<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, 1995
-----------------------
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 21, 1996: 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 30 through 41.
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<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, Chubb Colonial
Life Insurance Company ("Colonial") (formerly known as The Colonial Life
Insurance Company of America), 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, 1995, 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.
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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,
1995, the Company was not involved in any material legal proceedings.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not Applicable.
4 of 41
<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, 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Revenue $ 4,435,676 $ 3,590,273 $ 3,004,114 $ 2,699,890 $ 2,475,154
=========== =========== =========== =========== ===========
Net Income $ 232,354 $ 458,294 $ 514,505 $ 330,545 $ 218,462
=========== =========== =========== =========== ===========
Dividends Per Common Share $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
<CAPTION>
Selected Balance Sheet Data:
December 31, 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $47,388,865 $42,241,816 $33,773,719 $27,905,714 $22,930,802
=========== =========== =========== =========== ===========
Loan Payable $43,899,673 $38,889,535 $30,924,833 $25,382,406 $21,413,588
=========== =========== =========== =========== ===========
</TABLE>
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<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 $47,059,897 at December 31,
1995. Annual amounts due to the Company were as follows:
1996 1997 1998 1999 2000 2001-2005
---- ---- ---- ---- ---- ---------
Collateral loans receivable $2.7 $3.0 $2.7 $3.7 $5.9 $29.0
(in millions)
The Company's funds for financing the Programs are currently obtained through
Loan Agreements with its affiliates, Chubb Colonial Life Insurance Company
("Colonial") (formerly known as The Colonial Life Insurance Company of America)
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, 1995 (or during 1995) 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, 1995 was 6.70% and ranged
from 4.95% to 9.25% 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, 1995 were
$44,200,000 compared to $39,500,000 at December 31, 1994. Funds borrowed at
December 31, 1995 represent $26,000,000 from Colonial and $18,200,000 from Chubb
Life. At December 31, 1994 funds borrowed represented $26,000,000 from Colonial
and $13,500,000 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 1995 and 1994 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, 1995:
<TABLE>
<CAPTION>
Loan Face Days to Maturity
Source Date (mils) Rate Maturity Date
- ------------ -------- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
Chubb Life 07/31/95 $10.0 6.31% 270 04/26/96
09/27/95 0.5 8.95% 277 06/30/96
09/29/95 6.0 8.95% 275 06/30/96
10/27/95 0.6 8.95% 247 06/30/96
11/27/95 0.5 8.95% 216 06/30/96
12/28/95 0.6 8.95% 185 06/30/96
-----
$18.2
Colonial 05/15/95 $14.5 6.02% 270 02/09/96
07/21/95 9.2 5.65% 266 04/12/96
10/10/95 2.3 5.67% 266 07/02/96
-----
$26.0
</TABLE>
Results of Operations
The Company concluded the year ended December 31, 1995 with net operating income
of $232,354 as compared to net operating income of $458,294 in 1994, and
$514,505 in 1993. The decline in net operating income is due to the narrowing
spread between the Company's cost of funds necessary to finance premium loans
and the lending rate charged to Program Participants.
Total revenues through December 31, 1995 were $4,435,676 versus $3,590,273 in
1994, and $3,004,114 in 1993. 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,
1995 were $47,059,897 as compared to $40,805,159 in 1994, and $33,348,372 in
1993. Comparatively, collateral loan interest was $3,899,087, $3,094,809 and
$2,523,551 for the years ended December 31, 1995, 1994 and 1993. The average
interest rate charged to each Participant's outstanding loan balance was 9.22%,
8.65% and 8.50% for the years 1995, 1994 and 1993, 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>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Collateral loans receivable $47,059,897 $40,805,159 $33,348,372
Collateral loan interest $ 3,899,087 $ 3,094,809 $ 2,523,551
Average Participant interest rate 9.22% 8.65% 8.50%
</TABLE>
8 of 41
<PAGE>
Interest expense on the Loan Agreements increased each year since 1993 due to
increases in interest rates and amounts borrowed by the Company. 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>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Loans payable $43,899,673 $38,889,535 $30,924,833
Interest expense $ 2,730,924 $ 1,516,229 $ 973,490
Average loan interest rate 6.70% 4.60% 3.50%
</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, 1995, were $1,299,523 as
compared to $1,260,818 in 1994, and $1,185,907 in 1993.
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 include placement, administrative and termination fees as well as
charges for special services. For the years ended December 31, 1995, 1994 and
1993 the number of programs administered by the Company were 6,521, 6,662 and
6,328, respectively.
Investment income earned by the Company increased in 1995 as compared to 1994
and 1993 due to an increase in investment returns on cash equivalents held year
to year.
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<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, 1995 and 1994 12
Consolidated Statements of Income and Retained Earnings
for each of the three years in the period ended December
31, 1995 13
Consolidated Statements of Cash Flows for the each of the
three years
in the period ended December 31, 1995 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, 1995 and 1994, and the related
consolidated statements of income and retained earnings, and cash flows for each
of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, 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.
Boston, Massachusetts Ernst & Young LLP
January 26, 1996
11 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1995 1994
------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 289,918 $ 1,311,399
Accounts receivable from customers 26,793 47,215
Federal income taxes recoverable 12,257 78,043
------------------------
Total current assets 328,968 1,436,657
Collateral notes receivable (including accrued
interest of $1,207,853 in 1995 and $1,027,677 in 1994) 47,059,897 40,805,159
------------------------
Total assets $47,388,865 $42,241,816
========================
Liabilities and Stockholder's Equity
Liabilities:
Due to affiliates $ 1,145,850 $ 1,188,275
Accrued expenses and other liabilities 263,232 316,250
------------------------
Total current liabilities 1,409,082 1,504,525
Loans payable to affiliates (net of prepaid
interest of $300,327 in 1995 and $610,465 in 1994) 43,899,673 38,889,535
------------------------
Total liabilities 45,308,755 40,394,060
------------------------
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 1,480,110 1,247,756
------------------------
Total stockholder's equity 2,080,110 1,847,756
------------------------
Total liabilities and stockholder's equity $47,388,865 $42,241,816
========================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
Revenues:
Interest on collateral notes receivable $3,899,087 $3,094,809 $2,523,551
Program participant fees 456,556 464,851 457,636
Interest on investments 74,648 30,613 22,927
Partnership syndication fees 5,385
----------------------------------
4,435,676 3,590,273 3,004,114
Operating expenses:
Interest on affiliated loan agreements 2,730,924 1,516,229 973,490
General and administrative 1,299,523 1,260,818 1,185,907
Realized loss on investments 60,000
----------------------------------
4,030,447 2,837,047 2,159,397
----------------------------------
Income before income taxes 405,229 753,226 844,717
Federal and state income tax (benefit):
Federal - Current 125,112 257,593 283,525
Federal - Deferred (10,819) (6,485)
State tax 47,763 48,158 53,172
----------------------------------
172,875 294,932 330,212
----------------------------------
Net income 232,354 458,294 514,505
Retained earnings at
beginning of year 1,247,756 789,462 274,957
----------------------------------
Retained earnings at end of year $1,480,110 $1,247,756 $ 789,462
==================================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 232,354 $ 458,294 $ 514,505
Adjustments to reconcile net income to net
cash used in operating activities:
(Increase) decrease in accounts
receivable from customers 20,422 (9,535) (11,160)
Increase (decrease) in accrued expenses
and other liabilities (53,018) (57,749) 126,277
Increase (decrease) in due to affiliates (42,425) 114,610 (311,931)
Increase in collateral notes receivable (6,254,738) (7,456,787) (5,788,925)
Change in federal income taxes payable
(recoverable) 65,786 (89,803) (3,273)
(Increase) decrease in prepaid interest
on affiliated loan agreements 310,138 (235,298) (157,573)
------------------------------------------------------
Net cash used in operating activities (5,721,481) (7,276,268) (5,632,080)
Investing activities
Write off of limited partnership investment 60,000
Financing activities
Proceeds from affiliated loan agreements 69,025,000 73,400,000 59,000,000
Principal payments on affiliated
loan agreements (64,325,000) (65,200,000) (53,300,000)
------------------------------------------------------
Net cash provided by financing activities 4,700,000 8,200,000 5,700,000
------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (1,021,481) 983,732 67,920
Cash and cash equivalents at beginning
of year 1,311,399 327,667 259,747
------------------------------------------------------
Cash and cash equivalents at end of year $ 289,918 $ 1,311,399 $ 327,667
======================================================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1995
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).
The preparation of financial statements in conformity with generally accepted
accounting principles requires Hampshire's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Nature of Operations and Transactions with Affiliates
Hampshire offers and administers Programs whereby Participants obtain life
insurance coverage solely 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.
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)
Collateral loans receivable from Participants were $47,059,897 at December 31,
1995. Annual amounts due to Hampshire under collateral notes receivable were as
follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001-2005
----- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Collateral loans receivable
(in millions) $2.7 $3.0 $2.7 $3.7 $5.9 $29.0
</TABLE>
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
and 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. as a participating general partner of certain limited
partnerships. The amount of such fees earned was $5,385 in 1995 and $0 in
1994 and 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 18, 1995, Hampshire entered into a reverse repurchase agreement with
Shawmut Bank (Bank) in the amount of $198,000. The agreement matures on January
17, 1996. 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.
16 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the financial statements for prior years have been
reclassified to correspond to the 1995 presentation.
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 and Hampshire's allocated portion of
such costs have been immaterial to Hampshire.
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 $27,237, $24,631 and $18,530 in 1995, 1994 and 1993,
respectively, which has been included in general and administrative expenses in
the accompanying financial statements.
17 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
2. Change in Accounting Principles (continued)
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.
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 1995,
1994 and 1993.
Of the $12,257 federal income taxes recoverable at December 31, 1995, $6,875
represents a deferred tax asset related to net postretirement benefits expense.
The deferred tax asset at December 31, 1994 was $10,819, which also related to
postretirement benefits.
Hampshire made income tax payments to Chubb of $59,326, $336,577 and $280,313 in
1995, 1994 and 1993, respectively.
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 are not determinable. Costs allocated
by Chubb Life to Hampshire during 1995 and 1994 relative to the Pension Plan
were $24,218 and $24,269, respectively.
18 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
4. Retirement Benefits (continued)
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 were $36,247 and $39,394 for the years ended December 31, 1995 and 1994,
respectively. Hampshire's costs prior to 1994 relative to these plans were
immaterial.
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.
19 of 41
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
6. Loan Agreements
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, 1995 on this loan were from 5.65% to 6.02%. At
December 31, 1995, 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 (6.3% at
December 31, 1995) on the first $10 million and at the rate which Hampshire
charges its clients (8.95%) on any loan balance over $10 million. At December
31, 1995, Hampshire had borrowed $18,200,000 under this agreement with Chubb
Life. Hampshire expects that it will be able to obtain this financing for the
foreseeable future.
Interest paid, including prepayments, on the loan agreements was $2,420,786,
$1,751,527 and $1,131,064 in 1995, 1994 and 1993, respectively.
20 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, 1995.
<TABLE>
<CAPTION>
Name/(1)/ Age Position/(2)/
-------- --- -------------
<S> <C> <C>
Randell G. Craig 49 Director
Ernest J. Tsouros 62 Director
Frederick H. Condon 60 Director
Joseph A. Morein 57 Director
John A. Weston 36 Treasurer, Principal Financial and
Accounting Officer
Charles C. Cornelio 36 Vice President, General Counsel and
Secretary
Carol R. Hardiman 41 Vice President, Administration
Shari J. Lease 41 Assistant Secretary
Christopher J. Moakley 32 Vice President, Consumer Relations
Ronald J. Angarella 36 President and Director
</TABLE>
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 Operating Officer of the Parent Corporation. He also serves as Director
and Executive Vice President of Colonial and the Service Company. Prior to
January 1995, Mr. Craig served as Executive Vice President, Individual
Insurance, and prior to March 1991 he served as Senior Vice President and Chief
Marketing Officer of the Parent Corporation. From 1986 to May 1990, Mr. Craig
was Vice President and Chief Marketing Officer, Individual Insurance, 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.
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.
21 of 41
<PAGE>
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 April of 1995 has been as Assistant Vice
President 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 1989 to April 1995 Mr. Weston was Mutual Fund
Accounting Officer for the Parent Corporation.
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 and Chief
Administrative Officer of Colonial and the Service Company and as Senior 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 UST Master Variable Series and 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 1995 has been as
Assistant Vice President and 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 Associate
Counsel of the Parent Corporation from April 1994 to April 1995, 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.
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.
22 of 41
<PAGE>
Ronald R. Angarella was elected President of the Broker Dealer in October 1995.
Mr. Angarella was elected Senior Vice President of the Parent Corporation and
Vice Chairman of the Broker-Dealer in November 1994. Mr. Angarella served as
Vice President, Staff Management of the Parent Corporation from September 1992
to November 1994, and Assistant Vice President, Staff Management of the Parent
Corporation from February 1992 to September 1992. From March 1990 to February
1992 he served as Assistant Vice President, Marketing of the Broker-Dealer.
- --------------------
/(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.
23 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, 1996.
<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.
(b) See Item 10, Directors and Executive Officers of the Registrant.
24 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, 1995 and 1994
(iii) Consolidated Statements of Operations and Retained Earnings for
each of the three years in the period ended December 31, 1995.
(iv) Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1995.
(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.
<TABLE>
<CAPTION>
Reg S-K
Item 601
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 Form 10-K, filed
Incorporation March 15, 1990, for the
of Company year ended December 31,
1989, pp. 25-27
</TABLE>
25 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, 1989, pp. 54
dated 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 1989, pp. 55-56
of 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 Company March 9, 1993, for the
and The Colonial Life Insurance year ended December 31,
Company of America, dated 1993, pp. 33-34
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>
26 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>
27 of 41
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Table No. Document Reference Source
--------- -------- ----------------
<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
(d) Loan Agreement between the Form 10-K filed
Company and Chubb Life March __, 1995 for the
Insurance of America, dated year ended December 31,
September 29, 1994 1994, pp. 36-37
(e) Company-Lender Agreement Form 10-K filed
between the Company and March __, 1995 for the
Chubb Life Insurance year ended December 31,
Company of America, dated 1994, pp. 38-39
September 29, 1994
(f) Acceptance of Company Form 10-K filed
-Lender Agreement between March __, 1995 for the
the Company and The Chubb year ended December 31,
Life Insurance Company of 1994, pp. 40-41
America, dated
September 29, 1994
(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
Limited Power of Attorney
(ii) Change in Participant in
Program
(iii) Disclosure Statement
(27) Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1995.
28 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 15, 1995 HAMPSHIRE FUNDING, INC.
By: /s/ RONALD R. ANGARELLA
---------------------------------------
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.
Name Title Date
---- ----- ----
/s/ RONALD R. ANGARELLA President and Director March 15, 1996
- -------------------------
Ronald R. Angarella
/s/ FREDERICK H. CONDON Director March 15, 1996
- -------------------------
Frederick H. Condon
Director March , 1996
- -------------------------
Ernest J. Tsouros
/s/ RANDELL G. CRAIG Director March 15, 1996
- -------------------------
Randell G. Craig
Director March , 1996
- -------------------------
Joseph A. Morein
/s/ JOHN A. WESTON Treasurer, Principal March 18, 1996
- ------------------------- Financial and Accounting
John A. Weston Officer
29 of 41
<PAGE>
[LOGO OF HFI APPEARS HERE] AGENCY AGREEMENT AND LIMITED POWER OF ATTORNEY
Hampshire Funding, Inc.
One Granite Place, P.O. Box 2005, Concord, NH 03302-2005
Check Applicable Box: __Original Agreement __Modification of Agreement
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
30 of 41
<PAGE>
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.
31 of 41
<PAGE>
Form 4-0701 Ed. 3/96 Page 1 of 3
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.
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
32 of 41
<PAGE>
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 Reserve 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
33 of 41
<PAGE>
company. These figures may change over the life of the Program, depending upon
deviations from the payment schedule,
Form 4-0701 Ed. 3/96 Page 2 of 3
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
34 of 41
<PAGE>
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.
MODIFICATION OF PROGRAM __ check box if applicable This Modification of
Program contains the 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)
in Hampshire Funding, Inc. Program No. _____________, established pursuant to an
Agency Agreement and Limited Power of Attorney executed by Hampshire Funding,
Inc. and ______________, on ___________, with an expiration date of
____________________.
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 ALL APPLICABLE PROSPECTUSES (E.G.,
THE COMPANY PROSPECTUS, MUTUAL FUND PROSPECTUS AND VARIABLE PRODUCT PROSPECTUS).
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 SEPARATELY.
*Participant (1) SignsX Date Street Town State Zip
*Participant (2) SignsX Date Street Town State Zip
Hampshire Funding, Inc. hereby accepts and agrees to act under the foregoing
Agency Agreement and Limited Power of Attorney. By: Date:
HAMPSHIRE FUNDING, INC. P.O. BOX 2005, Conncord, New Hampshire 03302
Form 4-0701 Ed. 3/96 Page 3 of 3
35 of 41
<PAGE>
[LOGO OF HFI 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
_______________ and with a maturity date of _______________.
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
36 of 41
<PAGE>
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.
Form 4-0858 Ed. 3/94 Page 1 of 2
37 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 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 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) Signs X Street Town State Zip Date
Assignor (2) Signs X Street Town State Zip Date
Assignee (1) Signs X Street Town State Zip Date
Assignee (2) Signs X Street Town State Zip Date
HAMPSHIRE FUNDING, INC. hereby accepts and agrees to act under said Agency
Agreement and under the terms of this Agreement.
By: Date:
HAMPSHIRE FUNDING, INC. P.O. BOX 2005 CONCORD, NEW HAMPSHIRE 03302
RETURN ALL COPIES TO HOME OFFICE
Form 4-0858 Ed. 3/94 Page 2 of 2
38 of 41
<PAGE>
[LOGO OF HFI APPEARS HERE] DISCLOSURE STATEMENT
Hampshire Funding, Inc.,
One Granite Place, P.O. Box 2005, Concord, NH 03302-2005
Federal Reserve Board Regulation Z Disclosure Statement for
__ increase in premiums to be advanced under the same policy
__ change in premium payment mode
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. To
receive written itemization of the Amount Financed, please call customer service
at 1-800-258-3648, extension 5348.
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,
39 of 41
<PAGE>
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.
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.
Form 4-01005
40 of 41
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 289,918
<SECURITIES> 0
<RECEIVABLES> 47,098,947<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 328,968
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,388,865
<CURRENT-LIABILITIES> 1,409,082
<BONDS> 43,899,673<F2>
0
0
<COMMON> 50,000
<OTHER-SE> 2,030,110
<TOTAL-LIABILITY-AND-EQUITY> 47,388,865
<SALES> 0
<TOTAL-REVENUES> 4,435,676
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,030,447<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 405,229
<INCOME-TAX> 172,875
<INCOME-CONTINUING> 232,354
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,354
<EPS-PRIMARY> 4.65
<EPS-DILUTED> 0
<FN>
<F1>Consists of A.R. $26,793 Tax recoverable $12,257 and long term colateral
notes receivable $47,059,897.
<F2>Includes loans payable to affiliates of $43,899,673.
<F3>Comprised of Interest on loan agreements $2,730,924; general and
administrative $1,299,523.
</FN>
</TABLE>
