<PAGE>
- --------------------------------------------------------------------------------
- ----------------------------------
BERGSTROM
CAPITAL
CORPORATION
- ----------------------------------
1997 SEMI-ANNUAL REPORT
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
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
DISTRIBUTION POLICY
The Company's distribution policy, which was adopted by the Board of
Directors on May 12, 1997, provides for an annual distribution to the
Company's stockholders, during the month of June each year, of a cash dividend
at the rate of a minimum of 6 percent of the Company's net asset value per
share as calculated on the last business day in March of that year. The Board
of Directors may modify or terminate the distribution policy at any time at
its discretion.
Please refer to the President's Letter in this report regarding the annual
distribution for the year 1997 in the amount of $8.50 per share, paid on June
9, 1997 to stockholders of record on May 22, 1997.
Under the distribution policy, distributions in any year in excess of the
Company's net investment income and net realized capital gains for such year
will constitute a return of stockholders' capital. For federal income tax
purposes, any return of capital will generally be treated as a non-taxable
recovery of basis to the extent of the stockholders' basis in their shares,
and as capital gain to the extent that the return of capital is in excess of
such basis.* The Company will be required to liquidate a portion of its
portfolio in order to fund any return of capital. Any return of capital will
also reduce the assets of the Company available for investment and will likely
have the effect of increasing the Company's expense ratio.
In any year in which the total of the Company's net investment income and
net realized capital gains exceeds the amount distributed for that year under
the distribution policy, the Company may, at the discretion of the Board of
Directors, retain a portion of the net realized long-term capital gains for
such year.
* The portion of any return of capital representing the Company's accumulated
earnings and profits from prior years will be treated as ordinary income.
The Company's accumulated earnings and profits as of December 31, 1996
amounted to $155,052.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
505 Madison Street, Suite 220
Seattle, Washington 98104
August 11, 1997
Dear Fellow Stockholders:
During the first half of 1997 the Company's net assets increased from
$151,427,077 to $161,599,250 which is an increase of $10,172,173. This
increase in net assets is after payment by the Company of $9,297,300 in
dividends ($8.50 per share on June 9, 1997). This increase is also after the
repurchase of stock during the first six months of 1997 for $3,802,008. The
increase in net assets, before deducting the payment of dividends and the
repurchase of stock, was $23,271,481 which was composed of net investment
income of $357,626, realized gain from the sale of investments of $18,255,473,
and an increase in unrealized appreciation of $4,658,382.
The per share net asset value (based on the number of shares outstanding at
the end of each period) increased from $136.15 on December 31, 1996 to $149.41
on June 30, 1997. After adjustment for the dividends, the per share net asset
value increased 16.0%. During the same period the Dow Jones Industrial
Average, adjusted for dividends, increased 20.1% and the Standard & Poor's 500
Stock Average, adjusted for dividends, increased 20.6%. The per share net
asset value on Friday, August 8, 1997 was $158.57.
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 first six months of 1997 the Company purchased the
remaining 12,200 shares of its capital stock under this authorization.
On February 10, 1997, the Company's Board of Directors authorized the
Company to purchase, on the American Stock Exchange, up to 100,000 shares of
its capital stock at market prices not in excess of the then current net asset
value per share. During the first six months of 1997 the Company purchased
18,400 shares of its capital stock under this authorization. As of June 30,
1997 the Company had 81,600 shares remaining under this authorization.
During the first six months of 1997 the Company had total interest and
dividend income of $965,335 as compared to $917,080 for the same period in
1996 for an increase of $48,255. During the first six months of 1997 operating
expenses were $607,709 which is a $35,983 increase from $571,726 for the first
six months of 1996. The resulting net investment income of $357,626 for the
first six months of 1997 is an increase from $345,354 for the first six months
of 1996. This resulted in an increase to $.33 per share versus $.30 per share.
The following are the major ($500,000 or more) changes made in the Company's
portfolio of common stocks during the second quarter of 1997:
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
----------------------------------
HELD
SECURITY NAME ADDITIONS REDUCTIONS JUNE 30, 1997
- --------------------------------------------- --------- ---------- -------------
<S> <C> <C> <C>
ADT Limited.................................. 125,000 60,000
BB&T Corporation............................. 18,000 18,000
Bed Bath & Beyond, Inc. ..................... 29,000 29,000
BetzDearborn, Inc. .......................... 12,000 12,000
Cisco Systems, Inc. ......................... 12,000 12,000
Eastman Kodak Co. ........................... 9,000 0
Emerson Electric Co. ........................ 16,000 0
Gartner Group, Inc. New Cl. A................ 21,000 21,000
Intel Corp. ................................. 4,000 9,000
Interpublic Group Of Companies, Inc. ........ 25,000 0
Manpower, Inc. .............................. 55,322 100,000
MCI Communications Corp. .................... 50,000 0
Morgan (J.P.) & Co., Inc. ................... 5,000 15,000
Pfizer, Inc. ................................ 7,000 5,000 15,000
Pharmacia & Upjohn, Inc. .................... 36,000 0
Pioneer Hi-Bred International, Inc. ......... 14,000 14,000
RCM International Growth Equity Fund A....... 65,000 145,000
SBC Communications, Inc. .................... 10,000 20,000
Tyco International Ltd. ..................... 9,000 19,000
USA Waste Services, Inc. .................... 20,000 0
Warner Lambert Co. .......................... 5,000 34,000
Xerox Corp. ................................. 11,000 11,000
</TABLE>
The value of the Company's investment in the securities of Amgen, Inc.
amounted to 12.8% of the Company's total assets at June 30, 1997. 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.
On June 9, 1997, the Company paid a cash dividend of $8.50 per share to
stockholders of record on May 22, 1997. The Company currently estimates that
the sources of this dividend will be $.44 per share from net investment income
for the year ending December 31, 1997, $.28 per share from net short-term
capital gains realized during the year ending December 31, 1997 and $7.78 per
share from net long-term capital gains realized during the year ending
December 31, 1997. This dividend was the annual distribution for the year 1997
under the Company's distribution policy. Please refer to the Distribution
Policy in this report. The Company does not intend to pay further dividends in
1997 and intends to retain any undistributed net long-term capital gains
realized during the year 1997.
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
program would not be commensurate with the benefit. The Company's policy of
retaining 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
Exchange 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 and each Monday in the Wall Street Journal, the New York Times 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
June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (see accompanying schedule)(Note 1):
Short-term investments (cost $11,797,870) $ 11,797,870
Common stocks (cost $67,699,129) 149,142,628
------------
TOTAL INVESTMENTS (COST $79,496,999) 160,940,498
Cash 6,404
Receivable for securities sold 2,032,177
Interest and dividends receivable 107,098
Other assets 130,372
------------
TOTAL ASSETS 163,216,549
------------
LIABILITIES:
Advisory fee payable (Note 5) 67,191
Payable for securities purchased 1,298,822
Payable for capital stock repurchased 221,886
Other accrued expenses 29,400
------------
TOTAL LIABILITIES 1,617,299
------------
NET ASSETS applicable to 1,081,600 outstanding shares of capi-
tal stock equivalent to $149.41 per share on June 30, 1997
(Note 3) $161,599,250
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 357,626 $ 652,522
Realized gain on investments 18,255,473 13,780,358
Increase in unrealized appreciation 4,658,382 1,523,330
------------ ------------
Net increase in net assets resulting from oper-
ations 23,271,481 15,956,210
------------ ------------
DIVIDENDS TO STOCKHOLDERS:
From net investment income (357,626) (652,522)
From net realized gain on investments (8,939,674) (7,166,898)
------------ ------------
Total dividends to stockholders ($8.50 per
share--1997; $6.9125
per share--1996) (9,297,300) (7,819,420)
------------ ------------
COST OF SHARES OF BERGSTROM CAPITAL CORPORATION
STOCK PURCHASED (30,600 SHARES--1997; 51,500
SHARES--1996) (3,802,008) (6,066,937)
------------ ------------
TOTAL INCREASE IN NET ASSETS 10,172,173 2,069,853
NET ASSETS, BEGINNING OF PERIOD 151,427,077 149,357,224
------------ ------------
NET ASSETS, END OF PERIOD $161,599,250 $151,427,077
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 433,568
Dividends 531,767
-----------
TOTAL INCOME 965,335
-----------
EXPENSES:
Advisory fees (Note 5) 459,261
Legal fees 22,825
Auditing fees 42,400
Stockholders' meeting and reports 9,115
Transfer agent fees and expenses 13,488
Custodian fees 12,957
Directors' fees and expenses 21,844
Fee for shares listed on American Stock Exchange 3,500
State and other taxes 12,371
Other 9,948
-----------
TOTAL EXPENSES 607,709
-----------
NET INVESTMENT INCOME ($.33 PER SHARE) (NOTE 2) 357,626
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on investments (excluding short-term
investments):
Proceeds from sale of securities $46,937,052
Cost of securities sold 28,697,282
-----------
Realized gain on investments sold (Notes 2 and 4) 18,239,770
Capital gain distributions received 15,703
-----------
Realized gain on investments 18,255,473
Unrealized appreciation of investments:
Beginning of period 76,785,117
End of period 81,443,499
-----------
Increase in unrealized appreciation 4,658,382
-----------
NET GAIN ON INVESTMENTS ($20.85 PER SHARE) (NOTE 2) 22,913,855
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,271,481
===========
</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>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $136.15 $128.35 $ 94.56 $95.06 $102.68 $104.89
Net investment income
(1) .33 .57 .99 1.22 1.10 1.05
Net realized and
unrealized gain (loss)
on investments 20.85 13.51 37.16 2.23 (6.72) (1.23)
Dividends from:
Net investment income
(2) (.33) (.58) (1.01) (1.22) (1.10) (1.05)
Net realized gain on
investments (8.17) (6.33) (3.99) (2.78) (.90) (.95)
------- ------- ------- ------ ------- -------
Total dividends (8.50) (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 .58 .63 .64 .05
------- ------- ------- ------ ------- -------
Net asset value at end
of period $149.41 $136.15 $128.35 $94.56 $ 95.06 $102.68
======= ======= ======= ====== ======= =======
Market value per share
at end of period $130.50 $119.00 $109.50 $84.88 $ 94.50 $132.13
======= ======= ======= ====== ======= =======
Total investment
returns:
Based on market value
per share (3) 17.9%* 15.6% 38.1% (3.4)% (25.1)% 10.1%
Based on net asset
value per share (4) 16.0%* 14.0% 43.5% 5.6% (3.8)% 1.1%
Net assets at end of
period (in millions) $ 162 $ 151 $ 149 $ 115 $ 118 $ 127
Ratio of expenses to
average net assets .39%* .76% .82% .84% .81% .79%
Ratio of net investment
income to average net
assets .23%* .43% .88% 1.29% 1.11% 1.08%
Average commission rate
paid (5) $0.0672 $0.0651 -- -- -- --
Portfolio turnover rate 17.26%* 31.80% 29.69% 25.58% 26.16% 13.55%
Number of shares
outstanding at end of
period (in thousands) 1,082 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
retained, 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.
*Not Annualized.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COST VALUE
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (7.3%):
$7,805,000 State Street Bank and Trust Company,
5.25% Euro-Dollar Deposit due 7/01/97 $ 7,805,000 $ 7,805,000
General Motors Acceptance Corp., 5.58%
2,000,000 Note due 7/09/97 1,997,520 1,997,520
General Motors Acceptance Corp., 5.58%
2,000,000 Note due 7/16/97 1,995,350 1,995,350
----------- ----------- ------------
$11,805,000 TOTAL--SHORT-TERM INVESTMENTS 11,797,870 11,797,870
=========== ----------- ------------
COMMON STOCKS (92.7%):
AEROSPACE AND DEFENSE (0.7%):
20,000 Sundstrand Corp. 505,395 1,116,250
----------- ------------
BANKS (4.1%):
18,000 BB&T Corporation 821,846 810,000
24,000 Bank New York, Inc. 933,258 1,044,000
13,000 Citicorp 1,347,574 1,567,312
23,000 Comerica, Inc. 744,004 1,564,000
15,000 Morgan (J.P.) & Co., Inc. 963,451 1,565,625
----------- ------------
4,810,133 6,550,937
----------- ------------
BEVERAGES (4.3%):
72,000 Coca-Cola Enterprises, Inc. 990,732 1,656,000
77,500 Coca-Cola Co. 104,001 5,231,250
----------- ------------
1,094,733 6,887,250
----------- ------------
BIOTECHNOLOGY (13.0%):
360,000 Amgen, Inc. (B) 1,880,819 20,925,000
----------- ------------
BUSINESS SERVICES (5.7%):
60,000 ADT Limited (B) 381,254 1,980,000
50,000 Cognizant Corporation 1,641,500 2,025,000
Huntingdon Life Sciences Group PLC ADR
135,000 (C) 741,765 725,625
100,000 Manpower, Inc. 1,671,364 4,450,000
----------- ------------
4,435,883 9,180,625
----------- ------------
CHEMICALS (0.5%):
12,000 BetzDearborn, Inc. 797,977 792,000
----------- ------------
COMMUNICATION SYSTEMS (2.3%):
20,000 SBC Communications, Inc. 179,424 1,237,500
75,600 Worldcom, Inc. 1,440,418 2,419,200
----------- ------------
1,619,842 3,656,700
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
COMMON STOCKS (UNAUDITED)--CONTINUED
<TABLE>
<CAPTION>
COST VALUE
<C> <S> <C> <C>
COMPUTERS AND INFORMATION (0.5%):
14,000 Hewlett Packard Co. $ 492,639 $ 784,000
----------- ------------
COSMETICS/PERSONAL CARE (0.6%):
14,000 Avon Products, Inc. 418,369 987,875
----------- ------------
DIVERSIFIED TECHNOLOGY (1.1%):
23,000 Nokia Corp. Sponsored ADR 858,978 1,696,250
----------- ------------
DRUGS AND HEALTH SUPPLIES (7.2%):
9,000 Glaxo PLC ADR 290,790 376,312
31,000 Guidant Corp. 988,169 2,635,000
20,000 Johnson & Johnson 898,474 1,287,500
18,000 Medtronic, Inc. 1,164,530 1,458,000
12,000 Merck & Co., Inc. 770,986 1,242,000
15,000 Pfizer, Inc. 1,283,208 1,792,500
31,000 Smithkline Beecham PLC ADR 1,295,975 2,840,375
----------- ------------
6,692,132 11,631,687
----------- ------------
ELECTRICAL COMPONENTS (1.2%):
28,000 General Electric Co. 1,211,090 1,830,500
69,000 Micro-Metrics, Inc. (A,B) 227,700 25,268
----------- ------------
1,438,790 1,855,768
----------- ------------
ELECTRONICS/NEW TECHNOLOGY (4.4%):
15,000 Analog Devices, Inc. 350,486 398,438
6,200 Ascend Communications, Inc. 253,718 244,125
12,000 Cisco Systems, Inc. 828,178 805,500
33,000 Ericsson L M Tel Co ADR 786,857 1,299,375
9,000 Intel Corp. 542,187 1,276,313
11,000 Lucent Technologies, Inc. 508,107 792,687
28,000 Newbridge Networks Corp. 904,550 1,218,000
54,000 Nextel Communications, Inc. 781,200 1,022,625
----------- ------------
4,955,283 7,057,063
----------- ------------
FINANCIAL SERVICES, DIVERSIFIED (1.4%):
15,000 Amresco, Inc. 324,375 322,500
25,000 Federal National Mortgage Association 645,849 1,090,625
34,000 Glendale Federal Bank FSB 937,264 888,250
----------- ------------
1,907,488 2,301,375
----------- ------------
FOOD PROCESSING (0.7%):
14,000 Pioneer Hi-Bred International, Inc. 862,848 1,120,000
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
COMMON STOCKS (UNAUDITED)--CONTINUED
<TABLE>
<CAPTION>
COST VALUE
<C> <S> <C> <C>
HARDWARE AND TOOLS (0.5%):
20,000 Snap-On, Inc. $ 585,650 $ 787,500
----------- ------------
HOUSEHOLD PRODUCTS (NON-DURABLE)
(2.0%):
30,000 Kimberly Clark Corp. 1,092,658 1,492,500
12,000 Proctor & Gamble Co. 572,220 1,695,000
----------- ------------
1,664,878 3,187,500
----------- ------------
INDUSTRIAL MACHINERY (0.8%):
19,000 Tyco International Ltd. 1,064,459 1,321,688
----------- ------------
INSURANCE (2.3%):
17,325 American International Group, Inc. 490,860 2,587,922
18,000 PMI Group, Inc. 818,585 1,122,750
----------- ------------
1,309,445 3,710,672
----------- ------------
LODGING (1.5%):
29,000 Doubletree Corp. 1,159,997 1,192,625
20,000 Marriott International, Inc. 540,111 1,227,500
----------- ------------
1,700,108 2,420,125
----------- ------------
MEDIA (1.6%):
Comcast UK Cable Partners Ltd. CI. A
51,000 Com 650,250 612,000
15,000 Disney (Walt) Co. 560,460 1,203,750
21,000 Gartner Group, Inc. New Cl. A 526,200 754,688
----------- ------------
1,736,910 2,570,438
----------- ------------
MEDICAL SUPPLIES (3.8%):
12,900 Abbott Laboratories 452,270 861,075
100,000 Baxter International, Inc. 880,840 5,225,000
----------- ------------
1,333,110 6,086,075
----------- ------------
OFFICE EQUIPMENT (0.5%):
11,000 Xerox Corp. 804,150 867,625
----------- ------------
PETROLEUM SERVICES (0.8%):
10,000 Baker Hughes, Inc. 323,611 386,875
7,000 Schlumberger, Ltd. 523,562 875,000
----------- ------------
847,173 1,261,875
----------- ------------
PHARMACEUTICALS (6.9%):
16,000 Bristol-Myers Squibb Co. 215,411 1,296,000
39,000 Lilly Eli & Co. 1,351,106 4,263,187
28,000 Schering-Plough Corp. 487,839 1,340,500
34,000 Warner Lambert Co. 1,702,611 4,224,500
----------- ------------
3,756,967 11,124,187
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
COMMON STOCKS (UNAUDITED)--CONTINUED
<TABLE>
<CAPTION>
COST VALUE
<C> <S> <C> <C>
RECREATION--TOYS (0.7%):
37,500 Hasbro, Inc. $ 926,822 $ 1,064,063
----------- ------------
REGULATED INVESTMENT COMPANIES (8.2%):
Convertible Holdings, Inc. Capital
300,000 Shares 3,024,788 4,800,000
50,000 Latin America Growth Fund, Inc. 528,218 587,500
65,000 Latin America Investment Fund 1,077,012 1,267,500
325,000 RCM Growth Equity Fund, Inc. 2,005,250 2,249,000
145,000 RCM International Growth Equity Fund A 1,875,370 2,164,850
175,000 RCM Small Cap Fund 1,961,750 2,189,250
----------- ------------
10,472,388 13,258,100
----------- ------------
RESTAURANTS (2.4%):
106,000 Host Marriott Corp. 1,577,381 1,888,125
42,000 McDonalds Corp. 1,184,151 2,029,125
----------- ------------
2,761,532 3,917,250
----------- ------------
RETAIL TRADE (2.3%):
29,000 Bed Bath & Beyond, Inc. 757,687 880,875
31,250 Consolidated Stores Corp. 896,115 1,085,938
25,000 Crown Books Corporation (B) 309,500 256,250
18,000 CVS Corporation 687,129 922,500
18,000 Hannaford Bros. Co. 448,648 640,125
----------- ------------
3,099,079 3,785,688
----------- ------------
SOFTWARE AND PROCESSING (10.7%):
11,000 America Online, Inc. 489,962 611,875
13,000 Automatic Data Processing, Inc. 285,181 611,000
573,750 Boole & Babbage, Inc. (B) 340,000 12,192,187
24,000 Microsoft Corp. (B) 999,600 3,033,000
24,000 Sterling Commerce, Inc. 750,406 789,000
----------- ------------
2,865,149 17,237,062
----------- ------------
TOTALS--COMMON STOCKS 67,699,129 149,142,628
----------- ------------
TOTALS--INVESTMENTS $79,496,999 $160,940,498
=========== ============
</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 the first six months of 1997, nor was any income earned.
(B) Non-income producing securities.
(C) Formerly Huntingdon International Holdings PLC ADR.
See Accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
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.
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 June 30, 1997 the aggregate gross
unrealized appreciation for all securities in which there is an excess of
value over tax cost is $81,854,554, the aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value is $411,055, the net unrealized appreciation is $81,443,499 and the
aggregate cost of securities for federal income tax purposes is $79,496,999.
NOTE 3--CAPITAL STOCK
At June 30, 1997 the issued and outstanding capital stock of the Corporation
consisted of 1,081,600 shares of $1 par value capital stock (1,505,462 shares
are authorized). Net assets consist of capital paid in of $79,887,561
(including $64,375,990 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 $81,443,499. During the six months ended June 30, 1997, 30,600
shares of Bergstrom Capital Corporation stock were purchased from stockholders
at a weighted average discount of 14.4% from net asset value. These shares
were retired and restored to the status of authorized but unissued shares.
As of June 30, 1997 the Corporation was authorized to purchase, on the
American Stock Exchange, up to 81,600 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.
<PAGE>
BERGSTROM CAPITAL CORPORATION
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
NOTE 4--SECURITIES
During the six months ended June 30, 1997, the cost of securities purchased
and the proceeds from securities sold, other than short-term investments,
aggregated $24,976,973 and $46,937,052, respectively.
The Company's investment in securities of the biotechnology industry as a
whole accounted for 12.8% of the Company's total assets on June 30, 1997. 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 $21,844 have been paid in 1997 only to directors of the Corporation who
were not affiliated with any investment adviser to the Corporation.
<PAGE>
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BOARD OF DIRECTORS
ERIK E. BERGSTROM GEORGE COLE SCOTT
Registered Representative
Chairman Anderson & Strudwick Incorporated
President
WILLIAM L. McQUEEN Closed-End Fund Advisors, Inc.
President and Treasurer C.H. WILLIAMS
NORMAN R. NIELSEN Retired Banker
Manager and Senior Member
of Research Staff
SRI International
OFFICERS
WILLIAM L. McQUEEN PAMELA A. FIORINI
President and Treasurer Secretary
ELIZABETH C. HEDLUND
Assistant Secretary
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BERGSTROM CAPITAL CORPORATION
505 Madison Street, Suite 220
Seattle, Washington 98104
(206) 623-7302
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