SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-2/A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
STERLING CAPITAL CORPORATION
(Exact Name of Registrant as Specified in Charter)
635 Madison Avenue, New York, New York, 10022
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code (212)980-3360
Page 1 of 11 Pages
<PAGE>
CONTENTS OF FORM N-2
Part I INFORMATION REQUIRED IN A PROSPECTUS OR REGISTRATION STATEMENT
Page
- - ----
3 Item 1 Cover Page (Prospectus Only)
3 Item 2 Synopsis (Prospectus Only)
3 Item 3 Condensed Financial Information (Prospectus Only)
3 Item 4 Plan of Distribution
3 Item 5 Use of Proceeds
3-4 Item 6 General Information and History
4 Item 7 Investment Objectives and Policies
4-5 Item 8 Tax Status
5-6 Item 9 Brokerage Allocation and Other Practices
6 Item 10 Pending Legal Proceedings
6 Item 11 Control Persons and Principal Holders of Securities
6 Item 12 Directors, Officers and Advisory Board Members
7 Item 13 Remuneration of Directors and Others
7 Item 14 Custodian, Transfer Agent and Dividend Paying Agent
7 Item 15 Investment Advisory and Other Services
7 Item 16 Default and Arrears on Senior Securities
7 Item 17 Capital Stock
7 Item 18 Long-Term Debt
7 Item 19 Other Securities
8 Item 20 Financial Statements
PART II OTHER INFORMATION
8 Item 1 Marketing Arrangements
8 Item 2 Other Expenses of Issuance and Distribution
8 Item 3 Indemnification
9-10 Item 4 Financial Statements and Exhibits
10 Item 5 Persons controlled by or Under Common Control with Registrant
10 Item 6 Number of Holders of Securities
10 Item 7 Location of Accounts and Records
10 Item 8 Business and Other Connections of Investment Advisor
10 Item 9 Management Services
10 Item 10 Undertakings
11 SIGNATURES
Page 2 of 11 Pages
<PAGE>
PART I INFORMATION REQUIRED IN PROSPECTUS OR REGISTRATION
STATEMENT
Item 1 Cover Page (Prospectus only)
Inapplicable
Item 2 Synopsis (Prospectus only)
Inapplicable
Item 3 Condensed Financial Information (Prospectus only)
Inapplicable
Item 4 Plan of Distribution
Inapplicable
Item 5 Use of Proceeds
Inapplicable
Item 6 General Information and History
The information in subparagraphs (a), (b) and (c) of Item 6, as
amended, is hereby incorporated by reference. Subparagraph (d) of Item 6 is
hereby amended in entirety to read as follows:
(d) The Registrant's shares of common stock are listed on the
American Stock Exchange. The Registrant's shares of common stock have
historically traded on the market for less than the net asset value of such
shares.
<TABLE>
<CAPTION>
Net Asset Value Per Share
---------------------------
As at (1) 1997 1996 1995
- - --------- ----- ----- -----
<S> <C> <C> <C>
March 31 (unaudited) $7.99 $7.83 $7.09
June 30 (unaudited) 8.62 8.01 7.46
Sept. 30 (unaudited) 9.39 8.06 7.90
Dec. 31 8.22 8.15 7.49
</TABLE>
- - ------------
(1) The Registrant's Board of Directors determines the value of Registrant's net
assets as of the end of each fiscal quarter.
Page 3 of 11 Pages
<PAGE>
Information with Respect to the Market Price and
Volume of Trading of Registrant's Securities
<TABLE>
<CAPTION>
1997 Shares
For 3 Months Ended High Low Traded
---- --- ------
<S> <C> <C> <C>
March 31 $7.50 $6.00 36,400
June 30 7.00 6.125 26,600
September 30 7.125 6.1875 69,300
December 31 7.875 6.50 51,700
<CAPTION>
1996 Shares
For 3 Months Ended High Low Traded
---- --- ------
<S> <C> <C> <C>
March 31 $6.375 $5.625 13,100
June 30 6.00 5.50 10,500
September 30 6.75 5.625 37,400
December 31 7.25 6.25 20,400
<CAPTION>
1995 Shares
For 3 Months Ended High Low Traded
---- --- ------
<S> <C> <C> <C>
March 31 $5.375 $4.50 26,300
June 30 5.375 4.75 20,000
September 30 5.75 5.00 14,100
December 31 7.125 5.375 22,100
</TABLE>
As of March 31, 1998 the unaudited net asset value per share was
$9.08. The closing sales price for the Registrant's shares on the American Stock
Exchange on March 31, 1998 was $8.0625.
Item 7 Investment Objectives and Policies
The information in subparagraphs (a), (b), (c) and (d) of Item 7, as
amended, is hereby incorporated by reference.
Item 8 Tax Status
The information in Item 8, as amended, is hereby amended in its
entirety as follows:
(a) The Registrant for the fiscal year ending December 31, 1997 was a
"personal holding company" under the Internal Revenue Code of 1986, as amended
(the "Code"), since five or fewer stockholders owned directly or indirectly more
than 50% of the Registrant's outstanding stock and more than 60% of the
Registrant's adjusted ordinary gross income was personal holding company income.
As a personal holding company, the Registrant would also be subject
Page 4 of 11 Pages
<PAGE>
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. For the year ended December 31, 1997
the Registrant did not have any undistributed personal holding company income.
Personal holding company income does not include the excess of net realized
long-term capital gain over net realized short-term capital loss, less the
Federal income tax attributable to such excess.
The Registrant policy is to comply with the requirements of the Code
that are applicable to regulated investment companies and to distribute all its
taxable income to its shareholders.
(b) The information set forth in subparagraph (a) of Item 8, as
amended, is hereby incorporated by reference.
(c) The information set forth in subparagraph (a) of Item 8, as
amended, is hereby incorporated by reference.
(d) Certain special tax aspects of the Registrant are described in
paragraph (a) of this Item which is hereby incorporated by reference.
Item 9 Brokerage Allocation
The information in subsection (1) of subparagraph (a) of Item 9 is
amended to read in its entirety as follows:
(a)(1) The aggregate dollar amount of brokerage commissions paid by the
Registrant during the three most recent fiscal years:
Year Ended December 31
1997 1996 1995
------- ------- -------
$29,465 $34,398 $36,258
The information in subsection (2) of subparagraphs (a) of Item 9, as
amended, is hereby incorporated by reference.
The information in subparagraph (b) of Item 9, as amended, is hereby
incorporated by reference.
The information in subparagraph (c) of Item 9 is hereby incorporated
by reference.
Page 5 of 11 Pages
<PAGE>
Subparagraph (d) of Item 9 is hereby amended to read in its entirety,
as follows:
During the fiscal year ended December 31, 1997, approximately $29,465
in brokerage commissions ($12,250,313 in purchase and sale transactions) were
designated to brokers because of research services provided by such brokers.
Item 10 Pending Legal Proceedings
None
Item 11 Control Persons and Principal Holders of Securities
The information in Item 11, as amended, is hereby incorporated by
reference.
Item 12 Directors, Officers and Advisory Board Members
The information in Item 12, as amended, is hereby incorporated by
reference and amended as follows:
Principal
Positions Occupations
Name and Held With During Past
Address Registrant 5 Years
------- ---------- -------
Michael Carey Treasurer Treasurer of the Registrant
since October 28, 1997;
since February 6, 1995
an employee of the
Registrant; from December
1989 to February 3, 1995
employed with Grant
Thornton, LLP.
Elizabeth Acton Secretary Secretary of the Registrant
since October 28, 1997;
since June 9, 1997
an employee of the
Registrant; from
January 1997 to June 1997
employed by Prudential
Securities; from February
1991 to January 1997
employed by The New
England Insurance Co.
Tracey Schadewald resigned as Secretary of the Registrant, effective May 16,
1997.
Page 6 of 11 Pages
<PAGE>
Item 13 Remuneration of Directors and Officers
Item 13 is amended to read as follows:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Pension or
Retirement
Benefits Estimated
Capacities Accrued Annual
in Which Aggregate During Regis- Benefits
Remuneration Remun- trant's Last Upon
Name of Person Was Received eration Fiscal Year Retirement
- - ------- ------ ------------ ------- ----------- ----------
<S> <C> <C> <C> <C>
Wayne S. Reisner President 78,000 N/A 54,600
Richard Kaufman Executive Vice President
and Treasurer 68,250 N/A 47,775
</TABLE>
Item 14 Custodian, Transfer Agent and Dividend Paying Agent
The information in Item 14, as amended, is hereby incorporated by
reference and amended as follows:.
Custodian: Citibank, N.A.
120 Broadway
New York, NY 10271
Item 15 Investment Advisory and Other Services
None
Item 16 Defaults and Arrears on Senior Securities
None
Item 17 Capital Stock
The information in Item 17, as amended, is hereby incorporated by
reference.
Item 18 Long-Term Debt
None
Item 19 Other Securities
None
Page 7 of 11 Pages
<PAGE>
Item 20 Financial Statements
A. Statements of the Registrant
1. Statement of Assets and Liabilities
The information contained in the Balance Sheet and Statement of
Assets and Liabilities included in the Registrant's Annual Report to
Shareholders for the fiscal year ended December 31, 1997, previously filed with
the Commission, is hereby incorporated by reference.
2. Statement of Income and Expense, Realized and Unrealized Gain or Loss on
Investments
The information contained in the Statement of Income and Expense,
Realized and Unrealized Gain or Loss on Investments included in the Registrant's
Annual Reports to Shareholders for the fiscal years ended December 31, 1997,
December 31, 1996 and December 31, 1995, respectively, previously filed with the
Commission, is hereby incorporated by reference.
B. Consolidated Statements
Inapplicable since the Registrant has no subsidiaries.
C. Unconsolidated Subsidiaries
Inapplicable.
D. General Provisions
Inapplicable
E. Historical Financial Information
Inapplicable.
PART II OTHER INFORMATION
Item 1 Marketing Agreements
Inapplicable.
Item 2 Other Expenses of Issuance and Distribution
Inapplicable.
Item 3 Indemnification
The information in Item 3 of Part II, as amended, is hereby
incorporated by reference.
Page 8 of 11 Pages
<PAGE>
Item 4 Financial Statements and Exhibits
(a) Financial Statements:
Included in Part I hereof:
Statement of Assets and Liabilities of the Registrant as at December
31, 1997, included in the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1997, previously filed with the Commission, is
hereby incorporated by reference.
Included in Part II hereof:
Registrant's Portfolio of Investment in Securities as at December 31,
1997, included in the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1997, previously filed with the Commission, is hereby
incorporated by reference.
Statements of Operations for the years ended December 31, 1997, 1996,
1995, included in the Registrant's Annual Reports to Shareholders for the fiscal
years ended December 31, 1997, 1996 and 1995, respectively, previously filed
with the Commission, are hereby incorporated by reference.
Notes to Financial Statements, included in the Registrant's Annual
Reports to Shareholders for the fiscal years ended December 31, 1997, 1996 and
1995, respectively, previously filed with the Commission, are hereby
incorporated by reference.
(b) Exhibits
1. Exhibit 1 to Form N-2, as amended, is hereby incorporated by
reference.
2. Exhibit 2 to Form N-2, as amended, is hereby incorporated by
reference.
3. None.
4. Exhibit 4 to Form N-2, as amended, is hereby incorporated by
reference.
5. None
6. None
7. None
8. Exhibit 8 to Form N-2, as amended, is hereby incorporated by
reference.
Page 9 of 11 Pages
<PAGE>
9. Exhibit 9 to Form N-2, as amended, is hereby incorporated by
reference; Custodian Agreement between Registrant and Citibank, New York, dated
October 1, 1997.
10. None.
11. None.
12. None.
13. None.
14. None.
15. None.
Item 5 Persons Controlled by or Under Common Control with Registrant
The information appearing in Item 11 in Part I is hereby incorporated
by reference.
Item 6 Number of Holders of Securities
Item 6 is hereby amended in its entirety to read as follows:
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, $1 par value 1,306 as of April 24, 1998
Item 7 Location of Accounts and Records
Item 7 of Part II, as amended, is hereby incorporated by reference.
Item 8 Business and Other Connections of Investment Advisor
Inapplicable.
Item 9 Management Services
None.
Item 10 Undertakings
Inapplicable.
Page 10 of 11 Pages
<PAGE>
SIGNATURES
Pursuant to the requirement of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment No. 18 to Form N-2 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York, on the 28th day of April, 1998.
STERLING CAPITAL CORPORATION
(Registrant)
By: /s/ Wayne S. Reisner
--------------------
Wayne S. Reisner, President
Page 11 of 11 Pages
CUSTODIAN AGREEMENT
THIS AGREEMENT, made as of October 1, 1997 by and between Sterling
Capital Corporation, (formerly known as The Value Line Development Capital
Corporation), a corporation organized and existing under the laws of the State
of New York and having its principal place of business at 635 Madison Avenue,
New York, New York (hereinafter referred to as "the Fund"), and Citibank, N.A.,
a national banking association having its principal place of business at 399
Park Avenue, New York, New York (hereinafter referred to as Citibank").
WITNESSETH
WHEREAS, the Fund is an investment company registered under the
Investment Company Act of 1940, and Citibank is a bank having the qualifications
prescribed by the Act to permit the Fund to place and maintain its securities
and similar investments in the custody of Citibank;
AND WHEREAS, the Fund desires Citibank to act as Custodian of the
assets of the Fund and to hold and administer the cash and securities of the
Fund upon the terms and subject to the conditions of this Agreement;
AND WHEREAS, Citibank is prepared to act as Custodian of the assets of
the Fund and to hold and administer the cash and securities of the Fund upon
such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and Citibank agree as follows:
1. Appointment of Citibank as Custodian of the assets of the Fund.
The Fund hereby appoints Citibank to hold in its sole custody
all the cash and securities of the Fund, upon the terms and subject to the
conditions hereafter set fourth, and Citibank hereby accepts such appointment
upon such terms and subject to such conditions.
2. Construction of Agreement.
(1) Any reference in this Agreement to a person or thing in
the singular shall, where the context requires, be construed as a reference to
such persons or things in the plural, and vice versa.
(2) Any reference in this Agreement to a person or thing in
the singular shall, where the context requires, be construed as a reference to
the feminine or neuter gender.
3. Interpretation of Agreement.
In this Agreement -
(a) the expression "the Board" means the Board of Directors of
the Fund; and, in the event that as Executive Committee of the Board has been
appointed, any reference to the Board includes a reference to the Executive
Committee;
(b) the expression "capital shares" means shares of the
capital stock of the Fund;
<PAGE>
(c) the expression "officers' instruction" means an
instruction, direction or authorization in writing signed in the name of the
Fund by any two of the following persons, namely, Chairman of the Board, the
President, any Vice President, the Secretary or the Treasurer of the Fund, and
any one of the aforesaid persons and any other person duly authorized by the
Board to sign officers'instructions; provided, however, that all officers'
instuctions shall include the signature of the President of the Fund in the case
of (I) a payment permitted under the terms of paragraphs (d), (e), (f), (h) and
(i) of subsection (2) of Section 4, and (ii) a transfer, exchange or delivery of
securities permitted under the terms of paragraphs (h), (i) and (n) of
subsection (1) of Section 6;
(d) the expression "security" has the same meaning as that
given to it in the Investment Company Act of 1940, as amended, excluding,
however, put and call options written by persons other than the Fund,
combinations thereof, and similar options;
(e) the expression "the Transfer Agent" means such bank,
corporation or other entity as is for the time being duly appointed by the Fund
to act as transfer agent and dividend disbursing agent for the Fund;
(f) the expression "designated broker" shall mean any
brokerage firm which is stated to be a designated broker in any officers'
instruction furnished by the Fund to Citibank from time to time.
4. Receipt and Disbursement of Monies by Citibank.
(1) Citibank shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by Citibank
acting pursuant to the provisions of this Agreement. Citibank shall hold in such
account or accounts, subject to the provisions of this Agreement, all cash
received by it from or for the account of the Fund.
(2) Citibank shall make payments of cash received for the
account of the Fund (insofar as cash is available for the purpose) only -
(a) upon the purchase of securities for the account of the
Fund and the delivery of such securities to Citibank, or to any other bank,
banking firm or trust company doing business in the United States and, with
concurrence of the Fund, designated by Citibank as its agent, registered in the
name of the Fund, or in the name of a nominee of Citibank referred to in
Subsection (1) of Section 9 of this Agreement, or in proper form for transfer;
provided, however, that the provisions of this paragraph (a) shall by applicable
to the purchase by the Fund through designated brokers of put and /or call
options written by persons other than the Fund, combinations thereof and similar
options issued by the Options Clearing Corporation or any similar clearing
corporation, in which event, Citibank will receive any non-negotiable
certificates (against receipt for such certificates) issued by the Options
Clearing Corporation, or any similar clearing corporation;
(b) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the Fund held by, or to be
delivered to , Citibank;
<PAGE>
(c) for expenses of Citibank in handling securities for, or on
behalf, the Fund, including the amount of stamp or transfer taxes payable by the
Fund in respect of a security transaction, and other similar items connected
with matters falling within the purview of this Agreement, including the
reimbursement of Citibank for its disbursements and out-of-pocket expenses
incurred by Citibank in the performance of its duties under this Agreement;
(d) for the payment of interest, taxes, management or
supervisory fees or operating expenses of the Fund (including, without
limitation thereto, fees for custodian, transfer agency, legal, and auditing
services and directors' compensation), or for the transfer of funds to an
account or accounts in the name of the Fund in a qualified bank or bands for the
purpose of paying operating expenses, provided that such transfer or transfers
shall be made only upon receipt by Citibank of an officers' instruction stating
that the account or accounts is or are, as the case may be, to be used for
paying operating expenses of the Fund and stating that the aggregate amount in
all such accounts does not exceed the amount of the Fund's Fidelity Bond
(pursuant to Section 17 (g) of the Investment Company Act of 1940, as amended),
covering the officers and employees authorized to draw on such account or
accounts;
(e) for the payment of cash dividends and other distributions
to shareholders of the Fund;
(f) for the purchase of capital shares by the Fund;
(g) in connection with any short sales effected or to be
effected by the Fund, for deposit in a segregated commercial account with
Citibank, pursuant to the provisions of subsection (1) of Section 4 hereof.
(h) for the payment of any principal on any indebtedness of
the Fund
(i) for other proper corporate purposes of the Fund; or
(j) upon the termination of this Agreement as set forth in
Section 26 of this Agreement.
(3) Before making any payment under subsection (2) of this
Section, Citibank -
(a) shall, in the case of a payment permitted under the terms
of paragraphs (a), (b), (d) or (h) of subsection (2) of this Section, have
received (any may rely on) an officers' instruction directing such payment and
setting forth the purpose for which such payment is to be made;
(b) shall, in the case of a payment permitted under the terms
of paragraph (e) or paragraph (f) of subsection (2) of this Section, have
received (and may rely on) an officers' instruction specifying that the payment
is in respect of a cash dividend or other distribution to shareholders of the
Fund duly declared by the Board or, as the case may be, is in respect of the
purchase of capital shares by the Fund duly authorized by the Board, and
designating the commercial account or accounts into which the amount of such
payments are to be deposited by Citibank for subsequent withdrawal by the Fund
or the Transfer Agent; and
<PAGE>
(c) shall, in the case of a payment for corporate purposes
permitted under the terms of paragraph (I) of subsection (2) of this Section,
have received (and may rely on) a copy of a resolution of the Board signed by an
officer of the Fund (other than the officer certifying such resolution and
certified by the Secretary or an Assistant Secretary of the Fund under its
corporate seal, specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
corporate purpose of the Fund, and naming the person or persons to whom such
payment is to be made.
(4) Citibank shall have no responsibility with respect to supervising
or policing the disbursement of monies paid by Citibank into a commercial
account or accounts pursuant to paragraph (e), paragraph (f) or paragraph (g) of
subsection (2) of this Section read with paragraph (b) of subsection (3) of this
Section.
(5) No officers' instruction shall be required to be received by
Citibank from the Fund in the case of a payment permitted under paragraph (c) of
subsection (2) of this Section.
(6) Citibank is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Citibank for the
account of the Fund.
5. Custody of Securities by Citibank.
(1) Citibank shall hold in a separate account, and physically
segregated at all times from the accounts of any other persons, firms or
corporations, pursuant to the provisions of this Agreement, all securities
received by it from or for the account of the Fund, except as provided in sub
paragraph 9 hereof.
(2) Citibank shall hold in a separate collateral account,
pursuant to the provisions of this Agreement, all securities and other property
or evidences thereof delivered to Citibank for safekeeping from time to time as
collateral for investments made by the Fund, pursuant to an officers'
instruction furnished to Citibank by the Fund.
(3) All securities and other property or evidences thereof
held by Citibank under this Section are to be held or disposed of by Citibank
for the Fund pursuant to the provisions of this agreement, and Citibank shall
have no power or authority to assign, hypothecate, pledge or otherwise dispose
of any such securities and other property or evidences thereof except pursuant
to the directions of the Fund and only for the account of the Fund as set forth
in Section 6 of this Agreement.
(4) Citibank shall use its best efforts to ensure that the
specific securities held by it hereunder are at all times identifiable in its
records.
(5) Anything to the contrary in this Section 5
notwithstanding, Citibank may (I) include any or all of the securities in a
system whereby Citibank files securities by issuer rather than by account, or
(ii) subject to the provisions of Section 17(f) of the Investment Company Act of
1940, as amended, and any rules which may be promulgated thereunder, utilize the
depository facilities of any system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Securities and Exchange Commission under the
<PAGE>
Securities Act of 1934, as amended, or such other persons as may be permitted by
the Securities and Exchange Commission. Citibank shall be entitled to rely upon
officers' instructions as certification that such filing of securities by issuer
or the utilization of such depository facilities is not in any way inconsistent
with the Fund's charter, By-Laws or with any law, rule or regulation which may
be applicable.
6. Transfer, Exchange, Delivery, etc. of Securities by Citibank.
(1) Citibank shall have sole power to release or deliver any
securities owned by the Fund and held by Citibank for the account of the Fund
pursuant to the provisions of this Agreement, other than securities held by it
for safekeeping as collateral under subsection (2) of Section 5 of this
Agreement. Citibank agrees to transfer, exchange or deliver such securities held
by it for the account of the Fund only -
(a) upon sales of such securities for the account of the Fund
and receipt by Citibank of payment therefor or of a check or draft in payment
therefor in such form as it is satisfactory to Citibank;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
and cash, pursuant to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or for deposit with a reorganization committee
or protective committee pursuant to a deposit agreement;
(e) upon conversion of such securities, pursuant to their
terms, into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) upon surrender of warrants, right or similar securities in
the exercise of such warrants, rights or similar securities;
(h) as collateral on borrowing effected by the Fund;
(i) as a complete or partial redemption in kind of capital
shares;
(j) for delivery to designated brokers as collateral in
connection with any short sales effected by the Fund; provided, that any
securities so delivered consists of either United States Government obligations
or securities fungible with the securities which are the subject sale;
(k) in connection with any short sales effected or to be
effected by the Fund, for deposit in a segregated commercial account with
Citibank, pursuant to the provisions of subsection (1) of Section 4 hereof;
<PAGE>
(1) upon sales of securities for the account of the Fund and
receipt by Citibank of payment therefor, including upon sales by the Fund
through designated brokers of put and/or call options written by persons other
than the fund, combinations thereof and similar options issued by the Options
Clearing Corporation or any similar clearing corporation, in which event
Citibank will deliver any non-negotiable certificates (against receipt for such
certificates) issued by the Options Clearing Corporation, or any similar
clearing corporation;
(m) for the delivery to (i) broker-custodians to fulfill put
and similar options written by persons other than the Fund held in the custody
of such broker-custodians and exercised by the Fund, or (ii) to designated
brokers to fulfill put and similar options issued by the Options Clearing
Corporation, or any similar clearing corporation and exercised by the Fund, in
which event Citibank will deliver any non-negotiable certificates (against
receipt for such certificates) issued by the Options Clearing Corporation, or
any similar clearing corporation;
(n) for other proper corporate purposes of the Fund; or
(o) upon the termination of this Agreement as set forth in
Section 26 of this Agreement.
(2) All certificates, evidences of receipt and all securities, cash or
other property receivable in exchange for securities delivered pursuant to the
provisions of this Agreement shall be delivered to Citibank or to its agent as
set forth above.
(3) Except as provided in Section 8 of this Agreement, before making
any transfer, exchange or delivery of securities under subsection (1) of this
Section, Citibank -
(a) shall, in the case of a transfer, exchange or delivery
permitted under the terms of paragraph, (a), (b) (except as to securities which
are unconditionally and pursuant to their terms called, redeemed or retired or
otherwise become payable), (c), (d), (e), (f), (g), (h), (i), (k), (l), or (m)
of subsection (1) of this Section, have received (and may rely on) an officers'
instruction directing such transfer, exchange or delivery;
(b) shall in the case of a transfer or delivery permitted
under the terms of paragraph (i) of subsection (1) of this Section, have
received (and may rely on) an officers' instruction directing the transfer or
delivery of the securities to be utilized for the redemption of shares,
specifying the person or persons to whom the transfer or delivery is to be made
in respect of the complete or, as the case may be, partial, redemption in kind
of capital shares; and
(c) shall, in the case of a transfer, exchange or delivery
permitted under the terms of paragraph (a) of subsection (I) of this Section,
have received (and may rely on) a copy of a resolution of the Board, signed by
an officer of the Fund (other than the officer certifying such resolution) and
certified by the Secretary or an Assistant Secretary of the Fund, under its
corporate seal, specifying the securities to be transferred, exchanged or
delivered, setting forth the purpose for which such transfer, exchange or
delivery is to be made, declaring such purpose to be a proper corporate purpose
of the Fund, and naming the person or persons to whom delivery of such
securities shall be made, each of whom shall be stated in such resolution to be
a properly bonded officer or employee of the Fund.
<PAGE>
(4) Citibank shall not deliver any of the assets of the Fund against
receipt of cash to any one or more of the directors, officers, employees or
agents of the Fund except as directed by an officers' employees or agents of the
Fund except as directed by an officers' instruction accompanied by a resolution
of the Board signed, certified and in form and substance similar to a resolution
required pursuant to paragraph (c) of subsection (3) of this Section.
(5) Notwithstanding the provisions of subsection (1) or subsection (2)
of this Section, Citibank shall not transfer, exchange or deliver any securities
or other property or evidence thereof held by it for safekeeping as collateral
under subsection (2) of Section 5 of this Agreement, except as directed by an
officers' instruction.
7. Reorganization, Dissolution etc. of the Fund.
(1) In the case of any of the following transactions, not in the
ordinary course of business, namely -
(a) the merger or consolidation of the Fund with or into
another investment company; or
(b) the sale by the Fund of all, or substantially all, of its
assets to another investment company; or
(c) the dissolution or liquidation of the Fund and the
distribution of its assets, then in any such case Citibank shall deliver the
securities held by it under this Agreement, and disburse cash, only upon receipt
of an officers' instruction together with advice of counsel satisfactory to
Citibank (who may be counsel for the Fund) to the effect that all necessary
corporate action therefor has been taken or, concurrently with any action by
Citibank, will be taken.
(2) In none of the circumstances specified in subsection (I) of
this Section shall Citibank, acting as Custodian under this Agreement, be deemed
or taken to be the agent of the Fund for the purposes of any merger,
consolidation, complete or substantial sale of assets, dissolution, liquidation
or other reorganization.
8. Matters where Citibank is to act without Specific Instructions.
(1) Unless and until Citibank receives an officer's instruction to
the contrary, Citibank shall, without instructions from the Fund -
(a) present for payment all securities held pursuant to the
provisions of this Agreement, which are unconditionally and, pursuant to their
terms, called, redeemed or retired or otherwise become payable, and all coupons
and other income items held pursuant to the provisions of this Agreement which
call for payment upon presentation, collect and receive payment on any and all
other income items, and hold the cash received by it upon such payment for the
account of the Fund;
(b) receive and hold for the account of the Fund all stock
dividends, rights and similar securities issued with respect to any securities
held pursuant to the provisions of this Agreement;
<PAGE>
(c) execute as agent on behalf of the Fund such ownership and
other certificates as may be required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws of
any State now or hereafter in effect in respect if securities held pursuant to
the provisions of this Agreement, inserting the Fund's name on such certificates
as the owner of the securities covered thereby, to the extent it may lawfully do
so; and
(d) exchange interim receipts or temporary securities for
definitive securities.
(2) With respect to securities of foreign issue, while Citibank
will use commercially reasonable efforts to collect any monies which may to its
knowledge become collectible arising from such securities, including dividends,
interest and other income, and to notify the Fund of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such securities, it is understood that Citibank shall be under no
responsibility for any failure or delay in effecting such collections or giving
such notices, whether or not relevant information is published in any financial
service available to it.
(3) Citibank shall not be under any obligation or duty to take
action to effect collection of any amount, if the securities (domestic or
foreign) upon which such amount is payable are in default and payment is refused
after due demand or presentation. Citibank will, however, notify the Fund in
writing of such default and refusal to pay.
(4) Without prejudice to anything in subsection (1) of this
Section, Citibank shall sell, if there is a market therefor, all subscription
and other rights issued with respect to securities held by Citibank for the
account of the Fund pursuant to the provisions of this Agreement and with
respect to which Citibank has not received an officers" instruction within a
reasonable time prior to the expiration of such rights.
9. Registration of Securities.
(1) Except as otherwise directed by an officers" instruction,
Citibank shall cause all securities held by it for the account of the Fund
pursuant to the provisions of this Agreement, except such as are in bearer form,
to be registered in the name of the Fund or of a registered nominee of Citibank,
which shall be a registered nominee as defined in the Internal Revenue Code and
any Regulations of the United States Treasury Department issued thereunder, or
in any provision of any subsequent federal law exempting nominee registration
from liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or by the laws of any State.
(2) The Fund shall from time to time furnish to Citibank
appropriate instruments to enable Citibank to hold or deliver in proper form for
transfer, or to register in the name of a registered nominee of Citibank, any
securities which Citibank may hold for the account of the Fund pursuant to the
provisions of this Agreement and which may from time to time be registered in
the name of the Fund.
<PAGE>
10. Voting of Securities; Proxies.
(1) Neither Citibank nor any nominee of Citibank shall vote any
of the securities held by Citibank for the account of the Fund pursuant to the
provisions of this Agreement, except in accordance with instructions contained
in an officers' instruction.
(2) Citibank shall deliver, or cause to be executed and
delivered, to the Fund all notices of meetings, proxies and proxy solicitation
material which relate to such securities, such proxies to be executed by the
registered holder of such securities (if registered otherwise than in the name
of the Fund), but without indicating the manner in which such proxies are to be
voted. The Fund understands that in regard to any foreign (i.e., non-U.S.)
securities, it may be difficult or impossible for Citibank to provide the Fund
with a proxy in a timely manner, and The Fund relieves Citibank of such
responsibility in such event.
11. Communications regarding Securities.
In any case where Citibank or its nominee receives any communication
containing financial information or other information of material importance to
security holders in respect of or relating to the securities held by Citibank
for the account of the Fund pursuant to the provisions of this Agreement (other
than notices of meeting, proxies and proxy solicitation material referred to in
Section 10 of this Agreement), Citibank shall forthwith deliver such
communication to the Fund:
Provided that nothing in the foregoing provisions of this Section shall
apply or have effect in relation to communications regarding securities held by
Citibank for safekeeping as collateral under subsection (2) of Section 5 of this
Agreement.
12. Certificates in respect of Exempt Transfers.
Citibank shall execute and deliver such certificates in connection with
securities delivered to it or by it pursuant to any provision of this Agreement
as may be required under the provisions of the Internal Revenue Code and any
Regulations of the United Stares Treasury Department issued thereunder, or by
the laws of any State, now or hereafter in effect, to exempt from transfer tax
exemptable transfers and/or deliveries of any such securities and to deliver
upon instructions of the Fund such certificates as may be so required by the
laws of foreign jurisdictions.
13. Resolutions Names of Officers and Persons Authorized to act for
the Fund.
(1) The Fund shall furnish to Citibank a certified copy of resolutions
adopted by the Board authorizing the execution, delivery and performance of this
Agreement by the Fund and a copy of each resolution adopted by the Board
designating the persons authorized to sign officers' instructions on behalf of
the Fund, in each case certified by the Secretary or an Assistant Secretary of
the Fund under its corporate seal.
(2) The Fund shall also furnish to Citibank a certificate, similarly
certified and sealed, of the specimen signatures of persons authorized to sign
officers' instructions, the names of its Directors and members of the Executive
Committee of the Board (if any) and the names and titles of its officers and a
similar certification of any changes which may occur from time to time.
<PAGE>
(3) In the event that any person named in the most recent certification
furnished to Citibank pursuant to sub-section (1) of this Section ceases to be
an officer of the Fund or as the case may be, another person authorized to sign
officers' instructions, the Fund will furnish Citibank with an officer's
instruction advising it to that effect. In the absence of such an officers'
instruction Citibank shall be entitled to rely, as aforesaid, upon the
signatures of all officers and other persons named in such most recent
certification.
14. Care and Diligence of the Bank.
Citibank represents and warrants that its officers and supervisory personnel
charged with carrying out its functions as Custodian of the assets of the Fund
will exercise the same skill with respects to such assets as they exercise with
respect to the property of Citibank of a similar character. Citibank shall at
all times exercise reasonable care and diligence in the performance of its
functions as Custodian of the assets of the Fund.
15. Indemnification, etc.
(1) The Fund shall fully indemnify and save harmless Citibank and its
nominee from any and all loss, liability or expense, including reasonable
counsel fees, arising out of its actions as Custodian of the assets of the Fund
pursuant to the provisions of this Agreement, other than loss, liability or
expense arising out of Citibank's gross negligence or willful misconduct, as
determined by a court of competent jurisdiction.
(2) Citibank agrees that, upon receipt of securities to be held by it
for the account of the Fund pursuant to the provisions of this Agreement, or to
be held in an account for safekeeping as collateral under subsection (2) of
Section 5 of this Agreement, and upon issuing its non-negotiable advice of
receipt therefor, it assumes full responsibility for exercising the skill,
reasonable care and diligence described in Section 14 of this Agreement with
respect to the safekeeping thereof while such securities are in the actual
possession of Citibank, its officers or employees. Citibank agrees that it will
give such securities the same physical care and safeguards as are afforded
similar property owned by it.
16. Reliance of Citibank on Opinions, Instructions, etc.
(1) Citibank may consult with counsel, who may be counsel for the
Fund, in any case where it appears to Citibank necessary or desirable to do so.
Citibank may rely upon, and shall be protected in acting upon, written advice of
counsel for the Fund or of Citibank's outside general counsel. The fund shall in
all events bear liability for the fees and disbursements of such counsel.
(2) Citibank may rely and act upon any officers" instruction, or other
instrument or paper believed by Citibank to be genuine and to have been signed
by any person thereunto duly authorized, where such documents are received from
or signed by or on behalf of the Fund or any officer or authorized employee of
the Fund. In any other case, Citibank may rely and act upon any direction,
instruction, certification, authorization or other instrument believed by
Citibank to be genuine or to have been signed by any person thereunto duly
authorized, where Citibank has exercised due care and diligence and has not been
guilty of any misconduct.
17. Responsibility for Compliance with the Fund's Investment Policies,
etc.
<PAGE>
(1) Citibank shall have no powers or duties with respect to ensuring
compliance by the Fund with any restrictions on the Fund's Investment powers or
policies impose by law or contained in its Articles of Incorporation, By-Laws,
Registration Statements or any amendments thereto or in its prospectuses or
elsewhere. The sole responsibility for such compliance shall be borne by the
Fund.
(2) Citibank shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to, or held by, it for the account
of the Fund are such as may properly be held by the Fund under the provisions of
its Articles of Incorporation or of its By-Laws, or under any provision of
Federal or State law or statute or of any rule, regulation or order of any
Federal or State agency.
(3) Citibank shall be under no duty or obligation to inquire into and
shall not be liable for
(a) the validity of the issue of any securities purchased by
or for the Fund, the legality of the purchase thereof, or the property of the
amount paid therefor;
(b) the legality of any sale of any securities by or for the
Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any capital shares or
the sufficiency of the amount to be paid therefor;
(d) the legality of the purchase of any capital shares or the
propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the issue of any securities held by the Fund as a
payment in kind of such dividend;
(f) any property or monies of the Fund unless and until
received by it, and any such property or monies delivered or paid by it pursuant
to the terms of this Agreement.
18. Compensation of Citibank.
(1) The Fund shall pay Citibank for its services rendered pursuant to
the provisions of this Agreement such compensation as may from time to time be
agreed upon in writing by the Fund and Citibank
(2) The Fund shall pay or reimburse Citibank from time to time -
(a) for any transfer taxes payable upon transfers or
securities made under any provision of this Agreement; and
(b) for all other necessary and proper disbursements and
expenses made or incurred by Citibank or its nominee in the performance of its
functions under any provision of this Agreement.
<PAGE>
19. Reports by Citibank.
Citibank shall, as soon as practicable after the close of each business day,
furnish to the Fund such advices on transactions and entries for the account of
the Fund occurring on that day as may be mutually agreed upon ham time to time
between the Fund and Citibank. Citibank shall also furnish to the Fund, at the
end of each quarter of the Fund's fiscal year, a list of the securities held by
Citibank for the account of the Fund pursuant to the provisions of this
Agreement or in an account for safekeeping as collateral under subsection (2) or
Section 5 of this Agreement, and, at the expense of the Fund, such additional
lists of securities held by Citibank as may be directed by an officers'
instruction.
20. Preservation of Records by the Bank.
The Bank shall preserve, for the periods and in the manner prescribed
by Section 31a-2 of the General Rules and Regulations made under the Investment
Company Act of 1940, any records as are required to be maintained by the
provisions of Section 31a-1 of such Rules pertaining to the account or accounts
of the Fund maintained by Citibank pursuant to this Agreement.
21. Access to Securities and Records.
Citibank agrees to provide access from time to time to the portfolio
securities held by Citibank for the account of the Fund pursuant to the
provisions of this Agreement, or in an account for safekeeping as collateral
under subsection (2) of Section 5 of this Agreement, and to the records
maintained by Citibank in connection therewith, to such of the Fund's authorized
officers, auditors and counseL or members of the staff of the Securities and
Exchange Commission, as the Fund may request in writing upon reasonable notice
for any proper corporate purpose, subject in each case to such physical security
requirements as Citibank may consider necessary or advisable.
22. Communications.
All communications between the Fund and the Bank shall be addressed as
follows until such time as either party is notified by the other party of a
change in its address for the purpose of this Section, namely
To Fund Sterling Capital Corporation
635 Madison Avenue
New York, NY 10022
Attn: Richard Kaufman
To Citibank Citibank, N.A.
120 Broadway, 2nd floor
New York, NY 10271
Attn: Courtland W. Hankins
23. Assignment of Agreement.
This Agreement may not be assigned by Citibank without the consent of
the Fund, authorized and approved by a resolution of the Board, or by the Fund
without the consent of Citibank.
24. Initial Delivery of Securities by the Fund.
The Fund will forthwith cause to be delivered to Citibank all of its
portfolio securities and cash.
<PAGE>
25. Termination of Agreement.
(1) This Agreement may be terminated by the Fund, or by Citibank, on
sixty days' written notice, signed by the President or any Vice President of the
Fund or, as the case may be, by the President or any Vice President of Citibank,
and sent by registered mail to Citibank or to the Fund, as the case may require.
Termination of this Agreement by the Fund shall be made only upon authorization
by a resolution of the Board.
(2) Notwithstanding anything in the foregoing provisions of this
Section, if it appears in the circumstances impracticable to effect the delivery
of cash and other property of the Fund to a successor custodian as contemplated
by Section 26 of this Agreement within the time specified in the notice of
termination as aforesaid, Citibank agrees that the Agreement shall remain in
full force and effect for such reasonable period as may be required to complete
necessary arrangements with the successor custodian or, as the case may be, to
obtain an order from the Securities and Exchange Commission making effective any
post-effective amendment of the Registration Statement of the Fund necessary in
the circumstances.
26. Successor Custodian.
Upon termination of this Agreement and payment by the Fund of all
proper charges and expenses, Citibank shall deliver at its offices all
securities duly endorsed and in proper form for transfer and all cash and other
property held by it for the Fund under this Agreement to one or more successor
custodians which shall meet the requirements of the Investment Company Act of
1940, as specified ill a notice of termination or officers' instruction.
27. Amendment of Agreement.
This Agreement may only be amended by an instrument in writing signed
by a properly authorized officer of the Fund and of Citibank. Amendment of this
Agreement by the Fund shall be made only upon authorization by a resolution of
the Board.
28. Effective date of the Agreement.
This Agreement shall become effective upon the termination of the
custodian agreement between the Fund and the present custodian of its assets.
29. Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective seals to be affixed hereto as of the date first
above written by their respective officers hereunto duly authorized.
STERLING CAPITAL CORPORATION
Attest:
_____________________________ By ___________________________
Elizabeth Acton Wayne S. Reisner, President
By ___________________________
Richard Kaufman, Vice-President
Attest: CITIBANK, N.A.
_____________________________ By ___________________________
