<PAGE>
- ----------------
BERGSTROM
CAPITAL
CORPORATION
- ----------------
1997 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.
On June 9, 1997, the Company paid a cash dividend of $8.50 per share to
stockholders of record on May 22, 1997. This dividend was the annual
distribution for the year 1997 under the Company's distribution policy.
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 Company retained the undistributed net long-term capital gains
realized during the year 1997.
<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. The Internal Revenue Code provides that, within 60 days 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. The Internal Revenue Code also provides that, if a stockholder owned
shares registered in the name of a broker or nominee on December 31 of such
year, the broker or nominee would send Form 2439 to such stockholder within 90
days following the end of such year. For the years 1980 through 1984, 1986,
1987, 1989, and 1991 through 1996, 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 1997 the Company has retained a portion of the net long-term
capital gains realized ($26.42722 per share) and has paid the federal income
tax thereon ($9.24953 per share) on behalf of its stockholders of record on
December 31, 1997. Of the $26.42722 per share net long-term capital gains
retained, $13.00694 per share, or 49.21797% has been designated as subject to
the 28% tax rate, and $13.42028 per share, or 50.78203% has been designated as
subject to the 20% tax rate. The Company will send Form 2439, Notice to
Shareholders of Undistributed Capital Gains, to stockholders of record on
December 31, 1997 by March 1, 1998. If you owned shares on December 31, 1997
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 by
March 31, 1998.
The portion of the long-term capital gains realized during the year 1997
which was not retained was distributed as a part of the dividend paid on June
9, 1997.
A Form 1099 was mailed in January 1998 to all stockholders of record on the
dividend record date in 1997 setting forth the specific amounts to be included
in their 1997 tax returns.
NOTICE OF DIVIDENDS PAID DURING THE YEAR 1997
<TABLE>
<CAPTION>
DIVIDEND DIVIDEND FROM
FROM NET LONG-TERM
1997 NET CAPITAL GAINS TOTAL
RECORD PAYMENT INVESTMENT REALIZED IN DIVIDENDS
DATE DATE INCOME 1997 PER SHARE
------- ------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
5/22/97 6/9/97 $1.79625* $6.70375** $8.50000
========= ========== ========
</TABLE>
* Includes short-term capital gain of $1.16592.
** Of the $6.70375 per share long-term capital dividend paid, $3.29945 per
share, or 49.21797% has been designated as subject to the 28% tax rate, and
$3.40430 per share, or 50.78203% has been designated as subject to the 20%
tax rate.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
505 Madison Street, Suite 220
Seattle, Washington 98104
February 9, 1998
Dear Fellow Stockholders:
Please refer to the Notice of Important Federal Income Tax Information and
the Notice of Dividends Paid During The Year 1997 in this report regarding the
retention of net long-term capital gains realized in 1997 and the details of
the dividend paid in 1997.
During the year of 1997 the Company's net assets increased from $151,427,077
to $158,894,821 which is an increase of $7,467,744. 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 year 1997 for $11,333,753. The increase in net assets, before
deducting the payment of dividends and the repurchase of stock, was
$28,098,797 which was composed of net investment income of $689,455, realized
gain on investments of $26,273,386 (after deducting $9,512,214 in income taxes
paid on behalf of stockholders), and an increase in unrealized appreciation of
$1,135,956.
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 $154.51
on December 31, 1997. 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
26.5%. During the same period the Dow Jones Industrial Average, adjusted for
dividends, increased 24.7% and the Standard & Poor's 500 Stock Average,
adjusted for dividends, increased
33.1%. The per share net asset value on Friday, February 6, 1998 was $161.41.
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 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 year 1997 the Company purchased 71,600 shares of
its capital stock under this authorization. As of December 31, 1997 the
Company had 28,400 shares remaining under this authorization.
During the year 1997 the Company had total interest and dividend income of
$1,898,678 as compared to $1,796,528 for the year 1996 for an increase of
$102,150. During the year 1997 operating expenses were $1,209,223 which is a
$65,217 increase from $1,144,006 for year of 1996. The resulting net
investment income of $689,455 for the year 1997 is an increase from $652,522
for the year 1996. This resulted in an increase to $.64 per share versus $.57
per share.
The following are the major ($500,000 or more) purchases and sales made in
the Company's portfolio of securities during the fourth quarter of 1997,
excluding changes resulting from reorganizations and stock splits:
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
--------------------------------------
HELD
SECURITY NAME ADDITIONS REDUCTIONS DECEMBER 31, 1997
- ----------------------------------------- --------- ---------- -----------------
<S> <C> <C> <C>
Amgen, Inc. ............................. 70,000 290,000
Avon Products, Inc. ..................... 14,000 0
BB&T Corporation......................... 18,000 0
BetzDearborn, Inc. ...................... 12,000 0
Boole and Babbage, Inc. ................. 73,750 500,000
Camco International, Inc. ............... 9,000 9,000
Cardinal Health, Inc. ................... 11,000 11,000
Citicorp................................. 6,000 7,000
Comcast UK Cable Partners Ltd. .......... 51,000 0
Compaq Computer Corp. ................... 13,000 5,000 8,000
Computer Sciences Corp. ................. 7,000 7,000
Dresdner RCM Growth Equity Fund, Inc. ... 345,000 670,000
Dresdner RCM Small Cap Fund.............. 185,000 360,000
Ericsson L M Tel Co ADR.................. 33,000 0
Guidant Corp. ........................... 15,000 47,000
Hasbro, Inc. ............................ 37,500 0
Home Depot, Inc. ........................ 11,000 11,000
Host Marriott Corp. ..................... 23,000 83,000
Intermedia Communications FLA, Inc. ..... 14,000 14,000
Johnson & Johnson........................ 9,000 11,000
Liberty Financial Companies.............. 24,000 24,000
Merck & Co., Inc. ....................... 12,000 0
Merrill Lynch Convertible Fund, Inc. .... 106,081 300,000
Microsoft Corp. ......................... 11,000 13,000
Pepsico, Inc. ........................... 23,000 23,000
Pfizer, Inc. ............................ 7,000 37,000
PMI Group, Inc. ......................... 13,000 0
Safeway, Inc. ........................... 11,000 11,000
SBC Communications, Inc. ................ 20,000 0
Sofamor/Danek Group, Inc. ............... 11,000 11,000
Teleport Communications Group............ 15,000 15,000
Travelers Group, Inc. ................... 17,000 17,000
Warner Lambert Co. ...................... 18,000 18,000
</TABLE>
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
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (see accompanying schedule) (Note 1):
Short-term investments (cost $18,327,549) $ 18,327,549
Common stocks (cost $76,610,404) 154,531,477
------------
TOTAL INVESTMENTS (COST $94,937,953) 172,859,026
Cash 6,674
Interest and dividends receivable 258,512
Other assets 8,223
------------
TOTAL ASSETS 173,132,435
------------
LIABILITIES:
Advisory fee payable (Note 5) 69,460
Payable for securities purchased 3,895,226
Payable for capital stock repurchased 747,816
Federal income tax payable (Note 2) 9,512,214
Other accrued expenses 12,898
------------
TOTAL LIABILITIES 14,237,614
------------
NET ASSETS applicable to 1,028,400 outstanding shares
of capital stock equivalent to $154.51 per share on
December 31, 1997 (Note 3) $158,894,821
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 689,455 $ 652,522
Realized gain on investments 26,273,386 13,780,358
Increase in unrealized appreciation 1,135,956 1,523,330
------------ ------------
Net increase in net assets resulting from
operations 28,098,797 15,956,210
------------ ------------
DIVIDENDS TO STOCKHOLDERS:
From net investment income (689,455) (652,522)
From net realized gain on investments (8,607,845) (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 (83,800
SHARES--1997; 51,500 SHARES--1996) (11,333,753) (6,066,937)
------------ ------------
TOTAL INCREASE IN NET ASSETS 7,467,744 2,069,853
NET ASSETS, BEGINNING OF PERIOD 151,427,077 149,357,224
------------ ------------
NET ASSETS, END OF PERIOD $158,894,821 $151,427,077
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 764,248
Dividends 1,134,430
-----------
TOTAL INCOME 1,898,678
-----------
EXPENSES:
Advisory fees (Note 5) 940,551
Legal fees 42,265
Auditing fees 50,400
Stockholders' meeting and reports 21,742
Transfer agent fees and expenses 30,538
Custodian fees 26,014
Directors' fees and expenses 51,380
Fee for shares listed on American Stock Exchange 7,000
State and other taxes 17,356
Other 21,977
-----------
TOTAL EXPENSES 1,209,223
-----------
NET INVESTMENT INCOME ($.64 PER SHARE) (NOTE 2) 689,455
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on investments (excluding short-term
investments):
Proceeds from sale of securities $78,967,452
Cost of securities sold 45,762,322
-----------
Realized gain on investments sold 33,205,130
Capital gain distributions received 2,580,470
-----------
Realized gain on investments before provision for
income taxes 35,785,600
Provision for income taxes (Note 2) 9,512,214
-----------
Realized gain on investments (Notes 2 and 4) 26,273,386
Unrealized appreciation of investments:
Beginning of period 76,785,117
End of period 77,921,073
-----------
Increase in unrealized appreciation 1,135,956
NET GAIN ON INVESTMENTS ($24.79 PER SHARE) (NOTE 2) 27,409,342
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $28,098,797
===========
</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 past results and
should not be regarded as a representation of future results.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period $136.15 $128.35 $ 94.56 $95.06 $102.68
Net investment income (1) .64 .57 .99 1.22 1.10
Net realized and unrealized gain
(loss) on investments 24.79 13.51 37.16 2.23 (6.72)
Dividends from:
Net investment income (2) (.63) (.58) (1.01) (1.22) (1.10)
Net realized gain on investments (7.87) (6.33) (3.99) (2.78) (.90)
------- ------- ------- ------ -------
Total dividends (8.50) (6.91) (5.00) (4.00) (2.00)
------- ------- ------- ------ -------
Increase due to purchase of
Bergstrom stock at less than net
asset value 1.43 .63 .64 .05 --
------- ------- ------- ------ -------
Net asset value at end of period $154.51 $136.15 $128.35 $94.56 $ 95.06
======= ======= ======= ====== =======
Market value per share at end of
period $142.50 $119.00 $109.50 $84.88 $ 94.50
======= ======= ======= ====== =======
Total investment returns:
Based on market value per share
(3) 37.0% 15.6% 38.1% (3.4)% (25.1)%
Based on net asset value per
share (4) 26.5% 14.0% 43.5% 5.6% (3.8)%
Net assets at end of period (in
millions) $ 159 $ 151 $ 149 $ 115 $ 118
Ratio of expenses to average net
assets .75% .76% .82% .84% .81%
Ratio of net investment income to
average net assets .43% .43% .88% 1.29% 1.11%
Average commission rate paid (5) $ .0646 $ .0651 -- -- --
Portfolio turnover rate 34.07% 31.80% 29.69% 25.58% 26.16%
Number of shares outstanding at
end of period (in thousands) 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.
(5) Represents average commission rate paid per share on purchases and sales
of equity securities by the Corporation, as computed under a Securities
and Exchange Commission rule which was effective for the Corporation for
the year ended December 31, 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, 1997
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT COST VALUE
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (10.6%):
$13,348,000 State Street Bank and Trust Company,
5.25% Euro-Dollar Deposit due 1/2/98 $13,348,000 $ 13,348,000
5,000,000 General Motors Acceptance Corp., 5.89%
Note due 1/26/98 4,979,549 4,979,549
----------- ----------- ------------
$18,348,000 TOTAL--SHORT-TERM INVESTMENTS 18,327,549 18,327,549
=========== ----------- ------------
COMMON STOCKS (89.4%):
AEROSPACE AND DEFENSE (0.6%):
20,000 Sundstrand Corp. 505,395 1,007,500
----------- ------------
BANKS (3.2%):
24,000 Bank New York, Inc. 933,258 1,387,500
7,000 Citicorp 827,467 885,063
12,500 Morgan (J.P.) & Co., Inc. 792,626 1,410,937
16,000 U.S. Bancorp DEL 1,466,681 1,791,000
----------- ------------
4,020,032 5,474,500
----------- ------------
BEVERAGES (4.7%):
60,000 Coca Cola Enterprises, Inc. 810,797 2,133,750
77,500 Coca-Cola Co. 104,001 5,163,438
23,000 Pepsico, Inc. 897,386 838,062
----------- ------------
1,812,184 8,135,250
----------- ------------
BIOTECHNOLOGY (9.1%):
290,000 Amgen, Inc. (B) 1,515,104 15,696,250
----------- ------------
BUSINESS SERVICES (3.6%):
50,000 Cognizant Corporation 1,641,500 2,228,125
135,000 Huntingdon Life Sciences Group PLC ADR 741,765 489,375
100,000 Manpower, Inc. 1,671,364 3,525,000
----------- ------------
4,054,629 6,242,500
----------- ------------
COMMUNICATION SYSTEMS (3.5%):
7,000 ASM Lithography Holding N V 630,364 472,500
14,000 Intermedia Communications FLA, Inc. 671,691 850,500
54,000 Nextel Communications, Inc. 781,200 1,404,000
15,000 Teleport Communications Group 798,473 823,125
84,000 Worldcom, Inc. GA 1,730,113 2,541,000
----------- ------------
4,611,841 6,091,125
----------- ------------
COMPUTERS AND INFORMATION (1.4%):
8,000 Compaq Computer Corp. 565,624 451,500
21,000 Hewlett Packard Co. 957,756 1,312,500
7,000 International Business Machines 701,514 731,938
----------- ------------
2,224,894 2,495,938
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
COST VALUE
<C> <S> <C> <C>
DIVERSIFIED TECHNOLOGY (0.7%):
18,000 Nokia Corp. Sponsored ADR $ 655,476 $ 1,260,000
------------ ------------
DRUGS AND HEALTH
SUPPLIES (6.6%):
10,000 Boston Scientific Corp. 431,450 458,750
9,000 Glaxo Wellcome PLC ADR 290,790 430,875
47,000 Guidant Corp. 645,930 2,925,750
11,000 Johnson & Johnson 472,955 724,625
18,000 Medtronic, Inc. 564,209 941,625
37,000 Pfizer, Inc. 1,791,096 2,758,813
60,000 Smithkline Beecham PLC ADR 1,244,831 3,086,250
------------ ------------
5,441,261 11,326,688
------------ ------------
ELECTRICAL COMPONENTS (1.2%):
28,000 General Electric Co. 1,211,090 2,054,500
69,000 Micro-Metrics, Inc. (A,B) 227,700 25,268
------------ ------------
1,438,790 2,079,768
------------ ------------
ELECTRONICS/NEW
TECHNOLOGY (2.9%):
14,000 Altera Corp. 738,790 463,750
27,000 Cisco Systems, Inc. 1,322,839 1,505,250
17,000 Intel Corp. 505,187 1,194,250
11,000 Lucent Technologies, Inc. 508,107 878,625
28,000 Newbridge Networks Corp. 904,550 976,500
------------ ------------
3,979,473 5,018,375
------------ ------------
FINANCIAL SERVICES,
DIVERSIFIED (2.8%):
15,000 Amresco, Inc. 324,375 444,375
18,000 Federal National Mortgage
Association 440,845 1,027,125
34,000 Golden State Bancorp, Inc. 937,264 1,270,750
17,000 Travelers Group, Inc. 879,399 915,875
19,000 Washington Mutual, Inc. 1,203,416 1,212,438
------------ ------------
3,785,299 4,870,563
------------ ------------
FOOD PROCESSING (0.9%):
14,000 Pioneer Hi-Bred
International, Inc. 862,848 1,501,500
------------ ------------
HARDWARE AND TOOLS (0.5%):
20,000 Snap-On, Inc. 585,650 872,500
------------ ------------
HEALTH CARE SERVICES (0.7%):
9,000 Bergen Brunswig Corp. 375,502 379,125
11,000 Cardinal Health, Inc. 832,822 826,375
------------ ------------
1,208,324 1,205,500
------------ ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
COST VALUE
<C> <S> <C> <C>
HOUSEHOLD PRODUCTS (NON-DURABLE)
(1.1%):
24,000 Proctor & Gamble Co. $ 572,220 $ 1,915,500
----------- ------------
INDUSTRIAL MACHINERY (2.4%):
92,000 Tyco International Ltd. New 1,550,614 4,145,750
----------- ------------
INSURANCE (2.2%):
25,987 American International Group, Inc. 490,850 2,826,086
24,000 Liberty Financial Companies 840,637 906,000
----------- ------------
1,331,487 3,732,086
----------- ------------
LODGING (1.4%):
20,000 Marriott International, Inc. 540,111 1,385,000
23,000 Promus Hotel Corp. New (C) 905,248 966,000
----------- ------------
1,445,359 2,351,000
----------- ------------
MEDIA (1.7%):
24,000 CBS Corporation (D) 679,194 706,500
15,000 Disney (Walt) Co. 560,460 1,485,938
21,000 Gartner Group, Inc. New Cl. A 526,200 782,250
----------- ------------
1,765,854 2,974,688
----------- ------------
MEDICAL SUPPLIES (3.6%):
12,900 Abbott Laboratories 452,270 845,756
9,300 Alza Corp. 281,092 295,856
100,000 Baxter International, Inc. 880,840 5,043,750
----------- ------------
1,614,202 6,185,362
----------- ------------
OFFICE EQUIPMENT (0.5%):
11,000 Xerox Corp. 804,150 811,937
----------- ------------
PETROLEUM SERVICES (0.3%):
9,000 Camco International, Inc. 562,283 573,187
----------- ------------
PHARMACEUTICALS (6.7%):
16,000 Bristol-Myers Squibb Co. 215,411 1,514,000
78,000 Lilly Eli & Co. 1,351,106 5,430,750
28,000 Schering-Plough Corp. 487,839 1,739,500
11,000 Sofamor/Danek Group, Inc. 725,173 715,688
18,000 Warner Lambert Co. 1,195,839 2,232,000
----------- ------------
3,975,368 11,631,938
----------- ------------
POLLUTION CONTROL (0.4%):
14,000 Culligan Water Technologies, Inc. 620,720 703,500
----------- ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
COST VALUE
<C> <S> <C> <C>
REGULATED INVESTMENT COMPANIES (9.1%):
670,000 Dresdner RCM Growth Equity Fund, Inc.
(E) $ 4,138,453 $ 4,133,900
158,769 Dresdner RCM International Growth
Equity Fund A (F) 2,063,870 2,178,313
360,000 Dresdner RCM Small Cap Fund (G) 4,104,054 4,140,000
50,000 Latin America Growth Fund, Inc. 528,218 487,500
70,000 Latin America Investment Fund 1,168,662 1,001,875
300,000 Merrill Lynch Convertible Fund, Inc. 3,053,290 3,807,000
----------- ------------
15,056,547 15,748,588
----------- ------------
RESTAURANTS (2.1%):
83,000 Host Marriott Corp. 1,262,300 1,628,875
42,000 McDonalds Corp. 1,184,151 2,005,500
----------- ------------
2,446,451 3,634,375
----------- ------------
RETAIL TRADE (3.7%):
29,000 Bed Bath & Beyond, Inc. 757,687 1,116,500
31,250 Consolidated Stores Corp. 896,115 1,373,047
25,000 Crown Books Corporation (B) 309,500 159,375
18,000 CVS Corporation 687,129 1,153,125
15,000 Family Dollar Stores, Inc. 419,821 439,687
18,000 Hannaford Bros. Co. 448,648 781,875
11,000 Home Depot, Inc. 659,596 647,625
11,000 Safeway, Inc. 657,405 695,750
----------- ------------
4,835,901 6,366,984
----------- ------------
SOFTWARE AND PROCESSING (11.8%):
12,000 America Online, Inc. 564,298 1,070,250
11,000 Automatic Data Processing, Inc. 241,307 675,125
500,000 Boole & Babbage, Inc. (B) 285,370 15,000,000
7,000 Computer Sciences Corp. 555,460 584,500
13,000 Microsoft Corp. (B) 481,412 1,680,250
14,000 Peoplesoft, Inc. 449,795 546,000
24,000 Sterling Commerce, Inc. 750,406 922,500
----------- ------------
3,328,048 20,478,625
----------- ------------
TOTALS--COMMON STOCKS 76,610,404 154,531,477
----------- ------------
TOTALS--INVESTMENTS $94,937,953 $172,859,026
=========== ============
</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 1997, nor was any income earned.
(B) Non-income producing securities.
(C) Formerly Doubletree Corp.
(D) Formerly Westinghouse Electric Co.
(E) Formerly RCM Growth Equity Fund, Inc.
(F) Formerly RCM International Growth Equity Fund A
(G) Formerly RCM Small Cap Fund
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.
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
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 2--FEDERAL INCOME TAXES--CONTINUED
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 December 31, 1997 the aggregate gross
unrealized appreciation for all securities in which there is an excess of
value over tax cost is $79,368,710, the aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value is $1,447,637, the net unrealized appreciation is $77,921,073 and the
aggregate cost of securities for federal income tax purposes is $94,937,953.
NOTE 3--CAPITAL STOCK
At December 31, 1997 the issued and outstanding capital stock of the
Corporation consisted of 1,028,400 shares of $1 par value capital stock
(1,505,462 shares are authorized). Net assets consist of capital paid in of
$80,705,558 (including $72,725,732 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 $77,921,073. During the year ended December 31, 1997, 83,800
shares of Bergstrom Capital Corporation stock were purchased by the
Corporation from stockholders at a weighted average discount of 11.9% from net
asset value per share. These shares were retired and restored to the status of
authorized but unissued shares.
As of December 31, 1997 the Corporation was authorized to purchase, on the
American Stock Exchange, up to 28,400 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, 1997, the cost of securities purchased
and the proceeds from securities sold, other than short-term investments,
aggregated $50,953,288 and $78,967,452, 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
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 5--INVESTMENT ADVISORY CONTRACT AND PAYMENTS TO AFFILIATES--CONTINUED
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--DIRECTOR'S 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 $51,380 have been paid in 1997 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 1997
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
DEC. 31 SEPT. 30 JUNE 30 MARCH 31
------- -------- ------- --------
<S> <C> <C> <C> <C>
Total investment income $ 527 $ 406 $ 501 $ 465
Net investment income 223 109 198 159
Per share .21 .10 .19 .14
Net realized and unrealized gain (loss)
on investments (5,332)* 9,827 19,741 3,173
Per share (5.19) 9.13 17.98 2.87
</TABLE>
* Net of provision for federal income tax in the amount of $9,512 on net long-
term capital gains retained.
<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>
** Net of provision for federal income tax in the amount of $3,561 on net
long-term capital gains retained.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
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, 1997, the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended December 31,
1997 and 1996, and the financial highlights for each of the years in the five-
year period ended December 31, 1997. 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, 1997 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Bergstrom Capital
Corporation at December 31, 1997, 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 30, 1998
<PAGE>
BOARD OF DIRECTORS
ERIK E. BERGSTROM GEORGE COLE SCOTT
Chairman Registered Representative
Anderson & Strudwick Incorporated
WILLIAM L. McQUEEN President
President and Treasurer Closed-End Fund Advisors, Inc.
NORMAN R. NIELSEN WILLIAM H. SPERBER
Manager and Senior Member President, Chief Executive Officer
of Research Staff and Managing Director
SRI International The Trust Company of Washington
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
