> <C> <C> <C>
8-22-96 9-20-96 $.5768 $6.3357 $6.9125*
====== ======= ========
</TABLE>
* Composed of $3.00 paid in cash and $3.9125 paid by an in-kind
distribution of The Adams Express Company common stock.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
505 Madison Street, Suite 220
Seattle, Washington 98104
February 10, 1997
Dear Fellow Stockholders:
Please refer to the Notice of Important Federal Income Tax Information and
the Notice of Dividends Paid During The Year 1996 in this report regarding the
retention of net long-term capital gains realized in 1996 and the details of
the dividend paid in 1996. No predictions can be made as to the amounts of
future dividends since the amount of dividends paid is necessarily dependent
on the Company's future net investment income and other factors.
During the year 1996 the Company's net assets increased from $149,357,224 to
$151,427,077 which is an increase of $2,069,853. This increase in net assets
is after payment by the Company of $7,819,420 in dividends ($6.9125 per share
on September 20, 1996). This increase is also after the repurchase of stock
during the year 1996 for $6,066,937. The increase in net assets, before
deducting the payment of dividends and the repurchase of stock, was
$15,956,210 which was composed of net investment income of $652,522, realized
gain from the sale of investments of $13,780,358 (after deducting $3,561,094
in income taxes paid on behalf of stockholders), and an increase in unrealized
appreciation of $1,523,330.
The per share net asset value (based on the number of shares outstanding at
the end of each period) increased from $128.35 on December 31, 1995 to $136.15
on December 31, 1996. After adjustment for the dividends and the federal
income tax on net long-term capital gains retained, which tax was paid on
behalf of the Company's stockholders, the per share net asset value increased
14.0%. The Company's performance for the year 1996 was affected by the
decrease in the value of the Company's investment in the securities of Amgen,
Inc. Excluding the value of the Company's investment in the securities of
Amgen, Inc., the per share net asset value increased 19.4% during the year
1996. During the same period the Dow Jones Industrial Average, adjusted for
dividends, increased 29.5% and the Standard & Poor's 500 Stock Average,
adjusted for dividends, increased 23.0%. The per share net asset value on
Friday, February 7, 1997 was $144.93.
The value of the Company's investment in securities of Amgen, Inc. has
increased since the date of acquisition relative to the Company's other
assets, causing the Amgen, Inc. securities to account for 13.9% of the
Company's total assets on December 31, 1996. The investment of a substantial
percentage of the Company's assets in the securities of a single issuer or
industry exposes the Company to a greater risk of loss resulting from
unfavorable price movements or market conditions relating to such issuer or
industry. To help reduce this risk, the Company has been selling shares of
Amgen, Inc. since the third quarter of 1992. On September 30, 1992 the Company
owned 1,240,000 shares of Amgen, Inc. (as adjusted for the 2 for 1 stock split
on August 16, 1995). On December 31, 1996 the Company owned 500,000 shares of
Amgen, Inc. long and had sold 90,000 shares of Amgen, Inc. short (the short
position was closed in January 1997), for a net position of 410,000 shares.
This is a reduction of 66.9% since September 30, 1992.
On February 26, 1996 the Company's Board of Directors authorized the Company
to purchase, on the American Stock Exchange, up to 50,000 shares of its
capital stock at market prices not in excess of the then current net asset
value per share. During the year 1996 the Company purchased 37,800 shares of
its capital stock under this authorization. As of December 31, 1996 the
Company had 12,200 shares remaining under this authorization.
Please refer to the Notice to Stockholders of 1997 Stock Repurchase Program
at the beginning of this report regarding the authorization by the Board of
Directors on February 10, 1997 to repurchase an additional 100,000 shares of
capital stock.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
During the year 1996 the Company had total interest and dividend income of
$1,796,528 as compared to $2,293,547 for the year 1995 for a decrease of
$497,019. During the year 1996 operating expenses were $1,144,006 which is a
$35,991 increase from $1,108,015 for year of 1995. The resulting net invest-
ment income of $652,522 for the year 1996 is a decrease from $1,185,532 for
the year 1995. This resulted in a decrease to $.57 per share from $.99 per
share.
During the fourth quarter the following changes were made in the Company's
portfolio of common stocks.
SHARES PURCHASED OR ACQUIRED
20,724 The Adams Express Company (1)
20,000 Allegiance Corp. (2)
4,900 Allergan, Inc.
191,250 Boole & Babbage, Inc. (3)
20,000 Cabletron Systems, Inc. (4)
4,000 Cisco Systems, Inc.
3,000 Citicorp
15,000 Coca Cola Enterprises, Inc.
51,000 Comcast UK Cable Partners Ltd. Cl A Com.
17,000 Doubletree Corp.
6,000 Ericsson L M Tel Co. ADR
3,000 Federated Department Stores, Inc.
5,182 Footstar, Inc. (5)
5,000 General Electric Co.
14,999 Guidant Corp.
11,000 Gulfstream Aerospace Corp.
8,000 Hasbro, Inc.
24,000 Informix Corp.
7,000 Kimberly Clark Corp.
30,000 Latin America Growth Fund, Inc.
50,000 Latin America Investment Fund, Inc.
20,000 Latin American Discovery Fund, Inc.
11,000 Lucent Technologies, Inc.
12,000 MCI Communications Corp.
5,000 MFS Communications, Inc.
12,000 Microsoft Corp. (6)
16,000 Newbridge Networks Corp. (7)
10,000 Olsten, Inc.
1,000 Oracle Corporation
325,000 RCM Growth Equity Fund, Inc.
155,000 RCM International Growth Equity Fund A
175,000 RCM Small Cap Fund
5,000 Snap-On, Inc.
7,000 Tyco International Ltd.
20,000 USA Waste Services, Inc.
SHARES SOLD
20,000 Allegiance Corp.
3,500 Cabletron Systems, Inc. (4)
3,700 Danka Business Systems PLC Sponsored ADR
9,000 Dreyers Grand Ice Cream, Inc.
10,000 Eastman Kodak Co.
3,000 Emerson Electric Co.
43,100 Eskimo Pie Corporation
15,000 Flightsafety International, Inc.
5,182 Footstar, Inc.
4,720 Fresenius Medical Care AG ADR
4,500 Fresenius Medical Care AG Class D Preferred
10,000 Frontier Corp.
4,500 Grace (W. R.) & Co.
11,000 Gulfstream Aerospace Corp.
3,000 Guidant Corp.
19,000 Hercules, Inc.
14,000 Hewlett Packard Co.
10,000 Informix Corp.
20,000 Latin American Discovery Fund, Inc.
13,000 Marriott International, Inc.
15,000 Medaphis Corp.
41,000 Newell Co.
30,000 News Corp. LTD ADR New
35,500 Olsten, Inc.
6,000 Pacificare Health Systems, Inc. Class B
6,000 Proctor & Gamble Co.
375,000 RCM Growth Equity Fund, Inc.
75,000 RCM International Growth Equity Fund A
17,000 Southwest Airlines Co.
6,000 Xerox Corp.
(1) Received 10,724 shares under a dividend reinvestment program and then
purchased 10,000 shares.
(2) Received as a distribution from Baxter International, Inc.
(3) Received as a 3 for 2 stock split.
(4) Sold 3,500 shares and then purchased 10,000 shares and then received
10,000 shares as a 2 for 1 stock split.
(5) Received as a distribution from Melville Corporation.
(6) Received as a 2 for 1 stock split.
(7) Received 12,000 shares as a 2 for 1 stock split and then purchased
4,000 shares.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
OTHER CHANGES
The name of Melville Corporation was changed to CVS Corporation.
The cost basis of Convertible Holdings, Inc. Capital Shares was increased
by $231,455 for the long-term capital gains retained less the federal income
tax paid thereon.
The Company does not have a dividend reinvestment program. The Company has
considered this over the years and has determined that the cost of such a pro-
gram would not be commensurate with the benefit. The Company's policy of re-
taining all or a portion of the net long-term capital gains in certain years
accomplishes some of the same goals as would a dividend reinvestment program.
The Company's shares of capital stock are traded on the American Stock Ex-
change and are identified by the stock ticker symbol BEM. The net asset value
per share as of Friday's close of business is published each Saturday in
Barrons, each Sunday in the New York Times, and each Monday in the Wall Street
Journal and certain other publications under "Closed-End Funds".
Your Company welcomes questions or comments from stockholders. If you wish
to communicate with the Company's transfer agent, State Street Bank and Trust
Company, the address is P.O. Box 8200, Boston, Massachusetts 02266--8200 and
the telephone number is 1-800-426-5523.
Yours very truly,
/s/ William L. McQueen
William L. McQueen
President
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (see accompanying schedule) (Note 1):
Short-term investments (cost $6,165,000) $ 6,165,000
Common stocks (cost $71,419,438) 147,602,993
------------
TOTAL INVESTMENTS (cost $77,584,438) 153,767,993
Cash 5,629
Receivable for securities sold 255,000
Receivable from broker for proceeds on short sales 5,495,312
Interest and dividends receivable 339,520
Other assets 13,405
------------
TOTAL ASSETS 159,876,859
------------
LIABILITIES:
Securities sold short, at value (see accompanying schedule)
(proceeds $5,495,312) (Note 1) 4,893,750
Advisory fee payable (Note 5) 63,830
Payable for securities purchased 35,764
Federal income tax payable (Note 2) 3,436,464
Other accrued expenses 19,974
------------
TOTAL LIABILITIES 8,449,782
------------
NET ASSETS applicable to 1,112,200 outstanding shares of capi-
tal stock equivalent to $136.15 per share on December 31, 1996
(Note 3) $151,427,077
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 652,522 $ 1,185,532
Realized gain on investments 13,780,358 9,642,002
Increase in unrealized appreciation 1,523,330 34,864,765
------------ ------------
Net increase in net assets resulting from opera-
tions 15,956,210 45,692,299
------------ ------------
DIVIDENDS TO STOCKHOLDERS:
From net investment income (652,522) (1,185,532)
From net realized gain on investments (7,166,898) (4,664,968)
------------ ------------
Total dividends to stockholders ($6.9125 per
share--1996;
$5.00 per share--1995) (7,819,420) (5,850,500)
------------ ------------
COST OF SHARES OF BERGSTROM CAPITAL CORPORATION
STOCK
PURCHASED (51,500 SHARES--1996; 49,100 SHARES--
1995) (6,066,937) (5,164,844)
------------ ------------
TOTAL INCREASE IN NET ASSETS 2,069,853 34,676,955
NET ASSETS, BEGINNING OF PERIOD 149,357,224 114,680,269
------------ ------------
NET ASSETS, END OF PERIOD $151,427,077 $149,357,224
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 430,271
Dividends 1,366,257
-----------
TOTAL INCOME 1,796,528
-----------
EXPENSES:
Advisory fees (Note 5) 880,853
Legal fees 42,176
Auditing fees 44,650
Stockholders' meeting and reports 16,371
Transfer agent fees and expenses 45,439
Custodian fees 24,805
Directors' fees and expenses 51,710
Fee for shares listed on American Stock Exchange 7,000
State and other taxes 13,890
Other 17,112
-----------
TOTAL EXPENSES 1,144,006
-----------
NET INVESTMENT INCOME ($.57 PER SHARE) (NOTE 2) 652,522
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND SE-
CURITIES SOLD SHORT:
Realized gain on investments (excluding short-term
investments):
Proceeds from sales $64,249,653
Cost of securities sold 46,908,201
-----------
Realized gain before provision for income taxes 17,341,452
Provision for income taxes (Note 2) 3,561,094
-----------
Realized gain on investments (Notes 2 and 4) 13,780,358
Unrealized appreciation of investments and securi-
ties sold short:
Beginning of period 75,261,787
End of period 76,785,117
-----------
Increase in unrealized appreciation 1,523,330
-----------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT
($13.51 PER SHARE) (NOTES 2 AND 8) 15,303,688
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS $15,956,210
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
There are set forth below income and capital changes per share of capital
stock of the Corporation outstanding throughout each period, market value per
share at the end of each period, total investment returns for each period, and
certain ratios and other supplemental data for each period.
The total investment returns shown below are a record of the past and should
not be regarded as a representation of future results.
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31
------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period $128.35 $ 94.56 $95.06 $102.68 $104.89
Net investment income (1) .57 .99 1.22 1.10 1.05
Net realized and unrealized gain
(loss) on investments 13.51 37.16 2.23 (6.72) (1.23)
Dividends from:
Net investment income (2) (.58) (1.01) (1.22) (1.10) (1.05)
Net realized gain on investments (6.33) (3.99) (2.78) (.90) (.95)
------- ------- ------ ------- -------
Total dividends (6.91) (5.00) (4.00) (2.00) (2.00)
------- ------- ------ ------- -------
Increase due to sale of Bergstrom
stock under rights offering at
more than net asset value .09
Rights offering expenses charged
to paid in capital (.12)
Increase due to purchase of
Bergstrom stock at less than net
asset value .63 .64 .05
------- ------- ------ ------- -------
Net asset value at end of period $136.15 $128.35 $94.56 $ 95.06 $102.68
======= ======= ====== ======= =======
Market value per share at end of
period $119.00 $109.50 $84.88 $ 94.50 $132.13
======= ======= ====== ======= =======
Total investment returns:
Based on market value per share
(3) 15.6% 38.1% (3.4)% (25.1)% 10.1%
Based on net asset value per
share (4) 14.0% 43.5% 5.6% (3.8)% 1.1%
Net assets at end of period (in
millions) $ 151 $ 149 $ 115 $ 118 $ 127
Ratio of expenses to average net
assets .76% .82% .84% .81% .79%
Ratio of net investment income to
average net assets .43% .88% 1.29% 1.11% 1.08%
Average commission rate paid (5) $ .0651 -- -- -- --
Portfolio turnover rate 31.80% 29.69% 25.58% 26.16% 13.55%
Number of shares outstanding at
end of period (in thousands) 1,112 1,164 1,213 1,237 1,238
</TABLE>
(1) Based on weighted average number of shares outstanding.
(2) Based on number of shares outstanding on record date.
(3) Based on market value per share adjusted for reinvestment of dividends and
distributions of the federal income tax on net long-term capital gains re-
tained, which tax was paid on behalf of the Corporation's stockholders.
(4) Based on net asset value per share adjusted for reinvestment of dividends
and distributions of the federal income tax on net long-term capital gains
retained, which tax was paid on behalf of the Corporation's stockholders.
(5) Represents average commission rate paid per share on purchases and sales
of equity securities by the Company, as computed under a Securities and
Exchange Commission rule which was effective for the Company for the year
1996. Prior year rates have not been presented as permitted by the rule.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT COST VALUE
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (4.0%):
$ 6,165,000 State Street Bank and Trust Company,
4.875% Euro-Dollar Deposit due 1/02/97 $ 6,165,000 $ 6,165,000
----------- ----------- ------------
$ 6,165,000 TOTAL -- SHORT-TERM INVESTMENTS 6,165,000 6,165,000
=========== ----------- ------------
COMMON STOCKS (96.0%):
ADVERTISING (0.8%):
27,500 Interpublic Group Of Companies, Inc. 851,484 1,306,250
----------- ------------
AEROSPACE AND DEFENSE (0.6%):
20,000 Sundstrand Corp. 505,395 850,000
----------- ------------
BANKS (3.2%):
7,000 Citicorp 601,454 721,000
23,000 Comerica, Inc. 744,004 1,204,625
30,000 Morgan (J.P.) & Co., Inc. 2,024,651 2,928,750
----------- ------------
3,370,109 4,854,375
----------- ------------
BEVERAGES (4.1%):
24,000 Coca-Cola Enterprises, Inc. 990,732 1,164,000
80,000 Coca-Cola Co. 107,495 4,210,000
30,000 Pepsico, Inc. 807,640 877,500
----------- ------------
1,905,867 6,251,500
----------- ------------
BIOTECHNOLOGY (17.7%):
500,000 Amgen, Inc. (B) 2,612,249 27,187,500
----------- ------------
BUSINESS SERVICES (6.6%):
185,000 ADT Limited (B) 1,809,792 4,231,875
135,000 Huntingdon International Holdings plc
ADR 741,765 978,750
131,322 Manpower, Inc. (C) 2,250,241 4,267,965
20,000 USA Waste Services, Inc. (B) 658,700 637,500
----------- ------------
5,460,498 10,116,090
----------- ------------
COMMUNICATION SYSTEMS (3.5%):
50,000 MCI Communications Corp. 1,241,084 1,634,375
36,000 MFS Communications, Inc. 1,440,417 1,962,000
35,000 SBC Communications, Inc. (C) 320,874 1,811,250
----------- ------------
3,002,375 5,407,625
----------- ------------
COMPUTERS AND INFORMATION (1.6%):
14,000 Hewlett Packard Co. 492,639 703,500
12,000 International Business Machines 1,087,868 1,812,000
----------- ------------
1,580,507 2,515,500
----------- ------------
COSMETICS/PERSONAL CARE (0.5%):
14,000 Avon Products, Inc. 418,369 799,750
----------- ------------
DIVERSIFIED TECHNOLOGY (0.9%):
23,000 Nokia Corp. Sponsored ADR 858,978 1,325,375
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT
COMMON STOCKS-CONTINUED COST VALUE
<C> <S> <C> <C>
DRUGS AND HEALTH SUPPLIES (7.5%):
18,000 Allergan, Inc. $ 598,444 $ 641,250
30,000 Boston Scientific Corp. (B) 818,778 1,800,000
7,000 Forest Labs, Inc. 293,323 229,250
32,000 Guidant Corp. 1,035,795 1,824,000
20,000 Johnson & Johnson 898,474 995,000
14,000 Merck & Co., Inc. 906,038 1,109,500
13,000 Pfizer, Inc. 929,116 1,077,375
36,000 Pharmacia & Upjohn, Inc. (B) 1,377,690 1,426,500
31,000 Smithkline Beecham PLC ADR 1,295,975 2,108,000
10,100 Vivra Incorporated 336,525 279,013
---------- ----------
8,490,158 11,489,888
---------- ----------
ELECTRICAL COMPONENTS (1.5%):
8,000 Emerson Electric Co. 223,593 774,000
16,000 General Electric Co. 1,402,960 1,582,000
69,000 Micro-Metrics, Inc. (A,B) 227,700 24,994
---------- ----------
1,854,253 2,380,994
---------- ----------
ELECTRONICS/NEW TECHNOLOGY (3.4%):
20,000 Cabletron Systems, Inc. (B) 678,040 665,000
13,000 Cisco Systems, Inc. (B) 756,638 827,125
25,000 Ericsson L M Tel Co ADR 517,968 754,688
13,000 Intel Corp. 776,776 1,702,187
11,000 Lucent Technologies, Inc. 508,107 508,750
28,000 Newbridge Networks Corp. 904,550 791,000
---------- ----------
4,142,079 5,248,750
---------- ----------
FINANCIAL SERVICES, DIVERSIFIED (0.6%):
25,000 Federal National Mortgage Association 645,849 931,250
---------- ----------
HARDWARE AND TOOLS (0.5%):
20,000 Snap-On, Inc. 585,650 712,500
---------- ----------
HOUSEHOLD PRODUCTS (NON-DURABLE) (1.8%):
15,000 Kimberly Clark Corp. 1,092,658 1,428,750
12,000 Proctor & Gamble Co. 572,220 1,290,000
---------- ----------
1,664,878 2,718,750
---------- ----------
INDUSTRIAL MACHINERY (0.2%):
7,000 Tyco International Ltd. 375,870 370,125
---------- ----------
INSURANCE (1.9%):
17,325 American International Group, Inc. 490,860 1,875,431
18,000 PMI Group, Inc. 818,585 996,750
---------- ----------
1,309,445 2,872,181
---------- ----------
LODGING (1.8%):
17,000 Doubletree Corp. 667,497 765,000
35,000 Marriott International, Inc. 974,125 1,933,750
---------- ----------
1,641,622 2,698,750
---------- ----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT
COMMON STOCKS-CONTINUED COST VALUE
<C> <S> <C> <C>
MEDIA (1.1%):
51,000 Comcast UK Cable Partners Ltd. Cl. A Com $ 650,250 $ 694,875
15,000 Disney (Walt) Co. 560,460 1,044,375
----------- -----------
1,210,710 1,739,250
----------- -----------
MEDICAL SUPPLIES (3.1%):
12,900 Abbott Laboratories 452,270 654,675
100,000 Baxter International, Inc. (C) 880,840 4,100,000
----------- -----------
1,333,110 4,754,675
----------- -----------
PETROLEUM SERVICES (0.8%):
15,000 Baker Hughes, Inc. 486,631 517,500
7,000 Schlumberger, Ltd. 523,562 699,125
----------- -----------
1,010,193 1,216,625
----------- -----------
PHARMACEUTICALS (5.0%):
16,000 Bristol-Myers Squibb Co. 430,822 1,740,000
39,000 Lilly Eli & Co. 1,351,106 2,847,000
14,000 Schering-Plough Corp. 487,839 906,500
29,000 Warner Lambert Co. 1,178,477 2,175,000
----------- -----------
3,448,244 7,668,500
----------- -----------
RECREATION--TOYS (0.6%):
25,000 Hasbro, Inc. 926,822 971,875
----------- -----------
RECREATION PRODUCTS (0.5%):
9,000 Eastman Kodak Co. 439,010 722,250
----------- -----------
REGULATED INVESTMENT COMPANIES (9.1%):
174,484 The Adams Express Company 3,291,105 3,467,865
300,000 Convertible Holdings, Inc. Capital Shares 3,024,788 4,387,500
30,000 Latin America Growth Fund, Inc. 307,860 292,500
50,000 Latin America Investment Fund 808,062 787,500
325,000 RCM Growth Equity Fund, Inc. 2,005,250 2,070,250
80,000 RCM International Growth Equity Fund A 994,050 1,011,200
175,000 RCM Small Cap Fund 1,961,750 2,026,500
----------- -----------
12,392,865 14,043,315
----------- -----------
RESTAURANTS (2.6%):
61,000 Host Marriott Corp. 787,250 976,000
68,000 McDonalds Corp. 1,926,679 3,077,000
----------- -----------
2,713,929 4,053,000
----------- -----------
RETAIL TRADE (1.8%):
25,000 Crown Books Corporation (B) 309,500 293,750
18,000 CVS Corporation 687,129 744,750
25,000 Federated Department Stores, Inc. (B) 689,018 853,125
18,000 Hannaford Bros. Co. 448,648 612,000
7,000 Nine West Group, Inc. (B) 324,408 324,625
----------- -----------
2,458,703 2,828,250
----------- -----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT
COMMON STOCKS-CONTINUED COST VALUE
<C> <S> <C> <C>
SOFTWARE AND PROCESSING (12.7%):
13,000 Automatic Data Processing, Inc. $ 285,181 $ 557,375
573,750 Boole & Babbage, Inc. (B) 340,000 14,343,750
9,100 Computer Associates International, Inc. 487,056 452,725
17,000 Electronic Data Systems, Corp. 648,108 735,250
14,000 Informix Corp. (B) 411,250 285,250
24,000 Microsoft Corp. (B) 999,600 1,983,000
29,000 Oracle Corporation (B) 1,039,022 1,210,750
----------- ------------
4,210,217 19,568,100
----------- ------------
TOTALS -- COMMON STOCKS 71,419,438 147,602,993
----------- ------------
TOTALS -- INVESTMENTS $77,584,438 $153,767,993
=========== ============
<CAPTION>
SCHEDULE OF SECURITIES SOLD SHORT PROCEEDS MARKET VALUE
<C> <S> <C> <C>
90,000 Amgen, Inc. (B) $ 5,495,312 $ 4,893,750
======= =========== ============
</TABLE>
(A) Company "affiliated" with the Corporation as defined in the Investment
Company Act of 1940. There were no purchases or sales of this security during
1996, nor was any income earned.
(B) Non-income producing securities.
(C) Held by custodian in a segregated custodian account as collateral for open
short positions.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The Corporation is registered under the Investment Company Act of 1940 as a
nondiversified, closed-end management company. The following is a summary of
significant accounting policies consistently followed by the Corporation in
the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles.
A. Security valuation--Securities traded on national exchanges are valued at
the closing prices on the last business day of the reported period. Over-
the-counter securities and listed securities not traded on that day are
valued at the bid prices (asked prices for short open positions) at the
close of business on that day. Securities not publicly traded are valued at
fair value as determined by the Board of Directors. Cost of securities is
determined on the specific identification basis. Short-term notes which
mature in sixty days or less from the last day of the reported period are
valued at amortized cost, which approximates market value. Short-term notes
which mature in more than sixty days are valued at the quoted yield
equivalent on the last day of the reported period for securities of a
comparable maturity, quality, and type.
B. Security transactions and related investment income--Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Dividend income and distributions to stockholders are recorded
on the ex-dividend dates and interest income is recorded on the accrual
basis. Realized gains and losses on investments sold are computed on the
basis of identified cost.
C. Use of estimates--The preparation of financial statements in conformity
with generally accepted accounting principles 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 reported period. Actual results could differ from those
estimates.
D. Short sales--The Corporation may make short sales of securities for either
speculative or hedging purposes. When the Corporation makes a short sale,
it borrows the securities sold short from a broker and places cash and/or
securities with that broker as collateral for the securities borrowed. The
Corporation may be required to pay a fee to borrow the securities and may
also be obligated to pay any dividends declared on the borrowed securities.
The Corporation will realize a gain if the security price decreases and a
loss if the security price increases between the date of the short sale and
the date on which the Corporation replaces the borrowed securities. All
short sales made by the Corporation during the year 1996 were "against the
box", meaning that the Corporation held securities in its portfolio
sufficient to cover the securities borrowed, and were made for hedging
purposes. Therefore, any gain or loss on the short sale is offset by an
equal loss or gain on the securities in the Corporation's portfolio.
NOTE 2--FEDERAL INCOME TAXES
No provision has been made for federal taxes on net investment income
because the Corporation has elected to be taxed as a regulated investment
company under the Internal Revenue Code, and intends to maintain this
qualification and to distribute each year all of its taxable net investment
income to its stockholders in accordance with the minimum distribution
requirements of the Internal Revenue Code. In addition, under the Internal
Revenue Code, the Corporation may, but need not, distribute net long-term
capital gains realized. It is the presently declared policy of the Board of
Directors, which is subject to review by the Board of Directors from time to
time, that in any year in which the Corporation is taxed as a regulated
investment company, all or a portion of the net long-term capital gains
realized by the Corporation for such year may be retained by the Corporation,
taxes thereon paid by the Corporation and appropriate credit therefore allowed
to the stockholders of the Corporation, all as provided in Section
852(b)(3)(D) of the Internal Revenue Code. After review by the Board of
Directors during the year 1996, it was determined that a portion of the net
long-term capital gains realized during the year 1996 should be retained by
the Corporation and taxes thereon should be paid by the Corporation, and that
the remainder of the net long-term capital gains realized during the year 1996
should be distributed in 1996.
For federal income tax purposes at December 31, 1996 the aggregate gross
unrealized appreciation for all securities in which there is an excess of
value over tax cost is $76,873,384, the aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value is $689,829, the net unrealized appreciation for securities held long is
$76,183,555 and the aggregate cost of securities for federal income tax
purposes is $77,584,438.
NOTE 3--CAPITAL STOCK
At December 31, 1996 the issued and outstanding capital stock of the
Corporation consisted of 1,112,200 shares of $1 par value capital stock
(1,505,462 shares are authorized). Net assets consist of capital paid in of
$74,373,770 (including $55,060,191 of net long-term capital gains retained by
the Corporation, net of federal income taxes paid thereon on behalf of its
stockholders), undistributed net investment income of $268,190 and unrealized
appreciation of $76,785,117. During the year ended December 31, 1996, 51,500
shares of Bergstrom Capital Corporation stock were purchased from stockholders
at a weighted average discount of 10.6% from net asset value. These shares
were retired and restored to the status of authorized but unissued shares.
As of December 31, 1996 the Corporation was authorized to purchase, on the
American Stock Exchange, up to 12,200 shares of its capital stock. Purchases
will be made at market prices prevailing at the time of purchase, but in no
event will purchases be made at prices in excess of the then current net asset
value per share.
NOTE 4--SECURITIES
During the year ended December 31, 1996, the cost of securities purchased
and the proceeds from securities sold, other than short-term investments,
aggregated $45,721,146 and $64,249,653, respectively.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
The Company's investment in securities of the biotechnology industry as a
whole, after the short sale of Amgen, Inc., accounted for 13.9% of the
Company's total assets on December 31, 1996. The investment of a substantial
percentage of the Company's assets in the securities of a single issuer or
industry exposes the Company to a greater risk of loss resulting from
unfavorable price movements or market conditions relating to such issuer or
industry.
NOTE 5--INVESTMENT ADVISORY CONTRACT AND PAYMENTS TO AFFILIATES
The Corporation's advisory contract ("Contract") with Bergstrom Advisers,
Inc. (the "Adviser"), wholly owned by a principal stockholder of the
Corporation, provides for an advisory fee which on an annual basis would
amount to 3/4 of 1% of the first $50,000,000 of the Corporation's average net
assets, plus 1/2 of 1% of the value of the average net assets of the
Corporation in excess of $50,000,000. Such fee is computed weekly.
The Contract also provides that if in any fiscal year of the Corporation the
sum of the fee paid and payable to the Adviser for such year plus the
operating expenses, as defined, for such year exceeds 1 1/2% of the first
$50,000,000 of the Corporation's average net assets, plus 1% of the
Corporation's average net assets in excess of $50,000,000, the Adviser will
reimburse the Corporation for such excess, up to the amount of the fee
received by the Adviser for such year. In the event the excess operating
expenses are greater than the Adviser's fee for such year, the maximum amount
payable by the Adviser would be the amount of the fee received, and there
would be no carryforward or carryback of the unrecovered portion to any other
period. There was no reduction in the fee in 1996.
NOTE 6--DIRECTORS' FEES
One director of the Corporation is an officer and director of the
Corporation's investment adviser. Directors' fees and expenses in the amount
of $51,710 have been paid in 1996 only to directors of the Corporation who
were not affiliated with any investment adviser to the Corporation.
NOTE 7--QUARTERLY RESULTS OF OPERATIONS (Unaudited) (The per share data is
based on the weighted average number of shares outstanding throughout each
period.)
<TABLE>
<CAPTION>
FOR QUARTERS ENDED IN 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
DEC. 31 SEPT. 30 JUNE 30 MARCH 31
------- -------- ------- --------
<S> <C> <C> <C> <C>
Total investment income $ 429 $ 451 $479 $ 438
Net investment income 144 163 197 149
Per share .13 .14 .17 .13
Net realized and unrealized gain on
investments 3,132 6,475 628 5,069
Per share 2.88 5.70 .56 4.37
</TABLE>
<TABLE>
<CAPTION>
FOR QUARTERS ENDED IN 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
SEPT.
DEC. 31 30 JUNE 30 MARCH 31
------- ------ ------- --------
<S> <C> <C> <C> <C>
Total investment income $ 548 $ 564 $ 583 $ 599
Net investment income 289 283 311 303
Per share .25 .24 .25 .25
Net realized and
unrealized gain on
investments 9,364 13,810 10,328 11,005
Per share 8.05 11.51 8.53 9.07
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Bergstrom Capital Corporation:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Bergstrom Capital Corporation as of
December 31, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended December 31,
1996 and 1995, and the financial highlights for each of the years in the five
year period ended December 31, 1996. These financial statements and financial
highlights are the responsibility of the Corporation'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 at December 31, 1996 by correspondence with the custodian and brokers.
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 referred to above present fairly, in
all material respects, the financial position of Bergstrom Capital Corporation
at December 31, 1996 and the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
January 17, 1997
<PAGE>
--------------------------------------------------------------------------
--------------------------------------------------------------------------
BOARD OF DIRECTORS
ERIK E. BERGSTROM GEORGE COLE SCOTT
Chairman Registered Representative
Anderson & Strudwick Incorporated
WILLIAM L. McQUEEN President
Closed-End Fund Advisors, Inc.
President and Treasurer
C.H. WILLIAMS
NORMAN R. NIELSEN Retired Banker
Manager and Senior Memberof Research Staff
SRI International
OFFICERS
WILLIAM L. McQUEEN PAMELA A. FIORINI
Secretary
President and Treasurer
ELIZABETH C. HEDLUND
Assistant Secretary
- --------------------------------------------------------------
BERGSTROM CAPITAL CORPORATION
505 Madison Street, Suite 220
Seattle, Washington 98104
(206) 623-7302
