UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-1537
STERLING CAPITAL CORPORATION
(Exact name of registrant as specified in charter)
635 Madison Avenue New York, NY 10022
(Address of principal executive offices) (Zip code)
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 980-3360
Date of fiscal year end: 12/31/2003
Date of reporting period: 12/31/2003
Item 1. Reports to Stockholders.
The Registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
STERLING CAPITAL CORPORATION
635 Madison Avenue
New York, N.Y. 10022
February 20, 2004
To our Shareholders:
We enclose a report of our Corporation's operations for the year ended
December 31, 2003. The net asset value per share of the Corporation's Common
Stock as at December 31, 2003 was $7.20, as compared with its net asset value at
December 31, 2002 of $6.37 per share. As at February 18, 2004 the unaudited net
asset value per share was approximately $7.34.
As at December 31, 2003 and February 18, 2004 the closing sales price for
shares of the Corporation's Common Stock on the American Stock Exchange was
$5.35 and $5.50, respectively. Thus, as at December 31, 2003 and February 18,
2004 the market price for the Corporation's shares represented discounts of
approximately 26% and 25%, respectively, from the Corporation's net asset values
at such dates.
Certain of the Corporation's officers and directors and their associates
may from time to time add to their investments in the Corporation's Common Stock
by open market purchases or in private transactions. Officers and directors of
the Corporation currently own beneficially, directly or indirectly, an aggregate
of 1,977,396 shares (79.1% of the outstanding shares) of the Corporation's
capital stock, not including 101,000 shares (4.04% of the Corporation's
outstanding shares) owned by certain associates of such persons with respect to
which such officers and directors disclaim any beneficial interest.
Very truly yours,
/s/ Wayne S. Reisner
--------------------
Wayne S. Reisner
President
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Sterling Capital Corporation:
We have audited the statement of assets and liabilities of Sterling Capital
Corporation, including the schedule of investments, as of December 31, 2003, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Company'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 auditing standards generally
accepted in the United States of America. 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 as of December 31, 2003, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Sterling Capital Corporation as of December 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
TARDINO TOCCI & GOLDSTEIN LLP
New York, New York
February 20, 2004
STERLING CAPITAL CORPORATION
SCHEDULE OF INVESTMENTS
December 31, 2003
Number of Market Value
Shares (Note A)
------ --------
Common & Preferred Stocks - 57.85% of net assets
Technology -16.14%
Falconstor Software Inc.* .......................... 271,350 $2,371,599
Cisco Systems Inc.* ................................ 9,000 218,070
Check Point Software Technologies * ................ 10,000 168,600
Advanced Micro Devices, Inc. * ..................... 10,000 149,000
----------
$2,907,269
----------
Financial Services -11.36%
J.P. Morgan Chase & Co ............................. 10,000 $ 367,300
KeyCorp ............................................ 10,000 293,200
Travelers Ppty Casualty Cl A ....................... 17,000 285,260
MetLife Inc. ....................................... 8,000 269,360
Allstate Corp. ..................................... 6,000 258,120
Wilmington Trust Corp. ............................. 7,000 252,000
Mellon Financial Corp. ............................. 5,000 160,550
Merrill Lynch Strides 7% Conv ...................... 6,000 160,500
----------
$2,046,290
----------
Real Estate and
Real Estate Investment Trusts - 9.62%
Camden Property Trust .............................. 12,600 $ 558,180
Equity Residential ................................. 11,950 352,645
Equity Office Properties Trust ..................... 10,000 286,500
Amli Residential Properties Trust .................. 9,000 241,200
St. Joe Co. ........................................ 6,000 223,740
Equity Residential 9.125% Pfd C .................... 2,500 69,325
----------
$1,731,590
----------
* Non-income producing security
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
SCHEDULE OF INVESTMENTS - continued
December 31, 2003
Number of Market Value
Shares (Note A)
------ --------
Consumer Goods - 5.03%
Conagra Inc. ................................... 10,000 $263,900
Newell Rubbermaid Inc. ......................... 10,000 227,700
Sara Lee Corp. ................................. 10,000 217,100
Black & Decker Corp. ........................... 4,000 197,280
--------
$905,980
--------
Industrial and Business Services - 3.70%
Honeywell International Inc. ................... 10,500 $351,015
Koninklijke Philips Electronics NV Holdings .... 10,838 315,277
--------
$666,292
--------
Healthcare - 3.34%
Pfizer Inc. .................................... 10,000 $353,300
Merck & Co. .................................... 4,000 184,800
Rhone Poulenc 8.125% Pfd. ...................... 2,500 63,350
--------
$601,450
--------
Energy - 2.93%
Marathon Oil Corp. ............................. 10,000 $330,900
ConocoPhillips ................................. 3,000 196,710
--------
$527,610
--------
Telecommunication and Media - 2.38%
Verizon Communications ......................... 8,560 $300,285
Nokia Corp ADR ................................. 7,500 127,500
--------
$427,785
--------
Materials- 1.27%
Du Pont E I De Nemours & Co. ................... 5,000 $229,450
--------
* Non-income producing security
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
SCHEDULE OF INVESTMENTS - continued
December 31, 2003
Number of Market Value
Shares (Note A)
Retail - 1.13%
May Department Stores ............................. 7,000 $ 203,490
-----------
Automotive & Transportation Services - 0.95%
Ryder System Inc. ................................. 5,000 $ 170,750
-----------
Total common and preferred stocks (cost $7,665,181) $10,417,956
-----------
Total Investments (cost $7,665,181) ................ $10,417,956
===========
* Non-income producing security
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
ASSETS
Investment in securities, at value
(identified cost $7,665,181) (Note A) ............ $ 10,417,956
Cash.................................................. 7,652,423
Investment in real estate (cost $100,000) (Note A) ... 50,000
Receivables:
Dividends and interest ........................... 31,319
Other ............................................ 3,083
Prepaid Insurance .................................... 2,917
------------
Total assets $ 18,157,698
------------
LIABILITIES
Payables:
Investment Securities Purchased ................. $ 84,950
Accrued expenses and other liabilities .......... 65,494
------------
Total liabilities .................................... $ 150,444
------------
NET ASSETS
Common Stock, authorized 10,000,000 shares,
outstanding 2,500,000 shares, $1 par value each .. $ 2,500,000
Paid-in capital....................................... 17,701,668
Excess of distributions over accumulated net investment loss (6,717,855)
Excess of net realized gain on investments over distribution 1,820,668
Net unrealized appreciation on investments ........... 2,702,773
------------
Net assets............................................ $ 18,007,254
============
Net assets per outstanding share ..................... $ 7.20
============
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
STATEMENT OF OPERATIONS
For the year ended December 31, 2003
Investment income:
Dividends ..................................... $ 291,666
Interest....................................... 17,401
---------
Total investment income ..................... $ 309,067
---------
Expenses (Notes C and D):
Officers' salaries ............................ $ 153,667
Directors' fees and expenses .................. 62,101
Legal, audit and professional fees ............ 42,098
Payroll taxes, fees and employee benefits ..... 30,513
Office salaries................................ 26,349
Rent and Electric.............................. 25,219
Equipment rentals.............................. 24,499
Transfer agent and registrar fees ............. 22,975
Custodian fees and expenses ................... 17,319
American Stock Exchange listing fee ........... 15,000
Insurance...................................... 8,269
Miscellaneous.................................. 7,460
Federal, state and local taxes ................ 2,777
---------
Total expenses .............................. $ 438,246
---------
Net investment loss ............................... $(129,179)
---------
(continued)
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
STATEMENT OF OPERATIONS-continued
For the year ended December 31, 2003
Net investment loss (from previous page) ................ $ (129,179)
-----------
Net gain (loss) on investments (Notes A and B):
Realized loss from securities transactions:
Proceeds from sales ................................. 7,828,112
Cost of securities sold ............................. 9,228,796
-----------
Net realized loss ................................... (1,400,684)
-----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................. (906,286)
End of period........................................ 2,702,773
-----------
Net increase in unrealized appreciation ............. 3,609,059
-----------
Net realized loss and unrealized gain on investments .... 2,208,375
-----------
Net increase in net assets resulting from operations .... $ 2,079,196
===========
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2003 and 2002
Year ended
December 31, December 31,
2003 2002
------------ ------------
From investment activities:
Net investment income (loss) ......................... $ (129,179) $ 13,015
Net realized gain (loss) from securities transactions (1,400,684) 15,966
Net increase (decrease) in unrealized appreciation ... 3,609,059 (4,219,968)
------------ ------------
Increase (Decrease) in net assets derived from
investment activities ................................ 2,079,196 (4,190,987)
Distributions to shareholders .......................... -- (120,000)
Net Assets:
Beginning of year .................................... 15,928,058 20,239,045
------------ ------------
End of year .......................................... $ 18,007,254 $ 15,928,058
============ ============
The accompanying notes are an integral part of these statements
STERLING CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
Note A - Significant Accounting Policies
Sterling Capital Corporation (the "Corporation") (formerly known as The
Value Line Development Capital Corporation) is registered under the Investment
Company Act of 1940, as amended (the "Act"), and is a diversified, closed-end
investment company. The Corporation operates exclusively as an internally
managed investment company whereby its own officers and employees, under the
general supervision of its Board of Directors, conduct its operations. The
following is a summary of significant accounting policies consistently followed,
in all material respects, by the Corporation in the preparation of its financial
statements. The policies are in conformity with accounting principles generally
accepted in the United States of America.
(1) Security Valuation
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are valued at the last reported sales
price on the day of valuation; other securities traded in the over-the-counter
market and listed securities for which no sale was reported on that date are
valued at the last quoted bid price, except for short positions and call options
written, for which the last quoted asked price is used. Investments in real
estate are valued at fair value as determined by the Board of Directors.
(2) Federal Income Taxes
The Corporation's policy is to comply with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code") that are applicable to regulated
investment companies and to distribute substantially all its taxable income to
its shareholders.
The Corporation for the fiscal year ending December 31, 2003 was a
"personal holding company" under the Code, since five or fewer shareholders own
directly or indirectly more than 50% in value of the Corporation's outstanding
stock, and more than 60% of the Corporation's adjusted ordinary income was
"personal holding company income". As a personal holding company, the
Corporation will be subject to penalty taxes unless it distributes to its
shareholders an amount at least equal to its otherwise undistributed personal
holding company income, net of appropriate deductions applicable thereto. The
Corporation did not have any undistributed personal holding company income for
the year ended December 31, 2003. Personal holding company income does not
include the excess, if any, of net realized long-term capital gains over net
realized short-term capital losses, less any Federal income tax attributable to
such excess. The Corporation has considered methods of minimizing the possible
tax impact of being a personal holding company, and if appropriate, will make
sufficient distributions to shareholders so that the Corporation will not be
subject to such penalty tax.
At December 31, 2003, the Corporation had a net capital loss carryforward,
which may be used to offset future capital gains, of $1,400,684.
STERLING CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
(3) Securities Transactions Valuation
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date), dividend income is recorded on the ex-dividend
date and interest income is accrued as earned. Gains and losses from securities
transactions were computed on the identified cost basis.
(4) Distributions to Shareholders
Dividends to shareholders are recorded on the dividend declaration date.
5) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 income and
expenses during the reporting period. Actual results could differ from those
estimates.
Note B - Securities Transactions
The following summarizes all securities transactions by the Corporation for
the year ended December 31, 2003:
Purchases .............................................. $4,303,725
Sales .................................................. $9,228,796
Net realized loss and unrealized gain on investments for the year ended
December 31, 2003 was $2,208,375. This amount represents the net increase in
value of investments held during the period. The components are as follows:
Long transactions ...................................... $2,208,375
-----------
Net realized loss and unrealized gain on investments ... $2,208,375
===========
As of December 31, 2003, gross unrealized appreciation and (depreciation)
of the corporation's securities portfolio were as follows:
Unrealized appreciation ................................ $2,825,112
Unrealized depreciation ................................ (122,339)
----------
Net unrealized appreciation ............................ $2,702,773
==========
STERLING CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
Note C - Rent
The Corporation sublets a portion of office space at 635 Madison Avenue,
New York, NY, from Windy Gates Corporation ("Windy Gates"), a corporation
controlled by Walter Scheuer, the Chairman of the Board of Directors and
principal shareholder of the Corporation. The term of the Windy Gates lease
expires on June 30, 2004. The term of the sublease to the Corporation expires on
June 30, 2004. The annual rental obligation of these premises is being allocated
between the Corporation and Windy Gates on the basis of each such party's use of
this space. The Corporation's current net annual rent expense for this space is
approximately $25,000.
Note D - Other Transactions with Affiliates
Aggregate remuneration paid or accrued by the Corporation for the year
ended December 31, 2003 to certain persons who were "affiliated persons" within
the meaning of the Act, was as follows:
Officers' salaries .................... $153,667
Directors' fees ....................... 60,000
Incident to the sublease arrangements for office space at 635 Madison
Avenue referred to in Note C above, Mr. Scheuer and the Corporation, have
allocated certain of the expenses incurred in connection with each of such
party's use of various services located thereat, including office equipment and
secretarial, administrative and internal accounting personnel. For the year
ended December 31, 2003, Mr. Scheuer and the Corporation paid or accrued
approximately $357,000 and $44,000, respectively, in connection with the
allocation of expenses incurred with respect to the use of such services. In
addition, during the period certain persons who are also officers of the
Corporation rendered services to Mr. Scheuer personally for which they received
compensation from Mr. Scheuer.
STERLING CAPITAL CORPORATION
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each year:
Year Ended December 31
----------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Investment income ................................... $.12 $.20 $.29 $.30 $.25
Expenses ............................................ .17 .20 .19 .21 .21
---- ---- ---- ---- ----
Net investment income (loss)......................... (.05) - .10 .09 .04
Distributions of net realized
capital gains ....................................... - (.03) (.43) (.51) (.51)
Distributions of net investment income - (.01) (.13) (.08) (.04)
Net realized gain (loss)and increase
(decrease)in unrealized appreciation................ .88 (1.69) .14 (.05) 1.00
---- ---- ---- ---- ----
Net increase (decrease) in net asset value .83 (1.73) (.32) (.55) .49
Net asset value:
Beginning of period .............................. 6.37 8.10 8.42 8.97 8.48
---- ---- ---- ---- ----
End of period..................................... $7.20 $6.37 $8.10 $8.42 $8.97
===== ===== ===== ===== =====
Ratio of expenses to average net assets . 2.7% 2.7% 2.2% 2.4% 2.4%
Ratio of net investment income (loss) to
average net assets .................................. (.8)% .1% 1.2% 1.0% .4%
Portfolio turnover ................................. 47% 30% 38% 49% 37%
Number of shares outstanding at end
of year (in 000's) ................................. 2,500 2,500 2,500 2,500 2,500
See Report of Independent Registered Public Accounting Firm
Supplemental Information (Unaudited)
The Directors and Officers of the Corporation, their ages and positions
with the Corporation, and their principal occupations during the past five years
are as follows:
Independent Directors
------------------------------------------------------------------------------------------------------------------------------------
Number of
Name, Positions Held Term of Principal Portfolios in Fund Other
Address* and Age with the Office** and Length Occupation(s) Complex Overseen Directorships held by
Corporation of Time Served During Past 5 Years by Director*** Director
------------------------------------------------------------------------------------------------------------------------------------
Jay Eliasberg Director Director since 1980 Private 1 None
84 Investor (1)
------------------------------------------------------------------------------------------------------------------------------------
Arthur P. Floor Director Director since 1980 Energy 1 None
79 Consultant (2)
------------------------------------------------------------------------------------------------------------------------------------
Nathan Kingsley Director Director since 1984 President, Total 1 None
77 Communications
International, a
media consulting
firm (3)
------------------------------------------------------------------------------------------------------------------------------------
Archer Scherl Director Director since 1994 Private 1 None
72 Investor (4)
------------------------------------------------------------------------------------------------------------------------------------
* The address of each of te directors is c/o Sterling Capital
Corporation, 635 Madison Avenue, New York, New York 10022.
** Each director serves for a term of one year and until his successor is
duly elected and qualified.
*** The Corporation is the only investment company overseen by the
directors.
(1) Mr. Eliasberg has been a private investor for more than the past five years.
(2) Mr. Floor has held his present position for more than the past five years.
(3) Mr. Kingsley has held his present position for more than the past five
years.
(4) Mr. Scherl has been a private investor for more than the past five syears.
Interested Director and Officers
------------------------------------------------------------------------------------------------------------------------------------
Number of
Term of
Name, Positions Held Office** and Principal Portfolios in Fund Other
Address* and Age with the Length of Time Occupation(s) Complex Overseen Directorships held by
Corporation Served During Past 5 Years by Director*** Director
------------------------------------------------------------------------------------------------------------------------------------
Walter Scheuer**** Chairman of the Director since Private Investor and 1 None
81 Board 1980 Chairman of the Board
of the Corporation (1)
------------------------------------------------------------------------------------------------------------------------------------
Wayne S. Reisner President (2) (2) N/A (2)
53
------------------------------------------------------------------------------------------------------------------------------------
Michael Carey Vice President, (3) (3) N/A None
37 Secretary and
Treasurer
------------------------------------------------------------------------------------------------------------------------------------
* The address of each of the directors is c/o Sterling Capital
Corporation, 635 Madison Avenue, New York, New York 10022.
** Each director serves for a term of one year and until his successor is
duly elected and qualified.
*** The Corporation is the only investment company overseen by the
director.
**** Mr. Scheuer, who is the controlling shareholder of the Corporation,
may be deemed an "interested person" of the Corporation as that term
is defined in Section 2(a)(19) of the Investment Company Act of 1940,
as amended (the "1940 Act").
(1) Mr. Scheuer has held his present position with the Corporation since
October 28, 1980. From March 1989 until June 2002, Mr. Scheuer was the
controlling shareholder of Manchester Capital Corporation ("Manchester"),
an investment adviser registered under the Investment Advisers Act of 1940,
as amended. In June 2002 Manchester sold substantially all of its assets
and changed its name to Winterset Management Corp. ("Winterset").
(2) Mr. Reisner has been President since March 15, 1993. Mr. Reisner was
Executive Vice President of the Corporation from July 1988 to March 1993
and was Vice President from November 1985 to July 1988. Mr. Reisner has
been employed by the Corporation since August 1985. Mr. Reisner also has
been a Vice President and a Director of Windy Gates since March 15, 1993.
Mr. Reisner has been a Director and President of Winterset since December
9, 1988 and March 1, 1989, respectively. Mr. Reisner has been a director of
Carret and Company LLC since June 2002.
(3) Mr. Carey has been Vice President since July 27, 1999. Mr. Carey has been
Secretary and Treasurer of the Corporation since September 30, 2002 and
October 29, 1997, respectively. Mr. Carey has been employed by the
Corporation since February 1995.
Proxy Voting Policies and Procedures
The policies and procedures used by the Corporation to determine how to
vote proxies relating to portfolio securities are available without charge, upon
request, by calling toll free 1-800-949-3456.
Non-Fundamental Investment Policy
On December 16, 2003, the Board of Directors of the Corporation revised the
non-fundamental investment policy of the Corporation to permit a greater
percentage of the Corporation's assets to be invested in securities of other
registered investment companies. The Corporation may now invest in securities of
other investment companies to the extent permitted by the Investment Company Act
of 1940, as amended.
STERLING CAPITAL CORPORATION
Report for the Year Ended December 31, 2003
OFFICERS
Walter Scheuer ...................... Chairman of the Board of Directors
Wayne S. Reisner .................... President
Michael Carey ....................... Vice President, Secretary and Treasurer
DIRECTORS
Jay Eliasberg (1) Nathan Kingsley (1)
Arthur P. Floor (1) Archer Scherl (1)
Walter Scheuer
Transfer Agent and Registrar Custodian
Registrar and Transfer Company Citibank, N.A.
10 Commerce Drive 120 Broadway
Cranford, New Jersey 07016 New York, New York 10271
Auditors General Counsel
Tardino Tocci & Goldstein LLP Skadden, Arps,
The Chanin Building Slate, Meagher & Flom LLP
122 East 42nd Street Suite 1518 Four Times Square
New York, New York 10168 New York, New York 10036
(1) Member of the Audit Committee
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its
principal executive officer, principal financial officer and principal
accounting officer or controller or persons performing similar
functions.
(b) Not applicable.
(c) The Registrant has not amended its code of ethics during the period
covered by the report in Item 1 above.
(d) The Registrant has not granted a waiver or implicit waiver from a
provision of its code of ethics during the period covered by the
report in Item 1 above.
(e) Not applicable.
(f) A copy of the Registrant's code of ethics is filed as an exhibit
pursuant to Item 10(a)(1) of this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The Registrant's board of directors has determined that Archer Scherl, an
"independent" director, qualifies as the audit committee financial expert, as
defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)-(d) Aggregate fees billed to the registrant for the last two
fiscal years for professional services rendered by the registrant's
principal accountant were as follows:
2003 2002
------- -------
Audit Fees $23,000 $19,500
Tax Fees 2,000 1,500
(e)(1) The registrant's audit committee has adopted policies and procedures
with regard to the pre-approval of audit, audit-related and tax compliance
services provided by the registrant's principal accountant on an annual basis.
Certain non-audit services provided to the registrant, if required, will also be
subject to pre-approval by the audit committee. (2) No services included in (b)
through (d) of this Item were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
The Registrant has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act. The
audit committee members are Archer Scherl, Jay Eliasberg, Arthur Floor, and
Nathan Kingsley.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
The Registrant's proxy voting policies and procedures that it uses to
determine how to vote proxies' relating to portfolio securities is as follows:
Sterling Capital Corporation (the "Company") is uniquely structured as an
internally managed closed-end investment company. Our research efforts,
including the receipt and analysis of proxy material, are focused on the
securities in the Company's portfolio, as well as alternative investment
opportunities. We vote proxies relating to our portfolio securities in the best
long-term interests of the Company.
Our investment approach stresses fundamental security analysis, which
includes an evaluation of the integrity, as well as the effectiveness of
management personnel. In proxy material, we review management proposals and
management recommendations relating to shareholder proposals in order to, among
other things, gain assurance that management's positions are consistent with its
integrity and the long-term interests of the company. We generally find this to
be the case and, accordingly, give significant weight to the views of management
when we vote proxies.
Proposals that may have an impact on the rights or privileges of the
securities held by the Company would be reviewed very carefully. The explanation
for a negative impact could justify the proposal; however, if such justification
were not present, we would vote against a significant reduction in the rights or
privileges associated with any of our holdings.
Proposals relating to corporate governance matters are reviewed on a
case-by-case basis. When they involve changes in the state of incorporation,
mergers or other restructuring, we would, if necessary, complete our review of
the rationale for the proposal by contacting company representatives and, with
few exceptions, vote in favor of management's recommendations.
Proposals relating to anti-takeover provisions, such as staggered boards,
poison pills and supermajorities could be more problematic. They would be
considered in light of our assessment of the capability of current management,
the duration of the proposal, the negative impact it might have on the
attractiveness of the company to future "investors," among other factors. We can
envision circumstances under which we would vote against an anti-takeover
provision.
Generally, we would vote with management on proposals relating to changes
to the company's capital structure, including increases and decreases of capital
and issuances of preferred stock; however, we would review the facts and
circumstances associated with each proposal before finalizing our decision.
Well-structured stock option plans and management compensation programs are
essential for companies to attract and retain high caliber management personnel.
We generally vote in favor of proposals relating to these issues; however, there
could be an occasion on which we viewed such a proposal as over reaching on the
part of management or having the potential for excessive dilution when we would
vote against the proposal.
Corporations should act in a responsible manner toward their employees, the
communities in which they are located, the customers they serve and the world at
large. We have observed that most stockholder proposals relating to social
issues focus on a narrow issue and the corporate position set forth in the proxy
material provides a well-considered response demonstrating an appropriate and
responsible action or position. Accordingly, we generally support management
recommendations on these types of proposals; however, we would consider each
proposal on a case-by-case basis.
We take voting proxies of securities held in our portfolio very seriously.
As indicated above, it is an integral part of the analytical process at Sterling
Capital Corporation. Each proposal and any competing interests are reviewed
carefully on a case-by-case basis. Generally, we support and vote in accordance
with the recommendations of management; however, the overriding basis for the
votes we cast is the best long-term interests of the Company.
Item 8. [Reserved.]
Item 9. Controls and Procedures.
(a) The Registrant's principal executive officer and principal financial
officer have concluded that the Registrant's disclosure controls and procedures
are sufficient to ensure that information required to be disclosed by the
Registrant in this Form N-CSR was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
(b) There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Registrant's internal
controls or in other factors that could significantly affect the Registrant's
internal controls subsequent to the date of their evaluation.
Item 10. Exhibits.
(a)(1) Code of Ethics.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b) Certification of principal executive officer and principal financial officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) STERLING CAPITAL CORPORATION
By: /s/ Wayne S. Reisner
--------------------
Name: Wayne S. Reisner
Title: President
Date: March 5, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Wayne S. Reisner
--------------------
Name: Wayne S. Reisner
Title: Principal Executive Officer
Date: March 5, 2004
By: /s/ Michael J. Carey
--------------------
Name: Michael J. Carey
Title: Principal Financial Officer
Date: March 5, 2004