<PAGE>
--------------------------------------------------------------------------
--------------------------------------------------------------------------
- ----------------------------------
BERGSTROM
CAPITAL
CORPORATION
- ----------------------------------
1998 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 1998 in the amount of $10.75 per share, paid on June
8, 1998 to stockholders of record on May 21, 1998.
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.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
505 Madison Street, Suite 220
Seattle, Washington 98104
August 10, 1998
Dear Fellow Stockholders:
During the first half of 1998 the Company'snet assets increased from
$158,894,821 to $175,859,383 which is an increase of $16,964,562. This
increase in net assets is after payment by the Company of $10,927,375 in
dividends ($10.75 per share on June 8, 1998). This increase is also after the
repurchase of stock during the first six months of 1998 for $1,916,864. The
increase in net assets, before deducting the payment of dividends and the
repurchase of stock, was $29,808,801 which was composed of net investment
income of $203,760, realized gain from the sale of investments of $20,432,130,
and an increase in unrealized appreciation of $9,172,911.
The per share net asset value (based on the number of shares outstanding at
the end of each period) increased from $154.51 on December 31, 1997 to $173.26
on June 30, 1998. After adjustment for the dividends, the per share net asset
value increased 19.1%. During the same period the Dow Jones Industrial
Average, adjusted for dividends, increased 14.1% and the Standard & Poor's 500
Stock Average, adjusted for dividends, increased 17.7%. The per share net
asset value on Friday, August 7, 1998 was $167.50.
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 1998 the Company purchased
13,400 shares of its capital stock under this authorization. As of June 30,
1998 the Company had 15,000 shares remaining under this authorization.
During the first six months of 1998 the Company had total interest and
dividend income of $837,131 as compared to $965,335 for the same period in
1997 for a decrease of $128,204. During the first six months of 1998 operating
expenses were $633,371 which is a $25,662 increase from $607,709 for the first
six months of 1997. The resulting net investment income of $203,760 for the
first six months of 1998 is a decrease of $153,866 from $357,626 for the first
six months of 1997. This resulted in a decrease to $.20 per share versus $.33
per share.
The following are the major ($500,000 or more) purchases and sales made in the
Company's portfolio of securities during the second quarter of 1998:
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
------------------------------------
HELD
SECURITY NAME ADDITIONS REDUCTIONS JUNE 30, 1998
- ------------------------------------------- --------- ---------- -------------
<S> <C> <C> <C>
Albertsons, Inc. .......................... 19,000 0
Altera Corp. .............................. 10,000 25,000 0
Alza Corp. ................................ 13,000 33,000
Amgen, Inc. ............................... 20,000 180,000
ASM Lithography Holdings N V............... 7,000(1) 14,000 0
BankAmerica Corp. ......................... 13,000 13,000
Bausch & Lomb, Inc. ....................... 20,000 20,000
Boole & Babbage, Inc. ..................... 100,000 500,000
CBS Corporation............................ 24,000 0
Computer Sciences Corp. ................... 14,000 0
Consolidated Stores Corp. ................. 24,000 0
CVS Corporation............................ 10,000(2) 8,000 20,000
Dayton Hudson Corp. ....................... 32,000 32,000
Lilly Eli & Co. ........................... 11,000 39,000 50,000
EMC Corp. Mass............................. 18,000 18,000
HBO & Co. ................................. 18,000(3) 18,000
International Business Machines............ 7,000 0
Manpower, Inc. ............................ 15,000 70,000
McDonalds Corp. ........................... 16,000 70,000
Monsanto Co. .............................. 29,000 29,000
Networks Associates, Inc. ................. 13,000 13,000
Nokia Corp. Sponsored ADR.................. 18,000(4) 11,000 25,000
North Fork Bancorporation, Inc. ........... 21,000 21,000
Office Depot, Inc. ........................ 17,000 17,000
Smithkline Beecham PLC ADR................. 15,000 36,000
Sterling Commerce, Inc. ................... 24,000 0
Tenet Healthcare Corp. .................... 15,000 15,000 0
Warner Lambert Co. ........................ 54,000(5) 72,000
Xerox Corp. ............................... 15,000 15,000
</TABLE>
- -------
(1) Received as a stock split.
(2) Sold 8,000 shares and then received 10,000 shares as a stock split.
(3) Purchased 9,000 shares and then received 9,000 shares as a stock split.
(4) Received 18,000 shares as a stock split and then sold 11,000 shares.
(5) Purchased 6,000 shares and then received 48,000 shares as a stock split.
The Company's Board of Directors has approved the appointment of Dresdner
RCM Global Investors LLC as its sole investment adviser. The appointment is
subject to the approval of a new advisory agreement by the Company's
stockholders at the annual meeting on November 9, 1998. The new advisory
agreement would be effective upon approval by the Company's stockholders. The
Company expects to mail to stockholders proxy materials for the annual meeting
in late September 1998. The proposed appointment was announced in a press
release issued on March 3, 1998, and was discussed in the Company's 1998 First
Quarter Report.
On June 8, 1998, the Company paid a cash dividend of $10.75 per share to
stockholders of record on May 21, 1998. The Company currently estimates that
the sources of this dividend will be $.40 per share from net investment income
for the year ending December 31, 1998, $.07 per share from net short-term
capital gains realized during the year ending December 31, 1998 and $10.28
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
per share from net long-term capital gains realized during the year ending
December 31, 1998. This dividend was the annual distribution for the year 1998
under the Company's distribution policy. Please refer to the Distribution
Policy in this report.
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.
Like other investment companies and financial and business organizations
worldwide, the Company could be adversely affected if computer systems on
which the Company and its service providers rely are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 issue. Failure to address successfully the Year
2000 issue could result in interruptions in and other adverse effects on the
Company's business and operations. The Company has commenced a review, both
internally and as regards the Company's vendors, of the Year 2000 issue as it
may affect the Company. The Company is taking steps it believes are reasonably
designed to address the Year 2000 issue. There can be no assurance that these
steps will be sufficient. In addition, there can be no assurance that the Year
2000 issue will not have an adverse effect on the companies whose securities
are held by the Company or on global markets or economies generally.
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, 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,
LOGO
/s/ WILLIAM L. MCQUEEN
William L. McQueen
President
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (see accompanying schedule)(Note 1):
Short-term investments (cost $6,120,000) $ 6,120,000
Common stocks (cost $82,774,039) 169,868,023
------------
TOTAL INVESTMENTS (COST $88,894,039) 175,988,023
Cash 5,140
Interest and dividends receivable 91,615
Other assets 5,778
------------
TOTAL ASSETS 176,090,556
------------
LIABILITIES:
Advisory fee payable (Note 5) 70,442
Payable for securities purchased 137,488
Other accrued expenses 23,243
------------
TOTAL LIABILITIES 231,173
------------
NET ASSETS applicable to 1,015,000 outstanding shares of
capital stock equivalent to $173.26 per share on June 30, 1998
(Note 3) $175,859,383
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1998 DECEMBER 31,
(UNAUDITED) 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 203,760 $ 689,455
Realized gain on investments 20,432,130 26,273,386
Increase in unrealized appreciation 9,172,911 1,135,956
------------ ------------
Net increase in net assets resulting from
operations 29,808,801 28,098,797
------------ ------------
DIVIDENDS TO STOCKHOLDERS:
From net investment income (203,760) (689,455)
From net realized gain on investments (10,723,615) (8,607,845)
------------ ------------
Total dividends to stockholders ($10.75 per
share-1998; $8.50 per share-1997) (10,927,375) (9,297,300)
------------ ------------
COST OF SHARES OF BERGSTROM CAPITAL CORPORATION
STOCK REPURCHASED (13,400 SHARES--1998; 83,800
SHARES--1997) (1,916,864) (11,333,753)
------------ ------------
TOTAL INCREASE IN NET ASSETS 16,964,562 7,467,744
NET ASSETS, BEGINNING OF PERIOD 158,894,821 151,427,077
------------ ------------
NET ASSETS, END OF PERIOD $175,859,383 $158,894,821
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 365,528
Dividends 471,603
-----------
TOTAL INCOME 837,131
-----------
EXPENSES:
Advisory fees (Note 5) 490,514
Legal fees 25,909
Auditing fees 39,973
Stockholders' meeting and reports 8,835
Transfer agent fees and expenses 13,435
Custodian fees 13,726
Directors' fees and expenses 20,789
Fee for shares listed on American Stock Exchange 3,500
State and other taxes 6,759
Other 9,931
-----------
TOTAL EXPENSES 633,371
-----------
NET INVESTMENT INCOME ($.20 PER SHARE) (NOTE 2) 203,760
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on investments (excluding short-term
investments):
Proceeds from sale of securities $43,920,939
Cost of securities sold 23,488,809
-----------
Realized gain on investments sold (Notes 2 and 4) 20,432,130
Unrealized appreciation of investments:
Beginning of period 77,921,073
End of period 87,093,984
-----------
Increase in unrealized appreciation 9,172,911
-----------
NET GAIN ON INVESTMENTS ($29.10 PER SHARE) (NOTE 2) 29,605,041
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $29,808,801
===========
</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 JUNE YEARS ENDED DECEMBER 31
30, 1998 -------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at be-
ginning of period...... $154.51 $136.15 $128.35 $ 94.56 $95.06 $102.68
Net investment in-
come(1)................ .20 .64 .57 .99 1.22 1.10
Net realized and
unrealized gain (loss)
on investments......... 29.10 24.79 13.51 37.16 2.23 (6.72)
Dividends from:
Net investment in-
come(2).............. (.20) (.63) (.58) (1.01) (1.22) (1.10)
Net realized gain on
investments.......... (10.55) (7.87) (6.33) (3.99) (2.78) (.90)
------- ------- ------- ------- ------ -------
Total dividends..... (10.75) (8.50) (6.91) (5.00) (4.00) (2.00)
------- ------- ------- ------- ------ -------
Increase due to repur-
chase of Bergstrom
stock at less than net
asset value............ .20 1.43 .63 .64 .05 --
------- ------- ------- ------- ------ -------
Net asset value at end
of period.............. $173.26 $154.51 $136.15 $128.35 $94.56 $ 95.06
======= ======= ======= ======= ====== =======
Market value per share
at end of period....... $151.00 $142.50 $119.00 $109.50 $84.88 $ 94.50
======= ======= ======= ======= ====== =======
Total investment re-
turns:
Based on market value
per share(3)......... 14.8%* 37.0% 15.6% 38.1% (3.4)% (25.1)%
Based on net asset
value per share(4) 19.1%* 26.5% 14.0% 43.5% 5.6% (3.8)%
Net assets at end of pe-
riod (in millions)..... $ 176 $ 159 $ 151 $ 149 $ 115 $ 118
Ratio of expenses to av-
erage net assets....... .37%* .75% .76% .82% .84% .81%
Ratio of net investment
income to average net
assets................. .12%* .43% .43% .88% 1.29% 1.11%
Portfolio turnover rate. 18.44%* 34.07% 31.80% 29.69% 25.58% 26.16%
Number of shares
outstanding at end of
period (in thousands).. 1,015 1,028 1,112 1,164 1,213 1,237
</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.
* Not Annualized.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT COST VALUE
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (3.5%):
$6,120,000 State Street Bank and Trust Company,
5.25%
Euro-Dollar Deposit due 7/01/98 $ 6,120,000 $ 6,120,000
---------- ----------- ------------
$6,120,000 TOTAL--SHORT-TERM INVESTMENTS 6,120,000 6,120,000
========== ----------- ------------
COMMON STOCKS (96.5%):
BANKS (4.0%):
24,000 Bank New York, Inc. 933,258 1,456,500
13,000 BankAmerica Corp. 1,157,941 1,123,688
6,000 Citicorp 746,120 895,500
21,000 North Fork Bancorporation, Inc. 559,499 513,187
22,500 Southtrust Corp. 822,345 978,750
48,000 U.S. Bancorp DEL 1,466,681 2,067,000
----------- ------------
5,685,844 7,034,625
----------- ------------
BEVERAGES (6.0%):
60,000 Coca Cola Enterprises, Inc. 810,797 2,355,000
77,500 Coca-Cola Co. 104,001 6,626,250
37,000 Pepsico, Inc. 1,408,417 1,523,938
----------- ------------
2,323,215 10,505,188
----------- ------------
BIOTECHNOLOGY (6.7%):
180,000 Amgen, Inc. (A) 940,410 11,767,500
----------- ------------
BUSINESS SERVICES (3.1%):
50,000 Cognizant Corporation 1,641,500 3,150,000
135,000 Huntingdon Life Sciences Group PLC ADR 741,765 227,812
70,000 Manpower, Inc. 1,127,696 2,008,125
----------- ------------
3,510,961 5,385,937
----------- ------------
CHEMICALS (1.3%):
29,000 Monsanto Co. 1,714,729 1,620,375
13,500 Zeneca Group PLC ADR 596,411 592,313
----------- ------------
2,311,140 2,212,688
----------- ------------
COMMUNICATION SYSTEMS (3.8%):
28,000 Intermedia Communications FLA, Inc. 706,839 1,174,250
56,000 Nextel Communications, Inc. 914,015 1,393,000
84,000 Worldcom, Inc. GA 1,730,113 4,068,750
----------- ------------
3,350,967 6,636,000
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS (UNAUDITED)--CONTINUED
COST VALUE
<C> <S> <C> <C>
COMPUTERS AND INFORMATION (1.3%):
12,000 Dell Computer Corp. $ 671,410 $ 1,113,750
21,000 Hewlett Packard Co. 957,756 1,257,375
----------- -----------
1,629,166 2,371,125
----------- -----------
DIVERSIFIED TECHNOLOGY (1.0%):
25,000 Nokia Corp. Sponsored ADR 450,507 1,818,750
----------- -----------
DRUGS AND HEALTH SUPPLIES (6.3%):
20,000 Bausch & Lomb, Inc. 1,003,644 1,002,500
18,000 Boston Scientific Corp. 798,180 1,289,250
13,000 Johnson & Johnson 619,376 958,750
25,000 Medtronic, Inc. 914,913 1,593,750
37,000 Pfizer, Inc. 1,791,096 4,021,437
36,000 Smithkline Beecham PLC ADR 631,103 2,178,000
----------- -----------
5,758,312 11,043,687
----------- -----------
ELECTRICAL COMPONENTS (2.0%):
28,000 General Electric Co. 1,211,090 2,548,000
18,000 Grainger WW, Inc. 884,195 896,625
----------- -----------
2,095,285 3,444,625
----------- -----------
ELECTRONICS/NEW TECHNOLOGY (3.1%):
27,000 Cisco Systems, Inc. 1,322,839 2,485,687
18,000 EMC Corp. Mass 828,617 806,625
11,000 Intel Corp. 309,719 815,375
16,000 Lucent Technologies, Inc. 364,959 1,331,000
----------- -----------
2,826,134 5,438,687
----------- -----------
FINANCIAL SERVICES, DIVERSIFIED (2.6%):
30,000 Amresco, Inc. 794,693 873,750
18,000 Federal National Mortgage Association 440,845 1,093,500
22,000 Travelers Group, Inc. 1,182,188 1,333,750
28,500 Washington Mutual, Inc. 1,203,416 1,237,969
----------- -----------
3,621,142 4,538,969
----------- -----------
FOOD PROCESSING (0.7%):
30,000 Pioneer Hi-Bred International, Inc. 616,320 1,241,250
----------- -----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS (UNAUDITED)--CONTINUED
COST VALUE
<C> <S> <C> <C>
HARDWARE AND TOOLS (0.4%):
20,000 Snap-On, Inc. $ 585,650 $ 725,000
----------- -----------
HEALTH CARE SERVICES (0.9%):
12,000 Bergen Brunswig Corp. 501,379 556,500
11,000 Cardinal Health, Inc. 832,822 1,031,250
----------- -----------
1,334,201 1,587,750
----------- -----------
HOUSEHOLD PRODUCTS (NON-DURABLE) (1.2%):
24,000 Proctor & Gamble Co. 572,220 2,185,500
----------- -----------
INDUSTRIAL MACHINERY (3.7%):
104,000 Tyco International Ltd. New 2,159,614 6,552,000
----------- -----------
INSURANCE (2.6%):
25,987 American International Group, Inc. 490,850 3,794,102
24,000 Liberty Financial Companies 840,637 828,000
----------- -----------
1,331,487 4,622,102
----------- -----------
LODGING (1.2%):
40,000 Marriott International, Inc. Class A (B) 497,055 1,295,000
19,000 Promus Hotel Corp. New 746,747 736,250
5,000 Sodexho Marriott Services, Inc. 43,057 145,000
----------- -----------
1,286,859 2,176,250
----------- -----------
MEDIA (2.1%):
15,000 Disney (Walt) Co. 560,460 1,575,938
26,000 Gartner Group, Inc. New Cl. A 683,313 910,000
27,000 General Motors Hughes Electronics Class H 967,270 1,272,375
----------- -----------
2,211,043 3,758,313
----------- -----------
MEDICAL SUPPLIES (5.2%):
25,800 Abbott Laboratories 452,270 1,054,575
33,000 Alza Corp. 1,304,041 1,427,250
26,000 American Home Products Corp. 1,204,311 1,345,500
100,000 Baxter International, Inc. 880,840 5,381,250
----------- -----------
3,841,462 9,208,575
----------- -----------
OFFICE EQUIPMENT (0.9%):
15,000 Xerox Corp. 1,621,706 1,524,375
----------- -----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS (UNAUDITED)--CONTINUED
COST VALUE
<C> <S> <C> <C>
PETROLEUM SERVICES (0.4%):
9,000 Camco International, Inc. $ 562,283 $ 700,875
----------- -----------
PHARMACEUTICALS (8.1%):
16,000 Bristol-Myers Squibb Co. 215,411 1,839,000
50,000 Lilly Eli & Co. 1,275,456 3,303,125
28,000 Schering-Plough Corp. 487,839 2,565,500
19,000 Sofamor/Danek Group, Inc. 1,331,098 1,644,687
72,000 Warner Lambert Co. 2,277,849 4,995,000
----------- -----------
5,587,653 14,347,312
----------- -----------
REGULATED INVESTMENT COMPANIES (7.4%):
670,000 Dresdner RCM Growth Equity Fund, Inc. 4,138,453 4,783,800
158,769 Dresdner RCM International Growth Equity
Fund A 2,063,870 2,506,965
360,000 Dresdner RCM Small Cap Fund 4,104,054 4,528,800
50,000 Latin America Smaller Companies Fund,
Inc. 528,218 362,500
70,000 Latin America Investment Fund 1,168,662 805,000
----------- -----------
12,003,257 12,987,065
----------- -----------
RESTAURANTS (3.6%):
83,000 Host Marriott Corp. 1,262,300 1,478,438
70,000 McDonalds Corp. 2,850,156 4,830,000
----------- -----------
4,112,456 6,308,438
----------- -----------
RETAIL TRADE (4.8%):
29,000 Bed Bath & Beyond, Inc. 757,687 1,502,562
20,000 CVS Corporation 381,438 778,750
32,000 Dayton Hudson Corp. 1,503,556 1,552,000
30,000 Family Dollar Stores, Inc. 419,821 555,000
15,000 Home Depot, Inc. 943,546 1,245,938
17,000 Nordstrom, Inc. 1,064,960 1,313,250
17,000 Office Depot, Inc. 550,424 536,562
22,000 Safeway, Inc. 657,405 895,125
----------- -----------
6,278,837 8,379,187
----------- -----------
SOFTWARE AND PROCESSING (12.1%):
26,000 America Online, Inc. 690,082 2,756,000
11,000 Automatic Data Processing, Inc. 241,307 801,625
500,000 Boole & Babbage, Inc. (A) 161,913 11,937,500
18,000 HBO & Co. 524,070 634,500
30,000 Microsoft Corp. (A) 791,038 3,251,250
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS (UNAUDITED)--
CONTINUED
COST VALUE
<C> <S> <C> <C>
SOFTWARE AND PROCESSING--CONTINUED
13,000 Network Associates, Inc. $ 562,860 $ 622,375
29,000 Peoplesoft, Inc. 1,194,638 1,363,000
----------- ------------
4,165,908 21,366,250
----------- ------------
TOTALS--COMMON STOCKS 82,774,039 169,868,023
----------- ------------
TOTALS--INVESTMENTS $88,894,039 $175,988,023
=========== ============
</TABLE>
(A) Non-income producing securities.
(B) Marriott International, Inc. New common stock was converted, on a one-
for-one basis, into Marriott International, Inc. Class A common stock.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (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 1997, it was determined that a portion of the net
long-term capital gains realized during the year 1997 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 1997
should be distributed in 1997 to the Corporation's stockholders.
For federal income tax purposes at June 30, 1998 the aggregate gross
unrealized appreciation for all securities in which there is an excess of
value over tax cost is $88,473,797, the aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value is $1,379,813, the net unrealized appreciation is $87,093,984 and the
aggregate cost of securities for federal income tax purposes is $88,894,039.
NOTE 3--CAPITAL STOCK
At June 30, 1998 the issued and outstanding capital stock of the Corporation
consisted of 1,015,000 shares of $1 par value capital stock (1,505,462 shares
are authorized). Net assets consist of capital paid in of $88,497,209
(including $82,434,246 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 $87,093,984. During the six months ended June 30, 1998, 13,400
shares of Bergstrom Capital Corporation stock were repurchased by the
Corporation from stockholders at a weighted average discount of 9.9% from net
asset value per share. These shares were retired and restored to the status of
authorized but unissued shares.
As of June 30, 1998 the Corporation was authorized to purchase, on the
American Stock Exchange, up to 15,000 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
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
NOTE 4--SECURITIES
During the six months ended June 30, 1998, the cost of securities purchased
and the proceeds from securities sold, other than short-term investments,
aggregated $29,652,444 and $43,920,939, respectively.
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
1997.
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
$20,789 have been paid in 1998 only to directors of the Corporation who were
not affiliated with any investment adviser to the Corporation.
<PAGE>
--------------------------------------------------------------------------
^ ^
^ -------------------------------------------------------------------------- ^
LOGO
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 WILLIAM H. SPERBER
NORMAN R. NIELSEN Chairman, President and Chief Executive Officer
The Trust Company of Washington
Manager and Senior Memberof Research Staff
SRI International
OFFICERS
WILLIAM L. McQUEEN PAMELA A. FIORINI
President and Treasurer Secretary
ELIZABETH C. HEDLUND
Assistant Secretary
- --------------------------------------------------------------
BERGSTROM CAPITAL CORPORATION
505 Madison Street, Suite 220
Seattle, Washington 98104
(206) 623-7302
