<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 [fee required]
For the fiscal year ended December 31, 1994
-------------------------
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [no fee required]
For the transition period from _________________ to _________________.
Commission file number 2-79192.
_________
HAMPSHIRE FUNDING, INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-0277842
- --------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE GRANITE PLACE, CONCORD, NEW HAMPSHIRE 03301
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 226-5000
-----------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Programs for coordinating the acquisition of mutual fund shares and insurance
- -----------------------------------------------------------------------------
Indicate by check mark whether the registrant has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and has been subject to such filing requirements
for the past 90 days. YES X NO
----- -----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
NONE
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of March 15, 1995: 50,000 shares, all of which are owned by
Chubb Life Insurance Company of America.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
The total number of pages, including exhibits, is 41, and the exhibit index
appears on pages 24 through 27.
1
<PAGE>
PART I
Item 1 - Description of Business
- --------------------------------
(a) Hampshire Funding, Inc. ("the Company") was incorporated in the State of
New Hampshire on December 8, 1969, as a wholly-owned subsidiary of Chubb
Life Insurance Company of America ("CLA"). The Company became a wholly-
owned subsidiary of The Chubb Corporation on December 21, 1971, when CLA
sold all the outstanding stock of the Company. On April 1, 1981, the
Company's common stock was transferred by contribution to Chubb Life
Insurance Company of New Hampshire ("CLNH"). On July 1, 1991, CLNH and
CLA merged with and into The Volunteer State Life Insurance Company,
which on the same date re-domesticated from Tennessee to New Hampshire
and changed its name to Chubb Life Insurance Company of America (the
"Parent Corporation"). As a result of said merger, all of the common
stock of the company is owned by the Parent Corporation. In addition,
the Company owns 100% of the outstanding shares of Hampshire
Syndications, Inc., incorporated in New Hampshire on October 9, 1986.
The Company, in affiliation with the Parent Corporation, The Colonial Life
Insurance Company of America ("Colonial"), Chubb Sovereign Life Insurance
Company ("Chubb Sovereign") (collectively "Insurance Companies") and Chubb
Securities Corporation (the "Broker-Dealer"), a member of the National
Association of Securities Dealers, Inc. ("NASD"), is primarily engaged in
the offering and administration of programs which coordinate the
acquisition of mutual fund shares and life or health insurance (the
"Programs"). The Programs are intended, in part, to augment the sales
activities of the Broker-Dealer and the Insurance Companies.
(b) Revenues, operating profit and loss, and identifiable assets for the three
years ended December 31, 1994, are included in Item 6 - Selected Financial
Data and Item 8 - Financial Statements and Supplementary Data.
(c) The Company offers and administers Programs which involve initial and
periodic cash purchases of mutual fund shares. Under the Programs,
purchasers of a Program ("Participants") make initial and periodic
purchases of mutual fund shares for cash with automatic reinvestment of
all distributions. Participants obtain insurance coverage through a
series of insurance premium loans offered by the Company. Loans to
Participants are secured by Participants' initial and periodic purchases
of mutual fund shares. The mutual fund shares are registered in the
Company's name as Custodian for Participants.
The objective of a Program is the utilization of the appreciation, if any,
in the value of the mutual fund shares and any dividends or capital gains
distributions thereon to aid in offsetting the principal and accumulated
interest on the loans.
The Programs are offered for sale by those agents of the Insurance
Companies who qualify as registered representatives, through the Broker-
Dealer, under the regulations of the NASD.
2 of 41
<PAGE>
The Company is authorized to offer Programs using insurance policies
offered by the Insurance Companies. Insurance available for purchase in
connection with a Program may vary from state to state, depending on
whether the Parent Corporation, Colonial or Chubb Sovereign is licensed to
sell insurance in a particular jurisdiction, and whether a jurisdiction in
which one of the Insurance Companies is licensed has approved the sale of
a particular insurance product.
Each Insurance Company offers several types of policies within the
Program. The Insurance Companies are subject to the regulations of the
insurance department of each state in which they are licensed to do
business. In addition, the Parent Corporation, through Chubb Separate
Account A, offers for sale a variable universal life insurance policy,
which is subject to regulation by the Securities and Exchange Commission.
Policies, including the variable universal life insurance product, issued
under the Program may not be identical in each state or jurisdiction.
Regulations that determine the types of policies and their provisions may
differ in each state. As a result, the Insurance Companies have internal
procedures designed to ensure that only approved policies are issued in
each state.
The Company has filed a Registration Statement under the Securities Act of
1933, as amended, with the Securities and Exchange Commission. The Company
is also subject to supervision by the Commissioners of Securities of the
jurisdictions in which the Company is authorized to offer the Programs for
sale.
The insurance agents who sell the Programs are subject to the oversight
and regulation of the insurance department of each jurisdiction where they
are licensed. In addition, only those agents who are registered
representatives of the Broker-Dealer may sell Programs; thus the insurance
agents are also subject to supervision and regulation of the NASD and
securities department of each jurisdiction where they are licensed.
The Company is not dependent upon a single or a few customers. The loss of
one or a few customers would not have a material adverse effect on the
business of the Company.
The Company faces limited competition in the sale of Programs, as the
number of companies offering plans similar to the Programs is quite small.
Historically, a large number of companies offered programs combining the
purchase of insurance and mutual fund shares; however, in recent years the
number of companies has reduced dramatically.
The business of the Insurance Companies is highly competitive. The
Insurance Companies compete on a nationwide basis with a large number of
insurance companies, and also compete with other financial service
companies in the area of equities, retirement planning and financial
planning. Finally, there has been a recent trend of greater involvement by
banks and thrifts in the insurance industry. Competition is based upon
cost of insurance, client service, performance of the cash value component
of whole life insurance, and agent loyalty to a company.
3 of 41
<PAGE>
The Company has no paid employees. Chubb America Service Corporation (the
"Service Company"), a wholly-owned subsidiary of the Parent Corporation,
is a management service company organized and operated to provide employee
and office services, as well as certain operating assets, to the Company
and its affiliates. The Service Company employs all of the personnel who
perform business functions for the Company. The Service Company believes
that its relationship with employees is good.
(d) Not applicable
Item 2 - Properties
- -------------------
The Company does not own or lease any real property. The Company occupies a
portion of the home office of the Parent Corporation located at One Granite
Place, Concord, New Hampshire. The use by the Company of such facilities and
the equipment and furnishings owned by the Service Company, the Parent
Corporation, or any of the other Insurance Companies is subject to a pro-rata
allocation of expenses.
Item 3 - Legal Proceedings
- --------------------------
The Company may become involved from time to time with legal proceedings arising
out of the ordinary course of its business. For the year ended December 31,
1994, the Company was not involved in any legal proceedings.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not Applicable.
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<PAGE>
PART II
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------------------
(a) Not publicly traded.
(b) 1 (See Item 12, Security Ownership of Certain Beneficial Owners and
Management.)
(c) The Company has not authorized or paid any dividends since inception.
There are no restrictions presently known on the Company's ability to pay
dividends except for general New Hampshire corporate laws relating to
earnings.
Item 6 - Selected Financial Data
- --------------------------------
<TABLE>
<CAPTION>
Selected Statement of Operations
Data: Year Ended December 31, 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Revenue $ 3,590,273 $ 3,004,114 $ 2,699,980 $ 2,475,154 $ 2,600,084
=========== =========== =========== =========== ===========
Net Income $ 458,294 $ 514,505 $ 330,545 $ 218,462 $ 32,190
=========== =========== =========== =========== ===========
Dividends Per Common Share $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
Selected Balance Sheet Data:
December 31, 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $ 42,241,816 $ 33,773,719 $ 27,905,714 $ 22,930,802 $21,140,780
=========== =========== =========== =========== ==========
Loan Payable $ 38,889,535 $ 30,924,833 $ 25,382,406 $ 21,413,588 $19,680,593
=========== =========== =========== =========== ==========
</TABLE>
___________________________
Affiliated life insurance companies paid the Company annual franchise fees in
previous years as compensation for issuing and servicing insurance policies
under the programs. It was intended that such compensation would result in the
Company having neither a significant profit or loss from its operations. In
March 1990, franchise agreements were entered into between the Company and
certain of the Insurance Companies. Franchise fees paid to the Company were
$300,000 in 1990. No franchise fees were received in 1991, 1992, 1993, or 1994.
5 of 41
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
LIQUIDITY AND CAPITAL RESOURCES
The Company offers investment programs (the "Programs") which coordinate the
acquisition of mutual fund shares and insurance over a period of time, usually
ten years. Under the Programs, purchasers of the program ("Participants")
purchase life and health insurance from affiliated insurance companies (the
"Insurance Companies") and finance the premiums through a series of loans
secured by mutual fund shares. Upon issuance of a policy by an Insurance
Company, the Company makes a loan to the Participant in an amount equal to the
selected premium mode. As each premium becomes due, if not paid in cash, a new
loan equal to the next premium and administrative fee is made and added to the
Participant's account indebtedness ("Account Indebtedness"). Thus, interest, as
well as principal, is borrowed and mutual fund shares are pledged as collateral.
Each loan made by the Company must initially be secured by mutual fund shares
which have a value of at least 250% of the loan, except for the initial premium
loan of Programs using certain no-load funds, where the collateral requirement
is 1800%. In addition, the aggregate value of all mutual fund shares pledged as
collateral must be at least 150% of the Participant's total Account
Indebtedness. If the value of the shares pledged to the Company declines below
130% of the Company's indebtedness, the Company will terminate the Programs and
liquidate shares sufficient to repay the indebtedness.
Collateral loans receivable from Participants were $40,805,159 at December 31,
1994. Annual amounts due to the Company were as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000-2004
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Collateral loans $2.4 $2.8 $3.0 $2.7 $3.3 $26.6
receivable (in millions)
</TABLE>
The Company's funds for financing the Programs are currently obtained through
Loan Agreements with its affiliates, The Colonial Life Insurance Company of
America ("Colonial") and Chubb Life Insurance Company of America ("Chubb Life").
The Loan Agreements provide for revolving credit arrangements under which
advances will be made to the Company in amounts not to exceed $29,000,000 from
Colonial and $20,000,000 from Chubb Life. The advances are currently short term
in nature, as none of the loans outstanding as of December 31, 1994 (or during
1994) exceeded 365 days to maturity. The advances are made at short-term
lending rates agreed upon by the Company and its lenders and are subject to
change in accordance with the Loan Agreements and market conditions. However,
the interest rate may not exceed the prime interest rate in effect in New York
City plus 2.5%. The average lending rate on these loans at December 31, 1994
was 4.60% and ranged from 3.25% to 8.85% during the year.
The continuance of the Program is dependent upon the Company's ability to
provide, or arrange for the financing of insurance premiums for Participants.
Since 1989, such financing has been available from its affiliates, Colonial and
Chubb Life. The Company expects that it will be able to obtain this financing
for the foreseeable future.
6 of 41
<PAGE>
The Company may also borrow funds from non-affiliated companies. There is no
assurance that the Company may obtain financing from non-affiliated companies
upon terms, conditions and rates as favorable as those from affiliated
companies. If the Company is unable to borrow funds in the future or continue
to borrow funds under its Loan Agreements for the purpose of financing loans to
Participants for the payment of insurance premiums, it may not be able to
continue the sale of the Programs.
Although the Company's present financing arrangements with its lenders do not
include the assignment of a Participant's mutual fund shares to the lender as
security, the Loan Agreements do authorize the Company to assign a Participant's
mutual fund shares to any lender as collateral security for the Company's
indebtedness pursuant to any financing arrangements. If any such assignment
takes place and the Company subsequently defaults on an obligation for which the
participant's mutual fund shares have been pledged as security, the mutual fund
shares may be redeemed by the lender to whom the obligation is owed. A lender
may cease to provide financing if the Company is in default under its Loan
Agreements. In this case, Programs will be terminated on their renewal dates.
The amount of funds borrowed under the Agreements at December 31, 1994 were
$39,500,000 compared to $31,300,000 at December 31, 1993. Funds borrowed at
December 31, 1994 represent $26,000,000 from Colonial and $13,500,000 from Chubb
Life. At December 31, 1993 funds borrowed represented $26,000,000 from Colonial
and $5,300,000 from Chubb Life. The increase in amounts borrowed by the Company
year to year was used to fund increased sales of Programs and for other working
capital needs.
In addition to loans payable, the Company has other short-term amounts due to
affiliates related to insurance premium payments and expense reimbursements to
Chubb America Service Corporation ("Service Company"). The Company has an
arrangement with affiliated Insurance Companies whereby the Company makes
monthly payments in arrears for premiums due. Reimbursements to the Service
Company are also made one month in arrears and are included in amounts due to
affiliates.
The Service Company, a wholly-owned subsidiary of the Parent Corporation, is a
management service company which provides employee services and office
facilities to the Company and its affiliates under a Service Agreement. The
Company pays the Service Company a monthly fee in accordance with mutually
agreed upon cost allocation methods which the Companies believe reflect a
proportional allocation of common expenses and are commensurate for the
performance of the applicable duties.
Working capital in 1994 and 1993 was provided by Participants' loan repayments,
administrative fees for the placement and maintenance of Programs and interest
earned on investments.
7 of 41
<PAGE>
Loan schedule as of December 31, 1994:
<TABLE>
<CAPTION>
Loan Face Days to Maturity
Source Date (mils) Rate Maturity Date
- ------ ---- ------ ---- -------- --------
<S> <C> <C> <C> <C> <C>
Chubb Life 12/30/94 $ 10.0 6.53% 31 01/03/95
09/29/94 1.0 8.85% 365 09/29/95
10/25/94 0.5 8.85% 339 09/29/95
11/17/94 1.0 8.85% 316 09/29/95
12/28/94 1.0 8.85% 275 09/29/95
-----
$ 13.5
Colonial 04/18/94 $ 2.3 4.95% 270 01/13/95
08/18/94 14.5 5.37% 270 05/15/95
10/25/94 9.2 6.10% 269 07/21/95
-----
$ 26.0
</TABLE>
RESULTS OF OPERATIONS
The Company concluded the year ended December 31, 1994 with net operating income
of $458,294 as compared to net operating income of $514,505 in 1993, and
$330,545 in 1992.
Total revenues through December 31, 1994 were $3,590,273 versus $3,004,114 in
1993, and $2,699,890 in 1992. These revenues include interest on collateral
loans receivable, program fees, interest on investments and partnership income.
The largest source of revenue was represented by interest on collateral loans
receivable.
The growth in collateral loan interest resulted from the increase in collateral
loans receivable year to year. Collateral loans receivable as of December 31,
1994 were $40,805,159 as compared to $33,348,372 in 1993, and $27,559,447 in
1992. Comparatively, collateral loan interest was $3,094,809, $2,523,551 and
$2,214,579 for the years ended December 31, 1994, 1993 and 1992. The average
interest rate charged to each Participant's outstanding loan balance was 8.65%,
8.50% and 9.14% for the years 1994, 1993 and 1992, respectively.
The Company's collateral loans receivable, collateral loan interest and average
interest rate charged to each Participant's loan balance for the three years
ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Collateral loans receivable $40,805,159 $33,348,372 $27,559,447
Collateral loan interest $ 3,094,809 $ 2,523,551 $ 2,214,579
Average Participant interest rate 8.65% 8.50% 9.14%
</TABLE>
8 of 41
<PAGE>
Interest expense on the Loan Agreements increased in 1994 as compared to 1993
due to increases in interest rates and amounts borrowed by the Company.
Interest expense decreased, however, in 1993 compared to 1992 due to declining
interest rates during 1993 even though the Company borrowed additional amounts
during that year. The Company's outstanding loans payable, interest expense and
average cost of borrowings for the three years ended December 31 are summarized
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Loans payable $38,889,535 $30,924,833 $25,382,406
Interest expense $ 1,516,229 $ 973,490 $ 1,013,582
Average loan interest rate 4.60% 3.50% 4.44%
</TABLE>
The Company's ability to achieve and maintain a spread between its cost of funds
necessary to finance premium loans and the lending rate charged to Program
Participants may impact its future operating results. The interest rate spread
is intended to provide sufficient revenue to offset the Company's general and
administrative expenses. General and administrative expenses, arising from
normal operating activities through December 31, 1994, were $1,308,976 as
compared to $1,239,079 in 1993, and $1,184,881 in 1992.
The Company may increase the interest rate charged to Participants to a maximum
of the prime interest rate plus 3% as its cost of borrowing increases. If the
Company's cost of borrowing were to rise significantly above the prime interest
rate, its ability to maintain an adequate interest rate spread would be
difficult and future earnings could be adversely impacted.
Program fees increased year to year as the number of programs administered by
the Company have grown. Program fees include placement, administrative and
termination fees as well as charges for special services. For the years ended
December 31, 1994, 1993 and 1992 the number of programs administered by the
Company were 6,662, 6,328 and 5,782, respectively.
Investment income earned by the Company increased in 1994 as compared to 1993
due to changes in the level of cash and investments held year to year.
The Company has franchise agreements with Chubb Life which provide that the
Company will be paid amounts required for its continued operations as
compensation for its services in providing and making the Programs available for
use. The Company did not receive any franchise fees in 1994, 1993 and 1992 and
does not expect to receive any fees in 1995.
9 of 41
<PAGE>
Item 8 - Financial Statements and Supplementary Data
- ----------------------------------------------------
The financial statements included herein are listed in the following index.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page References
---------------
<S> <C>
Report of Independent Auditors 11
Consolidated Balance Sheets at December 31, 1994 and 1993 12
Consolidated Statements of Operations and Retained Earnings
for each of the three years in the period ended December 31, 1994 13
Consolidated Statements of Cash Flows for the each of the three years
in the period ended December 31, 1994 14
Notes to Consolidated Financial Statements 15
</TABLE>
All schedules have been omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements,
including the notes thereto.
10 of 41
<PAGE>
Report of Independent Auditors
The Board of Directors
Hampshire Funding, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Hampshire
Funding, Inc. and Subsidiary as of December 31, 1994 and 1993, and the related
consolidated statements of operations and retained earnings, and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 referred to above present fairly, in
all material respects, the consolidated financial position of Hampshire Funding,
Inc. and Subsidiary at December 31, 1994 and 1993, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the financial statements, in 1994, the Company changed
its method of accounting for postemployment benefits, and in 1993, the Company
changed its method of accounting for postretirement benefits other than
pensions, and income taxes.
Ernst & Young LLP
January 27, 1995
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
----------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,311,399 $ 327,667
Accounts receivable from customers 47,215 37,680
Federal income taxes recoverable 78,043
----------------------------------
Total current assets 1,436,657 365,347
Collateral notes receivable (including accrued
interest of $1,027,677 in 1994 and $856,868 in 1993) 40,805,159 33,348,372
Limited partnership investment 60,000
----------------------------------
Total assets $42,241,816 $33,773,719
==================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Due to affiliates $ 1,188,275 $ 1,073,665
Accrued expenses and other liabilities 316,250 373,999
Federal income taxes payable 11,760
----------------------------------
Total current liabilities 1,504,525 1,459,424
Loans payable to affiliate (net of prepaid
interest of $610,465 in 1994 and $375,167 in 1993) 38,889,535 30,924,833
----------------------------------
Total liabilities 40,394,060 32,384,257
----------------------------------
Stockholder's equity:
Common stock, par value $1 per share; authorized
100,000 shares; issued and outstanding 50,000 shares 50,000 50,000
Additional paid-in capital 550,000 550,000
Retained earnings 1,247,756 789,462
----------------------------------
Total stockholder's equity 1,847,756 1,389,462
----------------------------------
Total liabilities and stockholder's equity $42,241,816 $33,773,719
==================================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Operations and Retained Earnings
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1994 1993 1992
--------------------------------------------
<S> <C> <C> <C>
Revenues:
Interest on collateral notes receivable $3,094,809 $2,523,551 $2,214,579
Program participant fees 464,851 457,636 428,794
Interest on investments 30,613 22,927 21,517
Partnership syndication fees 35,000
--------------------------------------------
3,590,273 3,004,114 2,699,890
Operating expenses:
Interest on loan agreement 1,516,229 973,490 1,013,582
General and administrative 1,308,976 1,239,079 1,184,881
Realized loss on investments 60,000
--------------------------------------------
2,885,205 2,212,569 2,198,463
--------------------------------------------
Income before income taxes 705,068 791,545 501,427
Federal income tax (benefit):
Current 257,593 283,525 170,882
Deferred (10,819) (6,485)
--------------------------------------------
246,774 277,040 170,882
--------------------------------------------
Net income 458,294 514,505 330,545
Retained earnings (deficit) at
beginning of year 789,462 274,957 (55,588)
--------------------------------------------
Retained earnings at end of year $1,247,756 $ 789,462 $ 274,957
============================================
</TABLE>
See accompanying notes.
13 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1994 1993 1992
------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 458,294 $ 514,505 $ 330,545
Adjustments to reconcile net income to net
cash used in operating activities:
Increase in accounts receivable from
customers (9,535) (11,160) (20,226)
Increase (decrease) in accrued expenses
and other liabilities (57,749) 126,277 112,100
Increase (decrease) in due to affiliates 114,610 (311,931) 1,040,332
Increase in collateral notes receivable (7,456,787) (5,788,925) (5,329,138)
Change in federal income taxes payable
(recoverable) (89,803) (3,273) (18,509)
(Increase) decrease in prepaid interest
on affiliated loan agreements (235,298) (157,573) 68,818
------------------------------------------------
Net cash used in operating activities (7,276,268) (5,632,080) (3,816,078)
INVESTING ACTIVITIES
Write off (purchase) of limited partnership
investment 60,000 (60,000)
------------------------------------------------
Net cash provided by investing activities 60,000 (60,000)
FINANCING ACTIVITIES
Proceeds from affiliated loan agreements 73,400,000 59,000,000 70,500,000
Principal payments on affiliated loan agreements (65,200, 000) (53,300,000) (66,600,000)
------------------------------------------------
Net cash provided by financing activities 8,200,000 5,700,000 3,900,000
------------------------------------------------
Increase in cash and cash equivalents 983,732 67,920 23,922
Cash and cash equivalents at beginning
of year 327,667 259,747 235,825
------------------------------------------------
Cash and cash equivalents at end of year $ 1,311,399 $ 327,667 $ 259,747
================================================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Hampshire Funding, Inc. (Hampshire) and its wholly-owned subsidiary, Hampshire
Syndications, Inc. Hampshire is a wholly-owned subsidiary of Chubb Life
Insurance Company of America (Chubb Life). Affiliates of Chubb Life include The
Colonial Life Insurance Company of America (Colonial), Chubb Sovereign Life
Insurance Company (Chubb Sovereign), Chubb America Service Corporation (CASC),
Chubb Investment Advisory Corporation and Chubb Securities Corporation (Chubb
Securities), which are all 100% owned by Chubb Life. Chubb Life is 100% owned
by The Chubb Corporation (Chubb).
TRANSACTIONS WITH AFFILIATES
Hampshire offers and administers Programs whereby Participants obtain life
insurance coverage from Chubb Life, Colonial and Chubb Sovereign. Under the
Programs, insurance premiums are paid by Participants through a series of loans
from Hampshire which are recorded as "collateral notes receivable." Loans to
the Participants are secured by Participants' ownership in shares of regulated
investment companies. The loans to Participants are funded substantially with
the proceeds from loan arrangements with Colonial and Chubb Life (see Note 6).
Chubb Securities is a registered broker-dealer that buys and sells the shares
for Participants. The fair value of a Participant's secured investment company
shares must exceed 150% of the total loan balance plus accrued interest
(Participant's Total Account Indebtedness). If the value of the shares pledged
as collateral to Hampshire declines below 130% of the Participant's Total
Account Indebtedness, Hampshire will terminate the Program and liquidate shares
sufficient to repay the indebtedness. All Programs are ten years in length.
Upon Program conclusion, loan balances and accrued interest become due.
Collateral loans receivable from Participants were $40,805,159 at December 31,
1994. Annual amounts due to the Company were as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000-2004
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Collateral loans receivable $2.4 $2.8 $3.0 $2.7 $3.3 $26.6
(in millions)
</TABLE>
15 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TRANSACTIONS WITH AFFILIATES (CONTINUED)
Substantially all general and administrative expenses are allocated to Hampshire
by CASC in accordance with mutually agreed upon cost allocation methods which
Hampshire and CASC believe reflect a proportional allocation of common expenses
which are commensurate for the performance of the applicable duties.
RECOGNITION OF REVENUES AND EXPENSES
Interest on collateral notes receivable and administrative fees charged to
Participants for establishing and maintaining Programs are recognized as revenue
when earned. Partnership syndication fees represent fees earned by Hampshire
Syndications, Inc. from its limited partnership investment. No such fees were
earned in 1994 or 1993.
CASH EQUIVALENTS
For purposes of reporting cash flows, cash equivalents include cash invested in
securities purchased under repurchase agreements and short-term corporate notes,
all of which have remaining maturities of three months or less at the date of
purchase.
At December 31, 1994, Hampshire entered into a reverse repurchase agreement with
the Bank of New Hampshire (Bank) in the amount of $158,000. The agreement
matures on January 31, 1995. This reverse repurchase agreement is included in
cash equivalents in the accompanying consolidated balance sheet. Hampshire
requires that the market value of the underlying securities provided as
collateral for repurchase agreements be a minimum of 100% of their contractual
resale price to the Bank.
Short-term corporate notes are carried at cost which approximates market value.
2. CHANGE IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, Chubb Life and Hampshire adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires that
the expected cost of providing postemployment benefits, principally severance,
disability and unemployment benefits, to former or inactive employees, their
beneficiaries and covered dependents be accrued during the years that the
employees render the necessary service. Prior to 1994, the pay as you go, or
cash method was used to recognize the cost of these benefits. The cumulative
effect of this change as of January 1, 1994 was immaterial to Hampshire.
Hampshire's allocated portion of such 1994 costs was $6,280, which has been
included in General and Administrative expenses in the accompanying financial
statements.
16 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
2. CHANGE IN ACCOUNTING PRINCIPLES (CONTINUED)
Effective January 1, 1993, Chubb Life and Hampshire adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions." SFAS
No. 106 requires that the expected cost of providing postretirement benefits,
principally health care and life insurance, to employees, their beneficiaries
and covered dependents be accrued during the years that the employees render the
necessary service. Prior to 1993, the pay-as-you-go, or cash method was used to
recognize the cost of these benefits. The cumulative effect of this change as
of January 1, 1993 was immaterial to Hampshire. Hampshire's allocated portion
of such costs was $24,631 and $18,530 in 1994 and 1993, respectively, which has
been included in General and Administrative expenses in the accompanying
financial statements.
Chubb Life and Hampshire also adopted SFAS No. 109, "Accounting for Income
Taxes," as of January 1, 1993. SFAS No. 109 prescribes an asset and liability
method of accounting for income taxes, rather than the deferred method
previously used. The objective of the asset and liability method is to
recognize an asset or liability for the expected future tax effects attributable
to differences between the financial reporting and the tax basis of assets and
liabilities, based on the enacted tax rates and other provisions of tax law.
The cumulative effect of such change as of January 1, 1993 was immaterial to
Hampshire. Of the $78,043 federal income taxes recoverable at December 31,
1994, $10,819 represents a deferred tax asset related to the postretirement
benefits and postemployment benefits expense of $30,911 recorded in 1994. The
deferred tax asset at December 31, 1993 was $6,485, which also related to
postretirement benefits.
3. FEDERAL INCOME TAXES
The operations of Hampshire are included in the consolidated federal income tax
return of Chubb. Federal income tax is allocated by Chubb Life as if Hampshire
filed a separate income tax return. Deferred tax assets and liabilities are
recognized for the expected future tax effects attributable to temporary
differences between the financial reporting and tax bases of assets and
liabilities, based on enacted tax rates and other provisions of tax law.
Federal income taxes have been provided at the statutory rate of 35% in 1994 and
1993 and 34% in 1992.
Hampshire made income tax payments to Chubb of $336,577, $280,313 and $189,391
in 1994, 1993 and 1992, respectively.
17 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
4. RETIREMENT BENEFITS
Hampshire participates in the Pension Plan for the Employees of Chubb Life and
Participating Affiliates, a defined benefit plan, which covers substantially all
of its employees. Accumulated plan benefits, plan net assets and net periodic
pension costs by component for Hampshire is not determinable. Costs allocated
by Chubb Life to Hampshire during 1994 relative to the Pension Plan were
$24,269.
Certain health and life insurance benefits for all eligible retired employees
are provided by Chubb Life. Benefits are paid as covered expenses are incurred.
Health care coverage is contributory. Retiree contributions vary based upon a
retiree's age, type of coverage and years of service with Hampshire. Life
insurance is noncontributory. The expected cost of providing these
postretirement benefits to employees and their beneficiaries and covered
dependents are being accrued during the years that the employees render the
necessary service.
5. OPTION AND INCENTIVE PLANS
As a subsidiary of Chubb, Hampshire and its employees are eligible to
participate in the following option and incentive plans:
The Employee Stock Ownership Plan (ESOP) is funded through semi-annual
contributions in amounts determined at the discretion of Chubb's Boards of
Directors. A portion of Chubb common stock is allocated to eligible
employees as contributions are made by Chubb.
The Capital Accumulation Plan, a savings plan, is funded by employee
contributions. Hampshire makes a matching contribution equal to 100% of each
eligible employee's pre-tax elective contributions, up to 4% of the
employee's compensation. Contributions are invested at the election of the
employee in Chubb's common stock or in various other investment funds.
Hampshire's proportionate share of costs related to these option and incentive
plans was $39,394 for the year ended December 31, 1994.
Total costs allocated by Chubb Life to Hampshire, during the year presented
relative to the above benefits, have been included in General and Administrative
expenses in the accompanying financial statements. Amounts allocated to
Hampshire in years prior to 1994 relative to the above benefit plans were
immaterial.
18 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
6. LOAN AGREEMENT
Since 1989, Hampshire's funds for financing premium loans have been obtained
through loan agreements with affiliates. Hampshire has a loan agreement with
Colonial providing for a $29,000,000 revolving line of credit. The interest
rate is variable and is based on Colonial's cost of short-term funds. The range
of interest rates at December 31, 1994 on this loan were from 4.95% to 6.10%.
At December 31, 1994, Hampshire had borrowed $26,000,000 under the agreement
with Colonial. On September 29, 1994, Hampshire amended its loan agreement with
Chubb Life to provide for a $20,000,000 revolving line of credit, representing
an increase of $10 million from the previous loan agreement. The interest
accrues at a rate not to exceed prime plus 250 basis points per annum.
Presently, interest is being charged to Hampshire at current short term rates
(6.53% at December 31, 1994) on the first $10 million and at the rate which
Hampshire charges their clients (8.85%) on any loan balance over $10 million.
At December 31, 1994, Hampshire had borrowed $13.5 million under this agreement
with Chubb Life. The balance on the loan was increased to $14 million
subsequent to December 31, 1994. Hampshire expects that it will be able to
obtain this financing for the foreseeable future.
Interest paid, including prepayments, on the loan agreements was $1,751,527,
$1,131,064 and $944,764 in 1994, 1993 and 1992, respectively.
19 of 41
<PAGE>
Item 9 - Changes in and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not Applicable
PART III
Item 10 - Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The following sets forth information relating to Directors and Executive
Officers of the Company as of December 31, 1994.
<TABLE>
<CAPTION>
Name/(1)/ Age Position/(2)/
---- --- --------
<S> <C> <C>
Bruce R. Stefany 45 President and Director
Randell G. Craig 49 Director
Ernest J. Tsouros 62 Director
Frederick H. Condon 60 Director
Joseph A. Morein 56 Director
John A. Weston 35 Treasurer, Principal Financial and
Accounting Officer
Charles C. Cornelio 35 Vice President, General Counsel and Secretary
Carol R. Hardiman 40 Vice President, Administration
Shari J. Lease 40 Assistant Secretary
Christopher J. Moakley 31 Vice President, Consumer Relations
Ronald J. Angarella 36 Vice Chairman and Director
James R. Wagner, Jr. 37 Director
</TABLE>
Bruce R. Stefany was elected President and Director of the Company and the
Broker-Dealer in December 1987. Mr. Stefany was elected President of Chubb
Series Trust in June 1994, President of Chubb America Fund, Inc. in January 1989
and Director and Senior Vice President of Chubb Investment Funds, Inc. in
January 1988. All Funds are registered investment companies. In December 1987,
he was elected President and Director of Hampshire Syndications, Inc., a
subsidiary of the Company. Effective February 1988, Mr. Stefany was elected
Senior Vice President of the Parent Corporation and Colonial.
Randell G. Craig was elected Director of the Company and the Broker-Dealer in
May 1990. His principal occupation has been as Executive Vice President and
Chief Marketing Officer of the Parent Corporation. He also serves as Director
and Executive Vice President of Colonial and the Service Company. Prior to
March 1992, Mr. Craig served as Executive Vice President, General Agency and
prior to March 1991 he served as Senior Vice President, General Agency of the
Parent Corporation. From 1986 to May 1990, Mr. Craig was Vice President,
Marketing and Sales for Crown Life Insurance Company.
Ernest J. Tsouros was elected Director of the Company and the Broker-Dealer in
May 1969. His principal occupation since 1982 has been as Vice President of the
Parent Corporation. He also serves as Vice President of Colonial and the
Service Company.
Frederick H. Condon was elected Director of the Company and the Broker-Dealer in
February 1984. His principal occupation since 1985 has been as Senior Vice
President, General Counsel and Secretary of the Parent Corporation. He serves
as Senior Vice President, General Counsel and Secretary of Colonial, Chubb
Sovereign, and the Service Company and as Vice President and Director of
Hampshire Syndications, Inc.
20 of 41
<PAGE>
Joseph A. Morein was elected Director of the Company and the Broker-Dealer in
September 1987. His principal occupation since August 1986 has been as a Vice
President of The Chubb Corporation.
John A. Weston was elected Treasurer of the Company and the Broker-Dealer in
August 1988. Mr. Weston was elected Treasurer of Chubb Series Trust in June
1994, and Assistant Treasurer, UST Master Variable Series, Inc. in September
1994. His principal occupation since July 1989 has been as Mutual Fund
Accounting Officer of the Parent Corporation. He was elected Treasurer of Chubb
Investment Funds, Inc. and Chubb America Fund, Inc. in April 1992, Treasurer of
Chubb Investment Advisory Corporation in May 1992, and Hampshire Syndications,
Inc. in July 1991. From July 1987 to July 1989 Mr. Weston was Mutual Fund
Accounting Manager for Chubb Investment Funds, Inc. and Chubb America Fund, Inc.
Charles C. Cornelio was elected Vice President, General Counsel and Secretary of
the Company, the Broker-Dealer, and Hampshire Syndications, Inc. in May 1993.
His principal occupation since December, 1994 has been as Senior Vice President
and Chief Administrative Officer of the Parent Corporation. From March 1992 to
December 1994 he served as Vice President, Counsel and Assistant Secretary for
the Parent Corporation. He also serves as Vice President, Counsel and Assistant
Secretary of Colonial and the Service Company and as Vice President, Counsel and
Assistant Secretary to Chubb Investment Funds, Inc. and Chubb America Fund, Inc.
From September 1988 to October 1989 Mr. Cornelio was Assistant Counsel of the
Parent Corporation, and from October 1989 to June 1991 he was Associate Counsel
of the Parent Corporation. He also serves as a Director of Hampshire
Syndications, Inc.
Carol R. Hardiman was elected Vice President, Administration of the Company and
the Broker-Dealer in June 1989. From October 1987 to May 1989, she was
Assistant Vice President of the Company and the Broker-Dealer.
Shari J. Lease was elected Assistant Secretary of the Company and the Broker-
Dealer in December 1994. Her principal occupation since April 1994 has been as
Assistant Vice President and Associate Counsel of the Parent Corporation. Ms.
Lease was elected Secretary of Chubb Investment Funds, Inc. and Chubb America
Fund, Inc., in April 1992, Secretary of Chubb Series Trust in December 1993 and
Assistant Secretary of Hampshire Syndications, Inc. in May 1994. She served as
Assistant Counsel of the Parent Corporation from October 1990 to April 1994 and
Assistant Secretary of Chubb Investment Funds, Inc. and Chubb America Fund, Inc.
from July 1991 to April 1992. From April 1984 to October 1990
Ms. Lease was Assistant Vice President and Assistant Counsel of SBM Company and
its various affiliates.
Christopher J. Moakley was elected Vice President of the Parent Corporation in
June 1994. His principal occupation since June 1994 has been as Vice President
of Consumer Relations of the Parent Corporation. Prior to joining the Parent
Corporation, Mr. Moakley served as Vice President, Corporate Secretary and
Compliance Officer for John Hancock Mutual Life Insurance Company and John
Hancock Variable Life Insurance Company from 1991 to 1994 and as Assistant
Regulatory and Compliance Officer from 1988 to 1990 for John Hancock Mutual Life
Insurance Company.
Ronald R. Angarella was elected Senior Vice President of the Parent Corporation
and Vice Chairman of the Broker-Dealer in November 1994. Mr. Angarella was
elected Vice President, Staff Management of the Parent Corporation in September
1992 and Assistant Vice President, Staff Management of the Parent Corporation in
February 1992. From March 1990 he served as Assistant Vice President, Marketing
of the Broker-Dealer.
21 of 41
<PAGE>
James R. Wagner, Jr. was elected Senior Vice President and Chief Marketing
Officer of the Parent Corporation in November 1994. He also acts as Trustee for
The Chubb Series Trust since June 1994. From June 1993 to November 1994 he
served as Senior Vice President, Marketing, Individual Insurance of the Parent
Corporation. He was elected Vice President of the Company in May 1991. Prior
to joining the Company, he was Agency Manager from January 1990 to May 1991 and
Assistant Vice President from March 1987 to January 1990 for Crown Life
Insurance Company.
_____________________________________________
/(1)/ There are no family relationships existing between or among any of the
above-listed Directors or Executive Officers.
/(2)/ The term of office of each of the foregoing Directors and Executive
Officers extends until the annual meetings of the shareholders and Board
of Directors or until removed by the Board of Directors.
22 of 41
<PAGE>
Item 11 - Executive Compensation
- --------------------------------
(a) The Company pays no remuneration to its Directors and Officers, nor does
it have any agreement, commitment, or plan to pay salaries or compensation
to any Director or Officer on other than a nominal basis. The Service
Company employs all of the personnel who perform business functions for
the Company, which personnel also perform functions for affiliates of the
Company.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) The table below sets forth ownership of the Company's issued and
outstanding common stock as of March 15, 1995.
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent of
Class of Beneficial Owner Beneficial Ownership Class
- -------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Chubb Life Insurance 50,000 shares of record 100
Company of America
One Granite Place
Concord, New Hampshire
</TABLE>
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
(a) The Company, the Parent Corporation, Colonial and Chubb Sovereign all have
agreements with the Service Company whereby the Service Company provides
service and joint operations. In addition, the Company utilizes furniture,
equipment and fixtures owned by one or more of the Insurance Companies.
The Company pays the Service Company a fee, determined in accordance with
mutually agreed upon cost allocation methods, which the Companies believe
reflect a proportional allocation of common costs and are commensurate for
the performance of the applicable duties.
The Company's funds for financing the Programs are currently obtained
through Loan Agreements and Company-Lender Agreements (together the
"Agreements") with Colonial and Chubb Life. The Agreements provide for
revolving credit arrangements under which Colonial will make advances to
the Company in an amount not to exceed $29,000,000, and Chubb Life will
make advances to the Company in an amount not to exceed $20,000,000. The
loans are made at short-term lending rates agreed upon by the Company and
its lenders which are subject to change in accordance with the Agreements
and market conditions.
In March, 1990 franchise fee agreements were entered into between the
Company and certain of the Insurance Companies from which the Company
received $300,000 of franchise fees. No franchise fees have been paid
since nor does the Company anticipate receiving any fees in 1995.
(b) See Item 10, Directors and Executive Officers of the Registrant.
23 of 41
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8K
- -------------------------------------------------------------------------
(a) Documents filed as a part of this Report.
1. The following consolidated financial statements of Hampshire Funding,
Inc. and Subsidiary are included in Item 8:
(i) Report of Independent Auditors
(ii) Consolidated Balance Sheets as of December 31, 1994 and 1993
(iii) Consolidated Statements of Operations and Retained Earnings for
each of the three years in the period ended December 31, 1994.
(iv) Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1994.
(v) Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All Schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in
the financial statements and the notes thereto.
3. Exhibits
(i) Pursuant to Rule 12b-23 and General Instruction G, the
following exhibits required to be filed with this Report
pursuant to the Instructions for Item 14 above are
incorporated by reference from the reference source cited in
the table below.
Reg S-K
Item 601
<TABLE>
<CAPTION>
Exhibit
Table No. Document Reference Source
--------- -------- ----------------
<S> <C> <C>
(1) Distribution Agreement Form 10-K, filed
between the Company and March 15, 1990, for the
Chubb Securities Corporation year ended December 31,
dated March 1, 1990 1989, pp. 23-24
(3) (i) Articles of Incorporation Form 10-K, filed
of Company March 15, 1990, for the
year ended December 31,
1989, pp. 25-27
</TABLE>
24 of 41
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Table No. Document Reference Source
--------- -------- ----------------
<S> <C> <C>
(ii) By-Laws of Company Form 10-K, filed
March 15, 1990, for the
year ended December 31,
1989, pp. 28-46
(10) (i) (a) Loan Agreement between Form 10-K, filed
the Company and The March 15, 1990, for the
Colonial Life Insurance year ended December 31,
Company of America, dated 1989, pp. 54
July 7, 1989
(b) Amendment to Loan Form 10-K, filed
Agreement between the March 15, 1990, for the
Company and The Colonial year ended December 31,
Life Insurance Company of 1989, pp. 55-56
America, dated March 8,
1990
(c) Second Amendment to Loan Form 10-K, filed
Agreement between the March 29, 1993, for the
Company and The Colonial year ended December 31,
Life Insurance Company of 1992, pp. 23-24
America, dated December 15,
1992
(d) Third Amendment to Loan Form 10-K, filed
Agreement between the March 29, 1993, for the
Company and The Colonial year ended December 31,
Life Insurance Company of 1992, pp. 25-26
America, dated March 8, 1993
(e) Fourth Amendment to Loan Form 10-K filed
Agreement between the March 9, 1994 for the
Company and The year ended December 31,
Colonial Life Insurance 1993, pp. 33-34
Company of America, dated
June 17, 1993
(ii) (a) Company-Lender Agreement Form 10-K, filed
between the Company and March 15, 1990, for the
The Colonial Life year ended December 31,
Insurance Company of 1989, pp. 57-60
America, dated July 7,
1989
(b) Amendment to Acceptance Form 10-K, filed
of Company-Lender March 15, 1990, for the
Agreement between the year ended December 31,
Company and The Colonial 1989, pp. 61
Life Insurance Company of
America, dated March 8,
1990
</TABLE>
25 of 41
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Table No. Document Reference Source
--------- -------- ----------------
<S> <C> <C>
(c) Second Amendment to Form 10-K, filed
Acceptance of March 29, 1993, for the
Company-Lender Agreement year ended December 31,
between the Company and 1992, pp. 27-28
The Colonial Life Insurance
Company of America,
dated December 15, 1992
(d) Third Amendment to Form 10-K, filed
Acceptance of March 29, 1993, for the
Company-Lender Agreement year ended December 31,
between the Company and 1992, pp. 29-30
The Colonial Life Insurance
Company of America,
dated March 8, 1993
(e) Fourth Amendment to Form 10-K filed
Acceptance of March 9, 1994 for the
Company-Lender year ended December 31,
Agreement between the 1993, pp. 35-36
Company and The
Colonial Life Insurance
Company of America, dated
June 17, 1993
(iii) Franchise Fee Agreement Form 10-K, filed
between the Company and March 15, 1990, for the
Chubb Life Insurance year ended December 31,
Company of America, dated 1989, pp. 62-63
March 9, 1990
(iv) Franchise Fee Agreement Form 10-K, filed
between the Company and March 15, 1990, for the
The Volunteer State Life year ended December 31,
Insurance Company, dated 1989, pp. 64-65
March 9, 1990
(v) (a) Loan Agreement between Form 10-K filed
the Company and Chubb March 9, 1994 for the
Life Insurance Company year ended December 31,
of America, dated 1993, pp. 37-38
September 29, 1993
(b) Company-Lender Agreement Form 10-K filed
between the Company and March 9, 1994 for the
Chubb Life Insurance year ended December 31,
Company of America, dated 1993, pp. 39-40
September 29, 1993
</TABLE>
26 of 41
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Table No. Document Page
--------- -------- ----
<S> <C> <C>
(c) Acceptance of Company Form 10-K filed
-Lender Agreement between March 9, 1994 for the
the Company and The Chubb year ended December 31,
Life Insurance Company of 1993, pp. 41-42
America, dated
September 29, 1993
(22) Subsidiaries of the Registrant Form 10-K, filed
March 15, 1990, for the
year ended December 31,
1989, pp. 66
(ii) Filed by enclosure.
Reg S-K
Item 601
(4) (i) Agency Agreement and 29-31
Limited Power of Attorney
(ii) Change in Participant in 32-33
Program
(iii) Disclosure Statement and 34-35
Agreement to Modify a
Program
(a) Loan Agreement between the 36-37
Company and Chubb Life
Insurance of America, dated
September 29, 1994
(b) Company-Lender Agreement 38-39
between the Company and
Chubb Life Insurance
Company of America, dated
September 29, 1994
(c) Acceptance of Company 40-41
-Lender Agreement between
the Company and The Chubb
Life Insurance Company of
America, dated
September 29, 1994
(b) Reports on Form 8-K
</TABLE>
No Reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1994.
27 of 41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DATE: March ___, 1995 HAMPSHIRE FUNDING, INC.
By: /s/ BRUCE R. STEFANY
---------------------------------------
Bruce R. Stefany, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ RONALD R. ANGARELLA Vice Chairman and Director March 10, 1995
- --------------------------
Ronald R. Angarella
/s/ BRUCE R. STEFANY President and Director March 10, 1995
- --------------------------
Bruce R. Stefany
/s/ JAMES R. WAGNER, JR. Director March 10, 1995
- --------------------------
James R. Wagner, Jr.
/s/ FREDERICK H. CONDON Director March 10, 1995
- --------------------------
Frederick H. Condon
/s/ ERNEST J. TSOUROS Director March 10, 1995
- --------------------------
Ernest J. Tsouros
/s/ RANDELL G. CRAIG Director March 10, 1995
- --------------------------
Randell G. Craig
- --------------------------
Joseph A. Morein Director March 10, 1995
/S/ JOHN A. WESTON
- --------------------------
JOHN A. WESTON Treasurer, Principal Financial March 10, 1995
and Accounting Officer
</TABLE>
28 of 41
<PAGE>
AGENCY AGREEMENT AND
[LOGO OF HAMPSHIRE FUNDING, INC. APPEARS HERE] LIMITED POWER OF ATTORNEY
________________________________________________________________________________
Hampshire Funding, Inc., One Granite Place, P.O. Box 2005, Concord, NH 03302
Subject to the agreement of Hampshire Funding, Inc. (the"Company")
I (We) (the "Participant(s)") hereby establish a Hampshire Funding, Inc.
Program for the Acquisition of Mutual Fund Shares and Insurance (the
"Program") which Program is described in the Company's Prospectus (the
"Prospectus"). This Agency Agreement and Limited Power of Attorney
(the"Agreement") shall be governed by and interpreted in accordance with the
laws of the State of New Hampshire. Singular nouns and pronouns shall be
read in the plural, where applicable.
I hereby appoint the Company as my Agent and attorney-in-fact and assign and
transfer to the Company as my Agent all my interest in my investment
account(s) and in any future additions thereto which are or will be held
pursuant to my Program (hereinafter referred to as the "Account") with
open-end investment companies registered under the Investment Company Act of
1940 (hereinafter referred to as the"Fund") and all shares of the Fund
(hereinafter referred to as the "Shares"), except the right to vote as a
shareholder in all matters relating to the Fund. The Account and Shares
shall be held in the Company's name or in that of its nominee as custodian
for my Account, which shall be held pursuant to the terms of this Agreement
and the current Prospectus.
1. I hereby authorize the Company to make advances on my behalf to pay
premiums as they become due or excess premiums as agreed to by the Company,
including renewal premiums, on any insurance policy available through the
Program for which I have instructed the Company to pay the premiums, or on any
policies purchased to replace said policies.
This Agreement shall evidence my obligation to repay the advances as
described herein. I agree to pay the Company the amount of all such
advances, including interest at a per annum rate determined by the company,
which may change at any time during the Program but which at no time shall be
less than the nominal interest rate of 6% per annum nor more than 3
percentage points above the prime or base rate as quoted in the Wall Street
Journal; nor more than the maximum rate permitted by the laws of the State of
New Hampshire, which laws shall govern all matters of interest and charges
hereunder. Any change in the interest rate made by the Company will become
effective immediately without prior notice to the Participants. Interest
will be compounded monthly, quarterly, semiannually or annually, which shall
be determined by the frequency of the premium advances, i.e. the premium
payment mode for the policy. The aggregate advances plus accrued interest is
hereinafter referred to as the "Account Indebtedness". I hereby pledge with
and authorize the Company to hold as custodian and pledge my Shares as
collateral security for the payment of the Account Indebtedness in accordance
with the terms herein and those of the current Prospectus. I understand and
agree that if I do not pay the accrued interest upon its due date, the due
date of the subsequent premium, the principal amount of my Account
Indebtedness shall be increased by the amount of all accrued interest, the
intent being that interest not paid when due shall be deemed thereafter to be
principal and shall be treated in the same manner as advances made for
insurance premiums.
2. I authorize the Company as my attorney-in-fact to accept on my behalf and
acknowledge the receipt of disclosure statements for the extension of credit
under the applicable regulations of the Federal Truth-In-Lending Act, if any,
for subsequent delivery to me.
3. I further hereby authorize the Company to assign and transfer my Account
indebtedness, and any Shares pledged to the Company as required to secure such
Account Indebtedness as collateral security for the Company's indebtedness
pursuant to any financing arrangements with certain lenders, but only to the
extent of the Account Indebtedness plus the current premium or premiums of the
policies listed above. Such Account Indebtedness and the Shares pledged to
secure the Company's Indebtedness shall not exceed my Account Indebtedness and
the Shares pledged to the Company in accordance with the terms of the
Prospectus. I further understand that in the event any of my pledged Shares are
sold or redeemed pursuant to the terms of this Agreement, the Prospectus, or the
Company's financing arrangements, my financial responsibility will be limited by
the amount of my Account Indebtedness to the Company; that the proceeds of the
sale or redemption of any Shares in excess of my Account Indebtedness will be
paid to me as though I specifically requested withdrawal of the same, unless
investment thereof is directed by me in writing, via mail or facsimile, in which
event I understand: (i) regular investment charges, if any, will be charged with
respect to any purchase of additional Shares; (ii) the number of Shares so sold
or redeemed shall not exceed the number of full Shares the sale or redemption
value of which will provide cash equal to my Account Indebtedness hereunder; and
(iii) any pledged Shares not sold or redeemed to satisfy my Account Indebtedness
will be delivered to my Account and released from all pledge arrangements
contemplated hereby.
4. I understand that I may at any time elect to pay the interest on my Account
Indebtedness in cash or to prepay in cash my Account Indebtedness in full or in
part, provided that I pay fees and charges as stated in the Prospectus which is
current at the time of termination or payment of Account Indebtedness. If the
Account Indebtedness is prepaid in full, the Program and this Agreement will
terminate.
5. I authorize the Company, as my attorney-in-fact, to execute on my behalf
any stock transfer power subject to the limitations stated herein and in the
Prospectus.
Page 1 of 3
29 of 41
<PAGE>
6. I agree to pay the Company annually an administrative charge which will
reasonably compensate it for its services pursuant hereto. Unless such
administrative charge is paid by me in cash, the Company, at its discretion,
hereby is further authorized to pay this charge by redeeming Shares in the
amount equal to such charge or to increase my Account Indebtedness by an amount
equal to that charge. I also understand that I may pay the entire administrative
charges over the life of the Program by paying, at the time this Agreement is
signed, a nonrefundable lump sum fee. I also agree to pay all termination fees
and liquidation charges upon termination of the Program and all charges for
special services in accordance with the current Prospectus.
7. This Appointment and Agreement may be terminated effective immediately by
me upon written notice mailed or transmitted via facsimile to the Company and
will be terminated by the Company upon the happening of any of the following
events: 1) the death of all Participants of the Program; 2) the death of all
Insureds covered by a policy (ies) under the Program; 3) if the Shares held as
collateral for the Account Indebtedness fail to meet the minimum collateral
requirements due either to a decline in value of the Shares or an increase in
the Account Indebtedness as set forth in the Prospectus; 4) if the Program fails
to meet the Program's minimum investment requirements set forth in the
Prospectus due to a decrease in the insurance premiums advanced under the
Program unless waived by the Company to the extent permitted by law; 5) the date
ten (10) years from the due date of the initial premium advanced (Normal
Expiration Date), unless extended by mutual agreement between the Company and
the Participant; or 6) upon the inability of the Company to provide or arrange
for financing of premiums. If the Participant is a corporation, "death of all
Participants" shall be read "the dissolution, or bankruptcy" of the corporation
or the appointment of a trustee or receiver for its property; if a Trustee
pursuant to a valid trust instrument, the termination of the trust.
Notwithstanding such termination, the appointments made hereunder shall continue
in effect for the purpose of redeeming my Shares or otherwise effecting payment
of my Account Indebtedness. The Company, any lender, and the Fund shall be
entitled to rely and act upon the authority granted by me under this Agreement
until each of them respectively has received actual written notice of its
revocation or termination.
8. I understand that the Company cannot give any assurance that the proposed
insured, in an application for a policy to be included in a Program, will
qualify for insurance. No fees charged at the initiation of a Program apply to
insurance, thus no conditional receipt for insurance coverage will be issued;
that is, I will be without insurance coverage until (i) the application for
insurance is approved and (ii) the expiration of 31 days from the date of
purchase of the mutual fund shares. If I wish to conditionally obtain insurance
coverage prior to completion of the underwriting process, I may pay an
additional premium payment as described in the current Prospectus. I understand
that such conditional insurance coverage may not be available in all cases.
9. Upon termination of this Agreement, the Program shall terminate and a
sufficient number of Shares held as collateral will be redeemed on a purely
discretionary basis by the Company to pay off the Account Indebtedness. The
remaining shares received from a pledgee or otherwise will be reregistered in
the name of the Participant. No investment of cash received in my Account upon
termination of this Agreement shall be made by the Company unless investment
thereof is directed by me in writing, in which event regular investment charges
will be made.
10. Subject to the agreement of the Company, the Participant in this Program
may be changed. The successor Participant must determine that the investment
is suitable for him/her and adopt all the terms of this Agreement as his/her
own, including the assumption of liability for the Account Indebtedness.
11. A policy may be added to the Program or the Program modified after its
inception upon agreement with the Company. However, the Program, if not
otherwise terminated, shall still terminate on the Normal Expiration Date,
unless extended by mutual agreement between the Company and the Participant.
12. The Program and all Shares held and/or purchased under the terms of a
Program for which there is more than one Participant will be held by
Hampshire Funding, Inc. as Custodian for all Participants as Joint Owners
with rights of survivorship, irrespective of the ownership of any shares
prior to the commencement of the Program.
FEDERAL REVERSE BOARD REGULATION Z
DISCLOSURE STATEMENT
All figures assume: 1) this Agreement will be in full force and effect
until the date ten (10) years from the due date of the initial premium advanced
under the Program, when the full amount of the loan (Account Indebtedness) will
be repaid; 2) the annual administrative charges are financed unless otherwise
indicated; 3) the interest rate, which is a variable rate and subject to change
at any time, remains the same throughout the ten year period of this Agreement;
and 4) no charges have been incurred for special services due to modification of
the Program.
If premiums of a variable or dynamic life insurance policy are paid under the
Program, the amount and timing of payments are assumed to follow the
recommended payment schedule for the policy's current interest rate, which is
provided by the appropriate insurance company. These figures may change over
the life of the Program, depending upon deviations from the payment schedule,
Page 2 of 3
30 of 41
<PAGE>
changes in the policy's interest rate, which is variable, and the policy's
face amount.
1. AMOUNT FINANCED, the amount of credit provided to you on your behalf $
________.
2. FINANCE CHARGE, the dollar amount the credit will cost you $_________.
3. TOTAL OF PAYMENTS, the amount you will have paid when you have repaid
the loan $_________.
4. ANNUAL PERCENTAGE RATE, the cost of your credit as a yearly rate.
Excluding annual administrative fee_________. Including annual
administrative fee_________.
You have the right to receive a written itemization of the Amount Financed.
Do you desire an itemization?
[_]Yes [_]No
DEFAULT CHARGE: There are no default, delinquency or collection charges.
Reasonable fees will be charged for special services such as loan reductions,
protested checks, changes in frequency of advances, changes from one mutual
fund account to another, redemption of mutual fund shares, and others.
PREPAYMENT: A termination fee and liquidation charges will be imposed if the
Account Indebtedness is prepaid in full; reasonable fees also will be charged
if the loan balance is reduced. Refer to the terms of this Agreement and the
Prospectus which is current at the time of termination or payment of Account
Indebtedness for information regarding these fees and charges and relating to
default, your obligation to maintain adequate security, the right of
Hampshire
Funding, Inc. to terminate the Program and require repayment of the Account
Indebtedness and any other transaction charges which may have been incurred.
VARIABLE RATE: The Annual Percentage Rate may increase or decrease at any
time during the term of the Program at the discretion of Hampshire Funding,
Inc. The nominal interest rate will in no event be less than 6% per annum nor
exceed 3 percentage points above the prime or base rate as quoted in the Wall
Street Journal. An increase in the rate will mean a larger amount will be
due upon termination of the Program; additional collateral may be required in
accordance with the Margin Requirements of the Company. For example, if a
Participant were paying annual premiums of $1,000 at a nominal interest rate
of 12.000% for the ten year life of the Program, the Total of Payments,
including the administrative fee would be $20,833.86 with an Annual
Percentage Rate of 13.016%. If the Participant were paying the same premium
at a nominal interest rate of 13.000% for the ten year life of the Program,
the Total of Payments, including the administrative fee would be $22,063.18
with an Annual Percentage Rate of 14.015%, rather than the figures shown
above. See the Prospectus for further details relating to the Margin
Requirements.
SECURITY: The Account Indebtedness is secured by the pledge of your Shares
as described in this Agreement and the current Prospectus.
CREDIT INSURANCE: Credit life and disability insurance are not required to
obtain credit.
I ACKNOWLEDGE, PRIOR TO THE CONSUMMATION OF THE TRANSACTION DISCLOSED HEREIN,
RECEIPT OF A COPY OF THIS AGREEMENT CONTAINING THE DISCLOSURES REQUIRED BY
FEDERAL LAW. I FURTHER ACKNOWLEDGE A COPY OF THE COMPANY'S CURRENT PROSPECTUS,
THE CURRENT PROSPECTUS OF THE FUND, AND THE CURRENT PROSPECTUS OF ANY VARIABLE
UNIVERSAL LIFE PRODUCT TO BE USED IN THE PROGRAM. I UNDERSTAND I WILL RECEIVE AN
EXECUTED COPY OF THIS AGREEMENT AFTER IT HAS BEEN COUNTERSIGNED BY THE COMPANY.
I ALSO UNDERSTAND THAT I HAVE THE RIGHT TO PURCHASE LIFE INSURANCE ONLY, EQUITY
PRODUCTS ONLY, OR BOTH LIFE INSURANCE AND EQUITY PRODUCTS.
* Participant (1) * Participant (2)
Signs X Signs X
______________________________ ___________________________________
Street Street
______________________________ ___________________________________
Town State Zip Town State Zip
Date:_______________________ Date:____________________________
Hampshire Funding, Inc. hereby accepts and agrees to act under the foregoing
Agency Agreement and Limited Power of Attorney.
HAMPSHIRE FUNDING, INC. By:_____________________________
P.O. BOX 2005
Concord, New Hampshire 03302 Date:___________________________
- ---------------------------------------------------------------------
* DIRECTIONS
If the Participant is a corporation, an attested certificate of the vote of
the Board of Directors bearing a signature of a corporate officer other than
that of a person insured under a life insurance policy designated above must
be attached hereto.
If the Participant is a partnership, the agreement must be executed by at
least two general partners. A copy of the partnership agreement must be
attached hereto.
If the Participant is a trustee, the word trustee must appear after his/her
signature. The signature will warrant that the trustee is acting pursuant to
a valid trust instrument under which the trustee is authorized and empowered
to execute this Agreement and to fulfill all its terms and conditions and
carry out all of the transactions contemplated hereby. A copy of that trust
agreement must be attached hereto.
RETURN ALL COPIES TO HOME OFFICE
Page 3 of 3
31 of 41
<PAGE>
[LOGO OF HAMPSHIRE FUNDING, INC., APPEARS HERE] CHANGE IN PARTICIPANT
IN PROGRAM
================================================================================
Hampshire Funding, Inc., One Granite Place, P.O. Box 2005, Concord, NH 03302
Change of Participant in Hampshire Funding Program No.__________ Established
By Agency Agreement and Limited Power of Attorney dated ___________________ .
By signing below, and subject to the agreement of Hampshire Funding, Inc. I
(we),__________________________________________, the Assignor(s), do hereby
assign, transfer and set over all my (our) right, title and interest in
Hampshire Funding Program (The "Program") No.______________ established pursuant
to the above Agency Agreement,__________________________________________ to ,
the Assignee(s), who by signing below does hereby accept said assignment and the
terms set forth below. I (we), the Assignor(s), specifically assign, transfer
and set over all my (our) right, title and interest in all mutual fund shares
held as collateral security for said Program and authorize Hampshire Funding,
Inc. to register such shares in the name of "Hampshire Funding, Inc. C/F
________________(Assignee(s))," such shares being currently registered in
Hampshire Funding, Inc.'s name as custodian for me (us), the Assignor(s).
The Assignee(s) hereby (1) acknowledges receipt of a copy of Hampshire
Funding, Inc.'s Prospectus (the "Prospectus") and the aforesaid Agency
Agreement, (2) adopts and agrees to each and every term of the Agency
Agreement, and (3) appoints Hampshire Funding, Inc. as his attorney-in-fact
to perform all the functions described therein including but not limited to
the pledging of all shares in the Account, and authorizes Hampshire Funding,
Inc. to continue advances of monies for premiums for the insurance policies
included in said Program, and does hereby accept as his own, the obligation
to repay the Account Indebtedness as defined in the Agency Agreement, whether
incurred under it before or after this date.
The Assignee(s) understands that all transactions governing the Program
will be governed by the terms of said Agency Agreement and the Prospectus and
both Assignor(s) and Assignee(s) fully understand that said Program and the
Agency Agreement shall terminate and the Account Indebtedness be repaid
immediately, should the Assignee(s) not qualify for the Program. In that
event, the remaining shares following repayment of the Account Indebtedness
shall be reregistered in the name of the Assignee(s).
The Assignee(s) further acknowledge receipt of the Disclosure Statement
required by Federal Reserve Board Regulation Z, which is made by Hampshire
Funding, Inc. with respect to any sums borrowed pursuant to said Agency
Agreement. The figures below assume actual advances, accrued interest and
administrative fees from the inception of the Program to date and future
advances made at the current interest rate, which is a variable rate, and for
the current administrative fee, which is assumed to be financed unless
otherwise indicated. The figures do not include charges incurred for special
services due to modification of the Program. The Disclosure Statement assumes
the Program will be in full force and effect until the date ten years from
the due date of the initial premium advanced under said Program, at which
time the full amount of the loan (Account Indebtedness) will be repaid.
If premiums of a variable or dynamic life insurance policy are paid under
the Program, the amount and timing of payments are assumed to follow the
recommended payment schedule for the policy's current interest rate, which is
provided by the appropriate insurance company. These figures may change over
the life of the Program, depending upon deviations from the payment schedule,
changes in the policy's interest rate, which is variable, and the policy's
face amount.
1. AMOUNT FINANCED, the amount of credit provided to you on your behalf $
_____________________ .
2. FINANCE CHARGE, the dollar amount the credit will cost you $
______________________ .
3. TOTAL OF PAYMENTS, the amount you will have paid when you have repaid the
loan $ _________________ .
4. ANNUAL PERCENTAGE RATE, the cost of your credit as a yearly rate.
Excluding annual administrative fee ____________ %. Including annual
administrative fee _____________ %.
You have the right to receive a written itemization of the Amount Financed.
Do you desire an itemization?
[_] Yes [_] No
DEFAULT CHARGE: There are no default, delinquency or collection charges.
Reasonable fees will be charged for special services such as loan reductions,
protested checks, changes in frequency of advances, changes from one mutual
fund account to another, redemption of mutual fund shares, and others.
PREPAYMENT: A termination fee and liquidation charges will be imposed if the
Account Indebtedness is prepaid in full; reasonable fees also will be charged
if the loan balance is reduced. Refer to the terms of the Agency Agreement
and the Prospectus which is current at the time of termination or payment of
Account Indebtedness for information regarding these fees and charges and
relating to default, your obligation to maintain adequate security, the right
of Hampshire Funding, Inc. to terminate the Program and require repayment of
the Account Indebtedness and any other transaction charges which may have
been incurred.
RETURN ALL COPIES TO HOME OFFICE
Page 1 of 2
32 of 41
<PAGE>
VARIABLE RATE: The Annual Percentage Rate may increase or decrease during the
term of this transaction at the discretion of Hampshire Funding, Inc. Any
change in the interest rate made by the Company will become effective
immediately without prior notice to the Participants. The nominal interest
rate will in no event be less than 6% per annum nor exceed 3 percentage
points above the prime or base rate as quoted in the Wall Street Journal. An
increase in the rate will mean a larger amount will be due upon termination o
f the Program; additional collateral may be required in accordance with the
Margin Requirements of the Company. For example, if the nominal interest rate
on the premium advances was increased by 1% from the current rate, the Total
of Payments including the administrative fee would be _____________ with an
Annual Percentage Rate of _______ % rather than the figures shown above. See
the current Prospectus for further details relating to the Margin
Requirements.
SECURITY: The Account Indebtedness is secured by the pledge of the
Participant's shares, as described in the Agency Agreement and the current
prospectus.
CREDIT INSURANCE: Credit life and disability insurance are not required to
obtain credit.
I (WE), THE ASSIGNEE(S), ACKNOWLEDGE, PRIOR TO THE FIRST PREMIUM ADVANCE MADE
FOLLOWING CHANGE OF PARTICIPANT, RECEIPT OF A COPY OF ALL APPLICABLE
PROSPECTUSES, THE AGENCY AGREEMENT AND THIS ASSIGNMENT CONTAINING THE
DISCLOSURES REQUIRED BY FEDERAL LAW. I (WE) UNDERSTAND THAT I (WE) WILL RECEIVE
AN EXECUTED COPY OF THIS ASSIGNMENT AFTER IT HAS BEEN COUNTERSIGNED BY THE
COMPANY.
Assignor (1) Assignor (2)
Signs X _______________________________ Signs X ___________________________
_______________________________________ ___________________________________
Street Street
_______________________________________ ___________________________________
Town State Zip Town State Zip
Date: _______________________________ Date: ___________________________
Assignee (1) Assignee (2)
Signs X _______________________________ Sign X ___________________________
_______________________________________ __________________________________
Street Street
_______________________________________ __________________________________
Town State Zip Town State Zip
Date: _______________________________ Date: _________________________
HAMPSHIRE FUNDING, INC. hereby HAMPSHIRE FUNDING, INC.
accepts and agrees to act under said P.O. BOX 2005
Agency Agreement and under the terms CONCORD, NEW HAMPSHIRE 03302
of this Agreement.
By _________________________________
Date:_______________________________
RETURN ALL COPIES TO HOME OFFICE
Page 2 of 2
33 of 41
<PAGE>
[LOGO OF HAMPSHIRE FUNDING, INC., DISCLOSURE STATEMENT AND AGREEMENT
APPEARS HERE] TO MODIFY A PROGRAM
==============================================================================
Hampshire Funding, Inc., One Granite Place, P.O. Box 2005, Concord, NH 03302
Federal Reserve Board Regulation Z Disclosure Statement for
[_] addition of policy number(s) ________________________
[_] increase in premiums to be advanced due to modification
of policy number(s) ______________________
[_] change in premium payment mode of policy number(s) ______________________
in Hampshire Funding Program ("Program") No. __________ established pursuant to
an Agency Agreement and Limited Power of Attorney executed by and between
Hampshire Funding, Inc. and on ________ . The figures below assume actual
advances, accrued interest and administrative fees from the inception of the
Program to date, and future advances made at the current interest rate, which
is a variable rate, and for the current administrative fee, which is assumed
to be financed unless otherwise indicated. The figures do not include
charges incurred for special services due to modification of the Program.
The Disclosure Statement assumes the Program will be in full force and effect
until the Normal Expiration Date, ten years from the due date of the initial
premium advanced under the Agency Agreement, at which time the full amount of
the loan (Account Indebtedness) will be repaid.
If premiums of a variable or dynamic life insurance policy are paid under the
Program, the amount and timing of payments are assumed to follow the
recommended payment schedule for the policy's current interest rate, which is
provided by the appropriate insurance company. These figures may change over
the life of the Program, depending upon deviations from the payment schedule,
changes in the policy's interest rate, which is variable, and the policy's
face amount.
1.Amount Financed, the amount of credit provided to you on your behalf $
____________ .
2.FINANCE CHARGE, the dollar amount the credit will cost you $ __________ .
3.Total of Payments, the amount you will have paid when you have repaid the
loan $ _____________ .
4.ANNUAL PERCENTAGE RATE, the cost of your credit as a yearly rate. Excluding
annual administrative fee __________ %. Including annual administrative
fee _________ %.
You have the right to receive a written itemization of the Amount Financed.
Do you desire an itemization?
[_] Yes [_] No
DEFAULT CHARGE: There are no default, delinquency or collection charges.
Reasonable fees will be charged for special services such as loan reductions,
protested checks, changes in frequency of advances, changes from one mutual
fund to another, redemption of mutual fund shares, and others.
PREPAYMENT: A termination fee and liquidation charges will be imposed if the
Account Indebtedness is prepaid in full; reasonable fees also will be charged
if the loan balance is reduced. Refer to the terms of this Agreement and the
Prospectus which is current at the time of termination or payment of Account
Indebtedness for information regarding these fees and charges and relating to
default, your obligation to maintain adequate security, the right of
Hampshire Funding, Inc. to terminate the Program and require repayment of
the Account Indebtedness and any other transaction charges which may have
been incurred.
VARIABLE RATE: The Annual Percentage Rate may increase or decrease at any
time during the term of the Program at the discretion of Hampshire Funding,
Inc. Any change in the interest rate made by the Company will become
effective immediately without prior notice to the Participants. The nominal
interest rate will in no event be less than 6% per annum nor exceed 3
percentage points above the prime or base rate as quoted in the Wall Street
Journal. An increase in the rate will mean a larger amount will be due upon
termination of the Program; additional collateral may be required in
accordance with the Margin Requirements of the Company. For example, if the
nominal interest rate on the premium advances was increased by 1% from the
current rate, the Total of Payments including the administrative fee would be
___________ with an Annual Percentage Rate of ______________ % rather than the
figures shown above. See the current Prospectus for further details relating
to the Margin Requirements.
SECURITY: The Account Indebtedness is secured by the pledge of your shares,
as described in the Agency Agreement and the current Prospectus.
CREDIT INSURANCE: Credit life and disability insurance are not required to
obtain credit.
I ACKNOWLEDGE PRIOR TO THE MODIFICATION TO THE PROGRAM DESCRIBED ABOVE,
RECEIPT OF A COPY OF ALL APPLICABLE PROSPECTUSES, THE AGENCY AGREEMENT AND
THIS DISCLOSURE STATEMENT CONTAINING THE DISCLOSURES REQUIRED BY FEDERAL LAW
AND AGREE THAT THE MODIFICATION TO THE PROGRAM WILL BE GOVERNED BY THE TERMS
OF THE AFOREMENTIONED AGENCY AGREEMENT. I UNDERSTAND I WILL RECEIVE AN
EXECUTED COPY OF THIS DISCLOSURE STATEMENT AND AGREEMENT AFTER IT HAS BEEN
COUNTERSIGNED BY THE COMPANY.
RETURN ALL COPIES TO HOME OFFICE
Page 1 of 2
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<PAGE>
Participant (1) Participant (2)
Signs X ______________________________ Signs X _____________________________
______________________________________ _____________________________________
Street Street
______________________________________ _____________________________________
Town State Zip Town State Zip
Date: ______________________________ Date: _____________________________
HAMPSHIRE FUNDING, INC. hereby accepts HAMPSHIRE FUNDING, INC.
and agrees to act under the aforemen- P.O. BOX 2005
tioned Agency Agreement and to make CONCORD, NEW HAMPSHIRE 03302
the modification to the Program
established thereby.
By _______________________________
Date: ____________________________
RETURN ALL COPIES TO HOME OFFICE
Page 2 of 2
35 of 41
<PAGE>
Loan Agreement
--------------
This Agreement is made by and between Chubb Life Insurance Company of America,
Concord, New Hampshire (hereinafter "Chubb Life") and Hampshire Funding, Inc.,
Concord, New Hampshire (hereinafter "HFI") and is effective as of September
29th , 1994.
- -----
1. Chubb Life agrees to make loans to HFI, upon written request from
HFI, in an aggregate amount which shall not exceed Twenty Million Dollars
($20,000,000) at a rate of interest not in excess of the prime interest
rate in effect in New York City at the time of any cash loan plus 2 1/2%
and not less than a reasonable rate in accordance with market conditions.
Interest on the amount advanced shall be paid as agreed by the parties but
not less frequently than quarterly on the average daily outstanding
balance. The principal balance outstanding on any loan shall be paid on
its maturity date as agreed by the parties.
2. HFI shall make loans to its Hampshire Funding Program
participants, which loans shall be secured by the pledge of mutual fund
shares or other acceptable collateral to HFI, which shall, at all times,
have a fair market value of not less than one hundred thirty percent (130%)
of the unpaid balance of HFI's notes held by Chubb Life, plus accrued
interest thereon.
3. The funds so borrowed by HFI shall be used by HFI solely to
finance the purchase of life insurance issued by Chubb Life of Concord, New
Hampshire, The Colonial Life Insurance Company of America of Parsippany,
New Jersey and Chubb Sovereign Life Insurance Company of Santa Barbara,
California for HFI's customers who purchase programs for coordinating the
acquisition of mutual fund shares and life insurance.
4. Until Chubb Life has loaned HFI $20,000,000 as provided by this
Agreement, HFI agrees that it will not, without the express consent of
Chubb Life, borrow any additional sums from any other lender other than The
Colonial Life Insurance Company of America, and that it will at all times
comply with Chubb Life's requirements concerning the redemption of shares
to pay back its loans.
36 of 41
<PAGE>
It Witness Whereof, this Agreement has been executed in duplicate on the 29th
------
day of September, 1994.
CHUBB LIFE INSURANCE COMPANY
OF AMERICA
Attest: /s/Charles C. Cornelio By: /s/Richard V. Werner
----------------------- -----------------------
Charles C. Cornelio Richard V. Werner
Title: Vice President, Title: Senior Vice President
Counsel, Assistant Secretary and Treasurer
HAMPSHIRE FUNDING, INC.
Attest: /s/Charles C. Cornelio By: /s/Bruce R. Stefany
----------------------- -------------------------
Charles C. Cornelio Bruce R. Stefany
Title: Vice President, Title: President
General Counsel and
Secretary
Attest: /s/Charles C. Cornelio By: /s/John A. Weston
----------------------- --------------------------
Charles C. Cornelio John A. Weston
Title: Vice President, Title: Treasurer
General Counsel, and
Secretary
37 of 41
<PAGE>
COMPANY-LENDER AGREEMENT
------------------------
This Agreement is made by and between Hampshire Funding, Inc., Concord, New
Hampshire (hereinafter "HFI"), and those lenders who have executed and caused to
be attached hereto an "Acceptance of Company-Lender Agreement" in the form
prescribed hereinafter.
WITNESSETH:
WHEREAS, HFI offers for sale and administers programs (the "Programs")
which coordinate the acquisition of mutual fund shares and insurance described
in the Registration Statement and Prospectus, as amended, filed by HFI with the
Securities and Exchange Commission (the "Registration Statement"), and
WHEREAS, HFI intends to obtain funds for the financing of the Programs
through loans from various lenders in amounts at interest rates and maturities
to be negotiated by HFI and such lenders, and
WHEREAS, HFI and such lenders desire to set forth their rights and
obligations in this Agreement with respect to said loans.
NOW THEREFORE, it is agreed as follows:
1. The lenders agree to lend and HFI agrees to borrow the funds specified
and at the interest rate and term set forth on the "Acceptance of Company-Lender
Agreement" executed by HFI and such lenders and attached hereto and made a part
hereof (the "Acceptance").
2. HFI agrees to finance the Programs with the proceeds or to repay
existing outstanding loans used for that purpose and in accordance with the
provisions of the Registration Statement to obtain security for its loans to the
Program Participants, which shall, at all times, have a fair market value of not
less than 130% of the principal plus accrued interest on all loans made by HFI.
Said shares shall be redeemed by HFI upon demand by lender in the event
conditions of default arise as set forth in paragraph 4 or the redemption value
to the collateral held by HFI drops to a level set forth in Paragraph 3.
3. In the event the aggregate redemption value of the mutual fund shares
pledged with HFI by Participants is less than 130% of HFI's principal
indebtedness plus accrued interest with its lenders, lenders may demand that HFI
redeem any such shares as in accordance with its agreements with Participants
may redeem in order to liquidate HFI's entire principal amount of indebtedness
plus accrued interest, or any portion thereof.
38 of 41
<PAGE>
4. In the event of a default by HFI in the timely payment of its principal
obligations or interest payments to its lenders, HFI does hereby agree to redeem
pledged mutual fund shares, but on and only on the maturity date of a
Participant's Program. Any such redemption shall be used for the repayment of
financing and shall be apportioned equitably amongst lenders whose loans are in
default; however, to the extent any are secured, said lenders shall maintain a
priority position.
5. The current Prospectus of HFI shall be attached to each "Acceptance of
Company-Lender Agreement" and shall govern the provisions hereof to the extent
that the Company-Lender Agreement is inconsistent therewith. Any revised
Prospectus of HFI shall modify this Company-Lender Agreement to the extent that
the Prospectus is inconsistent herewith.
Lender:
CHUBB LIFE INSURANCE COMPANY
OF AMERICA
Attest: /s/Charles C. Cornelio By: /s/Richard V. Werner
----------------------- -----------------------
Charles C. Cornelio Richard V. Werner
Title: Vice President, Title: Senior Vice President
Counsel, Assistant Secretary and Treasurer
Accepted by:
HAMPSHIRE FUNDING, INC.
Attest: /s/Charles C. Cornelio By: /s/Bruce R. Stefany
----------------------- -------------------------
Charles C. Cornelio Bruce R. Stefany
Title: Vice President, Title: President
General Counsel and Secretary
Attest: /s/Charles C. Cornelio By: /s/John A. Weston
----------------------- --------------------------
Charles C. Cornelio John A. Weston
Title: Vice President, Title: Treasurer
General Counsel, and Secretary
Witness its hand and seal this 29th day of September, 1994
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<PAGE>
Acceptance of Company-Lender Agreement
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1. The parties hereto incorporate herein by reference the terms and provisions
of the Company-Lender Agreement attached hereto and made a part hereof.
A. Name of Lender
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Chubb Life Insurance Company of America
(hereinafter "Chubb Life")
B. Maximum Aggregate Amount of Loans
---------------------------------
$20,000,000
C. Rate of Interest
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An interest rate not in excess of the prime interest rate as quoted in
the Wall Street Journal in New York City at the time of any cash loan
plus 2 1/2% and not less than a reasonable rate in accordance with
market conditions.
D. Term of Loan
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To be agreed upon at the time each loan is made.
2. Chubb Life shall have the right to charge Hampshire Funding, Inc.
(hereinafter "HFI") for any costs it incurs in lending the money to HFI.
3. In addition to the provisions of Paragraphs 1 and 2, the parties agree that
HFI shall make, constitute and appoint Chubb Life its true and lawful
attorney-in-fact, for it, and in its name, place and stead to verify with
the various custodial banks that hold securities of the sundry mutual funds
used as collateral in HFI's programs the quantity and type of collateral on
deposit with HFI.
Also, HFI agrees that upon demand by Chubb Life it shall make, execute and
deliver any and all written instruments required by any investment company
to effectuate the redemption of shares demanded by Chubb Life pursuant to
the terms of the Company-Lender Agreement.
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<PAGE>
4. The provisions of this Acceptance of Company-Lender Agreement shall be
deemed effective as of September 29th , 1994, the date of execution of
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the Company-Lender Agreement by Hampshire.
Lender:
CHUBB LIFE INSURANCE COMPANY
OF AMERICA
Attest: /s/Charles C. Cornelio By: /s/Richard V. Werner
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Charles C. Cornelio Richard V. Werner
Title: Vice President, Title: Senior Vice President
Counsel, Assistant Secretary and Treasurer
Accepted by:
HAMPSHIRE FUNDING, INC.
Attest: /s/Charles C. Cornelio By: /s/Bruce R. Stefany
----------------------- -------------------------
Charles C. Cornelio Bruce R. Stefany
Title: Vice President, Title: President
Counsel and Secretary
Attest: /s/Charles C. Cornelio By: /s/John A. Weston
----------------------- --------------------------
Charles C. Cornelio John A. Weston
Title: Vice President, Title: Treasurer
Counsel, and Secretary
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