<PAGE>
- ----------------------------------
BERGSTROM
CAPITAL
CORPORATION
- ----------------------------------
1998 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 8, 1998, the Company paid a cash dividend of $10.75 per share to
stockholders of record on May 21, 1998. This dividend was the annual
distribution for the year 1998 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 Board of Directors has elected to retain the undistributed net
long-term capital gains realized during the year 1998.
<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 1997, 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 1998 the Company has retained a portion of the net long-term
capital gains realized ($8.10292 per share) and has paid the federal income
tax thereon ($2.83602 per share) on behalf of its stockholders of record on
December 31, 1998. The Company will send Form 2439, Notice to Shareholders of
Undistributed Capital Gains, to stockholders of record on December 31, 1998 by
March 1, 1999. If you owned shares on December 31, 1998 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, 1999.
The portion of the long-term capital gains realized during the year 1998
which was not retained was distributed as a part of the dividend paid on June
8, 1998.
A Form 1099 was mailed in January 1999 to all stockholders of record on the
dividend record date in 1998 setting forth the specific amounts to be included
in their 1998 tax returns.
NOTICE OF DIVIDENDS PAID DURING THE YEAR 1998
<TABLE>
<CAPTION>
Dividend From
Net Long-Term
Dividend From Capital Gains
1998 Net Investment Realized In Total Dividends
Record Date Payment Date Income 1998 Per Share
----------- ------------ ------------------- ------------- ---------------
<S> <C> <C> <C> <C>
5/21/98 6/8/98 $0.16073 $10.58927 $10.75000
======== ========= =========
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
505 Madison Street, Suite 220
Seattle, Washington 98104
February 8, 1999
Dear Fellow Stockholders:
Please refer to the Notice of Important Federal Income Tax Information and
the Notice of Dividends Paid During The Year 1998 in this report regarding the
retention of net long-term capital gains realized in 1998 and the details of
the dividend paid in 1998.
During the year 1998 the Company's net assets increased from $158,894,821 to
$200,332,879 which is an increase of $41,438,058. 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 year 1998 for $4,141,868. The increase in net assets, before deducting the
payment of dividends and the repurchase of stock, was $56,507,301 which was
composed of net investment income of $163,385, realized gain on investments of
$16,030,888 (after deducting $2,836,023 in income taxes paid on behalf of
stockholders), and an increase in unrealized appreciation of $40,313,028.
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 $200.33
on December 31, 1998. 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 38.5%. During
the same period the Dow Jones Industrial Average, adjusted for dividends,
increased 16.1% and the Standard & Poor's 500 Stock Average, adjusted for
dividends, increased 28.6%. The per share net asset value on Friday, February 5,
1999 was $206.84.
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 1998 the Company purchased the remaining
28,400 shares of its capital stock under this authorization.
During the year 1998 the Company had total interest and dividend income of
$1,443,780 as compared to $1,898,678 for the same period in 1997 for a
decrease of $454,898. During the year 1998 operating expenses were $1,280,395
which is a $71,172 increase from $1,209,223 for the year 1997. The resulting
net investment income of $163,385 for the year 1998 is a decrease of $526,070
from $689,455 for the year 1997. This resulted in a decrease to $.16 per share
versus $.64 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 1998:
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
------------------------------------------
HELD
SECURITY NAME ADDITIONS REDUCTIONS DECEMBER 31, 1998
- ------------------------------------- --------- ---------- -----------------
<S> <C> <C> <C>
American Home Products Corp.......... 11,000 37,000
Ascend Communications, Inc........... 24,000 24,000
BankAmerica Corp. NEW................ 14,711(1) 0
Bausch & Lomb, Inc................... 20,000 0
Bell Atlantic Corp................... 12,000 12,000
BMC Software, Inc. .................. 12,000 12,000 0
Boston Scientific Corp. ............. 18,000 0
Citicorp............................. 8,000(2) 14,000(2) 0
Citigroup, Inc....................... 35,000(2) 35,000
Clear Channel Communcations, Inc..... 27,000 27,000
Colgate Palmolive Co................. 20,000 20,000
Costco Companies, Inc. .............. 29,000 29,000
Dayton Hudson Corp. ................. 23,000 32,000 23,000
Dresdner RCM Growth Equity Fund,
Inc................................. 815,000 670,000 815,000
Dresdner RCM Small Cap Fund.......... 450,000 360,000 450,000
Federal Home Loan Mortgage Corp...... 15,000 15,000
Fiserv, Inc. ........................ 19,000 19,000
General Dynamics Corp................ 10,000 10,000
General Electric Co.................. 10,000 38,000
General Motors Hughes Electronics
Class H............................. 34,000 0
Gillette Co. ........................ 34,000 0
Host Marriott Corp................... 49,000 0
Intel Corp........................... 6,000 26,000
International Business Machines...... 15,000 15,000
Jacor Communications, Inc............ 15,000 15,000
Johnson & Johnson.................... 12,000 25,000
Kohls Corp........................... 20,000 20,000
Latin America Investment Fund........ 70,000 0
Manpower, Inc. ...................... 70,000 0
Medtronic, Inc. ..................... 11,000 25,000
Microsoft Corp. ..................... 8,000 38,000
Monsanto Co.......................... 39,000 0
Nordstrom, Inc. ..................... 34,000 0
Peoplesoft, Inc. .................... 29,000 0
Pepsico, Inc......................... 37,000 0
SBC Communications, Inc. ............ 18,000 18,000
Snap-On, Inc......................... 20,000 0
Travelers Group, Inc................. 22,000 0
Tricon Global Restaurants, Inc. ..... 25,000 25,000
Wal-Mart Stores, Inc................. 20,000 20,000
Warner Lambert Co.................... 32,000 40,000
Washington Mutual, Inc............... 28,500 0
Xerox Corp. ......................... 15,000 0
Yahoo, Inc........................... 4,500 4,500
Zeneca Group PLC ADR................. 13,500 27,000 0
</TABLE>
- -------
(1) 14,711 shares of BankAmerica Corp. NEW were received in exchange for
13,000 shares of BankAmerica Corp. as a result of a merger and then
14,711 shares of BankAmerica Corp. NEW were sold.
(2) 8,000 shares of Citicorp were purchased and then 35,000 shares of
Citigroup, Inc. were received in exchange for 14,000 shares of Citicorp
as a result of a merger.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
At the Annual Meeting of Stockholders on November 9, 1998 the stockholders
approved a new Investment Management and Advisory Agreement appointing
Dresdner RCM Global Investors LLC ("Dresdner RCM") as the Company's sole
investment adviser. As a result, Joanne L. Howard has assumed primary
responsibility for the day-to-day management of all of the Company's
investment portfolio. Since 1994, she had overseen the portion of the
Company's portfolio managed by Dresdner RCM as a subadviser. Ms. Howard is a
Managing Director of Dresdner RCM with over 30 years of experience in the
investment management business. She joined Dresdner RCM in 1992 as a member of
the Equity Portfolio Management Team.
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.
YEAR 2000 READINESS DISCLOSURE-- 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 is
continuing its review, both internally and as regards the Company's service
providers, 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,
/s/ WILLIAM L. MCQUEEN
William L. McQueen
President
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (see accompanying schedule): (Note 1):
Short-term investments (cost $2,015,481) $ 2,015,481
Common stocks (cost $82,971,836) 201,205,937
------------
Total Investments (cost $84,987,317) 203,221,418
Cash 5,000
Receivable for securities sold 454,411
Interest and dividends receivable 81,766
Other assets 7,720
------------
Total assets 203,770,315
------------
Liabilities:
Advisory fee payable (Note 5) 92,342
Payable for securities purchased 480,847
Other accrued expenses 28,224
Federal income tax payable (Note 2) 2,836,023
------------
Total liabilities 3,437,436
------------
Net assets applicable to 1,000,000 outstanding shares of
capital stock equivalent to $200.33 per share on December 31,
1998 (Note 3) $200,332,879
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
<S> <C> <C>
Operations:
Net investment income $ 163,385 $ 689,455
Realized gain on investments 16,030,888 26,273,386
Increase in unrealized appreciation 40,313,028 1,135,956
------------ ------------
Net increase in net assets resulting from
operations 56,507,301 28,098,797
------------ ------------
Dividends to stockholders:
From net investment income (163,385) (689,455)
From net realized gain on investments (10,763,990) (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 (28,400 shares-1998; 83,800
shares-1997) (4,141,868) (11,333,753)
------------ ------------
Total increase in net assets 41,438,058 7,467,744
Net assets, beginning of period 158,894,821 151,427,077
------------ ------------
Net assets, end of period $200,332,879 $158,894,821
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 465,633
Dividends 978,147
-----------
Total income 1,443,780
-----------
Expenses:
Advisory fees (Note 5) 942,620
Legal fees 81,411
Directors' fees and expenses (Note 6) 51,698
Auditing fees 50,473
Transfer agent fees and expenses 47,247
Custodian fees 25,041
Stockholders' meeting and reports 24,275
Other expenses 20,639
Officer's salary and related expenses (Note 5) 11,917
State and other taxes 9,672
Accounting expenses 8,402
Fee for shares listed on American Stock Exchange 7,000
-----------
Total expenses 1,280,395
-----------
Net investment income ($.16 per share) (Note 2) 163,385
-----------
Realized and unrealized gain on investments:
Realized gain on investments (excluding short-term
investments):
Proceeds from sale of securities $ 86,144,862
Cost of securities sold 67,333,520
------------
Realized gain on investments sold 18,811,342
Capital gain distributions received 55,569
------------
Realized gain on investments before provision for
income taxes 18,866,911
Provision for income taxes (Note 2) 2,836,023
-----------
Realized gain on investments (Notes 2 and 4) 16,030,888
Unrealized appreciation of investments:
Beginning of period 77,921,073
End of period 118,234,101
------------
Increase in unrealized appreciation 40,313,028
-----------
Net gain on investments ($55.99 per share) (Note 2) 56,343,916
-----------
Net increase in net assets resulting from operations $56,507,301
===========
</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
------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period........................... $154.51 $136.15 $128.35 $ 94.56 $95.06
Net investment income(1).......... .16 .64 .57 .99 1.22
Net realized and unrealized gain
on investments................... 55.99 24.79 13.51 37.16 2.23
Dividends from:
Net investment income(2)........ (.16) (.63) (.58) (1.01) (1.22)
Net realized gain on
investments.................... (10.59) (7.87) (6.33) (3.99) (2.78)
------- ------- ------- ------- ------
Total dividends............... (10.75) (8.50) (6.91) (5.00) (4.00)
------- ------- ------- ------- ------
Increase due to purchase of
Bergstrom stock at less than net
asset value...................... .42 1.43 .63 .64 .05
------- ------- ------- ------- ------
Net asset value at end of period.. $200.33 $154.51 $136.15 $128.35 $94.56
======= ======= ======= ======= ======
Market value per share at end of
period........................... $171.00 $142.50 $119.00 $109.50 $84.88
======= ======= ======= ======= ======
Total investment returns:
Based on market value per
share(3)....................... 32.1% 37.0% 15.6% 38.1% (3.4)%
Based on net asset value per
share(4)....................... 38.5% 26.5% 14.0% 43.5% 5.6%
Net assets at end of period (in
millions)........................ $ 200 $ 159 $ 151 $ 149 $ 115
Ratio of expenses to average net
assets........................... .74% .75% .76% .82% .84%
Ratio of net investment income to
average net assets............... .09% .43% .43% .88% 1.29%
Portfolio turnover rate........... 44.31% 34.07% 31.80% 29.69% 25.58%
Number of shares outstanding at
end of period (in thousands)..... 1,000 1,028 1,112 1,164 1,213
</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.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Shares Cost Value
<C> <S> <C> <C>
Short-Term Investments (1.0%):
2,015,481 SSgA Money Market Fund $2,015,481 $ 2,015,481
--------- ---------- -----------
2,015,481 Total--Short-Term Investments 2,015,481 2,015,481
========= ---------- -----------
Common Stocks (99.0%):
Aerospace (0.3%):
10,000 General Dynamics Corp. 568,899 586,250
---------- -----------
Banks (3.9%):
52,000 Bank New York, Inc. 1,065,418 2,093,000
35,000 Citigroup, Inc. 1,433,940 1,732,500
17,000 Firstar Corp. (A) 1,042,947 1,585,250
32,000 North Fork Bancorporation, Inc. 795,907 766,000
48,000 U.S. Bancorp DEL 1,466,681 1,704,000
---------- -----------
5,804,893 7,880,750
---------- -----------
Beverages (3.6%):
60,000 Coca Cola Enterprises, Inc. 810,797 2,145,000
77,500 Coca-Cola Co. 104,001 5,182,812
---------- -----------
914,798 7,327,812
---------- -----------
Biotechnology (9.3%):
180,000 Amgen, Inc. (B) 940,410 18,821,250
---------- -----------
Broadcasting (1.2%):
27,000 Clear Channel Communications, Inc. 1,351,043 1,471,500
15,000 Jacor Communications, Inc. 832,456 965,625
---------- -----------
2,183,499 2,437,125
---------- -----------
Business Services (1.9%):
19,000 Fiserv, Inc. 885,171 977,312
35,000 IMS Health, Inc. 1,045,889 2,640,313
16,666 Nielsen Media Research, Inc. 117,531 299,988
---------- -----------
2,048,591 3,917,613
---------- -----------
Communication Systems (5.1%):
12,000 Bell Atlantic Corp. 670,630 636,000
14,000 GTE Corp. 743,861 910,000
91,000 MCI WorldCom, Inc. 2,114,238 6,529,250
56,000 Nextel Communications, Inc. 914,015 1,323,000
18,000 SBC Communications, Inc. 805,341 965,250
---------- -----------
5,248,085 10,363,500
---------- -----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks--Continued
Shares Cost Value
<C> <S> <C> <C>
Computers and Information (2.5%):
32,000 Dell Computer Corp. $1,132,910 $ 2,342,000
15,000 International Business Machines 2,163,055 2,771,250
---------- -----------
3,295,965 5,113,250
---------- -----------
Diversified Technology (1.5%):
25,000 Nokia Corp. Sponsored ADR 450,507 3,010,937
---------- -----------
Drugs and Health Supplies (4.8%):
25,000 Johnson & Johnson 1,614,356 2,096,875
25,000 Medtronic, Inc. 1,270,266 1,856,250
37,000 Pfizer, Inc. 1,791,096 4,641,188
18,000 Smithkline Beecham PLC ADR 298,469 1,251,000
---------- -----------
4,974,187 9,845,313
---------- -----------
Electrical Components (1.9%):
38,000 General Electric Co. 2,112,832 3,878,375
---------- -----------
Electronics/New Technology (6.7%):
24,000 Ascend Communications, Inc. 1,285,368 1,578,000
40,500 Cisco Systems, Inc. 1,322,839 3,758,906
25,000 EMC Corp. Mass 1,276,967 2,125,000
26,000 Intel Corp. 1,669,538 3,082,625
15,000 Lucent Technologies, Inc. 341,565 1,650,000
15,000 Perkin-Elmer Corp. 1,054,466 1,463,438
---------- -----------
6,950,743 13,657,969
---------- -----------
Financial Services, Diversified (1.1%):
15,000 Federal Home Loan Mortgage Corp. 799,225 966,562
18,000 Federal National Mortgage Association 440,845 1,332,000
---------- -----------
1,240,070 2,298,562
---------- -----------
Food Processing (0.4%):
30,000 Pioneer Hi-Bred International, Inc. 616,320 810,000
---------- -----------
Health Care Services (1.2%):
24,000 Bergen Brunswig Corp. 501,379 837,000
22,500 Cardinal Health, Inc. 1,182,982 1,707,188
---------- -----------
1,684,361 2,544,188
---------- -----------
Household Products (Non-Durable) (1.6%):
24,000 Proctor & Gamble Co. 572,220 2,191,500
10,000 The Clorox Co. 906,269 1,168,125
---------- -----------
1,478,489 3,359,625
---------- -----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks--Continued
Shares Cost Value
<C> <S> <C> <C>
Industrial Machinery (4.2%):
112,000 Tyco International Ltd. New $ 2,643,273 $ 8,449,000
----------- -----------
Insurance (2.2%):
38,980 American International Group, Inc. 490,844 3,766,443
24,000 Liberty Financial Companies 840,637 648,000
----------- -----------
1,331,481 4,414,443
----------- -----------
Lodging (0.6%):
40,000 Marriott International, Inc. Class A 497,055 1,160,000
5,000 Sodexho Marriott Services, Inc. 43,057 138,437
----------- -----------
540,112 1,298,437
----------- -----------
Media (0.7%):
45,000 Disney (Walt) Co. 560,460 1,350,000
----------- -----------
Medical Supplies (5.7%):
25,800 Abbott Laboratories 452,270 1,264,200
36,000 Alza Corp. 1,430,971 1,881,000
37,000 American Home Products Corp. 1,755,990 2,083,563
100,000 Baxter International, Inc. 880,840 6,431,250
----------- -----------
4,520,071 11,660,013
----------- -----------
Pharmaceuticals (7.6%):
16,000 Bristol-Myers Squibb Co. 215,411 2,141,000
54,000 Lilly Eli & Co. 1,545,624 4,799,250
56,000 Schering-Plough Corp. 487,839 3,094,000
19,000 Sofamor/Danek Group, Inc. 1,331,098 2,313,250
40,000 Warner Lambert Co. 665,208 3,007,500
----------- -----------
4,245,180 15,355,000
----------- -----------
Regulated Investment Companies (5.8%):
815,000 Dresdner RCM Growth Equity Fund, Inc. (C) 4,311,350 4,784,050
Dresdner RCM International Growth Equity
165,254 Fund (C) 2,155,956 2,475,507
450,000 Dresdner RCM Small Cap Fund (C) 4,085,154 4,212,000
Latin America Smaller Companies Fund,
50,000 Inc. 528,218 281,250
----------- -----------
11,080,678 11,752,807
----------- -----------
Restaurants (3.3%):
70,000 McDonalds Corp. 2,850,156 5,363,750
25,000 Tricon Global Restaurants, Inc. 1,116,535 1,253,125
----------- -----------
3,966,691 6,616,875
----------- -----------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks--Continued
Shares Cost Value
<C> <S> <C> <C>
Retail Trade (7.4%):
58,000 Bed Bath & Beyond, Inc. $ 757,687 $ 1,979,250
20,000 Colgate Palmolive Co. 1,515,806 1,857,500
29,000 Costco Companies, Inc. 1,666,410 2,093,437
20,000 CVS Corporation 381,438 1,100,000
23,000 Dayton Hudson Corp. 1,177,430 1,247,750
34,000 Family Dollar Stores, Inc. 480,811 748,000
30,000 Home Depot, Inc. 943,546 1,835,625
20,000 Kohls Corp. 949,282 1,228,750
22,000 Safeway, Inc. 657,405 1,340,625
20,000 Wal-Mart Stores, Inc. 1,183,376 1,628,750
----------- ------------
9,713,191 15,059,687
----------- ------------
Software and Processing (14.5%):
40,000 America Online, Inc. 556,456 6,400,000
11,000 Automatic Data Processing, Inc. 241,307 882,062
500,000 Boole & Babbage, Inc. (B) 161,913 14,718,750
38,000 Microsoft Corp. (B) 1,665,538 5,270,125
16,000 Network Associates, Inc. 681,586 1,060,000
4,500 Yahoo, Inc. 551,250 1,066,219
----------- ------------
3,858,050 29,397,156
----------- ------------
Totals--Common Stocks 82,971,836 201,205,937
----------- ------------
Totals--Investments $84,987,317 $203,221,418
=========== ============
</TABLE>
(A) The name of Star Banc Corp. was changed to Firstar Corp. after its merger
with Firstar Corp.
(B) Non-income producing securities.
(C) Regulated investment company advised by Dresdner RCM Global Investors LLC,
the Corporation's investment adviser.
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 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
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--Continued
Section 852(b)(3)(D) of the Internal Revenue Code. The Board of Directors
determined that the portion of the net long-term capital gains realized during
the year 1998 which was not distributed as part of the annual dividend paid on
June 8, 1998 should be retained by the Corporation and taxes thereon should be
paid by the Corporation.
For federal income tax purposes at December 31, 1998 the aggregate gross
unrealized appreciation for all securities in which there is an excess of
value over tax cost is $118,738,243, the aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value is $504,142, the net unrealized appreciation is $118,234,101 and the
aggregate cost of securities for federal income tax purposes is $84,987,317.
NOTE 3--CAPITAL STOCK
At December 31, 1998 the issued and outstanding capital stock of the
Corporation consisted of 1,000,000 shares of $1 par value capital stock
(1,505,462 shares are authorized). Net assets consist of capital paid in of
$81,830,588 (including $77,992,631 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 $118,234,101. During the year ended December 31, 1998, 28,400
shares of Bergstrom Capital Corporation stock were repurchased by the
Corporation from stockholders at a weighted average discount of 9.4% from net
asset value per share. These shares were retired and restored to the status of
authorized but unissued shares.
NOTE 4--SECURITIES
During the year ended December 31, 1998, the cost of securities purchased
and the proceeds from securities sold, other than short-term investments,
aggregated $73,694,951 and $86,144,862, respectively.
NOTE 5--INVESTMENT ADVISORY CONTRACT AND PAYMENTS TO AFFILIATES
Effective November 9, 1998, Dresdner RCM Global Investors LLC ("Dresdner
RCM") was appointed as the Corporation's sole investment adviser. The
Corporation's advisory contract with Dresdner RCM provides for an advisory fee
determined by multiplying the market value of the Corporation's cash and
securities as of the close of business on the last day of each calendar
quarter by one-fourth of the applicable annual advisory fee rate. The annual
advisory fee rates are .70% on the first $10,000,000, .60% on the next
$10,000,000, .50% on the next $20,000,000, .35% on the next $20,000,000, .30%
on the next $40,000,000, and .25% on sums exceeding $100,000,000. The advisory
contract with Dresdner RCM also provides that shares of any investment company
advised by Dresdner RCM or any affiliate of Dresdner RCM shall not be
considered securities for purposes of determining advisory fees.
Prior to November 9, 1998 the Corporation's advisory contract was with
Bergstrom Advisers, Inc. ("Bergstrom Advisers"), wholly owned by a principal
stockholder of the Corporation. The advisory contract with Bergstrom Advisers
terminated on November 9, 1998. The advisory contract with Bergstrom Advisers
provided for an advisory fee which on an annual basis amounted 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 was computed weekly.
Officer's salary and related expenses in the amount of $11,917 have been
paid by the Corporation in 1998 to an officer of the Corporation for certain
financial, compliance and other administrative services.
NOTE 6--DIRECTOR'S FEES
Directors' fees and expenses in the amount of $51,698 have been paid in 1998
only to directors of the Corporation who were not affiliated with any
investment adviser to the Corporation.
<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, 1998, the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended December 31,
1998 and 1997, and the financial highlights for each of the years in the five-
year period ended December 31, 1998. 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, 1998 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. 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, 1998, 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
February 8, 1999
<PAGE>
BOARD OF DIRECTORS
ERIK E. BERGSTROM GEORGE COLE SCOTT
Chairman Registered Representative
Anderson & Strudwick Incorporated
President
Closed-End Fund Advisors, Inc.
WILLIAM L. McQUEEN
President and Treasurer WILLIAM H. SPERBER
Chairman, President and Chief Executive Officer
NORMAN R. NIELSEN The Trust Company of Washington
Manager and Senior Director and President
Memberof Research Staff Manzanita Capital, Inc.
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
