0001193125-13-092977.txt : 20130306 0001193125-13-092977.hdr.sgml : 20130306 20130306100209 ACCESSION NUMBER: 0001193125-13-092977 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20121231 FILED AS OF DATE: 20130306 DATE AS OF CHANGE: 20130306 EFFECTIVENESS DATE: 20130306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Sterling Capital Variable Insurance Funds CENTRAL INDEX KEY: 0001311261 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21682 FILM NUMBER: 13668410 BUSINESS ADDRESS: STREET 1: 434 FAYETTEVILLE STREET MALL CITY: RALEIGH STATE: NC ZIP: 27601 BUSINESS PHONE: 800-228-1872 MAIL ADDRESS: STREET 1: 434 FAYETTEVILLE STREET MALL STREET 2: 5TH FLOOR CITY: RALEIGH STATE: NC ZIP: 27601 FORMER COMPANY: FORMER CONFORMED NAME: BB&T Variable Insurance Funds DATE OF NAME CHANGE: 20110228 FORMER COMPANY: FORMER CONFORMED NAME: Sterling Capital Variable Insurance Funds DATE OF NAME CHANGE: 20110224 FORMER COMPANY: FORMER CONFORMED NAME: BB&T Variable Insurance Funds DATE OF NAME CHANGE: 20041210 0001311261 S000012130 STERLING CAPITAL SELECT EQUITY VARIABLE INSURANCE FUND C000033085 STERLING CAPITAL SELECT EQUITY VARIABLE INSURANCE FUND QBSEFX 0001311261 S000012131 STERLING CAPITAL STRATEGIC ALLOCATION EQUITY VARIABLE INSURANCE FUND C000033086 STERLING CAPITAL STRATEGIC ALLOCATION EQUITY VARIABLE INSURANCE FUND QBCMEX 0001311261 S000012134 STERLING CAPITAL SPECIAL OPPORTUNITIES VARIABLE INSURANCE FUND C000033089 STERLING CAPITAL SPECIAL OPPORTUNITIES VARIABLE INSURANCE FUND QBSOEX 0001311261 S000012135 STERLING CAPITAL TOTAL RETURN BOND VARIABLE INSURANCE FUND C000033090 STERLING CAPITAL TOTAL RETURN BOND VARIABLE INSURANCE FUND QBTRBX N-CSR 1 d491743dncsr.htm STERLING CAPITAL VARIABLE INSURANCE FUNDS STERLING CAPITAL VARIABLE INSURANCE FUNDS
Table of Contents

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             811-21682                

                    Sterling Capital Variable Insurance Funds                    

(Exact name of registrant as specified in charter)

434 Fayetteville Street, 5th Floor

                                 Raleigh, NC 27601-0575                                

(Address of principal executive offices) (Zip code)

James T. Gillespie, President

Sterling Capital Variable Insurance Funds

434 Fayetteville Street, 5th Floor

                Raleigh, NC 27601-0575                

(Name and address of agent for service)

Registrant’s telephone number, including area code:  (800) 228-1872

Date of fiscal year end:   December 31

Date of reporting period:   December 31, 2012

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.


Table of Contents

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.


Table of Contents
Sterling Capital Variable Insurance Funds

Table of Contents

 

 

Fund Summary

  

Sterling Capital Select Equity VIF

     2   

Sterling Capital Strategic Allocation Equity VIF

     3   

Sterling Capital Special Opportunities VIF

     4   

Sterling Capital Total Return Bond VIF

     5   

Summary of Portfolio Holdings

     6   

Expense Example

     7   

Schedules of Portfolio Investments

  

Sterling Capital Select Equity VIF

     8   

Sterling Capital Strategic Allocation Equity VIF

     9   

Sterling Capital Special Opportunities VIF

     10   

Sterling Capital Total Return Bond VIF

     11   

Financial Statements

     16   

Notes to Financial Statements

     22   

Report of Independent Registered Public Accounting Firm

     29   

Notice to Shareholders

     30   

Other Information

     31   

Board of Trustees

     34   


Table of Contents
 
 
 

 

Sterling Capital Select Equity VIF

Performance Overview 12/31/2002 - 12/31/2012

Growth of a $10,000 investment

 

LOGO

Portfolio Manager

Stephen L. Morgan, CFA

Executive Director & Select Equity portfolio manager Sterling Capital Management LLC

Average Annual Returns

 

      1 Year    5 Years    10 Years

Sterling Capital Select Equity VIF

   14.53%    -1.82%    4.53%

S&P 500® Index

   16.00%    1.66%    7.10%

The chart represents a comparison of a hypothetical $10,000 investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and includes the reinvestment of distributions. The returns include the Fund level expenses, but do not include fees charged by participating insurance companies. These charges and fees will reduce returns. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains, and do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The value of the contract will fluctuate so that when redeemed, it may be worth more or less than the original investment.

Investment Concerns

Equity securities (stocks) are more volatile and carry more risk. The net asset value per share of the Fund will fluctuate as the value of the securities in the portfolio changes. Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.

 

 

 

 

Q. How did the Fund perform during the 12-month period between January 1, 2012 and December 31, 2012?

A. The Fund underperformed its benchmark, the S&P 500® Index.

Q. What factors affected the Fund’s performance?

A. The economy’s continued gradual recovery as well as accommodative monetary policy both in the U.S. and abroad helped push financial markets higher during 2012. Additionally, the housing market appeared to have bottomed out, which helped boost consumer confidence. The Fund’s absolute return benefited from these developments.1

The Fund’s performance relative to its benchmark benefited from its overall sector positioning. The Fund held underweight positions in the traditionally defensive sectors of utilities and consumer staples, which underperformed the market. The Fund’s holdings in the media industry and in stocks affected by the housing recovery were among the largest positive contributors to relative performance.1

The Fund’s relative performance was dampened somewhat by its underweight position in the consumer discretionary sector, which outperformed the benchmark. The Fund’s overweight position in the energy sector, which was among the poorest performers during the year, also reduced the Fund’s relative performance. Two specific holdings in the energy sector and one position in the materials sector also detracted from returns.1

 

1 

Portfolio composition is as of December 31, 2012, and is subject to change.

The Fund is measured against the S&P 500® Index, a widely recognized, unmanaged index of common stocks. The index is unmanaged and does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

A portion of the Fund’s fees have been voluntarily reduced (See Note 5 in the Notes to the Financial Statements). If fees had not been reduced, the Fund’s total return for the periods would have been lower.

 

 

 

 

      2      

 

 


Table of Contents
 
 
 

 

Sterling Capital Strategic Allocation Equity VIF

Performance Overview 12/31/2002 - 12/31/2012

Growth of a $10,000 investment

 

LOGO

Portfolio Managers

Sterling Capital Strategic Allocation Equity VIF is managed by James C. Willis, CFA, Managing Director and Head of Sterling Capital Advisory Solutions Team, Jeffrey J. Schappe, CFA, Managing Director and Chief Market Strategist and Will G. Gholston, CFA, Director and Manager of Quantitative Analysis.

Average Annual Returns

 

      1 Year      5 Years      10 Years  

Sterling Capital Strategic Allocation Equity VIF

     13.41%         -1.33%         5.17%   

Russell Global Index1

     17.19%         -0.29%         9.17%   

S&P 500® Index1

     16.00%         1.66%         7.10%   

The chart represents a comparison of a hypothetical $10,000 investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and includes the reinvestment of distributions. The returns include the Fund level expenses, but do not include fees charged by participating insurance companies. These charges and fees will reduce returns. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains, and do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The value of the contract will fluctuate so that when redeemed, it may be worth more or less than the original investment.

Investment Concerns

Equity securities (stocks) are more volatile and carry more risk. The Fund is primarily concentrated in underlying funds and is therefore subject to the same risks as the underlying funds and bears a portion of the expenses of the underlying funds. The underlying funds may invest in equity securities and in other types of bonds and fixed-income instruments, short-term obligations and the shares of other investment companies. The net asset value per share of the Fund will fluctuate as the value of the securities in the portfolio changes.

 

 

 

Q. How did the Fund perform during the 12-month period between January 1, 2012 and December 31, 2012?

A. The Fund underperformed its benchmark, the Russell Global Index.

Q. What factors affected the Fund’s performance?

A. Risk assets generally made significant gains during the period, boosted by aggressive central bank action in the second half of the year. Real estate investment trusts (REITs) performed especially well. The Dow Jones Equity All REIT Index returned 19.57% during 2012, contributing significantly to the Fund’s absolute gains. Commodities had the opposite effect on the Fund’s absolute performance, as the Dow Jones UBS Commodity Index fell -1.06% over the period.2

The Fund’s allocation to other investment companies that invest in REITs aided its performance relative to its benchmark. A significant underweight position in non-U.S. developed equity shares for much of the period also strengthened the Fund’s relative performance, as these stocks underperformed the global equity benchmark substantially during the first three quarters of 2012.2

The Fund’s allocation to other investment companies that invest in commodities during the period hurt its performance relative to the benchmark, which had no direct exposure to commodities. An underweight allocation to emerging markets also detracted from relative performance.2

 

1 

As of February 1, 2012, the primary benchmark for the Fund changed from the S&P 500® Index to the Russell Global Index (the “New Benchmark”), as the New Benchmark was determined to be a more appropriate broad-based index for comparison purposes. The S&P 500® Index will not be shown in the future.

 

2 

Portfolio composition is as of December 31, 2012, and is subject to change.

S&P 500® Index is an unmanaged index generally considered to be representative of the performance of the stock market as a whole. The Fund is measured against the Russell Global Index. The Russell Global Index measures the performance of the global equity market. The indices do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

 

 

 

 

      3      

 

 


Table of Contents
 
 
 

 

Sterling Capital Special Opportunities VIF

Performance Overview 7/22/2004 - 12/31/2012

Growth of a $10,000 investment

 

LOGO

Portfolio Manager

George F. Shipp, CFA

Managing Director and portfolio manager Sterling Capital Management LLC

Average Annual Returns (Inception 7/22/2004)

 

      1 Year      5 Years     

Since

 

Inception

 

Sterling Capital Special Opportunities VIF

     14.33%         4.05%         9.92%   

S&P 500® Index

     16.00%         1.66%         5.29%   

The chart represents a comparison of a hypothetical $10,000 investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and includes the reinvestment of distributions. The inception date used for the S&P 500® Index was 07/31/04. The returns include the Fund level expenses, but do not include fees charged by participating insurance companies. These charges and fees will reduce returns. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains, and do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The value of the contract will fluctuate so that when redeemed, it may be worth more or less than the original investment.

Investment Concerns

Equity securities (stocks) are more volatile and carry more risk. The net asset value per share of the Fund will fluctuate as the value of the securities in the portfolio changes. A concentrated portfolio may add a measure of volatility to performance, as major fluctuations in any one holding will likely affect the Fund more than a fund with greater diversification.

 

 

 

 

Q. How did the Fund perform during the 12-month period between January 1, 2012 and December 31, 2012?

A. The Fund underperformed its benchmark, the S&P 500® Index.

Q. What factors affected the Fund’s performance?

A. Stocks made gains across all sectors during the 12-month period. The Fund’s strong absolute returns were fueled by exceptional performance from its information technology, consumer discretionary and health care holdings. These three sectors combined contributed more than 70% of the Fund’s total returns during the year.1

The Fund’s absolute returns were negatively impacted by its energy holdings, which included two of the portfolio’s five worst performing stocks. Energy stocks were constrained by a combination of lower global demand and lower commodity prices, particularly for natural gas. An individual holding in the health care sector was the Fund’s largest overall detractor, followed closely by a global personal computer manufacturing and services firm. A near-zero return on cash was also a significant drag on the Fund’s absolute returns .1

The Fund’s relative performance was boosted by an overweight position and favorable stock selection in consumer discretionary stocks. Among these, a cable and broadband provider performed especially well. The Fund’s largest allocation was to information technology holdings, some of which outpaced their sector peers ..1

Energy holdings were the largest detractor to the Fund’s performance relative to its benchmark. Two of its four energy holdings declined during the period. Health care sector returns beat the market, but two of the Fund’s health care holdings suffered declines. One of these was a health care IT firm that seemed well positioned to benefit from the industry’s move toward electronic health records but stumbled in its execution. The Fund’s above-average cash position also dragged on its relative performance .1

 

1 

Portfolio composition is as of December 31, 2012, and is subject to change.

The Fund is measured against the S&P 500® Index, a widely recognized, unmanaged index of common stocks. The index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

 

 

 

 

      4      

 

 


Table of Contents
 
 
 

 

Sterling Capital Total Return Bond VIF

Performance Overview 7/22/2004 - 12/31/2012

Growth of a $10,000 investment

 

LOGO

Portfolio Managers

Mark Montgomery, CFA

Managing Director and Senior Fixed Income portfolio manager Sterling Capital Management LLC

Richard T. LaCoff

Managing Director and Senior Fixed Income portfolio manager Sterling Capital Management LLC

Average Annual Returns (Inception 7/22/2004)

 

      1 Year      5 Years     

Since

 

Inception

 

Sterling Capital Total Return Bond VIF

     6.10%         6.36%         5.41%   

Barclays U.S. Aggregate Bond Index

     4.22%         5.95%         5.54%   

The chart represents a comparison of a hypothetical $10,000 investment in the indicated Fund versus a similar investment in the Fund’s benchmark, and includes the reinvestment of distributions. The inception date used for the Barclays U.S. Aggregate Bond Index was 07/31/04. The returns include the Fund level expenses, but do not include fees charged by participating insurance companies. These charges and fees will reduce returns. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains, and do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The value of the contract will fluctuate so that when redeemed, it may be worth more or less than the original investment.

Investment Concerns

Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return.

The Fund is subject to the risk that principal value tends to react in opposition to the movement of interest rates and that a rising interest rate environment increases the risk of loss of principal.

 

 

 

 

Q. How did the Fund perform during the 12-month period between January 1, 2012 and December 31, 2012?

A. The Fund outperformed its benchmark, the Barclays U.S. Aggregate Bond Index.

Q. What factors affected the Fund’s performance?

A. The U.S. economy expanded during the period, although at a below-trend rate of growth, while the rate of inflation remained tame. The Federal Reserve pursued an accommodative monetary policy to stimulate economic activity and improve labor market conditions. These factors created an environment conducive to solid fixed income market performance, as interest rates declined and the yield curve flattened.1

The Fund benefited from an overweight allocation to higher interest products, including corporate bonds, commercial and residential mortgage-backed securities, and taxable municipal bonds. All of these sectors boosted both absolute and relative returns. Within the corporate and securitized sectors, the portfolio had an overweight allocation to securities that carry higher risk, such as high-yield bonds, which further boosted the Fund’s performance relative to its benchmark.1

The major detractor from the Fund’s relative performance was yield curve positioning. Sector allocation decisions, particularly relating to higher interest products, produced a portfolio with a maturity profile weighted toward the intermediate range of the yield curve. This weighting detracted from performance due to the flattening of the yield curve.1

 

1 

Portfolio composition is as of December 31, 2012, and is subject to change.

The Fund is measured against Barclays U.S. Aggregate Bond Index which is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year. The index is unmanaged and does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for these services. Investors cannot invest directly in an index, although they can invest in its underlying securities.

A portion of the Fund’s fees have been voluntarily reduced (See Note 5 in the Notes to the Financial Statements). If fees had not been reduced, the Fund’s total return for the periods would have been lower.

 

 

 

 

      5      

 

 


Table of Contents
Sterling Capital Variable Insurance Funds

Summary of Portfolio Holdings (Unaudited)

December 31, 2012

 

Each Sterling Capital Variable Insurance Fund’s portfolio composition at December 31, 2012 was as follows :

 

Sterling Capital Select Equity VIF    Percentage
of net assets
 

Consumer Discretionary

     9.7

Consumer Staples

     9.1

Energy

     12.0

Financials

     17.1

Health Care

     11.6

Industrials

     14.5

Information Technology

     21.7

Materials

     2.1

Telecommunication Services

     1.8

Exchange Traded Funds

     0.0

Cash Equivalents

     0.2
  

 

 

 
     99.8
  

 

 

 

Sterling Capital Strategic Allocation Equity VIF

  

Sterling Capital Equity Income Fund, Institutional Class

     5.5

Sterling Capital Equity Index Fund, Institutional Class

     0.9

Sterling Capital Mid Value Fund, Institutional Class

     8.9

Sterling Capital Select Equity Fund, Institutional Class

     21.4

Sterling Capital Small Value Fund, Institutional Class

     2.2

Sterling Capital Special Opportunities Fund, Institutional Class

     13.6

Sterling Capital Ultra Short Bond Fund, Institutional Class

     0.7

Non-Affiliated Investment Companies

     8.6

Exchange Traded Funds

     38.2
  

 

 

 
     100.0
  

 

 

 

Sterling Capital Special Opportunities VIF

  

Consumer Discretionary

     15.9

Consumer Staples

     4.9

Energy

     9.2

Financials

     6.4

Health Care

     16.4

Industrials

     3.4

Information Technology

     32.3

Materials

     7.1

Cash Equivalents

     4.7
  

 

 

 
     100.3
  

 

 

 

Sterling Capital Total Return Bond VIF

  

Asset Backed Securities

     3.2

Collateralized Mortgage Obligations

     10.8

Commercial Mortgage-Backed Securities

     20.8

Corporate Bonds

     34.3

Mortgage-Backed Securities

     23.2

Municipal Bonds

     7.1

Preferred Stocks

     2.0

U.S. Treasury Bonds

     0.6

Cash Equivalents

     0.8
  

 

 

 
     102.8
  

 

 

 

 

6


Table of Contents
Sterling Capital Variable Insurance Funds

Expense Example (Unaudited)

December 31, 2012

 

As a shareholder of the Sterling Capital Variable Insurance Funds, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses.

These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Sterling Capital Variable Insurance Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2012 through December 31, 2012.

Actual Example

The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

     Beginning
Account Value
7/1/12
   Ending
Account Value
12/31/12
   Expenses Paid
During Period
7/1/12 - 12/31/12*
   Expense Ratio
During Period
7/1/12 - 12/31/12

Sterling Capital Select Equity VIF

   $1,000.00    $1,049.80    $5.67    1.10%

Sterling Capital Strategic Allocation Equity VIF

     1,000.00      1,077.90      3.60    0.69%

Sterling Capital Special Opportunities VIF

     1,000.00      1,086.10      6.66    1.27%

Sterling Capital Total Return Bond VIF

     1,000.00      1,027.90      6.12    1.20%

 

*

Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by 184 (the number of days in the most recent fiscal half-year) divided by 366 (the number of days in the fiscal year). Expenses shown do not include annuity contract fees or fees and expenses of any underlying funds in which the Funds invest.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on each Sterling Capital Variable Insurance Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

     Beginning
Account Value
7/1/12
   Ending
Account Value
12/31/12
   Expenses Paid
During Period
7/1/12 - 12/31/12*
   Expense Ratio
During Period
7/1/12 - 12/31/12

Sterling Capital Select Equity VIF

   $1,000.00    $1,019.61    $5.58    1.10%

Sterling Capital Strategic Allocation Equity VIF

     1,000.00      1,021.67      3.51    0.69%

Sterling Capital Special Opportunities VIF

     1,000.00      1,018.75      6.44    1.27%

Sterling Capital Total Return Bond VIF

     1,000.00      1,019.10      6.09    1.20%

 

*

Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by 184 (the number of days in the most recent fiscal half-year) divided by 366 (the number of days in the fiscal year). Expenses shown do not include annuity contract fees or fees and expenses of any underlying funds in which the Funds invest.

 

7


Table of Contents
Sterling Capital Select Equity VIF

Schedule of Portfolio Investments

December 31, 2012

 

 

 

Shares

           Fair Value      

COMMON STOCKS (99.6%)

  
  Consumer Discretionary (9.7%)   

3,840

  Coach, Inc.    $ 213,158   

8,700

  Comcast Corp., Class A      325,206   

5,460

  DIRECTV(a)      273,873   

6,270

  Target Corp.      370,996   

1,680

  Time Warner Cable, Inc.      163,279   

7,620

  Walt Disney Co. (The)      379,400   
    

 

 

 
       1,725,912   
    

 

 

 
  Consumer Staples (9.1%)   

8,860

  Coca-Cola Co. (The)      321,175   

5,910

  CVS Caremark Corp.      285,749   

11,850

  Mondelez International, Inc., Class A      301,819   

4,920

  PepsiCo, Inc.      336,676   

2,355

  Philip Morris International, Inc.      196,972   

2,670

  Procter & Gamble Co. (The)      181,266   
    

 

 

 
       1,623,657   
    

 

 

 
  Energy (12.0%)   

3,615

  Anadarko Petroleum Corp.      268,631   

9,600

  Cenovus Energy, Inc.      321,984   

3,790

  Chevron Corp.      409,850   

4,380

  Exxon Mobil Corp.      379,089   

5,820

  Schlumberger, Ltd.      403,268   

8,160

  Suncor Energy, Inc.      269,117   

2,715

  Valero Energy Corp.      92,636   
    

 

 

 
       2,144,575   
    

 

 

 
  Financials (17.1%)   

1,160

  American Express Co.      66,677   

13,801

  Bank of New York Mellon Corp. (The)      354,686   

4,740

  Berkshire Hathaway, Inc., Class B(a)      425,178   

14,055

  Charles Schwab Corp. (The)      201,830   

12,273

  JPMorgan Chase &Co.      539,644   

14,730

  MetLife, Inc.      485,206   

6,180

  PNC Financial Services Group, Inc.      360,356   

13,560

  Wells Fargo & Co.      463,481   

5,088

  Weyerhaeuser Co., REIT      141,548   
    

 

 

 
       3,038,606   
    

 

 

 
  Health Care (11.6%)   

7,080

  Express Scripts Holding Co.(a)      382,320   

4,500

  Johnson & Johnson.      315,450   

7,350

  Merck & Co., Inc.      300,909   

10,770

  Pfizer, Inc.      270,111   

8,700

  UnitedHealth Group, Inc.      471,888   

5,460

  WellPoint, Inc.      332,623   
    

 

 

 
       2,073,301   
    

 

 

 
  Industrials (14.5%)   

9,330

  ABB, Ltd., ADR      193,971   

5,390

  Boeing Co. (The)      406,190   

3,840

  FedEx Corp.      352,205   

3,140

  Fluor Corp.      184,443   

Shares

           Fair Value      

COMMON STOCKS — (continued)

  
  Industrials — (continued)   

25,440

  General Electric Co.    $ 533,986   

6,090

  Honeywell International, Inc.      386,532   

6,630

  Pentair, Ltd      325,865   

7,260

  Xylem, Inc.      196,746   
    

 

 

 
       2,579,938   
    

 

 

 
  Information Technology (21.7%)   

1,380

  Apple, Inc.      735,581   

16,620

  Cisco Systems, Inc.      326,583   

16,440

  EMC Corp.(a)      415,932   

465

  GOOGLE, Inc., Class A(a)      329,857   

5,240

  Intel Corp.      108,101   

1,950

  International Business Machines Corp.      373,523   

21,930

  Microsoft Corp.      586,189   

8,430

  Oracle Corp.      280,888   

6,900

  QUALCOMM, Inc.      427,938   

7,440

  TE Connectivity, Ltd.      276,173   
    

 

 

 
       3,860,765   
    

 

 

 
  Materials (2.1%)   

10,590

  Barrick Gold Corp.      370,756   
    

 

 

 
  Telecommunication Services (1.8%)   

9,600

  AT&T, Inc.      323,616   
    

 

 

 
 

Total Common Stocks
(Cost $14,272,907)

     17,741,126   
    

 

 

 

EXCHANGE TRADED FUNDS (0.0%)

  

195

  Utilities Select Sector SPDR Fund      6,815   
    

 

 

 
 

Total Exchange Traded Funds
(Cost $5,615)

     6,815   
    

 

 

 

INVESTMENT COMPANY (0.2%)

  

25,728

 

Federated Treasury Obligations Fund, Institutional Shares

     25,728   
    

 

 

 
 

Total Investment Company
(Cost $25,728)

     25,728   
    

 

 

 

Total Investments — 99.8%
(Cost $14,304,250)

     17,773,669   

Net Other Assets (Liabilities) — 0.2%

     31,412   
    

 

 

 

NET ASSETS — 100.0%

   $ 17,805,081   
    

 

 

 

 

 

(a)    Represents non-income producing security.

ADR — American Depositary Receipt

 

REIT — Real Estate Investment Trust

 

SPDR — Standard and Poors Depositary Receipt

 

 

See accompanying notes to the financial statements.

 

8


Table of Contents
Sterling Capital Strategic Allocation Equity VIF

Schedule of Portfolio Investments

December 31, 2012

 

 

 

  Shares  

      

    Fair Value    

 

AFFILIATED INVESTMENT COMPANIES (53.2%)

  

16,947

 

Sterling Capital Equity Income Fund,
Institutional Class

   $ 269,290   

4,367

 

Sterling Capital Equity Index Fund,
Institutional Class

     41,703   

30,342

 

Sterling Capital Mid Value Fund,
Institutional Class

     435,106   

83,087

 

Sterling Capital Select Equity Fund,
Institutional Class

     1,044,409   

8,773

 

Sterling Capital Small Value Fund, Institutional Class(a)

     107,729   

35,784

 

Sterling Capital Special Opportunities Fund,
Institutional Class

     660,576   

3,338

 

Sterling Capital Ultra Short Bond Fund,
Institutional Class

     33,380   
    

 

 

 
 

Total Affiliated Investment Companies
(Cost $2,158,389)

     2,592,193   
    

 

 

 

NON-AFFILIATED INVESTMENT
COMPANIES (8.6%)

   

18,042

 

Credit Suisse Commodity Return Strategy
Fund(a)

     144,879   

27,785

 

Federated Treasury Obligations Fund,
Institutional Shares

     27,785   

10,616

 

Harding, Loevner International Equity
Portfolio

     169,226   

1,957

 

Lazard Emerging Markets Equity Portfolio

     38,234   

1,160

 

Oppenheimer Developing Markets Fund

     40,469   
    

 

 

 
 

Total Non-Affiliated Investment Companies
(Cost $386,517)

     420,593   
    

 

 

 

EXCHANGE TRADED FUNDS (38.2%)

  

2,307

 

iShares Dow Jones US Real Estate Index Fund

     149,309   

9,055

  iShares MSCI EAFE Index Fund      514,505   

3,887

  iShares MSCI EAFE Small Cap Index Fund      158,240   

3,516

  iShares MSCI EAFE Value Index Fund      171,053   

9,530

  iShares MSCI Emerging Markets Index Fund      422,656   

1,555

  iShares Russell 2000 Index Fund      131,071   

5,038

  iShares Russell Midcap Growth Index Fund      316,386   
    

 

 

 
 

Total Exchange Traded Funds
(Cost $1,571,062)

     1,863,220   
    

 

 

 

Total Investments — 100.0%
(Cost $4,115,968)

     4,876,006   

Net Other Assets (Liabilities) — (0.0)%

     (1,119
    

 

 

 

NET ASSETS — 100.0%

   $ 4,874,887   
    

 

 

 
 

 

(a)    Represents non-income producing security.

See accompanying notes to the financial statements.

 

9


Table of Contents
Sterling Capital Special Opportunities VIF

Schedule of Portfolio Investments

December 31, 2012

 

 

    Shares    

            Fair Value      

COMMON STOCKS (95.6%)

  

   Consumer Discretionary (15.9%)   

50,000

   Comcast Corp., Class A    $ 1,869,000   

13,000

   DIRECTV(a)      652,080   

98,000

   Ford Motor Co.      1,269,100   

17,000

   Yum! Brands, Inc.      1,128,800   
     

 

 

 
        4,918,980   
     

 

 

 
   Consumer Staples (4.9%)   

75,000

   Dole Food Co., Inc.(a)      860,250   

26,000

   Mondelez International, Inc., Class A      662,220   
     

 

 

 
        1,522,470   
     

 

 

 
   Energy (9.2%)   

15,000

   Apache Corp.      1,177,500   

11,000

   EOG Resources, Inc.      1,328,690   

10,000

   Halliburton Co.      346,900   
     

 

 

 
        2,853,090   
     

 

 

 
   Financials (6.4%)   

40,000

   Charles Schwab Corp. (The)      574,400   

25,000

   CME Group, Inc.      1,267,750   

15,500

  

Och-Ziff Capital Management Group LLC, Class A

     147,250   
     

 

 

 
        1,989,400   
     

 

 

 
   Health Care (16.4%)   

24,000

   Agilent Technologies, Inc.      982,560   

33,000

   Merck & Co., Inc.      1,351,020   

34,000

  

Teva Pharmaceutical Industries, Ltd., ADR

     1,269,560   

27,000

   UnitedHealth Group, Inc.      1,464,480   
     

 

 

 
        5,067,620   
     

 

 

 
   Industrials (3.4%)   

7,000

   FedEx Corp.      642,040   

8,000

   Ryder System, Inc.      399,440   
     

 

 

 
        1,041,480   
     

 

 

 
   Information Technology (32.3%)   

150,000

   Activision Blizzard, Inc.      1,593,000   

    Shares    

            Fair Value      

COMMON STOCKS — (continued)

  

   Information Technology — (continued)   

13,000

  

Check Point Software Technologies, Ltd.(a)

   $ 619,320   

78,000

   Cisco Systems, Inc.      1,532,700   

70,000

   Corning, Inc.      883,400   

92,000

   Dell, Inc.      931,960   

30,000

   eBay, Inc.(a)      1,530,600   

27,500

   Harris Corp.      1,346,400   

19,000

   Intuit, Inc.      1,130,500   

18,000

   Nuance Communications, Inc.(a)      401,760   
     

 

 

 
        9,969,640   
     

 

 

 
   Materials (7.1%)   

26,000

   Newmont Mining Corp      1,207,440   

2,000

   Potash Corp. of Saskatchewan, Inc.      81,380   

52,000

   Yamana Gold, Inc.      894,920   
     

 

 

 
        2,183,740   
     

 

 

 
  

Total Common Stocks
(Cost $24,280,224)

     29,546,420   
     

 

 

 

INVESTMENT COMPANY (4.7%)

  

1,461,140

   Federated Treasury Obligations Fund,   
  

Institutional Shares

     1,461,140   
     

 

 

 
  

Total Investment Company
(Cost $1,461,140)

     1,461,140   
     

 

 

 

Total Investments — 100.3%
(Cost $25,741,364)

     31,007,560   

Net Other Assets (Liabilities) — (0.3)%

     (78,848
     

 

 

 

NET ASSETS — 100.0%

   $ 30,928,712   
     

 

 

 

 

(a)

Represents non-income producing security.

ADR — American Depositary Receipt

 

 

See accompanying notes to the financial statements.

 

10


Table of Contents
Sterling Capital Total Return Bond VIF

Schedule of Portfolio Investments

December 31, 2012

 

 

Principal
    Amount    

            Fair Value      

ASSET BACKED SECURITIES (3.2%)

  

$95,000

  

American Express Credit Account Master Trust, Series 2008-7, Class A, 1.509%, 3/15/16(a)

   $ 95,762   

200,000

  

Capital One Multi-Asset Execution Trust, Series 2006-A5, Class A5, 0.269%, 1/15/16(a)

     199,996   

174,000

  

Chase Issuance Trust, Series 2008-A8, Class A8, 1.409%, 5/15/17(a)

     178,441   

85,000

  

MBNA Credit Card Master Note Trust, Series 2006-A5, Class A5, 0.269%, 10/15/15(a)

     84,974   
     

 

 

 
  

Total Asset Backed Securities
(Cost $559,763)

     559,173   
     

 

 

 

COLLATERALIZED MORTGAGE
OBLIGATIONS (10.8%)

   

89,334

  

Adjustable Rate Mortgage Trust, Series 2004-5, Class 4A1, 5.159%, 4/25/35(a)

     88,864   

54,950

  

Banc of America Alternative Loan Trust, Series 2004-10, Class 1CB1, 6.000%, 11/25/34

     53,860   

102,475

  

Banc of America Funding Corp., Series 2006-2, Class 3A1, 6.000%, 3/25/36

     104,557   

61,958

  

Countrywide Alternative Loan Trust, Series 2004-22CB, Class 1A1, 6.000%, 10/25/34

     64,253   

46,832

  

Countrywide Home Loan Mortgage Pass Through Trust, Series 2002-38, Class A3, 5.000%, 2/25/18

     46,880   

61,980

  

Credit Suisse First Boston Mortgage Securities Corp., Series 2005-7, Class 4A3, 5.000%, 8/25/20

     65,267   

50,948

  

Fannie Mae, Series 2003-33, Class A, 4.000%, 5/25/33

     55,918   

48,401

  

Fannie Mae, Series 2003-33, Class AQ, 4.000%, 5/25/33

     52,487   

136,181

  

Fannie Mae, Series 2012-84, Class HL, 2.500%, 1/25/42

     141,156   

69,234

  

Freddie Mac, Series 3768, Class V, 4.000%, 11/15/23

     76,831   

169,841

  

Freddie Mac, Series 4077, Class PJ, 3.500%, 11/15/40

     183,293   

59,311

  

MASTR Alternative Loans Trust, Series 2004-13, Class 3A1, 6.500%, 1/25/35

     60,207   

116,956

  

PHH Mortgage Capital LLC, Series 2007-6, Class A1, 6.002%, 12/18/37(a)

     123,860   

37,251

  

RAAC, Series 2004-SP3, Class AI5, 4.890%, 12/25/32(a)

     37,615   

76,014

  

RALI Trust, Series 2005-QR1, Class A, 6.000%, 10/25/34

     77,463   

48,735

  

Residential Asset Securitization Trust, Series 2004-IP2, Class 4A, 2.823%, 12/25/34(a)

     48,796   

105,352

  

Specialty Underwriting & Residential Finance, Series 2004-AA1, Class 1A1, 5.000%, 10/25/34

     106,681   

127,684

  

Structured Adjustable Rate Mortgage Loan Trust, Series 2004-6, Class 4A1, 2.709%, 6/25/34(a)

     132,031   

68,106

  

Structured Asset Securities Corp., Series 2003-10, Class A, 6.000%, 4/25/33

     72,669   

30,670

  

Structured Asset Securities Corp., Series 2005-6, Class 5A1, 5.000%, 5/25/35

     31,042   

113,298

  

Wells Fargo Mortgage Backed Securities Trust, Series 2004-BB, Class A2, 2.623%, 1/25/35(a)

     111,031   

Principal
    Amount    

            Fair Value      

COLLATERALIZED MORTGAGE
OBLIGATIONS — (continued)

   

$117,404

  

Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR16, Class 6A3, 2.657%, 10/25/35(a)

   $ 115,686   

36,741

  

Wells Fargo Mortgage Backed Securities Trust, Series 2007-16, Class 1A1, 6.000%, 12/28/37

     38,210   
     

 

 

 
  

Total Collateralized Mortgage Obligations (Cost $1,818,905)

     1,888,657   
     

 

 

 

COMMERCIAL MORTGAGE-BACKED
SECURITIES (20.8%)

   

150,000

  

Banc of America Commercial Mortgage Trust, Series 2006-3, Class A4, 5.889%, 7/10/44(a)

     171,373   

153,000

  

Banc of America Commercial Mortgage Trust, Series 2006-5, Class A4, 5.414%, 9/10/47

     174,022   

140,000

  

Banc of America Commercial Mortgage Trust, Series 2007-2, Class A4, 5.625%, 4/10/49(a)

     163,741   

12,487

  

Banc of America Commercial Mortgage Trust, Series 2007-2, Class A2, 5.634%, 4/10/49(a)

     12,755   

89,000

  

Banc of America Merrill Lynch Commercial Mortgage, Inc., Series 2005-1, Class AJ, 5.196%, 11/10/42(a)

     93,629   

95,000

  

CD Commercial Mortgage Trust, Series 2005-CD1, Class AM, 5.219%, 7/15/44(a)

     104,467   

150,000

  

CD Commercial Mortgage Trust, Series 2007-CD4, Class A4, 5.322%, 12/11/49

     172,067   

95,000

  

CD Mortgage Trust, Series 2006-CD3, Class A5, 5.617%, 10/15/48

     109,187   

100,000

  

COMM Mortgage Trust, Series 2005-LP5, Class AJ, 5.046%, 5/10/43(a)

     107,778   

74,000

  

COMM Mortgage Trust, Series 2012-CR4, Class A3, 2.853%, 10/15/45

     76,024   

155,000

  

COMM Mortgage Trust, Series 2006-C7, Class A4, 5.748%, 6/10/46(a)

     176,033   

155,000

  

Commercial Mortgage Pass-Through Certificates, Series 2006-C4, Class A3, 5.467%, 9/15/39

     175,974   

18,622

  

Credit Suisse First Boston Mortgage Securities Corp., Series 2002-CP5, Class C, 5.230%, 12/15/35

     18,621   

139,000

  

Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C1, Class AJ, 5.075%, 2/15/38(a)

     146,744   

101,000

  

DBUBS Mortgage Trust, Series 2011-LC2A, Class A4, 4.537%, 7/10/44(b)

     116,773   

100,000

  

GMAC Commercial Mortgage Securities Trust, Inc., Series 2005-C1, Class AM, 4.754%, 5/10/43

     107,361   

158,000

  

GMAC Commercial Mortgage Securities Trust, Inc., Series 2006-C1, Class A4, 5.238%, 11/10/45(a)

     174,184   

168,000

  

Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A5, 5.224%, 4/10/37(a)

     185,620   

117,000

  

Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class AM, 5.277%, 4/10/37(a)

     126,664   

150,000

  

JPMorgan Chase Commercial Mortgage Securities Corp., Series 2006-CB16, Class A4, 5.552%, 5/12/45

     172,311   
 

 

Continued

 

11


Table of Contents
Sterling Capital Total Return Bond VIF

Schedule of Portfolio Investments — (continued)

December 31, 2012

 

 

 

Principal
Amount

           Fair Value      

COMMERCIAL MORTGAGE-BACKED
SECURITIES — (continued)

   

$150,000

 

LB-UBS Commercial Mortgage Trust, Series
2007-C1, Class A4, 5.424%, 2/15/40

   $ 174,133   

28,000

 

Merrill Lynch/Countrywide Commercial
Mortgage Trust, Series 2006-3, Class A3,
5.389%, 7/12/46(a)

     28,309   

80,000

 

Morgan Stanley Capital I Trust, Series
2006-HQ8, Class A4, 5.420%, 3/12/44(a)

     89,454   

80,000

 

Morgan Stanley Capital I Trust, Series
2006-HQ8, Class AM, 5.469%, 3/12/44(a)

     88,393   

58,000

 

UBS-Barclays Commercial Mortgage Trust,
Series 2012-C4, Class A3, 2.533%, 12/10/45

     58,926   

119,000

 

Wachovia Bank Commercial Mortgage Trust,
Series 2005-C20, Class AMFX, 5.179%,
7/15/42(a)

     130,355   

57,164

 

Wachovia Bank Commercial Mortgage Trust,
Series 2007-C30, Class A3, 5.246%,
12/15/43

     58,359   

150,000

 

Wachovia Bank Commercial Mortgage Trust,
Series 2006-C27, Class A3, 5.765%,
7/15/45(a)

     170,701   

157,000

 

WF-RBS Commercial Mortgage Trust, Series
2011-C3, Class A4, 4.375%, 3/15/44(b)

     180,531   

71,000

 

WF-RBS Commercial Mortgage Trust, Series
2012-C10, Class A3, 2.875%, 12/15/45

     73,305   
    

 

 

 
  Total Commercial Mortgage-Backed
Securities
(Cost $3,533,303)
     3,637,794   
    

 

 

 

CORPORATE BONDS (34.3%)

  

  Consumer Discretionary (3.5%)   

38,000

 

Carnival Corp., 1.875%, 12/15/17

     38,052   

33,000

 

CBS Corp., 8.875%, 5/15/19(c)

     44,509   

73,000

 

Comcast Cable Communications Holdings, Inc.,
9.455%, 11/15/22(c)

     110,366   

19,000

 

COX Communications, Inc., 4.700%,
12/15/42(b)

     19,387   

37,000

 

Delphi Corp., 5.875%, 5/15/19

     39,683   

65,000

 

George Washington University (The), 3.485%,
9/15/22

     68,758   

31,000

 

Home Depot, Inc. (The), 5.875%, 12/16/36

     40,740   

35,000

 

Kohl’s Corp., 3.250%, 2/1/23

     33,984   

27,000

 

NBCUniversal Media LLC, 5.950%, 4/1/41

     33,103   

19,000

 

Nordstrom, Inc., 6.250%, 1/15/18

     23,035   

26,000

 

Royal Caribbean Cruises, Ltd., 11.875%,
7/15/15

     31,460   

26,000

 

Service Corp. International, 7.000%, 5/15/19

     28,470   

36,000

 

Time Warner Cable, Inc., 5.875%, 11/15/40

     41,947   

33,000

 

Wyndham Worldwide Corp., 5.625%, 3/1/21

     36,832   

24,000

 

Wyndham Worldwide Corp., 4.250%, 3/1/22

     24,780   
    

 

 

 
       615,106   
    

 

 

 
  Consumer Staples (2.0%)   

25,000

 

Altria Group, Inc., 9.950%, 11/10/38

     41,186   

19,000

 

Anheuser-Busch InBev Worldwide, Inc.,
6.375%, 1/15/40

     26,398   

27,000

 

Beam, Inc., 5.875%, 1/15/36

     31,334   

26,000

 

Coca-Cola Co. (The), 3.150%, 11/15/20

     28,293   

14,000

 

Constellation Brands, Inc., 4.625%, 3/1/23

     14,630   

38,000

 

CVS Caremark Corp., 6.125%, 9/15/39

     48,631   

41,000

 

Kraft Foods Group, Inc., 3.500%, 6/6/22(b)

     43,762   

58,000

 

Lorillard Tobacco Co., 6.875%, 5/1/20

     70,695   

Principal
Amount

           Fair Value      

CORPORATE BONDS — (continued)

  

  Consumer Staples — (continued)   

$37,000

 

Wal-Mart Stores, Inc., 5.625%, 4/15/41(c)

   $ 48,454   
    

 

 

 
       353,383   
    

 

 

 
  Energy (4.9%)   

36,000

 

Boardwalk Pipelines LP, 3.375%, 2/1/23

     35,358   

28,000

 

BP Capital Markets PLC, 1.375%, 11/6/17

     28,025   

34,000

 

Cameron International Corp., 6.375%, 7/15/18

     41,128   

25,000

 

Canadian Oil Sands, Ltd., 4.500%, 4/1/22(b)

     27,277   

27,000

 

Denbury Resources, Inc., 8.250%, 2/15/20

     30,375   

28,000

 

Devon Energy Corp., 3.250%, 5/15/22(c)

     29,223   

37,000

 

Energy Transfer Partners LP, 9.000%, 4/15/19

     48,788   

40,000

 

Enterprise Products Operating LLC, 5.950%,
2/1/41

     48,291   

25,000

 

Halliburton Co., 4.500%, 11/15/41

     27,909   

43,000

 

Kinder Morgan Energy Partners LP, 3.950%,
9/1/22

     45,978   

32,000

 

NuStar Logistics LP, 7.900%, 4/15/18(c)

     36,170   

36,000

 

Occidental Petroleum Corp., 1.750%, 2/15/17

     36,916   

51,000

 

Petrobras International Finance Co. - PifCo,
3.500%, 2/6/17(c)

     53,486   

30,000

 

Petrohawk Energy Corp., 6.250%, 6/1/19

     34,161   

30,000

 

Plains Exploration & Production Co., 6.500%,
11/15/20

     33,225   

26,000

 

Regency Energy Partners LP/Regency Energy
Finance Corp., 6.500%, 7/15/21

     28,470   

41,000

 

Schlumberger Investment SA, 3.300%,
9/14/21(b)(c)

     43,661   

31,000

 

Shell International Finance BV, 6.375%,
12/15/38

     43,554   

42,000

 

Statoil ASA, 3.150%, 1/23/22(c)

     44,388   

34,000

 

Talisman Energy, Inc., 5.500%, 5/15/42

     37,473   

30,000

 

Western Gas Partners LP, 4.000%, 7/1/22

     31,575   

54,000

 

Williams Partners LP/ Williams Partners
Finance Corp., 7.250%, 2/1/17

     65,601   
    

 

 

 
       851,032   
    

 

 

 
  Financials (14.5%)   

30,000

 

ABN AMRO North American Holding
Preferred Capital Repackage Trust I, 3.407%,
12/29/49(a)(b)

     30,000   

31,000

 

Aflac, Inc., 8.500%, 5/15/19

     42,220   

33,000

 

Alexandria Real Estate Equities, Inc., REIT,
4.600%, 4/1/22

     35,421   

30,000

 

Alleghany Corp., 4.950%, 6/27/22

     32,861   

56,000

 

American International Group, Inc., 3.800%,
3/22/17

     60,611   

115,000

 

Bank of America Corp., 5.700%, 1/24/22

     138,293   

29,000

 

Bank of New York Mellon Corp. (The), STEP,
1.969%, 6/20/17

     29,908   

30,000

 

Bank of Nova Scotia, 4.375%, 1/13/21

     34,739   

35,000

 

Berkshire Hathaway, Inc., 2.200%, 8/15/16(c)

     36,519   

31,000

 

BlackRock, Inc., 3.375%, 6/1/22

     32,924   

33,000

 

Caterpillar Financial Services Corp., MTN,
7.150%, 2/15/19

     42,968   

31,000

 

CIT Group, Inc., 4.750%, 2/15/15(b)

     32,240   

40,000

 

Citigroup, Inc., 5.875%, 1/30/42

     49,366   

26,000

 

CME Group, Inc., 3.000%, 9/15/22

     26,381   

49,000

 

Colonial Realty LP, 6.250%, 6/15/14(c)

     52,178   

23,000

 

Cooperatieve Centrale Raiffeisen-
Boerenleenbank BA, 3.875%, 2/8/22

     24,751   

31,000

 

CubeSmart LP, REIT, 4.800%, 7/15/22

     33,669   
 

 

Continued

 

12


Table of Contents
Sterling Capital Total Return Bond VIF

Schedule of Portfolio Investments — (continued)

December 31, 2012

 

 

Principal
    Amount    

            Fair Value      

CORPORATE BONDS — (continued)

  

   Financials — (continued)   

$38,000

  

Eksportfinans ASA, GMTN, 1.875%, 4/2/13

   $ 37,964   

40,000

  

Fifth Third Bancorp, 3.625%, 1/25/16

     42,737   

68,000

  

Ford Motor Credit Co. LLC, 7.000%, 4/15/15(c)

     75,823   

44,000

  

General Electric Capital Corp., 2.950%, 5/9/16(c)

     46,348   

33,000

  

General Electric Capital Corp., 2.100%, 12/11/19

     33,093   

52,000

  

General Electric Capital Corp., GMTN, 6.875%, 1/10/39(c)

     70,684   

25,000

  

Goldman Sachs Group, Inc. (The), 6.250%, 2/1/41

     30,673   

45,000

  

Health Care REIT, Inc., 4.125%, 4/1/19(c)

     48,409   

48,000

  

HSBC Finance Corp., 6.676%, 1/15/21

     56,946   

25,000

  

ING Bank NV, 4.000%, 3/15/16(b)

     26,605   

28,000

  

Invesco Finance PLC, 3.125%, 11/30/22

     28,283   

35,000

  

Jefferies Group, Inc., 8.500%, 7/15/19

     41,825   

48,000

  

John Deere Capital Corp., MTN, 1.850%, 9/15/16(c)

     49,645   

42,000

  

Jones Lang LaSalle, Inc., 4.400%, 11/15/22

     42,905   

49,000

  

JPMorgan Chase & Co., 2.600%, 1/15/16

     50,939   

111,000

  

JPMorgan Chase & Co., 4.350%, 8/15/21(c)

     124,124   

47,000

  

KeyCorp, MTN, 5.100%, 3/24/21

     54,755   

25,000

  

Kimco Realty Corp., REIT, MTN, 5.783%, 3/15/16

     28,069   

30,000

  

Liberty Mutual Group, Inc., 4.950%, 5/1/22(b)

     32,697   

25,000

  

Macquarie Bank, Ltd., 6.625%, 4/7/21(b)

     27,633   

66,000

  

Merrill Lynch & Co., Inc., MTN, 6.875%, 4/25/18(c)

     79,560   

22,000

  

MetLife, Inc., 7.717%, 2/15/19

     28,842   

101,000

  

Morgan Stanley, 5.375%, 10/15/15

     109,805   

48,000

  

Morgan Stanley, GMTN, 6.625%, 4/1/18(c)

     56,572   

47,000

  

Murray Street Investment Trust I, STEP, 4.647%, 3/9/17(c)

     50,837   

28,000

  

National City Corp., 6.875%, 5/15/19

     34,932   

32,000

  

National Rural Utilities Cooperative Finance Corp., 10.375%, 11/1/18

     47,303   

42,000

  

OneBeacon US Holdings, Inc., 4.600%, 11/9/22

     43,185   

35,000

  

Prudential Financial, Inc., 8.875%, 6/15/38(a)

     42,525   

41,000

  

Simon Property Group LP, REIT, 10.350%, 4/1/19(c)

     58,629   

28,000

  

SunTrust Banks, Inc., 3.500%, 1/20/17

     30,070   

55,000

  

Toyota Motor Credit Corp., MTN, 1.750%, 5/22/17

     56,322   

44,000

  

Ventas Realty LP/Ventas Capital Corp., REIT, 2.000%, 2/15/18

     44,028   

70,000

  

Wachovia Corp., 5.625%, 10/15/16

     80,257   

37,000

  

Wachovia Corp., 5.500%, 8/1/35

     42,074   

33,000

  

WR Berkley Corp., 4.625%, 3/15/22

     35,371   
     

 

 

 
        2,525,518   
     

 

 

 
   Health Care (2.1%)   

19,000

  

Amgen, Inc., 5.150%, 11/15/41

     21,382   

26,000

  

Cigna Corp., 5.375%, 2/15/42

     30,271   

36,000

  

DaVita HealthCare Partners, Inc., 6.625%, 11/1/20

     39,150   

42,000

  

DENTSPLY International, Inc., 2.750%, 8/15/16(c)

     43,576   

28,000

  

Fresenius US Finance II, Inc., 9.000%, 7/15/15(b)

     32,270   

Principal
    Amount    

            Fair Value      

CORPORATE BONDS — (continued)

  

   Health Care — (continued)   

$24,000

  

HCA, Inc., 8.500%, 4/15/19

   $ 26,760   

28,000

  

Mylan, Inc., 7.625%, 7/15/17(b)

     31,468   

47,000

  

Teva Pharmaceutical Finance IV BV, 3.650%, 11/10/21(c)

     50,301   

42,000

  

UnitedHealth Group, Inc., 4.625%, 11/15/41(c)

     44,839   

44,000

  

Valeant Pharmaceuticals

International, 6.500%, 7/15/16(b)

     46,255   
     

 

 

 
        366,272   
     

 

 

 
   Industrials (2.8%)   

52,000

  

Burlington Northern Santa Fe LLC, 4.950%, 9/15/41

     58,649   

28,000

  

Carlisle Cos., Inc., 3.750%, 11/15/22

     27,730   

47,000

  

Corrections Corp. of America, 7.750%, 6/1/17(c)

     49,937   

23,000

  

Equifax, Inc., 3.300%, 12/15/22

     22,815   

35,000

  

Flowserve Corp., 3.500%, 9/15/22

     35,151   

34,000

  

Iron Mountain, Inc., 5.750%, 8/15/24

     34,425   

29,500

  

Nielsen Finance LLC/Nielsen Finance Co., 4.500%, 10/1/20(b)

     29,353   

44,000

  

Penske Truck Leasing Co. LP/PTL Finance Corp., 3.125%, 5/11/15(b)

     44,895   

25,000

  

Republic Services, Inc., 6.200%, 3/1/40

     31,375   

36,000

  

Textron, Inc., 4.625%, 9/21/16

     39,211   

30,000

  

URS Corp., 5.000%, 4/1/22(b)

     30,884   

35,000

  

Verisk Analytics, Inc., 5.800%, 5/1/21(c)

     39,223   

25,000

  

Waste Management, Inc., 7.375%, 3/11/19

     31,789   

17,000

  

WPP Finance 2010, 3.625%, 9/7/22

     16,909   
     

 

 

 
        492,346   
     

 

 

 
   Information Technology (0.5%)   

18,000

  

Altera Corp., 1.750%, 5/15/17

     18,392   

25,000

  

Jabil Circuit, Inc., 4.700%, 9/15/22

     26,281   

30,000

  

Oracle Corp., 5.375%, 7/15/40

     37,405   
     

 

 

 
        82,078   
     

 

 

 
   Materials (1.3%)   

32,000

  

Anglo American Capital PLC, 4.125%, 9/27/22(b)

     33,432   

25,000

  

Ecolab, Inc., 5.500%, 12/8/41

     29,826   

31,000

  

Lubrizol Corp., 8.875%, 2/1/19

     43,256   

23,000

  

Newmont Mining Corp., 4.875%, 3/15/42

     23,688   

29,000

  

Rock-Tenn Co., 4.900%, 3/1/22(b)

     31,340   

29,000

  

Sealed Air Corp., 6.875%, 7/15/33(b)(c)

     27,840   

35,000

  

Xstrata Finance Canada, Ltd., 4.000%, 10/25/22(b)

     35,378   
     

 

 

 
        224,760   
     

 

 

 
   Telecommunication Services (1.3%)   

36,000

  

AT&T, Inc., 5.550%, 8/15/41

     43,204   

21,000

  

British Telecommunications PLC, 9.625%, 12/15/30

     33,362   

34,000

  

CC Holdings GS V LLC, 2.381%, 12/15/17(b)

     34,166   

14,000

  

SBA Telecommunications, Inc., 5.750%, 7/15/20(b)

     14,875   

27,000

  

Telefonica Emisiones SAU, 5.134%, 4/27/20(c)

     28,384   

73,000

  

Verizon Communications, Inc., 2.450%, 11/1/22

     73,024   
     

 

 

 
        227,015   
     

 

 

 
   Utilities (1.4%)   

55,000

  

Duke Energy Carolinas LLC, 6.100%, 6/1/37

     69,637   
 

 

Continued

 

13


Table of Contents
Sterling Capital Total Return Bond VIF

Schedule of Portfolio Investments — (continued)

December 31, 2012

 

 

Principal
    Amount    

            Fair Value      

CORPORATE BONDS — (continued)

  

   Utilities — (continued)   

$33,000

  

Progress Energy, Inc., 3.150%, 4/1/22

   $ 33,407   

15,000

  

PSEG Power LLC, 5.500%, 12/1/15

     16,748   

22,000

  

PSEG Power LLC, 2.750%, 9/15/16

     22,892   

30,000

  

Puget Energy, Inc., 5.625%, 7/15/22

     32,312   

39,000

  

Southern Co. (The), 1.950%, 9/1/16(c)

     40,192   

28,000

  

Virginia Electric and Power Co., 2.950%, 1/15/22

     29,486   
     

 

 

 
        244,674   
     

 

 

 
  

Total Corporate Bonds
(Cost $5,655,401)

     5,982,184   
     

 

 

 

MORTGAGE-BACKED SECURITIES (23.2%)

  

   Fannie Mae (12.5%)   

8,257

  

4.500%, 10/1/18, Pool #752030

     8,904   

14,209

  

5.000%, 10/1/25, Pool #255894

     15,578   

242,281

  

3.000%, 3/1/27, Pool #AK7410

     256,068   

83,784

  

2.500%, 10/1/27, Pool #AB6645

     87,939   

425,000

  

2.500%, 1/15/28(d)

     444,391   

162,491

  

4.000%, 6/1/32, Pool #MA1089

     174,921   

3,280

  

7.000%, 6/1/35, Pool #255820

     3,765   

23,868

  

5.000%, 11/1/35, Pool #842402

     25,915   

29,180

  

6.000%, 12/1/36, Pool #902054

     31,946   

181,608

  

5.500%, 8/1/37, Pool #995082

     198,685   

62,844

  

5.000%, 6/1/40, Pool #AD4927

     68,259   

58,585

  

5.000%, 6/1/40, Pool #AD7860

     65,256   

89,379

  

4.000%, 3/1/41, Pool #AH7283

     95,937   

133,975

  

4.500%, 5/1/41, Pool #AI1023

     145,438   

210,676

  

4.000%, 1/1/42, Pool #AK0685

     227,441   

144,607

  

3.500%, 11/1/42, Pool #AQ3200

     154,706   

167,000

  

3.000%, 1/15/43(d)

     174,985   
     

 

 

 
        2,180,134   
     

 

 

 
   Freddie Mac (8.2%)   

13,878

  

6.000%, 10/1/19, Pool #G11679

     15,097   

7,155

  

5.500%, 10/1/21, Pool #G12425

     7,722   

309,398

  

3.000%, 4/1/27, Pool #E03091

     327,588   

171,081

  

3.500%, 4/1/32, Pool #C91437

     182,870   

297,244

  

3.500%, 5/1/32, Pool #C91447

     317,727   

2,945

  

6.000%, 7/1/35, Pool #A36304

     3,225   

40,081

  

6.000%, 8/1/37, Pool #A64981

     43,618   

39,787

  

6.500%, 12/1/37, Pool #A69955

     45,282   

105,739

  

4.500%, 1/1/40, Pool #A90764

     113,467   

113,841

  

3.801%, 7/1/40, Pool #1B4948(a)

     120,442   

181,443

  

5.000%, 7/1/40, Pool #A93070

     196,945   

49,415

  

5.000%, 7/1/40, Pool #C03487

     53,637   
     

 

 

 
        1,427,620   
     

 

 

 
   Ginnie Mae (2.5%)   

97,241

  

4.500%, 2/15/40, Pool #737031

     106,964   

57,202

  

5.000%, 2/15/40, Pool #737037

     62,925   

208,114

  

4.500%, 9/20/40, Pool #4801

     230,120   

29,286

  

4.500%, 6/20/41, Pool #5082

     32,213   
     

 

 

 
        432,222   
     

 

 

 
  

Total Mortgage-Backed Securities
(Cost $3,949,763)

     4,039,976   
     

 

 

 

Principal
    Amount    

            Fair Value      

MUNICIPAL BONDS (7.1%)

  

   California (2.5%)   

$220,000

  

Metropolitan Water District of Southern California, Build America Bonds, Water Utility Improvements Revenue, Callable 7/1/19 @ 100, 6.538%, 7/1/39

   $ 262,647   

75,000

  

Palo Alto, Unified School District Refunding G.O., Taxable, 2.441%, 8/1/21

     74,487   

65,000

  

State of California, Build America Bonds, School Improvements G.O., Taxable, 7.625%, 3/1/40

     93,346   
     

 

 

 
        430,480   
     

 

 

 
   Colorado (0.3%)   

55,000

  

Colorado Housing & Finance Authority Revenue, Taxable, Series B, 1.600%, 5/15/16

     56,029   
     

 

 

 
   Connecticut (0.3%)   

60,000

  

State of Connecticut, Public Improvements G.O., Taxable, Series B, 2.551%, 10/15/22

     60,680   
     

 

 

 
   Illinois (0.8%)   

130,000

  

State of Illinois, Sales Tax Revenue, Taxable Building, 2.931%, 6/15/22

     132,127   
     

 

 

 
   New Mexico (0.3%)   

50,000

  

State of New Mexico, Public Improvements Refunding Revenue, Series A1, 5.000%, 7/1/15

     55,597   
     

 

 

 
   New York (2.2%)   

155,000

  

City of New York, NY, Build America Bonds, Public Improvements G.O., 4.774%, 3/1/20

     181,314   

95,000

  

New York City Municipal Water Finance Authority Refunding Revenue, Build America Bonds Taxable, Series EE, Callable 6/15/20 @ 100, 6.491%, 6/15/42

     111,596   

100,000

  

New York State Environmental Facilities Corp., Revenue Bonds, Taxable, State Revolving Funds, Series C, 2.745%, 6/15/22

     100,206   
     

 

 

 
        393,116   
     

 

 

 
   Pennsylvania (0.4%)   

70,000

  

Philadelphia Authority for Industrial Development, Refunding Revenue, Taxable, 3.664%, 4/15/22

     69,914   
     

 

 

 
   Washington (0.3%)   

45,000

  

Port of Vancouver, Refunding G.O., Limited Tax, Series B, 2.714%, 12/1/21

     44,978   
     

 

 

 
  

Total Municipal Bonds
(Cost $1,130,939)

     1,242,921   
     

 

 

 

U.S. TREASURY BONDS (0.6%)

  

95,000

  

3.125%, 2/15/42

     99,334   
     

 

 

 
  

Total U.S. Treasury Bonds
(Cost $96,519)

     99,334   
     

 

 

 
 

 

Continued

 

14


Table of Contents
Sterling Capital Total Return Bond VIF

Schedule of Portfolio Investments — (continued)

December 31, 2012

 

 

 

    Shares    

            Fair Value      

PREFERRED STOCKS (2.0%)

  

   Consumer Staples (0.6%)   

1

  

HJ Heinz Finance Co., Series B, 8.000%(b)

   $ 104,625   
     

 

 

 
   Financials (1.2%)   

2,059

   Citigroup Capital XIII, 7.875%      57,446   

1,775

   Citigroup Capital XV, 6.500%      44,553   

1,114

   DDR Corp., Series H, REIT, 7.375%      27,883   

1,355

  

SL Green Realty Corp., Series C, REIT,
7.625%

     33,997   

1,850

   US Bancorp, Series F, 6.500%      52,984   
     

 

 

 
        216,863   
     

 

 

 
   Telecommunication Services (0.2%)   

960

   Qwest Corp., 7.000%      24,950   
     

 

 

 
  

Total Preferred Stocks
(Cost $339,161)

     346,438   
     

 

 

 

INVESTMENT COMPANY (0.8%)

  

136,156

  

Federated Treasury Obligations Fund,
Institutional Shares

     136,156   
     

 

 

 
  

Total Investment Company
(Cost $136,156)

     136,156   
     

 

 

 

Total Investments — 102.8%
(Cost $17,219,910)

     17,932,633   

Net Other Assets (Liabilities) — (2.8)%

     (484,015
     

 

 

 

NET ASSETS — 100.0%

   $ 17,448,618   
     

 

 

 

 

(a)

The interest rate for this variable rate note, which will change periodically, is based either on the prime rate or an index of market rates. The reflected rate is in effect as of December 31, 2012. The maturity date reflected is the final maturity date.

(b)

Rule 144A, Section 4(2) or other security which is restricted as to resale to qualified institutional investors. The Investment Advisor, using Board approved procedures, has deemed these securities or a portion of these securities to be liquid.

(c)

Represents that all or a portion of the security was pledged as collateral for securities purchased on a when-issued basis.

(d)

Represents securities purchased on a when-issued basis. At December 31, 2012, total cost of investments purchased on a when-issued basis was $619,164.

G.O. — General Obligation

GMTN — Global Medium Term Note

MTN — Medium Term Note

REIT — Real Estate Investment Trust

STEP — Step Coupon Bond

 

 

See accompanying notes to the financial statements.

 

15


Table of Contents
Sterling Capital Variable Insurance Funds

Statements of Assets and Liabilities

December 31, 2012

 

 

     Sterling Capital
Select
Equity VIF
    Sterling Capital
Strategic Allocation
Equity VIF
    Sterling Capital
Special
Opportunities VIF
     Sterling Capital
Total Return
Bond VIF
 

Assets:

         

Investments at fair value - unaffiliated (a)

   $ 17,773,669      $ 2,283,813      $ 31,007,560       $ 17,932,633   

Investments at fair value - affiliated (b)

            2,592,193                  

Cash

     45,825                         

Interest and dividends receivable - unaffiliated

     17,276        137        38,349         123,318   

Interest and dividends receivable - affiliated

            15                  

Receivable for investments sold

     49,956                       6,097   

Receivable for capital shares issued

     12,465               36,122         70,923   

Prepaid and other expenses

     20,223        5,485        34,384         18,456   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total Assets

     17,919,414        4,881,643        31,116,415         18,151,427   
  

 

 

   

 

 

   

 

 

    

 

 

 

Liabilities:

         

Cash overdraft

                           1,223   

Payable for investments purchased

     32,475               110,703         619,818   

Payable for capital shares redeemed

     56,001        1,286        27,704         54,398   

Accrued expenses and other payables:

         

Investment advisory fees

     9,163        1,047        21,422         7,391   

Administration fees

     1,558               2,713         1,508   

Accounting out-of-pocket fees

     739        511        617         5,521   

Audit fees

     10,482        2,846        17,861         9,410   

Compliance service fees

     18        5        30         16   

Trustee fees

     29        8        50         27   

Printing fees

     3,868        1,053        6,603         3,497   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total Liabilities

     114,333        6,756        187,703         702,809   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net Assets:

   $ 17,805,081      $ 4,874,887      $ 30,928,712       $ 17,448,618   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net Assets Consist of:

         

Capital

   $ 35,302,598      $ 10,003,685      $ 22,336,357       $ 15,954,448   

Accumulated undistributed net investment income

     5,747        2,383        37,897         477,971   

Accumulated realized gain (loss)

     (20,972,683     (5,891,219     3,288,262         303,476   

Net unrealized appreciation (depreciation)

     3,469,419        760,038        5,266,196         712,723   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net Assets

   $ 17,805,081      $ 4,874,887      $ 30,928,712       $ 17,448,618   
  

 

 

   

 

 

   

 

 

    

 

 

 

Shares of Beneficial Interest Outstanding (Unlimited number of shares authorized, no par value)

     1,967,051        706,154        1,842,970         1,642,624   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net Asset Value — offering and redemption price per share

   $ 9.05      $ 6.90      $ 16.78       $ 10.62   
  

 

 

   

 

 

   

 

 

    

 

 

 

(a) Investments at cost - unaffiliated

   $ 14,304,250      $ 1,957,579      $ 25,741,364       $ 17,219,910   

(b) Investments at cost - affiliated

   $      $ 2,158,389      $       $   

See accompanying notes to the financial statements.

 

16


Table of Contents
Sterling Capital Variable Insurance Funds

Statements of Operations

For the Year Ended December 31, 2012

 

 

     Sterling Capital
Select
Equity VIF
    Sterling Capital
Strategic Allocation
Equity VIF
     Sterling Capital
Special
Opportunities VIF
    Sterling Capital
Total Return
Bond VIF
 

Investment Income:

         

Interest income

   $      $       $      $ 625,144   

Dividend income - unaffiliated

     423,884        57,528         565,285        24,168   

Dividend income - affiliated

            25,339                  

Foreign taxes withheld

     (3,049             (9,448       
  

 

 

   

 

 

    

 

 

   

 

 

 

Total investment income

     420,835        82,867         555,837        649,312   
  

 

 

   

 

 

    

 

 

   

 

 

 

Expenses:

         

Investment advisory fees (See Note 5)

     143,125        13,647         274,644        97,702   

Administration fees (See Note 5)

     19,989                34,406        18,337   

Accounting out-of-pocket fees

     6,380        3,518         6,406        34,739   

Audit fees

     19,706        5,356         33,634        17,898   

Compliance service fees (See Note 5)

     219        60         374        198   

Custodian fees

     2,011        274         2,732        1,909   

Fund accounting fees (See Note 5)

     1,765        480         3,022        1,606   

Insurance fees

     18,628        5,000         32,172        17,227   

Legal fees

     9,625        2,530         16,359        8,505   

Printing fees

     11,068        4,130         17,028        10,303   

Transfer agent fees (See Note 5)

     6,614        1,793         11,266        6,044   

Trustee fees

     1,913        519         3,270        1,739   

Other fees

     2,414        1,004         3,804        2,395   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total expenses before waivers

     243,457        38,311         439,117        218,602   
  

 

 

   

 

 

    

 

 

   

 

 

 

Less expenses waived by the Investment Advisor (See Note 5)

     (30,172                    (6,260
  

 

 

   

 

 

    

 

 

   

 

 

 

Net expenses

     213,285        38,311         439,117        212,342   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net investment income

     207,550        44,556         116,720        436,970   
  

 

 

   

 

 

    

 

 

   

 

 

 

Realized and Unrealized Gain:

         

Net realized gain from:

         

Investments - unaffiliated

     1,532,467        177,971         3,344,125        490,488   

Investments - affiliated

            101,784                  

Distributions from unaffiliated funds

            1,250                  

Distributions from affiliated funds

            33,009                  

Change in unrealized

appreciation/depreciation on investments

     1,115,741        328,916         1,217,194        180,859   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net realized and unrealized gain

     2,648,208        642,930         4,561,319        671,347   
  

 

 

   

 

 

    

 

 

   

 

 

 

Change in net assets from operations

   $ 2,855,758      $ 687,486       $ 4,678,039      $ 1,108,317   
  

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying notes to the financial statements.

 

17


Table of Contents
Sterling Capital Variable Insurance Funds

Statements of Changes in Net Assets

 

 

 

     Sterling Capital
Select
Equity VIF
    Sterling Capital
Strategic Allocation
Equity VIF
 
     For the
Year Ended
December 31,
2012
    For the
Year Ended
December 31,
2011
    For the
Year Ended
December 31,
2012
    For the
Year Ended
December 31,
2011
 

From Investment Activities:

        

Operations:

        

Net investment income (loss)

   $ 207,550      $ 272,072      $ 44,556      $ 52,995   

Net realized gain

     1,532,467        594,772        314,014        81,981   

Change in unrealized appreciation/depreciation

     1,115,741        (1,778,016     328,916        (569,273
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net assets from operations

     2,855,758        (911,172     687,486        (434,297
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders From:

        

Net investment income

     (192,318     (264,006     (46,937     (50,968

Net realized gains

                            
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net assets from shareholders distributions

     (192,318     (264,006     (46,937     (50,968
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital Transactions:

        

Proceeds from shares issued

     95,460        473,691        23,818        230,099   

Distributions reinvested

     192,318        264,006        46,937        50,968   

Value of shares redeemed

     (6,429,972     (6,596,389     (1,379,994     (1,922,281
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net assets from capital transactions

     (6,142,194     (5,858,692     (1,309,239     (1,641,214
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net assets

     (3,478,754     (7,033,870     (668,690     (2,126,479

Net Assets:

        

Beginning of year

     21,283,835        28,317,705        5,543,577        7,670,056   
  

 

 

   

 

 

   

 

 

   

 

 

 

End of year

   $ 17,805,081      $ 21,283,835      $ 4,874,887      $ 5,543,577   
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated undistributed net investment income

   $ 5,747      $      $ 2,383      $ 2,924   
  

 

 

   

 

 

   

 

 

   

 

 

 

Share Transactions:

        

Issued

     10,701        60,431        3,623        34,273   

Reinvested

     21,560        32,304        6,997        7,852   

Redeemed

     (733,268     (790,647     (207,077     (287,640
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in Shares

     (701,007     (697,912     (196,457     (245,515
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the financial statements.

 

18


Table of Contents

 

Sterling Capital
Special
Opportunities VIF
    Sterling Capital
Total Return
Bond VIF
 

For the
Year Ended
December 31,
2012

    For the
Year Ended
December 31,
2011
    For the
Year Ended
December 31,
2012
    For the
Year Ended
December 31,
2011
 
     
     
  $116,720      $ (21,746   $ 436,970      $ 657,479   
  3,344,125        1,460,907        490,488        645,611   
  1,217,194        (2,880,794     180,859        (148,416

 

 

   

 

 

   

 

 

   

 

 

 
  4,678,039        (1,441,633     1,108,317        1,154,674   

 

 

   

 

 

   

 

 

   

 

 

 
     
  (85,547            (521,025     (714,012
  (1,422,090     (1,463,601     (518,065     (678,181

 

 

   

 

 

   

 

 

   

 

 

 
  (1,507,637     (1,463,601     (1,039,090     (1,392,193

 

 

   

 

 

   

 

 

   

 

 

 
     
  637,311        2,957,322        1,212,865        4,818,430   
  1,507,637        1,463,601        1,039,090        1,392,193   
  (9,953,282     (9,293,407     (4,350,979     (7,891,763

 

 

   

 

 

   

 

 

   

 

 

 
  (7,808,334     (4,872,484     (2,099,024     (1,681,140

 

 

   

 

 

   

 

 

   

 

 

 
  (4,637,932     (7,777,718     (2,029,797     (1,918,659
     
  35,566,644        43,344,362        19,478,415        21,397,074   

 

 

   

 

 

   

 

 

   

 

 

 
  $30,928,712      $ 35,566,644      $ 17,448,618      $ 19,478,415   

 

 

   

 

 

   

 

 

   

 

 

 
  $37,897      $ 4,750      $ 477,971      $ 417,221   

 

 

   

 

 

   

 

 

   

 

 

 
     
  38,231        177,554        113,176        445,293   
  90,840        100,384        97,428        130,342   
  (601,876     (573,708     (404,427     (734,049

 

 

   

 

 

   

 

 

   

 

 

 
  (472,805     (295,770     (193,823     (158,414

 

 

   

 

 

   

 

 

   

 

 

 

 

19


Table of Contents
Sterling Capital Variable Insurance Funds

Financial Highlights

 

 

The financial highlights table is intended to help you understand the Funds’ financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions).

 

          Investment Activities     Distributions  
    Net Asset
Value,
Beginning
of Year
    Net
investment
income (loss)(a)
    Net realized/
unrealized gains
(losses) on
investments
    Total from
Investment
Activities
    Net
investment
income
    Net realized
gains on
investments
    Total
Distributions
 

Sterling Capital Select Equity VIF

             

Year Ended December 31, 2012

  $ 7.98        0.09        1.07        1.16        (0.09            (0.09

Year Ended December 31, 2011

  $ 8.41        0.09        (0.43     (0.34     (0.09            (0.09

Year Ended December 31, 2010

  $ 7.61        0.09        0.81        0.90        (0.10            (0.10

Year Ended December 31, 2009

  $ 6.49        0.07        1.12        1.19        (0.07            (0.07

Year Ended December 31, 2008

  $ 13.69        0.16        (4.63     (4.47     (0.16     (2.57     (2.73

Sterling Capital Strategic Allocation Equity VIF(c)

             

Year Ended December 31, 2012

  $ 6.14        0.05        0.77        0.82        (0.06            (0.06

Year Ended December 31, 2011

  $ 6.68        0.05        (0.54     (0.49     (0.05            (0.05

Year Ended December 31, 2010

  $ 5.90        0.07        0.81        0.88        (0.10            (0.10

Year Ended December 31, 2009

  $ 4.75        0.06        1.14        1.20        (0.05            (0.05

Year Ended December 31, 2008

  $ 10.33        0.09        (3.50     (3.41     (0.10     (2.07     (2.17

Sterling Capital Special Opportunities VIF

             

Year Ended December 31, 2012

  $ 15.36        0.06 (d)      2.13        2.19        (0.05     (0.72     (0.77

Year Ended December 31, 2011

  $ 16.60        (0.01     (0.61     (0.62            (0.62     (0.62

Year Ended December 31, 2010

  $ 14.29        (0.04     2.36        2.32        (0.01            (0.01

Year Ended December 31, 2009

  $ 10.27        (0.03     4.47        4.44               (0.42     (0.42

Year Ended December 31, 2008

  $ 16.03        0.02        (5.28     (5.26     (0.02     (0.48     (0.50

Sterling Capital Total Return Bond VIF

             

Year Ended December 31, 2012

  $ 10.61        0.26        0.38        0.64        (0.31     (0.32     (0.63

Year Ended December 31, 2011

  $ 10.73        0.36        0.28        0.64        (0.39     (0.37     (0.76

Year Ended December 31, 2010

  $ 10.37        0.40        0.39        0.79        (0.41     (0.02     (0.43

Year Ended December 31, 2009

  $ 9.94        0.41        0.42        0.83        (0.40            (0.40

Year Ended December 31, 2008

  $ 10.02        0.41        (0.08     0.33        (0.41            (0.41

 

 

*

During the periods certain fees were voluntarily waived (See Note 5 in the Notes to the Financial Statements). If such reductions had not occurred, the ratios would have been as indicated.

 

(a)

Per share net investment income (loss) has been calculated using the average daily shares method.

 

(b)

Total return ratios assume reinvestment of distributions at net asset value. Total return ratios do not reflect charges pursuant to the terms of the insurance contracts funded by separate accounts that invest in the Fund’s shares.

 

(c)

The expense ratios exclude the impact of fees/expenses paid by each underlying fund.

 

(d)

For the year ended December 31, 2012, net investment income per share reflects a special dividend which amounted to $0.02 per share. Excluding the special dividend, the ratio of net investment income to average net assets would have been 0.25% per share.

See accompanying notes to the financial statements.

 

20


Table of Contents

 

             Ratios/Supplemental Data  
Net Asset
Value,
End of
Year
     Total
Return(b)
    Net Assets,
End of
Year (000)
     Ratio of
net expenses
to average
net assets
    Ratio of net
investment
income (loss)
to average
net assets
    Ratio of
expenses to
average
net assets*
    Portfolio
turnover rate
 
             
$ 9.05         14.53   $ 17,805         1.06     1.04     1.22     64.31
$ 7.98         (4.04 )%    $ 21,284         0.97     1.11     1.21     69.66
$ 8.41         11.93   $ 28,318         0.94     1.22     1.21     63.34
$ 7.61         18.50   $ 32,124         1.00     1.01     1.24     137.52
$ 6.49         (37.43 )%    $ 35,978         0.81     1.52     1.16     49.73
             
$ 6.90         13.41   $ 4,875         0.70     0.82     0.70     32.83
$ 6.14         (7.32 )%    $ 5,544         0.58     0.80     0.67     6.80
$ 6.68         14.98   $ 7,670         0.40     1.21     0.68     64.81
$ 5.90         25.24   $ 7,947         0.41     1.21     0.66     18.04
$ 4.75         (38.22 )%    $ 8,528         0.31     1.15     0.59     61.04
             
$ 16.78         14.33   $ 30,929         1.28     0.34 %(d)      1.28     18.13
$ 15.36         (3.53 )%    $ 35,567         1.25     (0.05 )%      1.25     26.68
$ 16.60         16.24   $ 43,344         1.24     (0.28 )%      1.27     39.24
$ 14.29         43.53   $ 40,162         1.26     (0.28 )%      1.29     32.57
$ 10.27         (33.71 )%    $ 26,684         1.10     0.14     1.18     35.80
             
$ 10.62         6.10   $ 17,449         1.16     2.39     1.20     144.71
$ 10.61         6.10   $ 19,478         1.07     3.32     1.17     131.16
$ 10.73         7.73   $ 21,397         1.07     3.70     1.20     140.32
$ 10.37         8.57   $ 22,062         0.94     4.09     1.24     109.12
$ 9.94         3.38   $ 20,996         0.81     4.11     1.03     152.74

 

21


Table of Contents
Sterling Capital Variable Insurance Funds

Notes to Financial Statements

December 31, 2012

 

 

  1. Organization:

Sterling Capital Variable Insurance Funds (the “Trust”) was organized on November 8, 2004, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end investment company established as a Massachusetts business trust. The Trust commenced operations on May 1, 2005 and presently offers shares of Sterling Capital Select Equity VIF, Sterling Capital Strategic Allocation Equity VIF, Sterling Capital Special Opportunities VIF, and Sterling Capital Total Return Bond VIF (referred to individually as a “Fund” and collectively as the “Funds”). The Trust is authorized to issue an unlimited number of shares of beneficial interest without par value. Shares of the Funds are offered through variable annuity contracts offered through the separate accounts of participating insurance companies. All Funds are “diversified” funds.

Sterling Capital Strategic Allocation Equity VIF invests primarily in underlying mutual funds and exchange traded funds as opposed to individual securities. By owning shares of underlying investment companies (including exchange traded funds), Sterling Capital Strategic Allocation Equity VIF invests, to varying degrees, in securities of U.S. and non-U.S. companies, including small and medium sized companies, and in fixed-income securities. In addition, Sterling Capital Strategic Allocation Equity VIF’s exposure to underlying equity funds may include funds that invest in real estate or other similar securities and invest in derivatives.

Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Funds may enter into contracts with their vendors and others that provide for general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.

 

  2.

Significant Accounting Policies:

The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements. The policies are in conformity with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts. Actual results could differ from those estimates.

Securities Valuation — Investments in securities, the principal market for which is a securities exchange or an over-the-counter market, are valued at their latest available sale price (except for those securities that are traded on NASDAQ, which will be valued at the NASDAQ official closing price) or in the absence of such a price, by reference to the latest available bid price in the principal market in which such securities are normally traded. The Funds may also use an independent pricing service approved by the Board of Trustees (the “Board”) to value certain securities, including the use of electronic and matrix techniques. Short-term obligations without significant credit risk that mature in 60 days or less are valued at either amortized cost or original cost plus interest, which approximates fair value. Investments in open-end investment companies, including the underlying funds in which Sterling Capital Strategic Allocation Equity VIF invests, are valued at their respective net asset values as reported by such companies. Investments in closed-end investment companies and exchange traded funds are valued at their market values based upon the latest available sale price or, absent such a price, by reference to the latest available bid prices in the principal market in which such securities are normally traded. The differences between cost and fair value of investments are reflected as either unrealized appreciation or depreciation. Securities for which market quotations are not readily available or deemed unreliable (e.g., an approved pricing service does not provide a price, a furnished price is in error, certain stale prices, or an event occurs that materially affects the furnished price) will be fair valued in accordance with procedures established in good faith under the general supervision of the Board. No securities were valued in accordance with these procedures as of December 31, 2012.

Fair Value Measurements — The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

 

22


Table of Contents
Sterling Capital Variable Insurance Funds

Notes to Financial Statements — (continued)

December 31, 2012

 

• Level 3 – based on significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. During the fiscal year ended December 31, 2012 there were no significant changes to the valuation policies and procedures.

The summary of inputs used to determine the fair value of each Fund’s investments as of December 31, 2012 is as follows:

 

Investments in Securities

   Level 1–
Quoted Prices
     Level 2–
Other Significant
Observable Inputs
     Level 3–
Significant
Unobservable Inputs
     Total  

Sterling Capital Select Equity VIF

   $ 17,773,669(a)       $         $    —       $ 17,773,669   

Sterling Capital Strategic Allocation Equity VIF

     4,876,006(a)                         4,876,006   

Sterling Capital Special Opportunities VIF

     31,007,560(a)                         31,007,560   

Sterling Capital Total Return Bond VIF

     377,969(b)         17,554,664(a)                 17,932,633   

 

  (a) Industries or security types are disclosed in the Schedules of Portfolio Investments.
  (b) Represents investment companies and/or certain preferred stocks.

The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the fiscal year ended December 31, 2012, except for Sterling Capital Total Return Bond VIF. There were transfers from Level 2 to Level 1 during the fiscal year ended December 31, 2012 due to recharacterization of level in the fair value hierarchy of certain preferred stocks. A quoted price was obtained for those preferred stocks for the fiscal year ended December 31, 2012 whereas the price was based on other significant observable inputs for the fiscal year ended December 31, 2011.

 

     2012
Transfer from
Level 2 to Level 1
 

Sterling Capital Total Return Bond VIF

     $109,452   

Security Transactions and Related Income — During the period, security transactions are accounted for no later than one business day after trade date. For financial reporting purposes, however, security transactions are accounted for on the trade date of the last business day of the reporting period. Interest income is recognized on the accrual basis and includes, where applicable, the amortization/accretion of premium or discount. Dividend income is recorded on the ex-dividend date. Gains or losses realized from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.

When-Issued and Forward Commitments — The Funds may purchase securities on a “when-issued” basis. The Funds record when-issued securities on the trade date and pledge assets with a value at least equal to the purchase commitment for payment of the securities purchased. The value of the securities underlying when-issued or forward commitments to purchase securities, and any subsequent fluctuation in their value, is taken into account when determining the net asset value of the Funds commencing with the date the Funds agree to purchase the securities. The Funds do not accrue interest or dividends on “when-issued” securities until the underlying securities are received.

Mortgage Dollar Rolls — Sterling Capital Total Return Bond VIF may sell mortgage-backed securities for delivery in the current month and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specific future date at an agreed-upon price. The fair value of the securities that the Fund is required to purchase may decline below the agreed upon repurchase price of those securities. Pools of mortgages collateralizing those securities may have different prepayment histories than those sold. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in additional instruments for the Fund, and the income from these investments will generate income for the Fund. If such income does not exceed the income, capital appreciation and gain or loss that would have been realized on the securities sold as part of the dollar roll, the use of this technique will diminish the investment performance of the Fund compared with what the performance would have been without the use of dollar rolls. The Funds account for mortgage dollar roll transactions as purchases and sales.

 

23


Table of Contents
Sterling Capital Variable Insurance Funds

Notes to Financial Statements — (continued)

December 31, 2012

 

Expenses and Allocation Methodology — Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among all Funds daily in relation to the net assets of each Fund or on another reasonable basis. Expenses which are attributable to both the Funds and Sterling Capital Funds are allocated across the Funds and Sterling Capital Funds, based upon relative net assets or on another reasonable basis.

Distributions to Shareholders — Dividends from net investment income are declared and paid quarterly for the Funds, with the exception of Sterling Capital Total Return Bond VIF, in which case dividends from net investment income are declared daily and paid monthly. Distributable net realized gains, if any, are declared and distributed at least annually. Distributions to shareholders which exceed net investment income and net realized gains for tax purposes are reported as distributions of capital.

The character of income and gains distributed are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (e.g., disposition of market discount and market premium bonds, paydown gains and losses, mortgage dollar roll gains and losses, investments in real estate investment trusts (REITs), regulated investment companies (RICs), investments in partnerships and the character of distributions), such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. These reclassifications have no impact on net assets or net asset values per share.

As of December 31, 2012, these reclassifications were as follows:

 

     Decrease
Paid-in-Capital
    Increase
(Decrease)
Net Investment
Income
    Increase
(Decrease)
Realized
Gain (Loss)
 

Sterling Capital Select Equity VIF

   $      $ (9,485   $ 9,485   

Sterling Capital Strategic Allocation Equity VIF

            1,840        (1,840

Sterling Capital Special Opportunities VIF

     (3,372     1,974        1,398   

Sterling Capital Total Return Bond VIF

            144,805        (144,805

Federal Income Taxes — It is the policy of each Fund to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income tax is required in the Funds’ financial statements.

 

  3. Purchases and Sales of Securities:

Purchases and sales of securities (excluding U.S. Government Securities and securities maturing less than one year from acquisition) for the fiscal year ended December 31, 2012 were as follows:

 

     Purchases      Sales  

Sterling Capital Select Equity VIF

   $ 12,641,399       $ 18,317,040   

Sterling Capital Strategic Allocation Equity VIF

     1,756,006         2,991,563   

Sterling Capital Special Opportunities VIF

     5,828,700         13,907,129   

Sterling Capital Total Return Bond VIF

     10,058,489         8,663,495   

Purchases and sales of U.S. Government Securities (excluding securities maturing less than one year from acquisition) for the fiscal year ended December 31, 2012 for the Sterling Capital Total Return Bond VIF were $17,154,734 and $18,022,835, respectively.

 

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Sterling Capital Variable Insurance Funds

Notes to Financial Statements — (continued)

December 31, 2012

 

 

  4. Investments in Affiliated Issuers:

A summary of Sterling Capital Strategic Allocation Equity VIF’s transactions in the shares of affiliated issuers during the fiscal year ended December 31, 2012 is set forth below:

 

    Shares Held at
December 31,
2011
    Shares
Purchased
    Shares
Sold
    Shares Held at
December 31,
2012
    Value at
December 31,
2012
    Dividend
Income
January 1, 2012-
December 31, 2012
    Distributions
and Net Realized
Gain (Loss)
January 1, 2012-
December 31, 2012
 

Sterling Capital Equity Income Fund, Institutional Class

    24,835        173        8,061        16,947      $ 269,290      $ 4,808      $ 20,800   

Sterling Capital Equity Index Fund, Institutional Class

    6,607        66        2,306        4,367        41,703        621        (1,689

Sterling Capital International Fund, Institutional Class

    125,310               125,310                             27,454   

Sterling Capital Mid Value Fund, Institutional Class

    38,986        10,669        19,313        30,342        435,106        4,356        61,267   

Sterling Capital Select Equity Fund, Institutional Class

    90,720        27,449        35,082        83,087        1,044,409        13,515        (6,325

Sterling Capital Small Value Fund, Institutional Class

    11,128        1,000        3,355        8,773        107,729               5,584   

Sterling Capital Special Opportunities Fund, Institutional Class

    13,912        28,529        6,657        35,784        660,576        2,013        27,748   

Sterling Capital U.S. Treasury Money Market Fund, Institutional Class

    76,801        23,357,263        23,434,064                      11          

Sterling Capital Ultra Short Bond Fund, Institutional Class

           7,943        4,605        3,338        33,380        15        (46
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Affiliates

    388,299        23,433,092        23,638,753        182,638      $ 2,592,193      $ 25,339      $ 134,793   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  5. Related Party Transactions:

Under the terms of the investment advisory agreement, Sterling Capital Management LLC (“Sterling Capital” or the “Advisor”) is entitled to receive fees based on a percentage of the average daily net assets of the Funds. These fees are accrued daily and payable on a monthly basis and are reflected on the Statements of Operations as “Investment advisory fees.” Sterling Capital waived investment advisory fees and reimbursed certain expenses for the Funds referenced below which are not subject to recoupment and are included on the Statements of Operations as “Less expenses waived by the Investment Advisor.” Information regarding these transactions for the fiscal year ended December 31, 2012 is as follows:

 

     Contractual
Fee Rate
  Fee Rate after
Voluntary
Waivers

Sterling Capital Select Equity VIF

   0.70%1,2   0.60%1,2

Sterling Capital Strategic Allocation Equity VIF

   0.25%   0.25%

Sterling Capital Special Opportunities VIF

   0.80%   0.80%

Sterling Capital Total Return Bond VIF

   0.50%2,3   0.50%2,3

 

  1 The contractual fee rate was 0.74% and the fee rate after voluntary waivers was 0.50% prior to May 1, 2012.
  2

For a portion of the fiscal year ended December 31, 2012, Sterling Capital voluntarily reimbursed certain expenses of the Funds. Voluntary reimbursements of expenses are not subject to recoupment in subsequent fiscal periods, and may be discontinued at any time.

  3 The contractual fee rate was 0.60% and the fee rate after voluntary waivers was 0.50% prior to May 1, 2012.

During the period covered by this report, pursuant to a sub-advisory agreement with Sterling Capital, Scott & Stringfellow LLC (Scott & Stringfellow), a wholly owned subsidiary of BB&T Corporation, serves as the sub-advisor to Sterling Capital Special Opportunities VIF, subject to the general supervision of the Board and Sterling Capital. For its services, Scott & Stringfellow is entitled to a fee, payable by Sterling Capital. Please see Note 8 for important additional information.

Sterling Capital serves as the administrator to the Funds pursuant to an administration agreement. The Funds except Sterling Capital Strategic Allocation Equity VIF pay their portion of a fee to Sterling Capital for providing administration services based on the aggregate assets of the Funds except Sterling Capital Strategic Allocation Equity VIF and the Sterling Capital Funds, excluding the assets of Sterling Capital Strategic Allocation Conservative Fund, Sterling Capital Strategic Allocation Balanced Fund, Sterling Capital Strategic Allocation Growth Fund, Sterling Capital Strategic Allocation Equity Fund, Sterling Capital Corporate Fund and Sterling Capital Securitized Opportunities Fund, at a rate of 0.1075% on the first $3.5 billion of

 

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Sterling Capital Variable Insurance Funds

Notes to Financial Statements — (continued)

December 31, 2012

 

average net assets; 0.075% on the next $1 billion of average net assets; 0.06% on the next $1.5 billion of average net assets; and 0.04% of average net assets over $6 billion. Prior to July 1, 2012, the administration fee with respect to the first $3.5 billion of average net assets was 0.11%. This fee is accrued daily and payable on a monthly basis. Expenses incurred are reflected on the Statements of Operations as “Administration fees.” Pursuant to a sub-administration agreement with Sterling Capital, BNY Mellon Investment Servicing (US) Inc. (“BNY Mellon” or the “Sub-Administrator”), serves as the sub-administrator to the Funds subject to the general supervision of the Board and Sterling Capital. For these services, BNY Mellon is entitled to a fee payable by Sterling Capital.

BNY Mellon serves as the Funds’ fund accountant and transfer agent and receives compensation by the Funds for these services. Expenses incurred are reflected on the Statements of Operations as “Fund accounting fees” and “Transfer agent fees.”

Sterling Capital’s Chief Compliance Officer (“CCO”) serves as the Funds’ CCO. The CCO’s compensation is reviewed and approved by the Funds’ Board and paid by Sterling Capital. However, the Funds reimburse Sterling Capital for their allocable portion of the CCO’s salary. Expenses incurred for the Funds are reflected on the Statements of Operations as “Compliance service fees.”

For the fiscal year ended December 31, 2012, the Funds paid $123 in brokerage fees to Scott & Stringfellow, related to the execution of purchases and sales of the Funds’ portfolio investments.

The Trust has adopted a Variable Contract Owner Servicing Plan (the “service plan”) under which the Funds may pay a fee computed daily and paid monthly, at an annual rate of up to 0.25% of the average daily net assets of the Funds. A servicing agent may periodically waive all or a portion of its servicing fees. For the fiscal year ended December 31, 2012 the Funds did not participate in any service plan.

Certain Officers and a Trustee of the Funds are affiliated with Sterling Capital or the Sub-Administrator. Such Officers and Trustee receive no compensation from the Funds for serving in their respective roles. Each of the Trustees who are not interested persons (as defined in the 1940 Act) of the Trust who serve on the Board are compensated at the annual rate of $40,000 plus $5,000 for each regularly scheduled quarterly meeting attended, $4,000 for each special meeting attended in person and $3,000 for each special meeting attended by telephone, plus reimbursement for certain out of pocket expenses. The Trustee who is an interested person as defined in the 1940 Act of the Trust, but not affiliated with Sterling Capital is compensated at the annual rate of $40,000 plus $4,000 for each regularly scheduled quarterly meeting attended, $3,200 for each special meeting attended in person and $2,400 for each special meeting attended by telephone, plus reimbursement for certain out of pocket expenses. Each Trustee serving on a Committee of the Board receives a fee of $4,000 for each Committee meeting attended in person and $3,000 for each Committee meeting attended by telephone, plus reimbursement for certain out of pocket expenses. Committee meeting fees are only paid when such Committee meetings are not held in conjunction with a regular board meeting. Additionally, the Chairman of the Board and the Audit Committee Chairman each receive an annual retainer of $15,000, and the Chairman of the Nominations Committee receives additional compensation at the rate of $1,000 for each meeting over which he or she presides as Chairman. The fees are allocated across the Trust and the Sterling Capital Funds based upon relative net assets.

 

  6.

Line of Credit:

U.S. Bank, N.A. has made available a credit facility to the Funds, pursuant to a Credit Agreement (the “Agreement”). The primary purpose of the Agreement is to allow the Funds to avoid security liquidations that Sterling Capital believes are unfavorable to shareholders. Under the Agreement, Select Equity VIF, Total Return Bond VIF and Special Opportunities VIF have a commitment amount of $2,800,000, $1,500,000, and $2,600,000, respectively. Outstanding principal amounts under the Agreement bear interest at a rate per annum equal to the Prime Rate minus two percent (2%), but never at a rate of less than one percent (1%) per annum. The Agreement expires on March 31, 2013. During the fiscal year ended December 31, 2012 the Funds did not utilize the line of credit.

 

  7.

Federal Tax Information:

Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations. During the period, the Funds did not incur any interest or penalties.

 

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Sterling Capital Variable Insurance Funds

Notes to Financial Statements — (continued)

December 31, 2012

 

Management has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years (current year and prior three tax years), and has concluded that no provision for federal income tax is required in the Funds’ financial statements. The Funds’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Under the Regulated Investment Company Modernization Act of 2010, capital losses originating in taxable years beginning after December 22, 2010 (“post-enactment capital losses”) are carried forward indefinitely. Furthermore, post-enactment capital losses will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses as under previous law.

At December 31, 2012, the following Funds had net capital loss carryforwards available to offset future net capital gains, if any, to the extent provided by the Treasury regulations. To the extent that these carryforwards are used to offset future capital gains, it is probable that the gains that are offset will not be distributed to shareholders.

 

     Amount With No Expiration*              
     Long-term
Losses
   Amount      Expires  

Sterling Capital Select Equity VIF

   $     —      $ 17,459,184         2016   

Sterling Capital Select Equity VIF

          —        3,263,903         2017   

Sterling Capital Strategic Allocation Equity VIF

          —        2,264,206         2016   

Sterling Capital Strategic Allocation Equity VIF

          —        1,989,928         2017   

Sterling Capital Strategic Allocation Equity VIF

          —        1,467,590         2018   

Sterling Capital Strategic Allocation Equity VIF

   5,238                

 

  * Post-Enactment Losses: Must be utilized prior to losses subject to expiration.

Capital loss carryforwards utilized in the current year were $1,516,380 for Sterling Capital Select Equity VIF.

The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2012, were as follows:

 

     Distributions paid from         
     Ordinary
Income
     Net
Long-Term
Gains
     Total
Distributions
Paid*
 

Sterling Capital Select Equity VIF

   $ 192,318       $       $ 192,318   

Sterling Capital Strategic Allocation Equity VIF

     46,937                 46,937   

Sterling Capital Special Opportunities VIF

     85,547         1,422,090         1,507,637   

Sterling Capital Total Return Bond VIF

     542,470         496,620         1,039,090   

The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2011, were as follows:

 

     Distributions paid from         
     Ordinary
Income
     Net
Long-Term
Gains
     Total
Distributions
Paid*
 

Sterling Capital Select Equity VIF

   $ 264,006       $       $ 264,006   

Sterling Capital Strategic Allocation Equity VIF

     50,968                 50,968   

Sterling Capital Special Opportunities VIF

     44,822         1,418,779         1,463,601   

Sterling Capital Total Return Bond VIF

     1,031,540         360,653         1,392,193   

 

  * Total Distributions paid may differ from the Statements of Changes in Net Assets because distributions are recognized when actually paid for tax purposes.

 

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Table of Contents
Sterling Capital Variable Insurance Funds

Notes to Financial Statements — (continued)

December 31, 2012

 

 

At December 31, 2012, the components of accumulated earnings (deficit) on a tax basis were as follows:

 

     Undistributed
Ordinary
Income
     Undistributed
Long Term
Capital Gains
     Accumulated
Earnings
     Accumulated
Capital and
Other Losses
    Unrealized
Appreciation
(Depreciation)*
     Total
Accumulated
Earnings
(Deficit)
 

Sterling Capital Select Equity VIF

   $ 5,747       $       $ 5,747       $ (20,723,087   $ 3,219,823       $ (17,497,517

Sterling Capital Strategic Allocation Equity VIF

     2,383                 2,383         (5,726,962     595,781         (5,128,798

Sterling Capital Special Opportunities VIF

     24,973         3,344,117         3,369,090                5,223,265         8,592,355   

Sterling Capital Total Return Bond VIF

     584,587         244,246         828,833                665,337         1,494,170   

 

  *

The primary differences between book basis and tax basis unrealized appreciation (depreciation) were due to the deferral of losses on wash sales and timing of income recognition related to investments in hybrid securities and partnerships, and the deferral of market discount and premium until point of sale.

At December 31, 2012, federal income tax cost, gross unrealized appreciation and gross unrealized depreciation on securities were as follows:

 

     Tax Cost      Gross Tax
Unrealized
Appreciation
     Gross Tax
Unrealized
Depreciation
    Net Tax
Unrealized
Appreciation
 

Sterling Capital Select Equity VIF

   $ 14,553,846       $ 3,504,927       $ (285,104   $ 3,219,823   

Sterling Capital Strategic Allocation Equity VIF

     4,280,225         760,038         (164,257     595,781   

Sterling Capital Special Opportunities VIF

     25,784,295         6,539,830         (1,316,565     5,223,265   

Sterling Capital Total Return Bond VIF

     17,267,296         754,560         (89,223     665,337   

 

  8. Subsequent Events:

Management has evaluated the need for disclosure and/or adjustments resulting from subsequent events through the date the financial statements were issued, and has noted the following:

Effective January 1, 2013, George F. Shipp, the portfolio manager of the Sterling Capital Special Opportunities VIF, and Chief Investment Officer of Scott & Stringfellow (“Sub-Advisor”) became an employee of Sterling Capital. As a result, the sub-advisory agreement between the Advisor and the Sub-Advisor terminated, and the Sub-Advisor no longer provides Sub-Advisory services to the Fund. Mr. Shipp continues to serve as portfolio manager of the Fund, and the Fund continues to pursue its current investment objective and strategies.

On February 21, 2013, the Board approved a Plan of Liquidation with respect to Sterling Capital Strategic Allocation Equity VIF. It is expected that the Fund will be liquidated on or about April 26, 2013. After paying in full all known or reasonably ascertainable liabilities of the Fund, including without limitation all charges, taxes and expenses of the Fund, whether due, accrued or anticipated, that have been incurred or are expected to be incurred by the Fund, the Fund will distribute to its shareholders their pro rata share of the proceeds.

On February 21, 2013, the Board also approved certain changes with respect to the Sterling Capital Select Equity VIF. Effective as of May 1, 2013, it is expected that the Fund will be renamed the Sterling Capital Equity Income VIF and the Fund’s investment objective, principal strategies, principal risks, non-fundamental investment restrictions and portfolio management will change.

 

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Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders of

Sterling Capital Variable Insurance Funds:

We have audited the accompanying statements of assets and liabilities of the Sterling Capital Select Equity VIF, Sterling Capital Strategic Allocation Equity VIF, Sterling Capital Special Opportunities VIF and Sterling Capital Total Return Bond VIF (collectively, the “Funds”), four of the funds constituting Sterling Capital Variable Insurance Funds, including the schedules of portfolio investments, as of December 31, 2012, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2012, by correspondence with the custodian, transfer agent of the underlying funds and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds comprising the Sterling Capital Variable Insurance Funds as of December 31, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Philadelphia, Pennsylvania

February 26, 2013

 

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Table of Contents
Sterling Capital Variable Insurance Funds

December 31, 2012

 

 

Notice to Shareholders (Unaudited)

All amounts and percentages below are based on financial information available as of the date of this annual report and, accordingly are subject to change. For each item it is the intention of the Funds to report the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.

For the fiscal year ended December 31, 2012, each Fund is reporting the following items with regard to distributions paid during the year.

 

     Long-Term
Capital
Gain
     Qualified
Dividend
Income %
    (for corporate
shareholders)
Dividends
Received
Deduction %
    U.S.
Government
Income
 

Sterling Capital Select Equity VIF

   $         100.00     100.00     0.00

Sterling Capital Strategic Allocation Equity VIF

             100.00     63.46     0.66

Sterling Capital Special Opportunities VIF

     1,422,090         100.00     100.00     0.00

Sterling Capital Total Return Bond VIF

     496,620         0.08     0.08     1.70

 

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Table of Contents
Sterling Capital Variable Insurance Funds

December 31, 2012

 

 

Other Information (Unaudited)

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1-800-228-1872; and (ii) on the Securities and Exchange Commission’s (the “Commission”) website at http://www.sec.gov.

Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 1-800-228-1872 and (ii) on the Commission’s website at http://www.sec.gov.

The Funds file complete Schedules of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q is filed with the Commission within 60 days of the end of the quarter to which it relates, and is available without charge on the Commission’s website at http://www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

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BOARD CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED)

The Board of Trustees, at a meeting held on August 15-16, 2012, approved the continuance of the investment advisory agreement between Sterling Capital Variable Insurance Funds (the “Trust”) and Sterling Capital Management LLC (“Sterling Capital”), which serves as investment adviser to each series of the Trust (the “Funds”) for a new term running through January 31, 2013. The Board of Trustees also approved the continuance of the sub-advisory agreement (the “Sub-Advisory Agreement”) of Sterling Capital with Scott & Stringfellow, LLC (“Scott & Stringfellow” and, together with Sterling Capital, the “Advisers”), with respect to the Sterling Capital Special Opportunities VIF for a new term running through January 31, 2013. At a meeting held on November 14, 2012, the Board of Trustees approved the further continuance of the Advisory Agreement between the Trust and Sterling Capital for a new term running through January 31, 2014. At the meeting held on November 14, 2012, the Board of Trustees also approved the termination of the Sub-Advisory Agreement effective as of January 1, 2013, in connection with the anticipated transaction by which the portfolio manager of the Sterling Capital Special Opportunities VIF would become an employee of Sterling Capital and would continue to serve as portfolio manager of the Fund in such capacity. The Board approved the continuation of the Advisory Agreements two times in 2012 in order to adjust the Board’s contract review schedule for future years. As a result of this schedule change, the Board will have additional time for its review and deliberations in future years. All of the above referenced agreements are collectively referred to herein as the “Advisory Agreements” and are performed by the “Advisers.”

The Trustees reviewed extensive material in connection with their consideration of the Advisory Agreements, including data from an independent provider of mutual fund data (as assembled by the Trust’s administrator), which, where applicable, included comparisons with industry averages for comparable funds for advisory fees, 12b-1 fees, and total fund expenses. The data reflected Sterling Capital fee waivers in place, as well as Sterling Capital’s contractual investment advisory fee levels. The Board was assisted in its review by independent legal counsel, who provided memoranda detailing the legal standards for review of the Advisory Agreements. To facilitate its review, the Board received a detailed presentation by Sterling Capital, which included a fund-by-fund analysis of each Fund’s investment process and performance. Presentations were also provided by each entity proposed to be utilized by Sterling Capital as a sub-adviser. The Board also received and considered fund-by-fund profitability information from the Advisers. The Independent Trustees met outside the presence of management and the Advisers with their independent legal counsel as part of their deliberations.

In their deliberations regarding the Advisory Agreements, each Trustee attributed different weights to various factors involved in an analysis of the Advisory Agreements, and in each case no factor alone was considered determinative. The Trustees determined that the overall arrangements between the Trust and the Advisers, as provided in the Advisory Agreements, were fair and reasonable and that the continuance of the Advisory Agreements was in the best interests of each applicable Fund and its shareholders.

The matters addressed below were considered and discussed by the Trustees in reaching their conclusions.

Nature, Extent and Quality of Services Provided by the Advisers — The Trustees received and considered information regarding the nature, extent, and quality of the services provided to each Fund under the Advisory Agreements. The Trustees took into account information furnished throughout the year at Trustee meetings, as well as materials furnished specifically in connection with the annual review process. The Trustees considered the background and experience of each Adviser’s senior management and the expertise of investment personnel of each Adviser responsible for the day-to-day management of each Fund. The Trustees considered the overall reputation, and the capabilities and commitment of the Advisers to provide high quality service to the Funds.

The Trustees received information concerning the investment philosophy and investment processes applied or to be applied by the Advisers in managing the Funds as well as each Adviser’s Form ADV. The Trustees also considered information regarding regulatory compliance and compliance with the investment policies of the Funds. The Trustees also considered each Adviser’s trading practices, including Scott & Stringfellow, which engages in affiliated brokerage for portfolio trades for the Funds it sub-advises. The Trustees also considered the procedures of the Advisers designed to fulfill the Advisers’ fiduciary duty to the Funds with respect to possible conflicts of interest, including the Advisers’ codes of ethics (regulating the personal trading of its officers and employees).

Based on their review, the Trustees concluded that, with respect to the nature, extent and quality of services to be provided by the Advisers, the nature and extent of responsibilities was consistent with mutual fund industry norms, and that the quality of the services provided or to be provided by the Advisers was or was expected to be satisfactory or better.

Investment Performance — The Trustees considered performance results of each Fund in absolute terms and relative to each Fund’s benchmark and peer group. In the Trustees’ review of performance, long- and short-term performance were considered. In conducting their review, the Trustees particularly focused on Funds where performance compared unfavorably with peers.

After reviewing the performance of each Fund, and taking into consideration the management style, investment strategies, and prevailing market conditions during the prior year and for longer periods, the Trustees concluded that the performance of each Fund was acceptable or better or that, in cases where performance issues were encountered, Sterling Capital was appropriately addressing the situation.

Cost of Services, Including the Profits Realized by the Advisers and Affiliates — The Trustees considered peer group comparable information with respect to the advisory fees charged by Sterling Capital to each of the Funds, taking into consideration both

 

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contractual and actual (i.e., after fee waivers) fee levels. The Trustees also considered the advisory fee waivers in place for certain Funds. The Trustees concluded that the investment advisory and sub-advisory fees (collectively, the “investment advisory fees”) paid by the Funds fell within an acceptable range as compared to peer groups, and were fair and reasonable.

As part of their review, the Trustees considered benefits to Sterling Capital aside from investment advisory fees. The Trustees reviewed administration fees received by Sterling Capital and considered the fallout benefits to Sterling Capital such as the research services available to Sterling Capital by reason of brokerage commissions generated by the Funds’ turnover. The Trustees also considered benefits to Sterling Capital’s affiliates, including brokerage commissions received by Scott & Stringfellow for executing trades on behalf of the Sterling Capital Special Opportunities Variable Insurance Fund. With respect to Scott & Stringfellow, the Trustees noted that brokerage commissions were paid at a standard commission rate, which was consistent with that used by Sterling Capital with respect to all equity funds of the Trust and that such brokerage arrangements were considered by Scott & Stringfellow to be advantageous.

The Trustees also considered information from Sterling Capital regarding fees for separate accounts managed by Sterling Capital with investment objectives and strategies similar to those of comparable Funds. The Trustees noted that management of the Funds was a much more intensive process than management of separate accounts, including daily fluctuations in the size of the Funds and the need to comply with extensive and complex restrictions set by applicable regulation or established in controlling disclosure documents, and therefore the Trustees concluded that the differences between the services that Sterling Capital provides to the Funds and those it provides to separate accounts substantially limit the probative value of comparisons to those other clients.

The Trustees also considered the reasonableness of the current and proposed advisory fees in the context of the profitability of the Advisers. In determining whether all investment advisory fees were reasonable, the Trustees reviewed profitability information provided by the Advisers with respect to investment advisory services. With respect to such information, the Trustees recognized that such profitability data was generally unaudited and represented an Adviser’s own determination of its and its affiliates’ revenues from the contractual services provided or expected to be provided to the Funds, less expenses of providing such services. Expenses include direct and indirect costs and were calculated using an allocation methodology developed by the Adviser. The Trustees also recognized that it is difficult to make comparisons of profitability from fund investment advisory and sub-advisory contracts, because comparative information is not generally publicly available and could be affected by numerous factors. Based on their review, the Trustees concluded that the profitability of the Advisers as a result of their relationships with the Funds was acceptable.

Based on the foregoing, the Trustees concluded that the fees proposed under the Advisory Agreements were fair and reasonable, in light of the services and benefits provided or expected to be provided to each Fund.

Economies of Scale — The Trustees also considered whether fee levels reflect economies of scale and whether economies of scale would be produced by the growth of the Funds’ assets. The Trustees also considered the advisory fee waivers in place for certain Funds and found that the waivers were a reasonable way to provide the benefits of economies of scale to shareholders of such Funds. The Trustees concluded that each Fund’s advisory fee levels fairly reflected such economies of scale as might exist at current asset levels.

 

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Sterling Capital Variable Insurance Funds

 

 

 

Information about Trustees and Officers (Unaudited)

Overall responsibility for the management of the Funds rests with its Board of Trustees (“Trustees”), who are elected by the Shareholders of the Funds. The Trustees elect the officers of the Funds to supervise actively its day-to-day operations. The names of the Trustees, birthdates, term of office and length of time served, principal occupations during the past five years, number of portfolios overseen and directorships held outside of the Funds are listed in the two tables immediately following. The business address of the persons listed below is 434 Fayetteville Street, Fifth floor, Raleigh, North Carolina 27601.

INDEPENDENT TRUSTEES

 

Name and Birthdate

  

Position(s) Held

With the Funds

  

Term of Office/
Length of

Time Served

  

Principal Occupation
During the Last 5 Years

   Number of
Portfolios
in Fund
Complex
Overseen
    by Trustee*     
   Other
Directorships
Held

by Trustee

Thomas W. Lambeth

Birthdate: 1/35

  

Trustee,

Chairman of the Board of Trustees

  

Indefinite,

8/92 — Present

   From January 2001 to present, Senior Fellow, Z. Smith Reynolds Foundation    26    None

Drew T. Kagan

Birthdate: 2/48

   Trustee   

Indefinite,

8/00 — Present

   From September 2010 to present, Chairman, Montecito Advisors, Inc.; from December 2003 to September 2010, CEO, Montecito Advisors, Inc.; from March 1996 to December 2003, President, Investment Affiliate, Inc.    26    None

Laura C. Bingham

Birthdate: 11/56

   Trustee   

Indefinite,

2/01 — Present

   From June 2010 to present, independent consultant; from July 1998 to June 2010, President of Peace College    26    None

Douglas R. Van Scoy

Birthdate: 11/43

   Trustee   

Indefinite,

5/04 — Present

   Retired; from November 1974 to July 2001, employee of Smith Barney (investment banking), most recently as Director of Private Client Group and Senior Executive Vice President    26    None

James L. Roberts

Birthdate: 11/42

   Trustee   

Indefinite,

11/04 — Present

   Retired; from November 2006 to present, Director, Grand Mountain Bancshares, Inc.; from January 1999 to December 2003, President, CEO and Director, Covest Bancshares, Inc.    26    None

 

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Sterling Capital Variable Insurance Funds

 

 

The following table shows information for the trustees who are, each, an “interested person” of the Funds as defined in the 1940 Act:

INTERESTED TRUSTEES

 

Name and Birthdate

     Position(s) Held  
With the Funds
  

Term of Office/

Length of

Time Served

  

Principal Occupation
During the Past 5 Years

   Number of
Portfolios
in Fund
Complex

  by Trustee*  
    

Other
Directorships
Held

by Trustee

Alexander W. McAlister** Birthdate: 3/60    Trustee    Indefinite, 11/10 — Present    President, Sterling Capital      26       Director, Sterling Capital

Alan G. Priest***

Birthdate: 5/52

   Trustee   

Indefinite,

7/12 — Present

   Retired; from April 1987 to April 2012, Partner, Ropes & Gray LLP      26       None

 

  *

The Sterling Capital Fund Complex consists of two open-end investment management companies: Sterling Capital Funds and Sterling Capital Variable Insurance Funds.

 

  **

Mr. McAlister is treated by the Funds as an “interested person” (as defined in Section 2(a)(19) of the 1940 Act) of the Funds because he is an officer of the Advisor.

 

  ***

Mr. Priest is treated by the Fund as an “interested person” (as defined in Section 2(a)(19) of the 1940 Act) of the Funds because he was a partner of a law firm that acted as counsel to the Funds during the past two fiscal years.

The following table shows information for officers of the Funds:

 

Name and Birthdate

  

Position(s) Held

With the Funds

   Term of Office/
Length of
Time Served
  

Principal Occupation

During the Last 5 Years

James T. Gillespie

Birthdate: 11/66

   President    Indefinite,

President

12/12 — Present

   From March 2012 to present, Executive Director, Sterling Capital; From June 2010 to March 2012, Director, Sterling Capital and its predecessors; from August 2008 to June 2010, Vice President Relationship Management, JP Morgan Chase & Co.; from February 2005 to August 2008, Senior Vice President and Manager of Mutual Fund Administration, Sterling Capital and its predecessors

Kenneth R. Cotner

Birthdate: 2/59

   Treasurer    Indefinite,

12/12 — Present

   From 2001 to present, Chief Operating Officer; Sterling Capital and its predecessors

 

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Sterling Capital Variable Insurance Funds

 

 

 

Name and Birthdate

  

Position(s) Held

With the Funds

  

Term of Office/

Length of

Time Served

  

Principal Occupation

During the Last 5 Years

Todd M. Miller

Birthdate: 9/71

   Vice President and Secretary   

Indefinite,

Vice President,

8/05 — Present; Secretary,

8/10 — Present

   From June 2009 to present, Director, Sterling Capital Management LLC and its predecessors; from June 2005 to May 2009, Mutual Fund Administrator; from May 2001 to May 2005, Manager, BISYS Fund Services

Clinton L. Ward

Birthdate: 11/69

   Chief Compliance and Anti-Money Laundering Officer   

Indefinite,

4/07 — Present

   From July 2004 to present, Chief Compliance Officer and Executive Director, Sterling Capital Management LLC and its predecessors

Andrew J. McNally

Birthdate: 12/70

   Assistant Treasurer   

Indefinite,

Assistant

Treasurer,

6/10 — Present; Treasurer,

4/07 — 6/10

   From January 2007 to present, Vice President and Senior Director, and from July 2000 to December 2006, Vice President and Director, Fund Accounting and Administration Department, BNY Mellon Investment Servicing (US) Inc.

Julie M. Powers

Birthdate: 10/69

   Assistant Secretary   

Indefinite,

11/11 — Present

   From November 2011 to present, Vice President; from March 2009 to October 2011, Senior Manager and Vice President; from August 2005 to February 2009, Manager and Assistant Vice President, Regulatory Administration Department, BNY Mellon Investment Servicing (US) Inc.

The Funds’ Statement of Additional Information includes additional information about the Funds’ Trustees and Officers. To receive your free copy of the Statement of Additional Information, call toll free: 1-800-228-1872.

 

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Item 2. Code of Ethics.

 

  (a)  

The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party (the “Code of Ethics”).

 

  (c)  

There have been no amendments, during the period covered by this report, to a provision of the Code of Ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in Item 2(b) of Form N-CSR.

 

  (d)  

The registrant has not granted any waivers, including an implicit waiver, from a provision of the “code of ethics” that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in Item 2(b) of Form N-CSR.

Item 3. Audit Committee Financial Expert.

As of the end of the period covered by the report, the registrant’s board of trustees has determined that Drew Kagan is qualified to serve as an audit committee financial expert serving on its audit committee and that he is “independent,” as defined by Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

Audit Fees

 

  (a)  

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $70,300 in 2012 and $68,000 in 2011.

Audit-Related Fees

 

  (b)  

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $0 in 2012 and $0 in 2011.


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Tax Fees

 

  (c)  

The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $7,000 in 2012 and $11,200 in 2011 Fees for both 2012 and 2011 relate to the preparation of federal income and excise tax returns.

All Other Fees

 

  (d)  

The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2012 and $0 in 2011.

 

  (e)(1)   Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust’s Audit Committee must pre-approve all audit and non-audit services provided by the independent accountants relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
  (e)(2)   The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:

 

  (b)   N/A

 

  (c)   100%

 

  (d)   N/A

 

  (f)  

The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was zero percent.

 

  (g)  

The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $199,900 in 2012 and $94,590 in 2011.

 

  (h)  

The registrant’s audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.


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Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

 

  (a)  

Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.

 

  (b)  

Not applicable.

 

Item 7.   Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

 

Item 8.   Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

 

Item 9.   Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

 

Item 10.   Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

 

Item 11.   Controls and Procedures.

 

  (a)  

The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are effective to provide reasonable assurance that information required to be disclosed by the registrant on Form N-CSR is recorded, processed,


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summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that information required to be disclosed by the registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

  (b)  

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

 

      (a)(1)   The registrant’s Code of Ethics is attached hereto.
      (a)(2)   Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
      (a)(3)   Not applicable.
      (b)   Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.


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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 Variable Insurance Funds

 

By (Signature and Title)           /s/ James T. Gillespie
 

        James T. Gillespie, President

        (principal executive officer)

 

Date       02/28/2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)           /s/ James T. Gillespie
 

        James T. Gillespie, President

        (principal executive officer)

 

Date       02/28/2013

 

By (Signature and Title)           /s/ Kenneth R. Cotner
 

        Kenneth R. Cotner, Treasurer

        (principal financial officer)

 

Date       02/27/2013
EX-99.CODE ETH 2 d491743dex99codeeth.htm CODE OF ETHICS CODE OF ETHICS

EX-99.CODE ETH

STERLING CAPITAL FUNDS

STERLING CAPITAL VARIABLE INSURANCE FUNDS

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

PRINCIPAL FINANCIAL OFFICERS

I. Covered Officers/Purpose of the Code

The Sterling Capital Funds and the Sterling Capital Variable Insurance Funds, (together the “Funds”) code of ethics (this “Code”) applies to the Funds’ Principal Executive Officer (“President”) and Principal Financial Officer (“Treasurer”) (the “Covered Officers” each of whom is identified in Exhibit A) for the purpose of promoting:

 

   

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

   

full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Funds;

 

   

compliance with applicable laws and governmental rules and regulations;

 

   

the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

 

   

accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to apparent as well as actual conflicts of interest.

II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

Overview. A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position in the Companies.

Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the“1940 Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as “affiliated persons” of the Fund. Each Covered Officer is an employee of the Fund’s Adviser or Sub-Administrator (“Service Provider”). The Fund’s and the Service Provider’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

 

1


Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Funds and the Service Provider of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Funds or for the Service Provider, or for both), be involved in establishing policies and implementing decisions which will have different effects on the Service Provider and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the 1940 Act, will be deemed to have been handled ethically. In addition, it is recognized by the Board of Trustees (the “Board”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other Codes.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the 1940 Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds.

Each Covered Officer must:

 

   

not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds;

 

   

not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than for the benefit of the Funds; and

 

   

not use material non-public knowledge of portfolio transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.

III. Disclosure & Compliance

 

   

Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Funds;

 

   

each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Funds’ Trustees and auditors, and to governmental regulators and self-regulatory organizations;

 

   

each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the Funds’ adviser or subadviser and administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds files with, or submit to, the SEC and in other public communications made by the Funds; and

 

   

it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

 

2


IV. Reporting and Accountability

Each Covered Officer must:

 

   

upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code (see Exhibit B);

 

   

annually thereafter affirm to the Board that he/she has complied with the requirements of the Code (see Exhibit C);

 

   

not retaliate against any employee or Covered Officer or their affiliated persons for reports of potential violations that are made in good faith;

 

   

notify the Qualified Legal Compliance Committee (“QLCC”) promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code; and

 

   

report at least annually any change in his affiliations from the prior year.

The QLCC is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation.

The Funds will follow these procedures in investigating and enforcing this Code:

 

   

the QLCC will take all appropriate action to investigate any potential violations reported to it;

 

   

if, after such investigation, the QLCC believes that no violation has occurred, the QLCC is not required to take any further action;

 

   

if the QLCC concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Service Provider or its board; or a recommendation to dismiss the Covered Officer; and

 

   

any changes to this Code will, to the extent required, be disclosed as provided by SEC rules.

 

3


V. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds’ adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and their investment adviser’s, principal underwriter’s and service providers’ codes of ethics under Rule 17j-1 under the 1940 Act and the adviser’s more detailed policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code.

VI. Amendments

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Funds’ board, including a majority of independent directors/trustees.

VII. Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its counsel, the investment adviser and the respective Service Providers.

VIII. Internal Use

The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of the Funds, as to any fact, circumstance, or legal conclusion.

Date: November 19, 2003

As amended August 29, 2006, February 27, 2007, August 28, 2007 and February 24, 2009

 

4


STERLING CAPITAL FUNDS

STERLING CAPITAL VARIABLE INSURANCE FUNDS

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

PRINCIPAL FINANCIAL OFFICERS

Exhibit A - Persons Covered by this Code of Ethics

Principal Executive Officer and President

Principal Financial Officer and Treasurer

 

5


STERLING CAPITAL FUNDS

STERLING CAPITAL VARIABLE INSURANCE FUNDS

Exhibit B

INITIAL CERTIFICATION

 

 

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

 

 

PRINCIPAL FINANCIAL OFFICERS

 

 

I,                                              , [Principal Executive Officer/Principal Financial Officer] of Sterling Capital Funds and the Sterling Capital Variable Insurance Funds, (together the “Funds”) hereby certify that I have received, read and understand the Code of Ethics for Principal Executive and Principal Financial Officers (“Code”) of the Funds.

 

  
Name:
Title:

 

Date:    

 

6


STERLING CAPITAL FUNDS

STERLING CAPITAL VARIABLE INSURANCE FUNDS

Exhibit C

ANNUAL CERTIFICATION

 

 

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

 

 

PRINCIPAL FINANCIAL OFFICERS

 

 

I,                                              , [Principal Executive Officer/Principal Financial Officer] of Sterling Capital Funds and the Sterling Capital Variable Insurance Funds, (together the “Funds”) hereby certify that I have received and read the Code of Ethics for Principal Executive and Principal Financial Officers (“Code”) of the Funds. I further certify to the Boards that I understand and have complied with the requirements of the Code.

 

  
Name:
Title:

 

Date:    

 

7

EX-99.CERT 3 d491743dex99cert.htm 302 CERTIFICATIONS 302 CERTIFICATIONS

Certification Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the

Sarbanes-Oxley Act

I, James T. Gillespie, certify that:

 

1.

I have reviewed this report on Form N-CSR of Sterling Capital Variable Insurance Funds;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  (a)  

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)  

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)  

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and


  (d)  

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)  

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  (b)  

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:    02/28/2013                        

/s/ James T. Gillespie

 
    James T. Gillespie, President  
    (principal executive officer)  


Certification Pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the

Sarbanes-Oxley Act

I, Kenneth R. Cotner, certify that:

 

1.

I have reviewed this report on Form N-CSR of Sterling Capital Variable Insurance Funds;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  (a)  

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)  

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)  

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and


  (d)  

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)  

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  (b)  

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:    02/27/2013                        

/s/ Kenneth R. Cotner

 
    Kenneth R. Cotner, Treasurer  
    (principal financial officer)  
EX-99.906CERT 4 d491743dex99906cert.htm 906 CERTIFICATIONS 906 CERTIFICATIONS

Certification Pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the

Sarbanes-Oxley Act

I, James T. Gillespie, President of Sterling Capital Variable Insurance Funds (the “Registrant”), certify that, to the best of my knowledge:

 

  1.

The Form N-CSR of the Registrant for the period ended December 31, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

  2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Date:    02/28/2013                        

/s/ James T. Gillespie

 
    James T. Gillespie, President  
    (principal executive officer)  

I, Kenneth R. Cotner, Treasurer of Sterling Capital Variable Insurance Funds (the “Registrant”), certify that, to the best of my knowledge:

 

  1.

The Form N-CSR of the Registrant for the period ended December 31, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

  2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Date:    02/27/2013                        

/s/ Kenneth R. Cotner

 
    Kenneth R. Cotner, Treasurer  
    (principal financial officer)  
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