Principal Risks
All investments carry a certain amount of risk and the Fund cannot guarantee that it will achieve its investment objective. An investment in the Fund is not a
deposit or obligation of any bank, is not endorsed or guaranteed by any bank and is not insured by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. You may lose money by investing in the Fund. Below are
all of the principal risks of investing in the Fund.
Interest Rate Risk:
The possibility that the value of the Funds investments will
decline due to an increase in interest rates. Interest rate risk is generally higher for longer-term bonds and lower for shorter-term bonds.
Income
Risk:
The possibility that the Funds income will decline due to a decrease in interest rates. Income risk is generally high for shorter-term bonds and low for longer term bonds.
Liquidity Risk:
The possibility that certain securities may be difficult or impossible to sell at the time and the price that would normally prevail in the market. The seller may have to lower the price,
sell other securities instead or forego an investment opportunity, any of which could have a negative effect on Fund management or performance.
Prepayment/Call Risk:
When mortgages and other obligations are prepaid and when securities are called, the Fund may have to reinvest in securities with a
lower yield or fail to recover additional amounts (i.e., premiums) paid for securities with higher interest rates, resulting in an unexpected capital loss. Call risk is the possibility that, during periods of declining interest rates, a bond issuer
will call or repay higher-yielding bonds before their stated maturity date. In both cases, investors receive their principal back and are typically forced to reinvest it in bonds that pay lower interest rates.
Estimated Maturity Risk:
The possibility that an underlying security holder will exercise its right to pay principal on an obligation earlier or later than
expected. This may happen when there is a rise or fall in interest rates. These events may shorten or lengthen the duration (
i.e.
, interest rate sensitivity) and potentially reduce the value of these securities.
Credit Risk:
The possibility that an issuer cannot make timely interest and principal payments on its debt securities, such as bonds. The lower a
securitys rating, the greater its credit risk.
U.S. Government Securities Risk:
The Fund invests in securities issued or guaranteed by the
U.S. government or its agencies (such as Fannie Mae or Freddie Mac securities). Although U.S. government securities issued directly by the U.S. government are guaranteed by the U.S. Treasury, other U.S. government securities issued by an agency or
instrumentality of the U.S. government may not be. No assurance can be given that the U.S. government would provide financial support to its agencies and instrumentalities if not required to do so by law.
Mortgage-Backed and Asset-Backed Securities Risk:
Mortgage-backed and other asset-backed securities may be particularly sensitive to changes in prevailing
interest rates. Rising interest rates tend to extend the duration of mortgage-backed securities, making them more sensitive to changes in interest rates, and may reduce the market value of the securities. Mortgage-backed securities are also subject
to pre-payment risk. Due to their often complicated structures, various mortgage-backed and asset-backed securities
may be difficult to value and may constitute illiquid securities. Furthermore, debtors may be entitled to the protection of a number of state and federal consumer protection credit laws with
respect to these securities, which may give the debtor the right to avoid or reduce payment.
Yankee Bond Risk:
Yankee bonds are subject to the
same risks as other debt issues, notably credit risk, market risk, currency and liquidity risk. Other risks include adverse political and economic developments; the extent and quality of government regulations of financial markets and institutions;
the imposition of foreign withholding taxes; and the expropriation or nationalization of foreign issuers.
For more information about the Funds
risks, please see the Additional Investment Strategies and Risks section in this Prospectus.
Performance
The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Funds performance from
year to year. The table shows how the Funds average annual returns for 1, 5 and 10 years and since the Funds inception compared with those of a broad measure of market performance. The Funds past performance (before and after
taxes) is not necessarily an indication of how the Fund will perform in the future.
Updated performance information is available at no cost by visiting www.sterlingcapitalfunds.com or by calling 1-800-228-1872.
Institutional Shares Annual Total Returns for years ended 12/31
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Best quarter:
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5.64%
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12/31/08
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Worst quarter:
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2.45%
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06/30/04
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