<PAGE>
- ----------------------------------
BERGSTROM
CAPITAL
CORPORATION
- ----------------------------------
1999 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 1999 in the amount of $13.50 per share, paid on June
7, 1999 to stockholders of record on May 20, 1999.
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 9, 1999
Dear Fellow Stockholders:
During the first half of 1999 the Company's net assets increased from
$200,332,879 to $212,965,298 which is an increase of $12,632,419. This
increase in net assets is after payment by the Company of $13,500,000 in
dividends ($13.50 per share on June 7, 1999). The increase in net assets,
before deducting the payment of dividends, was composed of net investment
income of $37,036, realized gain on investments of $37,805,056, and a decrease
in unrealized appreciation of $11,709,673.
The per share net asset value increased from $200.33 on December 31, 1998 to
$212.97 on June 30, 1999. After adjustment for the dividends, the per share net
asset value increased 13.1%. During the same period the Dow Jones Industrial
Average, adjusted for dividends, increased 19.5% and the Standard & Poor's 500
Stock Average, adjusted for dividends, increased 12.4%. The per share net asset
value on Friday, August 6, 1999 was $209.52.
During the first six months of 1999 the Company had total interest and
dividend income of $596,937 as compared to $837,131 for the same period in
1998 for a decrease of $240,194. During the first six months of 1999 operating
expenses were $559,901 which is a $73,470 decrease from $633,371 for the first
six months of 1998. The resulting net investment income of $37,036 for the
first six months of 1999 is a decrease of $166,724 from $203,760 for the first
six months of 1998. This resulted in a decrease to $.04 per share versus $.20
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 1999:
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
-------------------------------------
HELD
SECURITY NAME ADDITIONS REDUCTIONS JUNE 30, 1999
- ------------------------------------------ --------- ---------- -------------
<S> <C> <C> <C>
Abbott Laboratories 25,800 0
Alcoa, Inc................................ 15,000 15,000
America Online, Inc....................... 48,800 31,200
American International Group, Inc......... 7,000 35,000
Amgen, Inc................................ 15,000 345,000
Automatic Data Processing, Inc............ 22,000 0
Baxter International, Inc. ............... 15,000 85,000
BMC Software, Inc......................... 61,950 39,300
Carnival Corp............................. 39,500 39,500
Chevron Corp.............................. 16,500 16,500
Circuit City Stores....................... 15,400 15,400
Coca-Cola Co.............................. 10,000 67,500
Conoco, Inc............................... 42,500 42,500
CVS Corporation........................... 20,000 0
Dell Computer Corp........................ 37,000 0
Disney (Walt) Co.......................... 45,000 0
eBay, Inc................................. 7,000 7,000 0
Firstar Corp.............................. 52,000(1) 69,000
Fiserv, Inc............................... 11,000(2) 33,000(2) 0
Forest Laboratories, Inc.................. 25,900 25,900
General Dynamics Corp..................... 13,000 30,000
Global TeleSystems, Inc................... 15,000 15,000
GTE Corp.................................. 12,100 27,600
Intel Corp................................ 30,500(3) 31,000(3) 30,000
International Business Machines........... 29,100(4) 11,000(4) 29,100
Marsh & McLennan Companies, Inc........... 14,300 14,300
McDonalds Corp............................ 18,000 100,000
Medtronic, Inc............................ 24,000 0
Nike, Inc. Class B........................ 25,000 25,000
PE Corp.--PE Biosystems Group............. 15,000(5) 15,000(5) 0
Pfizer, Inc............................... 16,000 21,000
Pioneer Hi-Bred International, Inc........ 30,000 0
Proctor & Gamble Co....................... 14,000 10,000
Qualcomm, Inc............................. 28,000(6) 28,000
Smithkline Beecham PLC ADR................ 18,000 0
Tricon Global Restaurants, Inc............ 39,000 0
Tyco International Ltd. New............... 11,200 11,200 112,000
United Technologies Corp.................. 15,000 15,000
Walgreen Co............................... 60,000 60,000
Yahoo, Inc................................ 4,000 1,400 8,600
</TABLE>
- -------
(1) Received 34,000 shares as a stock split and then purchased 18,000 shares.
(2) Received 11,000 shares as a stock split and then sold 33,000 shares.
(3) Received 30,500 shares as a stock split and then sold 31,000 shares.
(4) Sold 11,000 shares and then purchased 7,600 shares and then received
7,600 shares as a stock split and then purchased 13,900 shares.
(5) Received 15,000 shares of PE Corp.--PE Biosystems Group and 7,500 shares
of PE Corp.--Celera Genomics Group in exchange for 15,000 shares of
Perkin-Elmer Corp. as a result of a merger and then sold 15,000 shares of
PE Corp.--PE Biosystems Group.
(6) Purchased 14,000 shares and then received 14,000 shares as a stock split.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
On June 7, 1999, the Company paid a cash dividend of $13.50 per share to
stockholders of record on May 20, 1999. The Company currently estimates that
the sources of this dividend will be $.07 per share from net investment income
for the year ending December 31, 1999, $3.04 per share from net short-term
capital gains realized during the year ending December 31, 1999 and $10.39 per
share from net long-term capital gains realized during the year ending
December 31, 1999. This dividend was the annual distribution for the year 1999
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.
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". This
information is also available on the Internet on a daily basis through a
variety of sources. The Company is not responsible for inaccuracies or
omissions in the dissemination of this information.
On September 30, 1999 the Company will move its offices to 221 First Avenue
West, Suite 320, Seattle, Washington 98119-4224. The new telephone number will
be (206) 283-0539.
Your Company welcomes questions or comments from stockholders. If you wish
to communicate with the Company's transfer agent, State Street Bank and Trust
Company, the address is P.O. Box 8200, Boston, Massachusetts 02266-8200 and
the telephone number is 1-800-426-5523.
Yours very truly,
/s/ WILLIAM L. MCQUEEN
William L. McQueen
President
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets:
Investments, at value (see accompanying schedule)(Note 1):
Short-term investments (cost $2,600,706) $ 2,600,706
Common stocks (cost $103,937,157) 210,461,585
------------
Total Investments (cost $106,537,863) 213,062,291
Cash 5,000
Interest and dividends receivable 97,424
Other assets 1,804
------------
Total assets 213,166,519
------------
Liabilities:
Advisory fee payable (Note 5) 161,768
Other accrued expenses 39,453
------------
Total liabilities 201,221
------------
Net assets applicable to 1,000,000 outstanding shares of
capital stock equivalent to $212.97 per share on June 30,
1999 (Note 3) $212,965,298
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1999 DECEMBER 31,
(Unaudited) 1998
<S> <C> <C>
Operations:
Net investment income $ 37,036 $ 163,385
Realized gain on investments 37,805,056 16,030,888
Increase (decrease) in unrealized appreciation (11,709,673) 40,313,028
------------ ------------
Net increase in net assets resulting from
operations 26,132,419 56,507,301
------------ ------------
Dividends to stockholders:
From net investment income (37,036) (163,385)
From net realized gain on investments (13,462,964) (10,763,990)
------------ ------------
Total dividends to stockholders ($13.50 per
share--1999; $10.75 per share--1998) (13,500,000) (10,927,375)
------------ ------------
Cost of shares of Bergstrom Capital Corporation
stock repurchased (28,400 shares--1998) -- (4,141,868)
------------ ------------
Total increase in net assets 12,632,419 41,438,058
Net assets, beginning of period 200,332,879 158,894,821
------------ ------------
Net assets, end of period $212,965,298 $200,332,879
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 25,058
Dividends 571,879
------------
Total income 596,937
------------
Expenses:
Advisory fees (Note 5) 336,288
Directors' fees and expenses (Note 6) 43,352
Officer's salary and related expenses (Note 5) 42,444
Auditing fees 35,600
Accounting expenses 30,599
Legal fees 17,712
Other expenses 14,771
Transfer agent fees and expenses 12,148
Custodian fees 11,132
Stockholders' meeting and reports 7,796
State and other taxes 4,559
Fee for shares listed on American Stock Exchange 3,500
------------
Total expenses 559,901
------------
Net investment income ($.04 per share) (Note 2) 37,036
------------
Realized and unrealized gain on investments:
Realized gain on investments (excluding short-
term investments):
Proceeds from sale of securities $ 68,478,083
Cost of securities sold 30,673,027
------------
Realized gain on investments sold (Notes 2 and
4) 37,805,056
Unrealized appreciation of investments:
Beginning of period 118,234,101
End of period 106,524,428
------------
Decrease in unrealized appreciation (11,709,673)
------------
Net gain on investments ($26.10 per share) (Note
2) 26,095,383
------------
Net increase in net assets resulting from
operations $ 26,132,419
============
</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, 1999 ------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
----------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at be-
ginning of period...... $200.33 $154.51 $136.15 $128.35 $ 94.56 $95.06
Net investment in-
come(1)................ .04 .16 .64 .57 .99 1.22
Net realized and
unrealized gain on
investments............ 26.10 55.99 24.79 13.51 37.16 2.23
Dividends from:
Net investment in-
come(2).............. (.04) (.16) (.63) (.58) (1.01) (1.22)
Net realized gain on
investments.......... (13.46) (10.59) (7.87) (6.33) (3.99) (2.78)
------- ------- ------- ------- ------- ------
Total dividends..... (13.50) (10.75) (8.50) (6.91) (5.00) (4.00)
------- ------- ------- ------- ------- ------
Increase due to
repurchase of Bergstrom
stock at less than net
asset value............ -- 0.42 1.43 .63 .64 .05
------- ------- ------- ------- ------- ------
Net asset value at end
of period.............. $212.97 $200.33 $154.51 $136.15 $128.35 $94.56
======= ======= ======= ======= ======= ======
Market value per share
at end of period....... $187.25 $171.00 $142.50 $119.00 $109.50 $84.88
======= ======= ======= ======= ======= ======
Total investment re-
turns:
Based on market value
per share(3)......... 13.4%* 32.1% 37.0% 15.6% 38.1% (3.4)%
Based on net asset
value per share(4)... 13.1%* 38.5% 26.5% 14.0% 43.5% 5.6%
Net assets at end of pe-
riod (in millions)..... $ 213 $ 200 $ 159 $ 151 $ 149 $ 115
Ratio of expenses to av-
erage net assets....... .27%* .74% .75% .76% .82% .84%
Ratio of net investment
income to average net
assets................. .02%* .09% .43% .43% .88% 1.29%
Portfolio turnover rate. 24.69%* 44.31% 34.07% 31.80% 29.69% 25.58%
Number of shares
outstanding at end of
period
(in thousands)......... 1,000 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.
* Not Annualized.
See accompanying Notes to Financial Statements.
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Cost Value
<C> <S> <C> <C>
Short-Term Investments (1.2%):
2,600,706 SSgA Money Market Fund $ 2,600,706 $ 2,600,706
--------- ------------ ------------
2,600,706 Total--Short-Term Investments 2,600,706 2,600,706
========= ------------ ------------
Common Stocks (98.8%):
Aerospace (1.5%):
30,000 General Dynamics Corp. 1,860,461 2,055,000
15,000 United Technologies Corp. 931,836 1,075,312
------------ ------------
2,792,297 3,130,312
------------ ------------
Banks (3.0%):
52,000 Bank New York, Inc. 1,065,418 1,907,750
52,500 Citigroup, Inc. 1,433,940 2,493,750
69,000 Firstar Corp. 1,584,346 1,932,000
------------ ------------
4,083,704 6,333,500
------------ ------------
Beverages (2.8%):
60,000 Coca Cola Enterprises, Inc. 810,797 1,785,000
67,500 Coca-Cola Co. 90,276 4,218,750
------------ ------------
901,073 6,003,750
------------ ------------
Biotechnology (9.9%):
345,000 Amgen, Inc. (A) 901,226 21,001,875
------------ ------------
Broadcasting (1.8%):
54,859 Clear Channel Communications, Inc. 2,852,944 3,781,842
------------ ------------
Communication Systems (7.4%):
18,000 Bell Atlantic Corp. 1,029,039 1,176,750
15,000 Global TeleSystems Group, Inc. 915,940 1,215,000
27,600 GTE Corp. 1,699,833 2,090,700
91,000 MCI WorldCom, Inc. 2,114,237 7,831,688
41,000 Nextel Communications, Inc. 687,750 2,057,687
23,000 SBC Communications, Inc. 1,075,954 1,334,000
------------ ------------
7,522,753 15,705,825
------------ ------------
Computers and Information (2.4%):
14,000 Hewlett-Packard Co. 1,031,911 1,407,000
29,100 International Business Machines 3,159,922 3,761,175
------------ ------------
4,191,833 5,168,175
------------ ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks (Unaudited)--Continued
Shares Cost Value
<C> <S> <C> <C>
Diversified Technology (2.0%):
45,000 Nokia Corp. Sponsored ADR $ 403,923 $ 4,120,313
------------ ------------
Drugs and Health Supplies (2.0%):
20,000 Johnson & Johnson 1,336,220 1,960,000
21,000 Pfizer, Inc. 823,740 2,304,750
------------ ------------
2,159,960 4,264,750
------------ ------------
Electrical Components (2.0%):
38,000 General Electric Co. 2,112,832 4,294,000
------------ ------------
Electronics/New Technology (11.4%):
81,000 Cisco Systems, Inc. 1,322,839 5,224,500
80,000 EMC Corp. Mass 3,040,122 4,400,000
30,000 Intel Corp. 1,359,819 1,785,000
82,550 Lucent Technologies, Inc. 2,298,798 5,566,966
20,000 Motorola, Inc. 1,464,544 1,895,000
28,000 Qualcomm, Inc. 2,182,438 4,018,000
10,000 Texas Instruments, Inc. 1,047,200 1,450,000
------------ ------------
12,715,760 24,339,466
------------ ------------
Financial Services, Diversified (0.8%):
15,000 Federal Home Loan Mortgage Corp. 799,225 870,000
13,000 Federal National Mortgage Association 316,587 888,875
------------ ------------
1,115,812 1,758,875
------------ ------------
Health Care Services (0.7%):
22,500 Cardinal Health, Inc. 1,182,982 1,442,812
------------ ------------
Household Products (Non-Durable) (1.5%):
54,000 Gillette Co. 3,029,284 2,214,000
10,000 Proctor & Gamble Co. 238,425 892,500
------------ ------------
3,267,709 3,106,500
------------ ------------
Industrial Machinery (5.0%):
112,000 Tyco International Ltd. New 2,985,545 10,612,000
------------ ------------
Insurance (2.4%):
35,000 American International Group, Inc. 753,200 4,097,188
14,300 Marsh & McLennan Companies, Inc. 1,016,776 1,079,650
------------ ------------
1,769,976 5,176,838
------------ ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks (Unaudited)--Continued
Shares Cost Value
<C> <S> <C> <C>
Lodging (0.7%):
40,000 Marriott International, Inc. Class A $ 497,055 $ 1,495,000
------------ ------------
Medical Supplies (5.2%):
70,000 Alza Corp. 3,003,273 3,561,250
37,000 American Home Products Corp. 1,755,990 2,127,500
85,000 Baxter International, Inc. 668,156 5,153,125
7,500 PE Corp.--Celera Genomics Group 98,867 121,406
------------ ------------
5,526,286 10,963,281
------------ ------------
Metal Mining (0.4%):
15,000 Alcoa, Inc. 868,366 928,125
------------ ------------
Petroleum Services (2.0%):
16,500 Chevron Corp. 1,515,609 1,570,594
42,500 Conoco, Inc. 1,145,573 1,184,688
25,000 Schlumberger Ltd. 1,484,671 1,592,187
------------ ------------
4,145,853 4,347,469
------------ ------------
Pharmaceuticals (6.4%):
32,000 Bristol-Myers Squibb Co. 215,411 2,254,000
54,000 Lilly Eli & Co. 1,545,624 3,867,750
25,900 Forest Laboratories, Inc. 1,220,840 1,197,875
56,000 Schering-Plough Corp. 487,839 2,968,000
8,000 Sepracor, Inc. 497,400 650,000
40,000 Warner Lambert Co. 665,208 2,775,000
------------ ------------
4,632,322 13,712,625
------------ ------------
Publishing (0.8%):
23,000 Time Warner, Inc. 1,554,189 1,690,500
------------ ------------
Recreational Activities (0.9%):
39,500 Carnival Corp. 2,002,201 1,915,750
------------ ------------
Regulated Investment Companies (5.7%):
815,000 Dresdner RCM Growth Equity Fund, Inc. (B) 4,311,350 5,574,600
165,254 Dresdner RCM International Growth Equity
Fund (B) 2,155,956 2,594,490
450,000 Dresdner RCM Small Cap Fund (B) 4,085,154 4,032,000
------------ ------------
10,552,460 12,201,090
------------ ------------
Restaurants (1.9%):
100,000 McDonalds Corp. 1,962,886 4,131,250
------------ ------------
</TABLE>
<PAGE>
BERGSTROM CAPITAL CORPORATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks (Unaudited)--
Continued
Shares Cost Value
<C> <S> <C> <C>
Retail Trade (9.8%):
67,500 Bed Bath & Beyond, Inc. $ 1,048,624 $ 2,598,750
15,400 Circuit City Stores 1,170,649 1,432,200
29,000 Colgate Palmolive Co. 2,255,864 2,863,750
34,000 Costco Companies, Inc. 2,115,016 2,722,125
23,000 Dayton Hudson Corp. 1,177,430 1,495,000
30,000 Home Depot, Inc. 943,546 1,933,125
20,000 Kohls Corp. 949,282 1,543,750
25,000 Nike, Inc. Class B 1,507,174 1,582,812
22,000 Safeway, Inc. 657,405 1,089,000
60,000 Walgreen Co. 1,542,744 1,762,500
40,000 Wal-Mart Stores, Inc. 1,183,376 1,930,000
------------ ------------
14,551,110 20,953,012
------------ ------------
Software and Processing (7.2%):
31,200 America Online, Inc. 173,714 3,447,600
39,300 BMC Software, Inc. (A) 9,201 2,122,200
92,000 Microsoft Corp. (A) 2,935,537 8,297,250
8,600 Yahoo, Inc. 1,577,535 1,481,350
------------ ------------
4,695,987 15,348,400
------------ ------------
Utilities (1.2%):
31,000 Enron Corp. 1,988,113 2,534,250
------------ ------------
Totals--Common Stocks 103,937,157 210,461,585
------------ ------------
Totals--Investments $106,537,863 $213,062,291
============ ============
</TABLE>
(A) Non-income producing securities.
(B) 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 (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. 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 June 30, 1999 the aggregate gross
unrealized appreciation for all securities in which there is an excess of
value over tax cost is $107,598,467, the aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value is $1,074,039, the net unrealized appreciation is $106,524,428 and the
aggregate cost of securities for federal income tax purposes is $106,537,863.
NOTE 3--CAPITAL STOCK
At June 30, 1999 the issued and outstanding capital stock of the Corporation
consists 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 $106,172,680
(including $102,334,723 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 $106,524,428.
NOTE 4--SECURITIES
During the six months ended June 30, 1999, the cost of securities purchased
and the proceeds from securities sold, other than short-term investments,
aggregated $51,638,348 and $68,478,083, respectively.
NOTE 5--INVESTMENT ADVISORY CONTRACT AND PAYMENTS TO AFFILIATES
The Corporation's advisory contract with Dresdner RCM Global Investors LLC
("Dresdner RCM") provides for an advisory fee determined by multiplying the
market value of the
<PAGE>
BERGSTROM CAPITAL CORPORATION
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NOTES TO FINANCIAL STATEMENTS (Unaudited)--Continued
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.
Officer's salary and related expenses in the amount of $42,444 have been
paid by the Corporation during the six months ended June 30, 1999 to an
officer of the Corporation for certain financial, compliance and other
administrative services.
NOTE 6--DIRECTORS' FEES
Directors fees and expenses in the amount of $43,352 have been paid in 1999
only to directors of the Corporation who were not affiliated with any
investment adviser to the Corporation.
<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 Member Director and President
of Research Staff Manzanita Capital, Inc.
SRI Consulting
OFFICERS
WILLIAM L. McQUEEN PAMELA A. FIORINI
President and Treasurer Secretary
ELIZABETH C. HEDLUND
Assistant Secretary
__________________________________________________________________________
BERGSTROM CAPITAL CORPORATION
Effective September 30, 1999:
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505 Madison Street, Suite 220 221 First Avenue West, Suite 320
Seattle, Washington 98104 Seattle, Washington 98119-4224
(206) 623-7302 (206) 283-0539
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