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: June 30, 2014
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.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
Sterling Capital Variable Insurance Funds
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| 2 | |||
3 | ||||
Schedules of Portfolio Investments | ||||
4 | ||||
5 | ||||
6 | ||||
12 | ||||
18 | ||||
23 |
Sterling Capital Variable Insurance Funds
|
Summary of Portfolio Holdings (Unaudited)
June 30, 2014
Each Sterling CapitalVariable Insurance Fund’s portfolio composition at June 30, 2014 was as follows:
Sterling Capital Equity Income VIF | Percentage of net assets | ||||
Consumer Discretionary | 15.4 | % | |||
Consumer Staples | 16.3 | % | |||
Energy | 15.8 | % | |||
Financials | 7.6 | % | |||
Health Care | 20.3 | % | |||
Industrials | 3.9 | % | |||
Information Technology | 10.1 | % | |||
Telecommunication Services | 3.8 | % | |||
Money Market Fund | 7.3 | % | |||
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| ||||
100.5 | % | ||||
|
| ||||
Sterling Capital Special Opportunities VIF | |||||
Consumer Discretionary | 18.6 | % | |||
Consumer Staples | 3.4 | % | |||
Energy | 10.6 | % | |||
Financials | 8.4 | % | |||
Health Care | 17.3 | % | |||
Industrials | 8.7 | % | |||
Information Technology | 32.0 | % | |||
Money Market Fund | 1.6 | % | |||
|
| ||||
100.6 | % | ||||
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| ||||
Sterling Capital Total Return Bond VIF | |||||
Asset Backed Securities | 7.1 | % | |||
Collateralized Mortgage Obligations | 9.3 | % | |||
Commercial Mortgage-Backed Securities | 18.5 | % | |||
Corporate Bonds | 39.4 | % | |||
Foreign Government Bonds | 1.2 | % | |||
Mortgage-Backed Securities | 10.5 | % | |||
Municipal Bonds | 9.2 | % | |||
Preferred Stocks | 1.5 | % | |||
U.S. Treasury Bonds | 1.0 | % | |||
U.S. Treasury Notes | 0.9 | % | |||
Money Market Fund | 0.5 | % | |||
|
| ||||
99.1 | % | ||||
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|
2
Sterling Capital Variable Insurance Funds
|
June 30, 2014
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 January 1, 2014 through June 30, 2014.
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 1/1/14 | Ending Account Value 6/30/14 | Expenses Paid During Period 1/1/14 - 6/30/14* | Expense Ratio During Period 1/1/14 - 6/30/14 | |||||
Sterling Capital Equity Income VIF | $1,000.00 | $1,045.80 | $6.04 | 1.19% | ||||
Sterling Capital Special Opportunities VIF | 1,000.00 | 1,133.80 | 6.93 | 1.31% | ||||
Sterling Capital Total Return Bond VIF | 1,000.00 | 1,042.20 | 6.28 | 1.24% |
* | Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by 181 (the number of days in the most recent fiscal half-year) divided by 365 (the number of days in the fiscal year). Expenses shown do not include annuity contract fees. |
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 1/1/14 | Ending Account Value 6/30/14 | Expenses Paid During Period 1/1/14 - 6/30/14* | Expense Ratio During Period 1/1/14 - 6/30/14 | |||||
Sterling Capital Equity Income VIF | $1,000.00 | $1,018.89 | $5.96 | 1.19% | ||||
Sterling Capital Special Opportunities VIF | 1,000.00 | 1,018.30 | 6.56 | 1.31% | ||||
Sterling Capital Total Return Bond VIF | 1,000.00 | 1,018.65 | 6.21 | 1.24% |
* | Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by 181 (the number of days in the most recent fiscal half-year) divided by 365 (the number of days in the fiscal year). Expenses shown do not include annuity contract fees. |
3
Sterling Capital Equity Income VIF
|
Schedule of Portfolio Investments
June 30, 2014 (Unaudited)
Shares | Fair Value | ||||||
COMMON STOCKS — 93.2% | |||||||
Consumer Discretionary — 15.4% | |||||||
13,999 | Mattel, Inc. | $ 545,540 | |||||
6,130 | McDonald’s Corp. | 617,536 | |||||
5,700 | Omnicom Group, Inc. | 405,954 | |||||
24,220 | Pearson PLC, ADR | 479,798 | |||||
3,600 | Time Warner Cable, Inc. | 530,280 | |||||
|
| ||||||
2,579,108 | |||||||
|
| ||||||
Consumer Staples — 16.3% | |||||||
9,800 | Coca-Cola Co. (The) | 415,128 | |||||
10,595 | General Mills, Inc. | 556,661 | |||||
7,570 | PepsiCo, Inc. | 676,304 | |||||
5,080 | Philip Morris International, Inc. | 428,295 | |||||
14,385 | Unilever PLC, ADR | 651,784 | |||||
|
| ||||||
2,728,172 | |||||||
|
| ||||||
Energy — 15.8% | |||||||
5,000 | Chevron Corp. | 652,750 | |||||
11,815 | Ensco PLC, Class A | 656,560 | |||||
18,090 | Kinder Morgan, Inc. | 655,943 | |||||
6,660 | Occidental Petroleum Corp. | 683,516 | |||||
|
| ||||||
2,648,769 | |||||||
|
| ||||||
Financials — 7.6% | |||||||
12,000 | MetLife, Inc. | 666,720 | |||||
6,445 | Travelers Cos., Inc. (The) | 606,281 | |||||
|
| ||||||
1,273,001 | |||||||
|
| ||||||
Health Care — 20.3% | |||||||
9,635 | Abbott Laboratories | 394,072 | |||||
6,630 | AbbVie, Inc. | 374,197 | |||||
8,980 | Baxter International, Inc. | 649,254 | |||||
7,800 | Novartis AG, ADR | 706,134 | |||||
18,260 | Pfizer, Inc. | 541,957 |
Shares | Fair Value | |||||
COMMON STOCKS — (continued) | ||||||
Health Care — (continued) | ||||||
6,800 | WellPoint, Inc. | $ | 731,748 | |||
|
| |||||
3,397,362 | ||||||
|
| |||||
Industrials — 3.9% | ||||||
6,275 | United Parcel Service, Inc., Class B | 644,191 | ||||
|
| |||||
Information Technology — 10.1% | ||||||
18,000 | Maxim Integrated Products, Inc. | 608,580 | ||||
9,190 | Microsoft Corp. | 383,223 | ||||
8,820 | QUALCOMM, Inc. | 698,544 | ||||
|
| |||||
1,690,347 | ||||||
|
| |||||
Telecommunication | ||||||
13,000 | Verizon Communications, Inc. | 636,090 | ||||
|
| |||||
Total Common Stocks | 15,597,040 | |||||
|
| |||||
MONEY MARKET FUND — 7.3% | ||||||
1,215,188 | Federated Treasury Obligations Fund, Institutional Shares | 1,215,188 | ||||
|
| |||||
Total Money Market Fund | 1,215,188 | |||||
|
| |||||
Total Investments — 100.5% | 16,812,228 | |||||
Net Other Assets (Liabilities) — (0.5)% | (86,312 | ) | ||||
|
| |||||
NET ASSETS — 100.0% | $ | 16,725,916 | ||||
|
|
ADR — American Depositary Receipt
See accompanying Notes to the Financial Statements.
4
Sterling Capital Special Opportunities VIF
|
Schedule of Portfolio Investments
June 30, 2014 (Unaudited)
Shares | Fair Value | ||||||
COMMON STOCKS — 99.0% | |||||||
Consumer Discretionary — 18.6% | |||||||
28,000 | Comcast Corp., Class A | $ | 1,503,040 | ||||
23,000 | DIRECTV(a) | 1,955,230 | |||||
14,300 | Discovery Communications, Inc., Class C(a) | 1,038,037 | |||||
63,000 | Ford Motor Co. | 1,086,120 | |||||
|
| ||||||
5,582,427 | |||||||
|
| ||||||
Consumer Staples — 3.4% | |||||||
27,000 | Mondelez International, Inc.,Class A | 1,015,470 | |||||
|
| ||||||
Energy — 10.6% | |||||||
7,500 | Apache Corp. | 754,650 | |||||
15,500 | EOG Resources, Inc. | 1,811,330 | |||||
9,000 | Halliburton Co. | 639,090 | |||||
|
| ||||||
3,205,070 | |||||||
|
| ||||||
Financials — 8.4% | |||||||
8,616 | American Campus Communities, | 329,476 | |||||
14,000 | Capital One Financial Corp. | 1,156,400 | |||||
15,500 | Och-Ziff Capital Management | 214,365 | |||||
17,100 | Ryman Hospitality Properties, | 823,365 | |||||
|
| ||||||
2,523,606 | |||||||
|
| ||||||
Health Care — 17.3% | |||||||
22,000 | Agilent Technologies, Inc. | 1,263,680 | |||||
17,300 | HCA Holdings, Inc.(a) | 975,374 | |||||
19,500 | Myriad Genetics, Inc.(a) | 758,940 | |||||
21,000 | UnitedHealth Group, Inc. | 1,716,750 | |||||
15,000 | Zoetis, Inc. | 484,050 | |||||
|
| ||||||
5,198,794 | |||||||
|
| ||||||
Industrials — 8.7% | |||||||
15,129 | Expeditors International of | 668,097 | |||||
24,000 | Nielsen NV | 1,161,840 |
Shares | Fair Value | ||||||
COMMON STOCKS — (continued) | |||||||
Industrials — (continued) | |||||||
13,000 | Verisk Analytics, Inc., Class A(a) | $ | 780,260 | ||||
|
| ||||||
2,610,197 | |||||||
|
| ||||||
Information Technology — 32.0% | |||||||
18,000 | Akamai Technologies, Inc.(a) | 1,099,080 | |||||
10,360 | Apple, Inc. | 962,755 | |||||
19,000 | Check Point Software Technologies, | 1,273,570 | |||||
65,000 | Cisco Systems, Inc. | 1,615,250 | |||||
18,600 | Citrix Systems, Inc.(a) | 1,163,430 | |||||
29,500 | eBay, Inc.(a) | 1,476,770 | |||||
18,000 | Intuit, Inc. | 1,449,540 | |||||
17,000 | NCR Corp.(a) | 596,530 | |||||
|
| ||||||
9,636,925 | |||||||
|
| ||||||
Total Common Stocks | 29,772,489 | ||||||
|
| ||||||
MONEY MARKET FUND — 1.6% | |||||||
491,524 | Federated Treasury Obligations Fund, Institutional Shares | 491,524 | |||||
|
| ||||||
Total Money Market Fund | 491,524 | ||||||
|
| ||||||
Total Investments — 100.6% | 30,264,013 | ||||||
Net Other Assets (Liabilities) — (0.6)% | (188,618 | ) | |||||
|
| ||||||
NET ASSETS — 100.0% | $ | 30,075,395 | |||||
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(a) | Represents non-income producing security. |
REIT — Real Estate Investment Trust
See accompanying Notes to the Financial Statements.
5
Sterling Capital Total Return Bond VIF
|
Schedule of Portfolio Investments
June 30, 2014 (Unaudited)
Principal | Fair Value | ||||||
ASSET BACKED SECURITIES — 7.1% |
| ||||||
$ 73,544 | Argent Securities, Inc. Pass Through | ||||||
Certificates, Series 2005-W3, Class A2D, |
| ||||||
0.492%, 11/25/35(a) | $ 69,463 | ||||||
246,000 | Avis Budget Rental Car Funding AESOP, LLC, | ||||||
Series 2012-3A, Class A, 2.100%, 3/20/19(b) | 248,702 | ||||||
102,000 | CarMax Auto Owner Trust, Series 2014-2, | ||||||
Class A3, 0.980%, 1/15/19 | 102,199 | ||||||
102,000 | Hyundai Auto Receivables Trust, Series 2014-B, | ||||||
Class A3, 0.900%, 12/17/18 | 102,054 | ||||||
75,544 | Long Beach Mortgage Loan Trust, | ||||||
Series 2006-WL2, Class 2A3, 0.352%, 1/25/36(a) | 71,287 | ||||||
60,774 | Park Place Securities, Inc. Pass Through | ||||||
Certificates, Series 2005-WHQ1, Class M2, |
| ||||||
0.652%, 3/25/35(a) | 60,119 | ||||||
148,609 | Securitized Asset Backed Receivables, LLC | ||||||
Trust, Series 2005-OP2, Class A2C, 0.472%, |
| ||||||
10/25/35(a) | 143,999 | ||||||
71,000 | World Omni Auto Receivables Trust, | ||||||
Series 2013-A, Class A3, 0.640%, 4/16/18 | 71,102 | ||||||
28,000 | World Omni Auto Receivables Trust, | ||||||
Series 2014-A, Class A3, 0.940%, 4/15/19 | 28,018 | ||||||
|
| ||||||
Total Asset Backed Securities | |||||||
(Cost $891,880) | 896,943 | ||||||
|
| ||||||
COLLATERALIZED MORTGAGE | |||||||
49,437 | Adjustable Rate Mortgage Trust, Series 2004-5, | ||||||
Class 4A1, 4.903%, 4/25/35(a) | 49,337 | ||||||
43,302 | Banc of America Alternative Loan Trust, | ||||||
Series 2004-10, Class 1CB1, 6.000%, 11/25/34 | 45,027 | ||||||
84,111 | Banc of America Funding Trust, Series 2006-2, | ||||||
Class 3A1, 6.000%, 3/25/36 | 84,943 | ||||||
46,813 | Countrywide Alternative Loan Trust, | ||||||
Series 2004-22CB, Class 1A1, 6.000%, 10/25/34 | 49,104 | ||||||
24,082 | Countrywide Home Loan Mortgage Pass | ||||||
Through Trust, Series 2002-38, Class A3, | |||||||
5.000%, 2/25/18 | 24,110 | ||||||
61,380 | Freddie Mac, Series 3768, Class V, 4.000%, | ||||||
11/15/23 | 66,380 | ||||||
49,504 | Freddie Mac, Series 4323, Class VA, 4.000%, | ||||||
3/15/27 | 53,668 | ||||||
145,586 | Freddie Mac, Series 4077, Class PJ, 3.500%, | ||||||
11/15/40 | 152,903 | ||||||
70,686 | Freddie Mac, Series 4328, Class KD, 3.000%, | ||||||
8/15/43 | 72,738 | ||||||
51,802 | MASTR Alternative Loan Trust, Series 2004-13, | ||||||
Class 3A1, 6.500%, 1/25/35 | 53,863 | ||||||
51,971 | PHHMC Trust, Series 2007-6, Class A1, | ||||||
5.623%, 12/18/37(a) | 52,632 | ||||||
12,815 | RAAC Trust, Series 2004-SP3, Class AI5, | ||||||
4.890%, 12/25/32(a) | 13,113 | ||||||
59,091 | RALI Trust, Series 2005-QR1, Class A, 6.000%, | ||||||
10/25/34 | 61,786 | ||||||
38,075 | Residential Asset Securitization Trust, | ||||||
Series 2004-IP2, Class 4A, 2.487%, 12/25/34(a) | 38,071 | ||||||
67,212 | Specialty Underwriting & Residential Finance | ||||||
Trust, Series 2004-AA1, Class 1A1, 5.000%, | |||||||
10/25/34 | 67,967 | ||||||
94,395 | Structured Adjustable Rate Mortgage Loan | ||||||
Trust, Series 2004-6, Class 4A1, 2.387%, | |||||||
6/25/34(a) | 95,740 |
Principal | Fair Value | ||||||
COLLATERALIZED MORTGAGE | |||||||
$ 14,360 | Structured Asset Securities Corp. Trust, | ||||||
Series 2005-6, Class 5A1, 5.000%, 5/25/35 | $ 14,633 | ||||||
83,111 | Wells Fargo Mortgage Backed Securities Trust, | ||||||
Series 2004-BB, Class A2, 2.615%, | |||||||
1/25/35(a) | 84,289 | ||||||
80,831 | Wells Fargo Mortgage Backed Securities Trust, | ||||||
Series 2005-AR16, Class 6A3, 2.615%, | |||||||
10/25/35(a) | 81,497 | ||||||
18,196 | Wells Fargo Mortgage Backed Securities Trust, | ||||||
Series 2007-16, Class 1A1, 6.000%, | |||||||
12/28/37 | 18,805 | ||||||
|
| ||||||
Total Collateralized Mortgage Obligations | |||||||
(Cost $1,138,238) | 1,180,606 | ||||||
|
| ||||||
COMMERCIAL MORTGAGE-BACKED | |||||||
78,406 | Banc of America Commercial Mortgage Trust, | ||||||
Series 2006-3, Class A4, 5.889%, 7/10/44(a) | 84,559 | ||||||
120,000 | Banc of America Commercial Mortgage Trust, | ||||||
Series 2006-5, Class A4, 5.414%, 9/10/47 | 129,204 | ||||||
4,986 | Banc of America Commercial Mortgage Trust, | ||||||
Series 2007-2, Class A2, 5.634%, 4/10/49(a) | 4,999 | ||||||
80,000 | Banc of America Commercial Mortgage Trust, | ||||||
Series 2007-5, Class A4, 5.492%, 2/10/51 | 87,239 | ||||||
73,000 | Banc of America Merrill Lynch Commercial | ||||||
Mortgage, Inc., Series 2005-1, Class AJ, | |||||||
5.466%, 11/10/42(a) | 75,228 | ||||||
40,000 | Banc of America Merrill Lynch Commercial | ||||||
Mortgage, Inc., Series 2005-3, Class AM, | |||||||
4.727%, 7/10/43 | 41,052 | ||||||
95,000 | Bear Stearns Commercial Mortgage Securities | ||||||
Trust, Series 2007-Top26, Class A4, 5.471%, | |||||||
1/12/45(a) | 104,627 | ||||||
60,000 | Bear Stearns Commercial Mortgage Securities | ||||||
Trust, Series 2007-PW18, Class A4, 5.700%, | |||||||
6/11/50 | 67,121 | ||||||
150,000 | CD Commercial Mortgage Trust, | ||||||
Series 2007-CD4, Class A4, 5.322%, 12/11/49 | 163,191 | ||||||
87,950 | COMM Mortgage Trust, Series 2006-C7, | ||||||
Class A4, 5.945%, 6/10/46(a) | 94,268 | ||||||
89,000 | COMM Mortgage Trust, Series 2013-CR11, | ||||||
Class A4, 4.258%, 10/10/46 | 96,231 | ||||||
117,000 | Commercial Mortgage Trust, Series 2005-GG5, | ||||||
Class AM, 5.277%, 4/10/37(a) | 122,639 | ||||||
139,000 | Credit Suisse First Boston Mortgage Securities | ||||||
Corp., Series 2005-C1, Class AJ, 5.075%, | |||||||
2/15/38(a) | 141,971 | ||||||
150,618 | GMAC Commercial Mortgage Securities, Inc., | ||||||
Series 2006-C1, Class A4, 5.238%, | |||||||
11/10/45(a) | 156,648 | ||||||
90,000 | GS Mortgage Securities Trust, | ||||||
Series 2014-GC18, Class A4, 4.074%, 1/10/47 | 95,600 | ||||||
116,765 | JPMorgan Chase Commercial Mortgage | ||||||
Securities Trust, Series 2006-CB16, Class A4, | |||||||
5.552%, 5/12/45 | 125,481 | ||||||
148,634 | LB-UBS Commercial Mortgage Trust, | ||||||
Series 2007-C1, Class A4, 5.424%, 2/15/40 | 162,264 | ||||||
118,000 | Morgan Stanley Capital I Trust, | ||||||
Series 2008-T29, Class A4, 6.454%, 1/11/43(a) | 135,542 | ||||||
80,000 | Morgan Stanley Capital I Trust, | ||||||
Series 2006-HQ8, Class AM, 5.647%, 3/12/44(a) | 85,272 |
Continued
6
Sterling Capital Total Return Bond VIF
|
Schedule of Portfolio Investments — (continued)
June 30, 2014 (Unaudited)
Principal | Fair Value | |||||
COMMERCIAL MORTGAGE-BACKED |
| |||||
$130,000 | Morgan Stanley Capital I Trust, | $ 143,783 | ||||
42,095 | Wachovia Bank Commercial Mortgage Trust, Series 2007-C30, Class A3, 5.246%, 12/15/43 | 42,163 | ||||
62,058 | Wachovia Bank Commercial Mortgage Trust, Series 2006-C27, Class A3, 5.765%, 7/15/45(a) | 66,113 | ||||
72,000 | WF-RBS Commercial Mortgage Trust, Series 2014-LC14, Class A5, 4.045%, 3/15/47 | 75,838 | ||||
39,000 | WF-RBS Commercial Mortgage Trust, Series 2014-C20, Class AS, 4.176%, 5/15/47 | 40,915 | ||||
|
| |||||
Total Commercial Mortgage-Backed Securities | 2,341,948 | |||||
|
| |||||
CORPORATE BONDS — 39.4% | ||||||
Consumer Discretionary — 3.8% | ||||||
21,000 | 21st Century Fox America, Inc., 5.400%, 10/1/43 | 23,431 | ||||
26,000 | Comcast Cable Communications Holdings, Inc., 9.455%, 11/15/22 | 37,791 | ||||
31,000 | ERAC USA Finance, LLC, 5.625%, 3/15/42(b) | 35,068 | ||||
29,000 | Ford Motor Co., 7.450%, 7/16/31 | 38,771 | ||||
47,000 | General Motors Financial Co., Inc., 2.750%, 5/15/16 | 47,705 | ||||
34,000 | Interpublic Group of Cos., Inc. (The), 3.750%, 2/15/23 | 34,108 | ||||
41,000 | Lear Corp., 5.375%, 3/15/24 | 42,127 | ||||
27,000 | NBCUniversal Media, LLC, 5.950%, 4/1/41 | 33,150 | ||||
26,000 | Royal Caribbean Cruises, Ltd., 11.875%, 7/15/15 | 28,795 | ||||
37,000 | Time Warner Cable, Inc., 4.000%, 9/1/21 | 39,525 | ||||
40,000 | Toll Brothers Finance Corp., 6.750%, 11/1/19 | 46,100 | ||||
29,000 | Viacom, Inc., 5.850%, 9/1/43 | 33,316 | ||||
33,000 | Wyndham Worldwide Corp., 5.625%, 3/1/21 | 37,193 | ||||
|
| |||||
477,080 | ||||||
|
| |||||
Consumer Staples — 0.8% | ||||||
42,000 | Altria Group, Inc., 5.375%, 1/31/44 | 46,004 | ||||
26,000 | CVS Caremark Corp., 6.125%, 9/15/39 | 32,375 | ||||
25,000 | Lorillard Tobacco Co., 6.875%, 5/1/20 | 29,709 | ||||
|
| |||||
108,088 | ||||||
|
| |||||
Energy — 5.9% | ||||||
30,000 | Access Midstream Partners LP/ACMP Finance Corp., 6.125%, 7/15/22 | 33,150 | ||||
16,000 | Access Midstream Partners LP/ACMP Finance Corp., 4.875%, 3/15/24 | 16,900 | ||||
33,000 | Chesapeake Energy Corp., 3.479%, 4/15/19(a) | 33,371 | ||||
35,000 | Continental Resources, Inc., 4.900%, 6/1/44(b) | 36,165 | ||||
32,000 | Denbury Resources, Inc., 5.500%, 5/1/22 | 32,720 | ||||
24,000 | Enable Midstream Partners LP, 5.000%, 5/15/44(b) | 24,186 | ||||
37,000 | Energy Transfer Partners LP, 9.000%, 4/15/19 | 47,283 | ||||
40,000 | Enterprise Products Operating, LLC, 5.950%, 2/1/41 | 47,612 | ||||
18,000 | Hess Corp., 5.600%, 2/15/41 | 20,930 | ||||
32,000 | Kinder Morgan Energy Partners LP, 5.000%, 3/1/43 | 31,758 | ||||
32,000 | NuStar Logistics LP, 8.150%, 4/15/18 | 36,759 |
Principal | Fair Value | |||||
CORPORATE BONDS — (continued) |
| |||||
Energy — (continued) | ||||||
$33,000 | Petrobras International Finance Co., 3.500%, 2/6/17 | $ 33,875 | ||||
46,000 | Petrofac, Ltd., 3.400%, 10/10/18(b) | 47,751 | ||||
30,000 | Petrohawk Energy Corp., 6.250%, 6/1/19 | 32,400 | ||||
27,000 | Phillips 66, 5.875%, 5/1/42 | 32,348 | ||||
30,000 | Plains Exploration & Production Co., 6.500%, 11/15/20 | 33,488 | ||||
26,000 | Regency Energy Partners LP/Regency Energy Finance Corp., 6.500%, 7/15/21 | 28,340 | ||||
41,000 | Schlumberger Investment SA, 3.300%, 9/14/21(b) | 42,527 | ||||
30,000 | Shell International Finance BV, 4.550%, 8/12/43 | 31,599 | ||||
42,000 | Statoil ASA, 4.800%, 11/8/43 | 46,304 | ||||
30,000 | Western Gas Partners LP, 4.000%, 7/1/22 | 31,071 | ||||
20,000 | Williams Partners LP, 4.300%, 3/4/24 | 20,858 | ||||
|
| |||||
741,395 | ||||||
|
| |||||
Financials — 20.7% | ||||||
33,000 | Ally Financial, Inc., 2.750%, 1/30/17 | 33,371 | ||||
94,000 | American International Group, Inc., 3.800%, 3/22/17 | 100,449 | ||||
31,000 | Apollo Management Holdings LP, 4.000%, 5/30/24(b) | 31,198 | ||||
45,000 | Aspen Insurance Holdings, Ltd., 4.650%, 11/15/23 | 46,743 | ||||
39,000 | Associates Corp. of North America, 6.950%, 11/1/18 | 46,576 | ||||
84,000 | Bank of America Corp., MTN, 6.875%, 4/25/18 | 98,963 | ||||
35,000 | Bank of America Corp., MTN, 5.875%, 2/7/42 | 41,566 | ||||
31,000 | Bank of America Corp., Series K, 8.000%, 7/29/49(a) | 34,309 | ||||
79,000 | Bear Stearns Cos., LLC (The), 5.550%, 1/22/17 | 87,084 | ||||
33,000 | Blackstone Holdings Finance Co., LLC, 6.625%, 8/15/19(b) | 39,397 | ||||
32,000 | Carlyle Holdings Finance, LLC, 3.875%, 2/1/23(b) | 32,606 | ||||
51,000 | CBRE Services, Inc., 6.625%, 10/15/20 | 54,124 | ||||
40,000 | CIT Group, Inc., 4.250%, 8/15/17 | 41,725 | ||||
26,000 | Citigroup, Inc., 5.875%, 1/30/42 | 31,104 | ||||
46,000 | Corrections Corp. of America, REIT, 4.125%, 4/1/20(b) | 45,655 | ||||
45,000 | CubeSmart LP, REIT, 4.800%, 7/15/22 | 48,430 | ||||
30,000 | Duke Realty LP, REIT, 7.375%, 2/15/15 | 31,232 | ||||
32,000 | Excel Trust LP, REIT, 4.625%, 5/15/24 | 32,544 | ||||
7,000 | Federal Realty Investment Trust, REIT, 2.750%, 6/1/23 | 6,702 | ||||
20,000 | First American Financial Corp., 4.300%, 2/1/23 | 20,054 | ||||
72,000 | General Electric Capital Corp., 5.300%, 2/11/21 | 81,873 | ||||
24,000 | General Electric Capital Corp., GMTN, 6.875%, 1/10/39 | 32,239 | ||||
41,000 | Goldman Sachs Group, Inc. (The), 6.250%, 2/1/41 | 50,016 | ||||
60,000 | Health Care REIT, Inc., 4.950%, 1/15/21 | 66,646 | ||||
40,000 | Healthcare Realty Trust, Inc., REIT, 3.750%, 4/15/23 | 39,072 | ||||
47,000 | Healthcare Trust of America Holdings LP, REIT, 3.700%, 4/15/23 | 45,670 | ||||
30,000 | Host Hotels & Resorts LP, REIT, | 29,729 |
Continued |
7
Sterling Capital Total Return Bond VIF
|
Schedule of Portfolio Investments — (continued)
June 30, 2014 (Unaudited)
Principal Amount | Fair Value | ||||||
CORPORATE BONDS — (continued) | |||||||
Financials — (continued) | |||||||
$77,000 | HSBC Finance Corp., 6.676%, 1/15/21 | $ 92,084 | |||||
28,000 | Invesco Finance PLC, 3.125%, 11/30/22 | 27,772 | |||||
35,000 | Jefferies Group, LLC, 8.500%, 7/15/19 | 43,750 | |||||
42,000 | Jones Lang LaSalle, Inc., 4.400%, 11/15/22 | 42,440 | |||||
31,000 | JPMorgan Chase & Co., Series Q, 5.150%, 12/29/49(a) | 29,721 | |||||
30,000 | Liberty Mutual Group, Inc., 7.800%, 3/15/37(b) | 35,400 | |||||
30,000 | Macquarie Bank, Ltd., 5.000%, 2/22/17(b) | 32,694 | |||||
29,000 | Macquarie Bank, Ltd., 6.625%, 4/7/21(b) | 33,291 | |||||
19,000 | Massachusetts Mutual Life Insurance Co., 8.875%, 6/1/39(b) | 30,259 | |||||
103,000 | Morgan Stanley, GMTN, 6.625%, 4/1/18 | 120,404 | |||||
92,000 | Murray Street Investment Trust I, STEP, 4.647%, 3/9/17 | 99,432 | |||||
53,000 | National City Corp., 6.875%, 5/15/19 | 63,299 | |||||
33,000 | National Rural Utilities Cooperative Finance Corp., 4.750%, 4/30/43(a) | 32,476 | |||||
25,000 | Nationwide Mutual Insurance Co., 9.375%, 8/15/39(b) | 38,909 | |||||
36,000 | Pacific LifeCorp, 5.125%, 1/30/43(b) | 37,352 | |||||
40,000 | ProAssurance Corp., 5.300%, 11/15/23 | 43,485 | |||||
40,000 | Prudential Financial, Inc., 8.875%, 6/15/38(a) | 49,052 | |||||
27,000 | Prudential Financial, Inc., MTN, Series D, 7.375%, 6/15/19 | 33,437 | |||||
32,000 | Reinsurance Group of America, Inc., 5.625%, 3/15/17 | 34,943 | |||||
30,000 | Retail Opportunity Investments Partnership LP, REIT, 5.000%, 12/15/23 | 32,110 | |||||
37,000 | Royal Bank of Canada, GMTN, 2.200%, 7/27/18 | 37,783 | |||||
30,000 | Royal Bank of Scotland Group PLC, 5.000%, 10/1/14 | 30,282 | |||||
17,000 | Senior Housing Properties Trust, REIT, 6.750%, 4/15/20 | 19,640 | |||||
45,000 | Simon Property Group LP, REIT, 10.350%, 4/1/19 | 60,969 | |||||
30,000 | Sirius International Group, Ltd., 6.375%, 3/20/17(b) | 33,179 | |||||
38,000 | SunTrust Banks, Inc., 3.500%, 1/20/17 | 40,234 | |||||
26,000 | Transatlantic Holdings, Inc., 8.000%, 11/30/39 | 36,061 | |||||
25,000 | Validus Holdings, Ltd., 8.875%, 1/26/40 | 35,924 | |||||
70,000 | Wachovia Corp., 5.625%, 10/15/16 | 77,140 | |||||
37,000 | Wachovia Corp., 5.500%, 8/1/35 | 41,679 | |||||
|
| ||||||
2,614,278 | |||||||
|
| ||||||
Health Care — 1.5% | |||||||
36,000 | DaVita HealthCare Partners, Inc., 6.625%, 11/1/20 | 38,250 | |||||
42,000 | DENTSPLY International, Inc., 2.750%, 8/15/16 | 43,497 | |||||
28,000 | Fresenius US Finance II, Inc., 9.000%, 7/15/15(b) | 30,170 | |||||
28,000 | Mylan, Inc., 7.875%, 7/15/20(b) | 30,992 | |||||
42,000 | Ventas Realty LP, 5.700%, 9/30/43 | 49,016 | |||||
|
| ||||||
191,925 | |||||||
|
| ||||||
Industrials — 1.9% | |||||||
24,000 | Burlington Northern Santa Fe, LLC, 4.950%, 9/15/41 | 25,785 | |||||
36,000 | CNH Industrial Capital, LLC, 3.875%, 11/1/15 | 36,720 |
Principal Amount | Fair Value | ||||||
CORPORATE BONDS — (continued) | |||||||
Industrials — (continued) | |||||||
$29,500 | Nielsen Finance, LLC/Nielsen Finance Co., 4.500%, 10/1/20 | $ 29,721 | |||||
39,000 | Ryder System, Inc., MTN, 2.350%, 2/26/19 | 39,321 | |||||
25,000 | Textron, Inc., 3.650%, 3/1/21 | 25,777 | |||||
30,000 | United Rentals North America, Inc., 7.375%, 5/15/20 | 33,150 | |||||
35,000 | Verisk Analytics, Inc., 5.800%, 5/1/21 | 39,461 | |||||
12,000 | Worthington Industries, Inc., 4.550%, 4/15/26 | 12,482 | |||||
|
| ||||||
242,417 | |||||||
|
| ||||||
Information | |||||||
27,000 | Altera Corp., 1.750%, 5/15/17 | 27,301 | |||||
|
| ||||||
Materials — 2.1% | |||||||
30,000 | FMG Resources (August 2006) Pty, Ltd., 6.875%, 4/1/22(b) | 32,175 | |||||
61,000 | Glencore Finance Canada, Ltd., 4.250%, 10/25/22(b) | 61,782 | |||||
36,000 | Louisiana-Pacific Corp., 7.500%, 6/1/20 | 39,600 | |||||
32,000 | LYB International Finance BV, 4.875%, 3/15/44 | 33,363 | |||||
32,000 | Mosaic Co. (The), 5.450%, 11/15/33 | 35,857 | |||||
29,000 | Rock-Tenn Co., 4.900%, 3/1/22 | 31,653 | |||||
34,000 | Rockwood Specialties Group, Inc., 4.625%, 10/15/20 | 35,275 | |||||
|
| ||||||
269,705 | |||||||
|
| ||||||
Telecommunication | |||||||
21,000 | British Telecommunications PLC, 9.625%, 12/15/30 | 33,448 | |||||
35,000 | GTP Acquisition Partners I, LLC, 7.628%, 6/15/16(b) | 37,111 | |||||
26,000 | Level 3 Financing, Inc., 9.375%, 4/1/19 | 28,535 | |||||
27,000 | Telefonica Emisiones SAU, 5.134%, 4/27/20 | 30,147 | |||||
64,000 | Verizon Communications, Inc., 6.550%, 9/15/43 | 80,540 | |||||
|
| ||||||
209,781 | |||||||
|
| ||||||
Utilities — 0.8% | |||||||
24,000 | CMS Energy Corp., 8.750%, 6/15/19 | 30,940 | |||||
33,000 | Progress Energy, Inc., 3.150%, 4/1/22 | 33,098 | |||||
37,000 | PSEG Power, LLC, 2.450%, 11/15/18 | 37,445 | |||||
|
| ||||||
101,483 | |||||||
|
| ||||||
Total Corporate Bonds | 4,983,453 | ||||||
|
| ||||||
FOREIGN GOVERNMENT BONDS — 1.2% | |||||||
Mexico — 0.9% | |||||||
32,000 | United Mexican States, 5.550%, 1/21/45 | 36,400 | |||||
72,000 | United Mexican States, MTN, 4.750%, 3/8/44 | 73,440 | |||||
|
| ||||||
109,840 | |||||||
|
| ||||||
Poland — 0.3% | |||||||
37,000 | Republic of Poland, 3.000%, 3/17/23 | 35,946 | |||||
|
| ||||||
Total Foreign Government Bonds | 145,786 | ||||||
|
| ||||||
MORTGAGE-BACKED | |||||||
Fannie Mae — 5.9% | |||||||
4,707 | 4.500%, 10/1/18, Pool #752030 | 4,998 | |||||
7,976 | 5.000%, 10/1/25, Pool #255894 | 8,862 |
Continued
8
Sterling Capital Total Return Bond VIF
|
Schedule of Portfolio Investments — (continued)
June 30, 2014 (Unaudited)
Principal | Fair Value | ||||||
MORTGAGE-BACKED | |||||||
Fannie Mae — (continued) | |||||||
$126,050 | 4.000%, 6/1/32, Pool #MA1089 | $ 135,508 | |||||
3,169 | 7.000%, 6/1/35, Pool #255820 | 3,577 | |||||
12,467 | 5.000%, 11/1/35, Pool #842402 | 13,871 | |||||
10,421 | 6.000%, 12/1/36, Pool #902054 | 11,767 | |||||
98,846 | 5.500%, 8/1/37, Pool #995082 | 111,101 | |||||
43,710 | 5.000%, 6/1/40, Pool #AD4927 | 48,586 | |||||
40,548 | 5.000%, 6/1/40, Pool #AD7860 | 45,105 | |||||
87,468 | 4.500%, 5/1/41, Pool #AI1023 | 94,767 | |||||
55,173 | 4.500%, 11/1/41, Pool #AJ4994 | 59,818 | |||||
81,510 | 4.000%, 1/1/42, Pool #AK0685 | 87,353 | |||||
117,411 | 3.500%, 5/1/43, Pool #AB9368 | 121,049 | |||||
|
| ||||||
746,362 | |||||||
|
| ||||||
Freddie Mac — 3.4% | |||||||
6,586 | 6.000%, 10/1/19, Pool #G11679 | 6,914 | |||||
4,281 | 5.500%, 10/1/21, Pool #G12425 | 4,674 | |||||
16,118 | 6.500%, 12/1/37, Pool #A69955 | 18,162 | |||||
64,324 | 4.500%, 1/1/40, Pool #A90764 | 69,651 | |||||
48,558 | 3.766%, 7/1/40, Pool #1B4948(a) | 50,985 | |||||
135,088 | 5.000%, 7/1/40, Pool #A93070 | 149,632 | |||||
123,522 | 4.000%, 11/1/41, Pool #Q04740 | 131,035 | |||||
|
| ||||||
431,053 | |||||||
|
| ||||||
Ginnie Mae — 1.2% | |||||||
104,894 | 4.500%, 6/15/39, Pool #701962 | 114,361 | |||||
38,538 | 5.000%, 2/15/40, Pool #737037 | 42,529 | |||||
|
| ||||||
156,890 | |||||||
|
| ||||||
Total Mortgage-Backed Securities | 1,334,305 | ||||||
|
| ||||||
MUNICIPAL BONDS — 9.2% | |||||||
California — 2.7% | |||||||
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 | 248,171 | |||||
65,000 | State of California, Build America Bonds, School Improvements G.O., 7.625%, 3/1/40 | 95,599 | |||||
|
| ||||||
343,770 | |||||||
|
| ||||||
Colorado — 0.5% | |||||||
55,000 | Colorado Housing & Finance Authority, Unemployment/Welfare Funding Revenue, Taxable, Series B, 1.600%, 5/15/16 | 56,020 | |||||
|
| ||||||
Connecticut — 0.5% | |||||||
60,000 | State of Connecticut, Public Improvements G.O., Taxable, | 58,465 | |||||
|
| ||||||
District of Columbia — 0.5% | |||||||
65,000 | George Washington University (The), Series 2012, 3.485%, 9/15/22 | 64,855 | |||||
|
| ||||||
Illinois — 1.0% | |||||||
130,000 | State of Illinois, Public Improvements Revenue, Taxable, 2.931%, 6/15/22 | 126,632 | |||||
|
| ||||||
New Jersey — 0.3% | |||||||
40,000 | New Jersey Economic Development Authority, School Facilities Construction, Refunding Revenue, Series 00, 1.648%, 3/1/18 | 39,947 | |||||
|
|
Principal Amount | Fair Value | ||||||
MUNICIPAL BONDS — (continued) | |||||||
New York — 2.1% | |||||||
$100,000 | New York State Environmental Facilities Corp., State Revolving Funds, Refunding Revenue, Taxable, Series C, 2.745%, 6/15/22 | $ 97,512 | |||||
155,000 | New York, NY, Build America Bonds, Public Improvements G.O., 4.774%, 3/1/20 | 172,149 | |||||
|
| ||||||
269,661 | |||||||
|
| ||||||
Pennsylvania — 0.5% | |||||||
70,000 | Philadelphia Authority for Industrial Development, Refunding Revenue, Taxable, 3.664%, 4/15/22 | 68,519 | |||||
|
| ||||||
Washington — 0.4% | |||||||
45,000 | Port of Vancouver, WA, Refunding G.O., Limited Tax, Taxable, Series B, 2.714%, 12/1/21 | 44,249 | |||||
|
| ||||||
Wisconsin — 0.7% | |||||||
90,000 | Milwaukee County, WI, Pension Promissory Notes, Refunding G.O., Taxable, Callable 12/1/22 @ 100, 3.862%, 12/1/30 | 87,983 | |||||
|
| ||||||
Total Municipal Bonds | 1,160,101 | ||||||
|
| ||||||
U.S. TREASURY BONDS — 1.0% | |||||||
135,000 | 3.125%, 2/15/43 | 129,959 | |||||
|
| ||||||
Total U.S. Treasury Bonds | 129,959 | ||||||
|
| ||||||
U.S. TREASURY NOTES — 0.9% | |||||||
115,000 | 1.750%, 5/31/16 | 117,911 | |||||
|
| ||||||
Total U.S. Treasury Notes | 117,911 | ||||||
|
| ||||||
Shares | |||||||
PREFERRED STOCKS — 1.5% | |||||||
Financials — 1.0% | |||||||
2,059 | Citigroup Capital XIII, 7.875% | 57,034 | |||||
1,137 | Lloyds Banking Group PLC, 7.750% | 30,267 | |||||
1,341 | US Bancorp, Series F, 6.500% | 37,897 | |||||
|
| ||||||
125,198 | |||||||
|
| ||||||
Telecommunication | |||||||
960 | Qwest Corp., 7.000% | 24,874 | |||||
|
| ||||||
Utilities — 0.3% | |||||||
1,375 | Dominion Resources, Inc., Series A, 8.375% | 35,090 | |||||
|
| ||||||
Total Preferred Stocks | 185,162 | ||||||
|
| ||||||
MONEY MARKET FUND — 0.5% | |||||||
65,211 | Federated Treasury Obligations Fund, Institutional Shares | 65,211 | |||||
|
| ||||||
Total Money Market Fund | 65,211 | ||||||
|
|
Continued |
9
Sterling Capital Total Return Bond VIF
|
Schedule of Portfolio Investments — (continued)
June 30, 2014 (Unaudited)
Fair Value | ||||
Total Investments — 99.1% | $ | 12,541,385 | ||
Net Other Assets (Liabilities) — 0.9% | 111,326 | |||
|
| |||
NET ASSETS — 100.0% | $ | 12,652,711 | ||
|
|
(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 June 30, 2014. The maturity date reflected is the final maturity date. |
(b) | Rule 144A, Section 4(2) or other security that is restricted as to resale to qualified institutional investors. The Advisor, using Board approved procedures, has deemed these securities or a portion of these securities to be liquid. |
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. |
10
(This page has been left blank intentionally.)
Sterling Capital Variable Insurance Funds
|
Statements of Assets and Liabilities
June 30, 2014 (Unaudited)
Sterling Capital Equity Income VIF | Sterling Capital Special Opportunities VIF | Sterling Capital Total Return Bond VIF | |||||||||||||
Assets: | |||||||||||||||
Investments at fair value (a) | $ | 16,812,228 | $ | 30,264,013 | $ | 12,541,385 | |||||||||
Cash | 10 | 6 | 13 | ||||||||||||
Interest and dividends receivable | 20,079 | 22,389 | 104,827 | ||||||||||||
Receivable for investments sold | — | — | 12,691 | ||||||||||||
Receivable for capital shares issued | — | — | 69,704 | ||||||||||||
Prepaid expenses | 9,367 | 15,718 | 7,721 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total Assets | 16,841,684 | 30,302,126 | 12,736,341 | ||||||||||||
|
|
|
|
|
| ||||||||||
Liabilities: | |||||||||||||||
Payable for investments purchased | — | — | 56,456 | ||||||||||||
Payable for capital shares redeemed | 86,831 | 173,767 | — | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 9,724 | 18,437 | 5,175 | ||||||||||||
Administration fees | 1,295 | 2,291 | 965 | ||||||||||||
Accounting out-of-pocket fees | 895 | 394 | 7,001 | ||||||||||||
Audit fees | 9,292 | 16,474 | 7,595 | ||||||||||||
Trustee fees | 58 | 85 | 48 | ||||||||||||
Other fees | 7,673 | 15,283 | 6,390 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total Liabilities | 115,768 | 226,731 | 83,630 | ||||||||||||
|
|
|
|
|
| ||||||||||
Net Assets | $ | 16,725,916 | $ | 30,075,395 | $ | 12,652,711 | |||||||||
|
|
|
|
|
| ||||||||||
Net Assets Consist of: | |||||||||||||||
Capital | $ | 31,052,048 | $ | 14,005,314 | $ | 12,070,756 | |||||||||
Undistributed net investment income | 757 | 34,157 | 320,376 | ||||||||||||
Accumulated realized gain (loss) | (16,450,040 | ) | 4,810,875 | (121,925 | ) | ||||||||||
Net unrealized appreciation (depreciation) | 2,123,151 | 11,225,049 | 383,504 | ||||||||||||
|
|
|
|
|
| ||||||||||
Net Assets | $ | 16,725,916 | $ | 30,075,395 | $ | 12,652,711 | |||||||||
|
|
|
|
|
| ||||||||||
Shares of Beneficial Interest Outstanding (Unlimited number of shares authorized, no par value) | 1,540,863 | 1,408,144 | 1,262,720 | ||||||||||||
|
|
|
|
|
| ||||||||||
Net Asset Value — offering and redemption price per share | $ | 10.85 | $ | 21.36 | $ | 10.02 | |||||||||
|
|
|
|
|
| ||||||||||
(a) Investments at cost | $ | 14,689,077 | $ | 19,038,964 | $ | 12,157,881 |
See accompanying Notes to the Financial Statements. |
12
Sterling Capital Variable Insurance Funds
|
Statements of Operations
For the Six Months Ended June 30, 2014 (Unaudited)
Sterling Capital Equity Income VIF | Sterling Capital Special Opportunities VIF | Sterling Capital Total Return Bond VIF | |||||||||||||
Investment Income: | |||||||||||||||
Interest income | $ — | $ — | $242,850 | ||||||||||||
Dividend income | 273,258 | 183,582 | 8,171 | ||||||||||||
Foreign taxes withheld | (4,084 | ) | (1,620 | ) | — | ||||||||||
|
|
|
|
|
| ||||||||||
Total investment income | 269,174 | 181,962 | 251,021 | ||||||||||||
|
|
|
|
|
| ||||||||||
Expenses: | |||||||||||||||
Investment advisory fees (See Note 4) | 57,595 | 115,103 | 31,977 | ||||||||||||
Administration fees (See Note 4) | 7,662 | 13,687 | 5,956 | ||||||||||||
Accounting out-of-pocket fees | 4,005 | 4,094 | 18,593 | ||||||||||||
Audit fees | 8,804 | 15,672 | 7,090 | ||||||||||||
Custodian fees | 651 | 959 | 573 | ||||||||||||
Fund accounting fees (See Note 4) | 617 | 1,102 | 480 | ||||||||||||
Insurance fees | 11,010 | 18,475 | 8,675 | ||||||||||||
Interest expense (See Note 5) | 4 | 5 | — | ||||||||||||
Legal fees | 3,727 | 6,654 | 2,993 | ||||||||||||
Printing fees | 5,358 | 9,587 | 4,192 | ||||||||||||
Transfer agent fees (See Note 4) | 2,477 | 4,386 | 1,978 | ||||||||||||
Trustee fees | 891 | 1,584 | 705 | ||||||||||||
Other fees | 1,373 | 2,143 | 1,165 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total expenses before waivers | 104,174 | 193,451 | 84,377 | ||||||||||||
Less expenses waived by the Investment Advisor (See Note 4) | (6,506 | ) | (974 | ) | (5,140 | ) | |||||||||
|
|
|
|
|
| ||||||||||
Net expenses | 97,668 | 192,477 | 79,237 | ||||||||||||
|
|
|
|
|
| ||||||||||
Net investment income (loss) | 171,506 | (10,515 | ) | 171,784 | |||||||||||
|
|
|
|
|
| ||||||||||
Realized and Unrealized Gain: | |||||||||||||||
Net realized gain from investments | 391,398 | 1,167,931 | 28,441 | ||||||||||||
Change in unrealized appreciation/depreciation on investments | 168,982 | 2,568,179 | 329,704 | ||||||||||||
|
|
|
|
|
| ||||||||||
Total realized and unrealized gain | 560,380 | 3,736,110 | 358,145 | ||||||||||||
|
|
|
|
|
| ||||||||||
Change in net assets from operations | $731,886 | $3,725,595 | $529,929 | ||||||||||||
|
|
|
|
|
|
See accompanying Notes to the Financial Statements. |
13
Sterling Capital Variable Insurance Funds
|
Statements of Changes in Net Assets
Sterling Capital Equity Income VIF | ||||||||
For the Six Months Ended June 30, 2014 (Unaudited) | For the Year Ended December 31, 2013 | |||||||
From Investment Activities: | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 171,506 | $ | 233,488 | ||||
Net realized gain | 391,398 | 4,139,865 | ||||||
Change in unrealized appreciation/depreciation | 168,982 | (1,515,250 | ) | |||||
|
|
|
| |||||
Change in net assets from operations | 731,886 | 2,858,103 | ||||||
|
|
|
| |||||
Distributions to Shareholders From: | ||||||||
Net investment income | (199,095 | ) | (219,509 | ) | ||||
Net realized gains | — | — | ||||||
|
|
|
| |||||
Change in net assets from shareholder distributions | (199,095 | ) | (219,509 | ) | ||||
|
|
|
| |||||
Capital Transactions: | ||||||||
Proceeds from shares issued | 134,918 | 753,357 | ||||||
Distributions reinvested | 199,095 | 219,509 | ||||||
Value of shares redeemed | (1,467,235 | ) | (4,090,194 | ) | ||||
|
|
|
| |||||
Change in net assets from capital transactions | (1,133,222 | ) | (3,117,328 | ) | ||||
|
|
|
| |||||
Change in net assets | (600,431 | ) | (478,734 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 17,326,347 | 17,805,081 | ||||||
|
|
|
| |||||
End of period | $ | 16,725,916 | $ | 17,326,347 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 757 | $ | 28,346 | ||||
|
|
|
| |||||
Share Transactions: | ||||||||
Issued | 13,143 | 77,495 | ||||||
Reinvested | 18,928 | 22,165 | ||||||
Redeemed | (140,931 | ) | (416,988 | ) | ||||
|
|
|
| |||||
Change in Shares | (108,860 | ) | (317,328 | ) | ||||
|
|
|
|
See accompanying Notes to the Financial Statements. |
14
Sterling Capital Special Opportunities VIF | Sterling Capital Total Return Bond VIF | ||||||||||||||||||||
For the Six Months Ended June 30, 2014 (Unaudited) | For the Year Ended December 31, 2013 | For the Six Months Ended June 30, 2014 (Unaudited) | For the Year Ended December 31, 2013 | ||||||||||||||||||
$ | (10,515 | ) | $ | 35,486 | $ | 171,784 | $ | 391,655 | |||||||||||||
1,167,931 | 3,698,673 | 28,441 | 5,981 | ||||||||||||||||||
2,568,179 | 3,390,674 | 329,704 | (658,923 | ) | |||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
3,725,595 | 7,124,833 | 529,929 | (261,287 | ) | |||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
— | (22,471 | ) | (207,541 | ) | (486,121 | ) | |||||||||||||||
— | (3,350,231 | ) | — | (487,195 | ) | ||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
— | (3,372,702 | ) | (207,541 | ) | (973,316 | ) | |||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
196,798 | 385,700 | 127,106 | 959,746 | ||||||||||||||||||
— | 3,372,702 | 207,544 | 973,316 | ||||||||||||||||||
(3,500,886 | ) | (8,785,357 | ) | (1,372,093 | ) | (4,779,311 | ) | ||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
(3,304,088 | ) | (5,026,955 | ) | (1,037,443 | ) | (2,846,249 | ) | ||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
421,507 | (1,274,824 | ) | (715,055 | ) | (4,080,852 | ) | |||||||||||||||
29,653,888 | 30,928,712 | 13,367,766 | 17,448,618 | ||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
$ | 30,075,395 | $ | 29,653,888 | $ | 12,652,711 | $ | 13,367,766 | ||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
$ | 34,157 | $ | 44,672 | $ | 320,376 | $ | 356,133 | ||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
10,051 | 21,133 | 12,736 | 94,381 | ||||||||||||||||||
— | 190,119 | 20,851 | 97,842 | ||||||||||||||||||
(176,191 | ) | (479,938 | ) | (138,491 | ) | (467,223 | ) | ||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||
(166,140 | ) | (268,686 | ) | (104,904 | ) | (275,000 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
15
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 | Net investment income (loss)(a) | Net realized/ unrealized gains (losses) on investments | Total from Investment Activities | Net investments income | Net realized gains on investments | Total Distributions | |||||||||||||||||||||||||||||
Sterling Capital Equity Income VIF | |||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2014 (Unaudited) | $10.50 | 0.11 | 0.37 | 0.48 | (0.13 | ) | — | (0.13 | ) | ||||||||||||||||||||||||||
Year Ended December 31, 2013 | $ 9.05 | 0.13 | 1.44 | 1.57 | (0.12 | ) | — | (0.12 | ) | ||||||||||||||||||||||||||
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 | ) | ||||||||||||||||||||||||||
Sterling Capital Special Opportunities VIF | |||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2014 (Unaudited) | $18.84 | (0.01 | ) | 2.53 | 2.52 | — | — | — | |||||||||||||||||||||||||||
Year Ended December 31, 2013 | $16.78 | 0.02 | 4.33 | 4.35 | (0.01 | ) | (2.28 | ) | (2.29 | ) | |||||||||||||||||||||||||
Year Ended December 31, 2012 | $15.36 | 0.06 | (e) | 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 | ) | |||||||||||||||||||||||||
Sterling Capital Total Return Bond VIF | |||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2014 (Unaudited) | $ 9.77 | 0.13 | 0.28 | 0.41 | (0.16 | ) | — | (0.16 | ) | ||||||||||||||||||||||||||
Year Ended December 31, 2013 | $10.62 | 0.26 | (0.43 | ) | (0.17 | ) | (0.33 | ) | (0.35 | ) | (0.68 | ) | |||||||||||||||||||||||
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 | ) |
* | During the periods certain fees were voluntarily waived (See Note 4 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) | Not annualized for periods less than one year. |
(c) | 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. |
(d) | Annualized for periods less than one year. |
(e) | 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. |
16
Ratios/Supplemental Data | |||||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return(b)(c) | Net Assets, End of Period (000) | Ratio of net expenses to average net assets(d) | Ratio of net investment income (loss) to average net assets(d) | Ratio of expenses to average net assets*(d) | Portfolio turnover rate(b) | |||||||||||||||||||||||||||
$10.85 | 4.58 | % | $16,726 | 1.19 | % | 2.08 | % | 1.27 | % | 8.02 | % | ||||||||||||||||||||||
$10.50 | 17.48 | % | $17,326 | 1.16 | % | 1.32 | % | 1.27 | % | 113.45 | % | ||||||||||||||||||||||
$ 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 | % | ||||||||||||||||||||||
$21.36 | 13.38 | % | $30,075 | 1.31 | % | (0.07 | )% | 1.32 | % | 12.30 | % | ||||||||||||||||||||||
$18.84 | 26.81 | % | $29,654 | 1.34 | % | 0.12 | % | 1.35 | % | 36.33 | % | ||||||||||||||||||||||
$16.78 | 14.33 | % | $30,929 | 1.28 | % | 0.34 | %(e) | 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 | % | ||||||||||||||||||||||
$10.02 | 4.22 | % | $12,653 | 1.24 | % | 2.69 | % | 1.32 | % | 26.15 | % | ||||||||||||||||||||||
$ 9.77 | (1.56 | )% | $13,368 | 1.23 | % | 2.57 | % | 1.29 | % | 114.13 | % | ||||||||||||||||||||||
$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 | % |
17
Sterling Capital Variable Insurance Funds
|
June 30, 2014 (Unaudited)
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 Equity Income 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.
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 these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the reporting period. 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. Investments in open-end investment companies are valued at their respective net asset values as reported by such companies. 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.
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 as follows:
— 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.)
— 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 period ended June 30, 2014 there were no significant changes to the valuation policies and procedures.
18
Sterling Capital Variable Insurance Funds
|
Notes to Financial Statements — (continued)
June 30, 2014 (Unaudited)
The summary of inputs used to determine the fair value of each Fund’s investments as of June 30, 2014 is as follows:
Level 1– Quoted Prices | Level 2– Other Significant Observable Inputs | Level 3– Significant Unobservable Inputs | Total | |||||||||||||||||
Assets: | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Sterling Capital Equity Income VIF | $ | 16,812,228 | (a) | $ | — | $— | $ | 16,812,228 | ||||||||||||
Sterling Capital Special Opportunities VIF | 30,264,013 | (a) | — | — | 30,264,013 | |||||||||||||||
Sterling Capital Total Return Bond VIF | 250,372 | (b) | 12,291,013(a) | — | 12,541,385 |
(a) | Industries, countries or security types are disclosed in the Schedules of Portfolio Investments. |
(b) | Represents money market funds and/or certain preferred stocks. |
The Funds’ policy is to recognize transfers in and transfers out as of the beginning of the reporting period. There were no transfers between Levels during the period ended June 30, 2014.
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.
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.
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 market 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.
Security Transactions and Related Income — During the period, security transactions are accounted for no later than one business day after the trade date. For financial reporting purposes, however, security transactions as of the last business day of the reporting period are accounted for on the trade date. 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.
19
Sterling Capital Variable Insurance Funds
|
Notes to Financial Statements — (continued)
June 30, 2014 (Unaudited)
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 period ended June 30, 2014 were as follows:
Purchases | Sales | |||||||
Sterling Capital Equity Income VIF | $ | 1,285,392 | $ | 3,267,930 | ||||
Sterling Capital Special Opportunities VIF | 3,533,937 | 5,717,308 | ||||||
Sterling Capital Total Return Bond VIF | 2,220,243 | 2,652,694 |
Purchases and sales of U.S. Government Securities (excluding securities maturing less than one year from acquisition) for the period ended June 30, 2014 for Sterling Capital Total Return Bond VIF were $1,107,792 and $1,370,649, respectively.
4. | 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 period ended June 30, 2014 is as follows:
Contractual Fee Rate | Fee Rate after Voluntary Waivers | |||||||
Sterling Capital Equity Income VIF | 0.70%1,2 | 0.70%1,2 | ||||||
Sterling Capital Special Opportunities VIF | 0.75%2,3 | 0.75%2,3 | ||||||
Sterling Capital Total Return Bond VIF | 0.50%2,4 | 0.50%2,4 |
1 | The contractual fee rate was 0.70% and the fee rate after voluntary waivers was 0.58% prior to May 1, 2014. |
2 | For a portion of the period ended June 30, 2014, 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 0.80% and the fee rate after voluntary waivers was 0.79% prior to May 1, 2014. |
4 | The contractual fee rate was 0.50% and the fee rate after voluntary waivers was 0.38% prior to May 1, 2014. |
Sterling Capital serves as the administrator to the Funds pursuant to an administration agreement. The Funds pay their portion of a fee to Sterling Capital for providing administration services based on the aggregate assets of the Funds and the Sterling Capital Funds, excluding the assets of Sterling Capital Strategic Allocation Conservative Fund, Sterling Capital Strategic Allocation Balanced Fund, and Sterling Capital Strategic Allocation Growth Fund, at a rate of 0.1075% on the first $3.5 billion of 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. 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.”
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 period ended June 30, 2014 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 $44,000 plus $5,000 for each regularly scheduled quarterly meeting attended, $4,000 for each special meeting attended in person and $1,500 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 $44,000 plus $4,000 for each regularly scheduled quarterly meeting attended, $3,200 for each special meeting attended in person and $1,200 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.
20
Sterling Capital Variable Insurance Funds
|
Notes to Financial Statements — (continued)
June 30, 2014 (Unaudited)
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. At a meeting held on February 19-20, 2014, the Board approved several changes in Trustee compensation. These changes became effective on April 1, 2014. Pursuant to these changes, (i) each Trustee who is not an interested person of the Trust will be compensated at an annual rate of $70,000, (ii) the Chairman of the Board will receive an annual retainer of $20,000, and (iii) the Chairman of the Nominating Committee will receive an annual retainer of $6,000 in lieu of a fee for each meeting over which he or she presides as Chairman. Other than as noted above, Trustee compensation remains the same.
5. | Line of Credit: |
U.S. Bank, N.A. has made available a credit facility to each Fund, pursuant to a credit agreement (each, an “Agreement”) with respect to each Fund. The primary purpose of the Agreements is to allow the Funds to avoid security liquidations that Sterling Capital believes are unfavorable to shareholders. Under the Agreements, Sterling Capital Equity Income VIF, Sterling Capital Special Opportunities VIF and Sterling Capital Total Return Bond VIF have a commitment amount of $1,700,000, $2,600,000, and $1,200,000, respectively. Outstanding principal amounts under the Agreements 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 Agreements expire on March 31, 2015. During the period ended June 30, 2014 each of the following Funds utilized its line of credit:
Average Interest Rate | Average Loan Balance | Number of Days Outstanding | Interest Expense Incurred | Maximum Amount Borrowed | |||||||||||||||||||||
Sterling Capital Equity Income VIF | 1.25% | $17,167 | 6 | $4 | $24,000 | ||||||||||||||||||||
Sterling Capital Special Opportunities VIF | 1.25% | 44,000 | 3 | 5 | 93,000 |
6. | Federal Tax Information: |
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.
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. During the period, the Funds did not incur any interest or penalties.
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, 2013, 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.
21
Sterling Capital Variable Insurance Funds
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Notes to Financial Statements — (continued)
June 30, 2014 (Unaudited)
Amount With No Expiration* | |||||||||||||||
Short-term Losses | Amount | Expires | |||||||||||||
Sterling Capital Equity Income VIF | $ — | $ | 13,577,535 | 2016 | |||||||||||
Sterling Capital Equity Income VIF | — | 3,263,903 | 2017 | ||||||||||||
Sterling Capital Total Return Bond VIF | 81,380 | — | — | ||||||||||||
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* | Post-Enactment Losses: Must be utilized prior to losses subject to expiration. |
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2013, were as follows:
Distributions paid from | |||||||||||||||
Ordinary Income | Net Long-Term Gains | Total Distributions Paid* | |||||||||||||
Sterling Capital Equity Income VIF | $ | 219,509 | $ | — | $ 219,509 | ||||||||||
Sterling Capital Special Opportunities VIF | 22,471 | 3,350,231 | 3,372,702 | ||||||||||||
Sterling Capital Total Return Bond VIF | 730,543 | 242,773 | 973,316 | ||||||||||||
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* | Total distributions paid may differ from the Statements of Changes in Net Assets because distributions are recognized when actually paid for tax purposes. |
At June 30, 2014, 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 Equity Income VIF | $ | 14,689,077 | $ 2,303,983 | $(180,832) | $ 2,123,151 | |||||||||||||||
Sterling Capital Special Opportunities VIF | 19,038,964 | 11,302,487 | (77,438) | 11,225,049 | ||||||||||||||||
Sterling Capital Total Return Bond VIF | 12,157,881 | 458,402 | (74,898) | 383,504 |
7. | 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 no events that require recognition or disclosure in the financial statements.
22
Serling Capital Variable Insurance Funds
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June 30, 2014
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.
23
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
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, 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) | Not applicable. | |
(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. |
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 | 8/22/14 |
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 | 8/22/14 |
By (Signature and Title) | /s/ Kenneth R. Cotner | |
Kenneth R. Cotner, Treasurer | ||
(principal financial officer) |
Date | 8/22/14 |