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FILE NO. 33-58862
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 6 TO REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
HL FUNDING COMPANY, INC.
(Exact name of registrant as specified in its character)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
06-1362143
(I.R.S. Employer Identification Number)
6355
(Primary Standard Industrial Classification Code Number)
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
(Address of Principal Executive Office)
SCOTT K. RICHARDSON, ESQ.
ITT HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
(860) 843-7563
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
The program covered by this registration statement is to be issued from time to
time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Title of Each Class Proposed Proposed Aggregate Amount of
of Securities to Amount to Offering Offering Registration
be Registered be Registered Price per Unit Price Fee
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Programs to Fund
Insurance Premiums 75 million shares * 75,000,000 Paid
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</TABLE>
*The maximum aggregate offering price is estimated solely for the purpose of
determining the registration fee. The amount being registered and the proposed
maximum offering price per unit are not applicable in that these contracts are
not issued in predetermined amounts or units.
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HL FUNDING CO. INC.
Cross Reference Sheet Pursuant to
Regulation S-K, Item 501(b)
FORM S-1 ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front Cover
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges Not Applicable
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Distribution of Contracts
9. Description of Securities to be Registered Description of Contracts
10. Interests and Named Experts and Counsel Legal Matters & Experts
11. Information with Respect to the Registrant The Company and its
Affiliates; Financing of
the Programs by the
Company; Legal Matters
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Undertakings
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PROSPECTUS
HL FUNDING COMPANY, INC. DISTRIBUTED BY: HARTFORD EQUITY SALES COMPANY
P.O. Box 2999 P.O. Box 2999
Hartford, CT 06104-2999 Hartford, CT 06104-2999
Telephone: (203) 843-8889 Telephone: (203) 843-8213
PROGRAMS FOR COORDINATING THE
USE OF MUTUAL FUND SHARES AS COLLATERAL TO FINANCE INSURANCE PREMIUMS
The securities offered in this Prospectus are personalized programs which
coordinate the use of mutual fund shares as collateral to finance insurance
premiums over a term of years. HL Funding programs (the "Programs") are offered
and administered by HL Funding Company, Inc. (the "Company"). They involve (1)
use of mutual fund shares as collateral to secure loans, and (2) use of the loan
proceeds to pay insurance premiums over the life of a Program.
The Programs are intended to provide an option for the financing of premiums to
persons who (1) have already determined that they have a need for insurance (2)
have decided to purchase a particular insurance product(s) and (3) already own,
or intend to acquire, mutual fund shares to use as collateral for such
financing.
Appreciation, if any, in the value of mutual fund shares may aid in offsetting
the principal and accumulated interest on the loans which must be paid upon
termination of the Program. However, there can be no assurance that this
objective will be achieved, since the Programs also involve the risk of an
actual decline in the net asset value of the mutual fund shares.
A person who purchases a Program (a "Participant") must pay his outstanding
indebtedness to the Company upon termination of the Program, which is usually
the end of the tenth program year (unless extended at the option of the
Company). Additionally, a Program will automatically terminate and the loans
will become immediately due and payable if the value of the mutual fund shares
purchased in connection with the Program declines below applicable margin and
collateral maintenance requirements. Accordingly, a prospective Participant
should carefully consider whether the risks involved in borrowing funds through
a Program to purchase insurance is more beneficial to the prospective
Participant than paying the premiums directly.
The Company is offering $75 million worth of Programs for sale to the public by
means of this Prospectus. The total amount of securities offered hereunder will
be equal to the aggregate amount of the initial insurance premiums paid on
behalf of all Participants after the effective date of this Prospectus.
THE PROGRAMS DESCRIBED IN THIS PROSPECTUS INVOLVE SUBSTANTIAL RISKS
WHICH COULD RESULT IN SIGNIFICANT LOSSES TO PARTICIPANTS. ACCORDINGLY, PERSONS
CONTEMPLATING ENTERING INTO A PROGRAM ARE URGED TO READ AND CONSIDER THE
DISCUSSION OF "RISK FACTORS" IN THIS PROSPECTUS.
THE COMPANY RESERVES THE RIGHT TO DETERMINE IF A PROSPECTIVE PARTICIPANT MAY
PARTICIPATE IN THE PROGRAMS.
THE COMPANY RESERVES THE RIGHT AT ANY TIME TO SUSPEND OR LIMIT THE
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PUBLIC OFFERING OF THE PROGRAMS.
A DECLINE IN THE VALUE OF THE MUTUAL FUND SHARES PLEDGED AS COLLATERAL FOR A
PROGRAM MAY RESULT IN A REQUEST TO FURNISH ADDITIONAL SHARES AS COLLATERAL,
WHICH, IF NOT FURNISHED, MAY RESULT IN TERMINATION OF THE PROGRAM AND THE
LIQUIDATION OF THE COLLATERAL.
PROSPECTIVE PARTICIPANTS SHOULD READ THE PROSPECTUSES FOR THE APPLICABLE MUTUAL
FUNDS AND VARIABLE LIFE INSURANCE POLICIES, IF ANY, TO BE USED IN CONNECTION
WITH THE PROGRAMS BEFORE ENTERING INTO THE PROGRAMS.
UPON TERMINATION OF A PROGRAM, ALL OUTSTANDING LOANS MUST BE REPAID AND, IF ANY
SUBSEQUENT PREMIUMS ARE DUE, THEY MUST BE PAID FROM OTHER SOURCES.
ALTHOUGH A PROGRAM ITSELF INVOLVES NO SALES LOADS, PARTICIPANTS MAY BE ASSESSED
SALES LOADS UPON THE PURCHASE OF MUTUAL FUND SHARES AS WELL AS UPON THE PURCHASE
OF INSURANCE. THE SALES LOADS FOR THE SALES OF MUTUAL FUNDS MAY RANGE FROM 0% TO
8.5% OF THE OFFERING PRICE, WHILE THE SALES LOADS FOR THE SALE OF INSURANCE
CONTRACTS MAY RANGE FROM 0% TO 90.00% OF THE PREMIUM. THESE SALES LOADS WOULD
APPLY WHETHER OR NOT THOSE MUTUAL FUNDS OR INSURANCE POLICIES WERE PURCHASED IN
CONNECTION WITH THE PROGRAMS.
PARTICIPANTS NEED NOT PURCHASE MUTUAL FUND SHARES IF THEY ALREADY OWN SUFFICIENT
MUTUAL FUND SHARES WHICH ARE ELIGIBLE TO BE PLEDGED AS COLLATERAL. EVEN IF THE
PURCHASE OF MUTUAL FUND SHARES IS NECESSARY FOR A PARTICIPANT TO HAVE SUFFICIENT
SHARES AVAILABLE TO BE PLEDGED IN CONNECTION WITH A PROGRAM, SUCH SHARES NEED
NOT BE PURCHASED FROM THE SAME REGISTERED REPRESENTATIVE OR BROKER/ DEALER WHO
IS OFFERING THE PROGRAMS AND/OR THE INSURANCE PRODUCTS TO BE FINANCED BY THE
PROGRAMS.
THE INTEREST RATE IN A PROGRAM WILL NOT BE LESS THAN 6% PER ANNUM, NOR EXCEED
THREE PERCENTAGE POINTS ABOVE THE PRIME, OR BASE RATE, AS QUOTED IN THE WALL
STREET JOURNAL.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. PERSONS SHOULD CONSULT THIS PROSPECTUS
AND ANY SUPPLEMENT THERETO FOR ADDITIONAL INFORMATION (IF ANY) REQUIRED BY STATE
LAW. IN ADDITION, THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF ANY MUTUAL
FUND SHARES OR INSURANCE PRODUCTS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus Dated:
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TABLE OF CONTENTS
Page
----
The Company and its Affiliates
The Company
The Hartford Equity Sales Company, Inc.
The Insurance Companies
Interest in Mutual Funds
Risk Factors
Suitability of a Program
Risk of Decline in Value of Mutual Fund Shares
Restriction on Redemption of Mutual Fund Shares
Risk of Termination for Failure to Maintain Collateral and Margin
Requirements
Risk of Failure to Qualify for Insurance
Risk of Loss on Early Termination
Risk That the Company Will Not Be Able to Obtain Financing
Risk of Adverse Determination Under State Law
Disadvantages of Cancelling Existing Insurance
Cash Surrender Value of an Insurance Policy Offered in Connection with
a Program
Risk Associated with Using Borrowed Funds
Tax Considerations
Summary of Charges
The Programs
General; Distribution of Programs
Determination of Suitability
Mutual Funds
Acquisition of Insurance
Agency Agreement and Limited Power of Attorney
Insurance Premium Loans to Participants
Additional Mutual Fund Shares
Status Reports
Program Modification
Partial Payment of Indebtedness
Termination
Rights of Participants
Financing of the Programs by the Company
Legal Matters
Experts
Available Information
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----------------------------------------
THE COMPANY AND ITS AFFILIATES
----------------------------------------
1. THE COMPANY
The Company is a corporation formed in the State of Connecticut on February 8,
1993. The Company is a wholly-owned subsidiary and an affiliate of Hartford
Life Insurance Company ("HLIC"), which is ultimately owned by Hartford Fire
Insurance Company.
The Company's principal executive offices are located at 200 Hopmeadow Street,
Simsbury, CT 06089 and its telephone number is (203) 843-8213.
All administrative duties of the Company are performed by personnel employed by
the Company or its affiliates.
The administrative costs of issuing and maintaining the Programs are expected to
be offset by: a) fees charged to Program Participants, (b) interest charged to
Participants for insurance premium loans to the extent that the interest charged
exceeds the cost to the Company of obtaining funds to finance the Programs; and
(c) interest income earned on investments.
The Company is not a registered investment company under the Investment Company
Act of 1940, nor does it participate in the management or supervision of any of
the mutual funds that may be used in connection with the Programs.
This Prospectus relates only to the Programs described herein. No offer is made
hereby of any security representing an interest in the Company or any of its
affiliates and, therefore, Participants will have no voting rights or ownership
interests in, and will not share in the profits or losses of the Company or any
of its affiliates.
2. HARTFORD EQUITY SALES COMPANY, INC. ("HESCO")
HESCO is a broker-dealer incorporated in Connecticut and is a member of the
National Association of Securities Dealers, Inc. HESCO's common stock is wholly
owned by HLIC.
The Programs are offered through HESCO or other, independent broker-dealers.
HESCO is the principal underwriter of variable life and variable annuity
contracts issued by HLIC, Hartford Life and Accident Insurance Company ("HL&A")
and ITT Hartford Life and Annuity Insurance Company ("IHLA")(each, an "Insurance
Company," and collectively, "The Insurance Companies"). The premiums for
certain of those contracts may be financed by the Programs. Currently, HESCO
does not offer mutual fund shares.
3. THE INSURANCE COMPANIES
The policies that may be financed by the Programs include various insurance
policies offered by the Insurance Companies. The Insurance Companies write many
types of insurance products. These products include group pensions, variable
annuities, as well as individual and group life insurance products. The
Insurance Companies also write accident and health policies.
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HLIC was originally incorporated under the laws of Massachusetts June 5, 1902.
It was subsequently redomiciled to Connecticut. It is a stock life insurance
company engaged in the business of writing health and life insurance, both
ordinary and group, in all states of the United States and the District of
Columbia. The offices of HLIC are located in Simsbury Connecticut; however, its
mailing address is P.O. Box 2999, Hartford CT 06104-2999.
HL&A was incorporated under the laws of Connecticut on February 14, 1967. It is
a stock life insurance company engaged in the business of writing health and
life insurance, both ordinary and group, in the District of Columbia and all
states of the United States, except New York. The offices of HL&A are located
in Simsbury, Connecticut; however, its mailing address is P.O. Box 2999,
Hartford, CT 06104-2999.
IHLA, formerly ITT Life Insurance Corporation, was originally incorporated under
the laws of Wisconsin on January 9, 1956. IHLA was redomiciled to Connecticut
on May 1, 1996. It is a stock life insurance company engaged in the business of
writing both individual and group life insurance and annuities in all states
including the District of Columbia, except New York. The offices of IHLA are
located in Minneapolis, Minnesota; however, its mailing address is P.O. Box
2999, Hartford, Connecticut 06104-2999.
HLIC is the parent of IHLA. HL&A is the parent of HLIC. HL&A is ultimately
100% owned by Hartford Fire Insurance Company, one of the largest multiple lines
insurance carriers in the United States. On December 20, 1995, Hartford Fire
Insurance Company became an independent, publicly traded corporation.
The Insurance Companies' policies may be sold in connection with the Programs by
agents who are also registered representatives of broker-dealers.
4. INTEREST IN MUTUAL FUNDS
Broker-dealers offering the Programs may have dealer agreements with the various
mutual funds whose shares may be purchased for use in connection with the
Programs, and may receive commissions for sales efforts in their behalf.
Participants need not purchase mutual fund shares if they already own sufficient
mutual fund shares which are eligible to be pledged as collateral. Even if the
purchase of mutual fund shares is necessary for a Participant to have sufficient
shares available to be pledged in connection with a Program, such shares need
not be purchased from the same registered representative or broker-dealer who is
offering the programs and/or the insurance products to be financed by the
Programs.
None of the mutual funds that may be used in connection with the Programs or
their sponsors, managers or distributors has any interest in the Programs. None
of the mutual funds that may be used in connection with the Programs assumes any
responsibility for the soundness of the Programs or the operations, policies,
representations or conduct of the Company. No fund that may be used in
connection with the Programs is the owner of record of 10% or more of the
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outstanding stock of ITT Hartford Group, Inc, the ultimate owner of Hartford
Fire Insurance Company.
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RISK FACTORS
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1. SUITABILITY OF A PROGRAM
No person should enter into a Program unless his financial circumstances warrant
and he expects to be able to maintain the Program over its entire ten-year life.
Individual financial circumstances may, of course, change from time to time and,
in the event of an adverse change, the ability of a person to maintain a Program
may be impaired. A prospective Participant should also consider his ability to
continue to pay insurance premiums after the ten-year life of a Program.
Persons who may be in a position to pay insurance premiums in cash, should give
particular attention to the interest and other costs involved in a Program. All
prospective Participants should consider to what extent, and on what terms, they
may themselves be able to arrange loans independently to finance insurance
premium payments. Prospective Participants should consult their legal,
financial, and/or tax adviser regarding the suitability of entering into the
Programs.
In addition, the collateral requirements of the Programs may require regular
purchases of mutual fund shares over a period of several years in order for a
Participant to continue his Program. (See "The Programs Determination of
Suitability," page ____.)
2. RISK OF DECLINE IN VALUE OF MUTUAL FUND SHARES
A feature of the Programs to potential Participants is the possibility of using
the appreciated value of mutual fund shares (as well as dividends or capital
gains distributions thereon) to help defray, at the end of the ten-year period,
or at an earlier termination, principal and accumulated interest charges on the
loans used to purchase insurance. However, appreciation depends on the actual
performance of the particular mutual fund(s) used in connection with a given
Program. Because of the unpredictability of the market conditions, any given
fund may actually decline rather than appreciate in value. If the value of the
fund(s) shares used in connection with a particular Participant's Program
declines below the Company's applicable collateral maintenance requirements, the
Program will automatically terminate and the loans will become immediately due
and payable. However, under certain circumstances as described in 4(b)(ii)
below, a Participant may be given the opportunity to assign additional shares or
make a cash payment to reduce Account Indebtedness. In no event, however, will
the Participant be obligated to purchase additional mutual fund shares. It is
just one option in certain circumstances to keep the program from terminating.
(See "The Programs--Insurance Premium Loans to Participants.")
3. RESTRICTION ON REDEMPTION OF MUTUAL FUND SHARES
Mutual fund shares pledged as collateral and necessary to maintain the margin
requirements
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described below may not be redeemed by the Participants until termination of the
Program, and then only to the extent the value of such collateral exceeds the
Account Indebtedness. (See "The Programs -- Insurance Premium Loans to
Participants -- Margin and Collateral Requirements; and -- Termination.")
4. RISK OF TERMINATION FOR FAILURE TO MAINTAIN COLLATERAL AND MARGIN
REQUIREMENTS
Failure to maintain the appropriate collateral and margin requirements may
result in an involuntary termination of a Program without prior notice to the
Participant. Certain collateral and margin requirements have been imposed by the
Company in order to comply with federal regulations and to insure sufficient
collateral for the Company's loans to Participants. These requirements are more
fully described under "The Programs--Insurance Premium Loans to Participants,
page____." The following summary is qualified in its entirety by reference to
that portion of the Prospectus.
(a) 31-day Holding Period for Qualified Shares
To be eligible for use in connection with a Program, the shares must:
(i) have been held for 31 days; and
(ii) be maintained in an account in which capital gains and dividend
distributions are required to be reinvested.
Mutual fund shares held in an Account (as defined under "The Program--Agency
Agreement and Limited Power of Attorney," page ____.) which are properly
available for use as collateral within a Program, as described above, are
referred to herein as "Qualified Shares."
If mutual fund shares which have already been held for 31 days are exchanged
to purchase shares of another fund within the same mutual fund complex, the
31 day holding period requirement does not apply to the newly purchased
shares.
(b) Margin Requirements
The Company imposes the following specific requirements:
(i) 250% REQUIREMENT FOR NEW FINANCING-Initial premium loans, and any new
financing of additional premiums on policy renewal dates, must be
secured by Qualified Shares having a value of at least 250% of the
new credit extended to a Participant in order to finance a premium.
If the 250% renewal requirement is not met, the Company intends not
to renew the loan and reserves the right to terminate the Program.
(ii) 150% OF ACCOUNT INDEBTEDNESS AT RENEWAL DATE-At the time of renewal,
if the value of Qualified Shares pledged with the Company does not
exceed 150% of the Participant's accumulated debt, interest, and
other charges owed to the Company (the "Account Indebtedness"), the
Company intends not to renew the loan unless additional Qualified
Shares are pledged or the Account Indebtedness is reduced. If
Qualified
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Shares available for pledge are being held by the Company as
custodian for the Participant, it will pledge such shares with
itself, in accordance with the Agency Agreement and Limited Power of
Attorney required to be executed by a Participant prior to initiation
of a Program (the "Agency Agreement"),in order to meet the 150%
requirement. If additional shares are needed, the Company may, but is
not obligated to, give notice to a Participant (in order to allow the
Participant to provide additional Qualified Shares or reduce the
Account Indebtedness) before it refuses to renew the loan and
terminates the Program.
(iii) 130% REQUIREMENT BETWEEN RENEWAL DATES-If, at any time during the
term of a Program, the value of a Participant's Qualified Shares
declines below 130% of the Account Indebtedness, the Company intends
to, without prior notice to the Participant, terminate the Program,
redeem the shares necessary to satisfy the Account Indebtedness, and
return the excess shares, if any, to the Participant.
THE COMPANY HAS NO OBLIGATION TO PROVIDE NOTICE TO THE PARTICIPANT THAT THE
APPLICABLE MARGIN REQUIREMENT HAS BEEN VIOLATED AND THAT HIS PROGRAM WILL BE
TERMINATED. IN ADDITION, THE TOTAL VALUE OF THE PARTICIPANT'S SHARES AT THE
TIME OF REDEMPTION MAY BE SIGNIFICANTLY LESS THAN THE APPLICABLE MARGIN
REQUIREMENT.
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5. RISK OF FAILURE TO QUALIFY FOR INSURANCE
The Company cannot give any assurance that any proposed insured under a policy
to be purchased in connection with a Program, will qualify for insurance.
If a prospective Participant purchases mutual fund shares for use as Program
collateral prior to being approved for insurance, and such approval is not
obtained, he would be unable to use such shares in connection with a Program.
Accordingly, prospective Participants making such pre-approval purchase of
shares to be used in connection with a Program should keep in mind that they may
find themselves owning mutual fund shares, susceptible to a decrease in value,
which could not be used for the purpose for which they were purchased. In that
regard, prospective Participants should be aware that individuals proposed for
insurance who have had medical problems, or who have been denied insurance in
the past, or who are in higher risk groups, may bear a much greater risk for the
Insurance Companies and may not be issued an insurance policy or may have to pay
additional premiums.
6. RISK OF LOSS ON EARLY TERMINATION
Although a Program is voluntary and may be terminated at any time upon written
request by a Participant, it should not be concluded that it may be terminated
without loss. Termination of a Program in its early stages is more likely to
lead to a loss in a Participant's investment if mutual fund sales loads are
incurred in any purchase of mutual fund shares acquired for use in the Programs.
Furthermore, in the of event of an early termination of a Program, the cash
value, if any, of an insurance policy used in connection with the Program may be
minimal and might not be available if the Participant is not the owner of the
policy. A Participant also would pay a $100 termination fee and a $25
liquidation charge per mutual fund for early termination. On the other hand, a
termination in the latter stages of the Program will result in increased
interest expense and administrative fees which the Participant must pay. (See
"Summary of Charges" page ____.)
Termination of a Program (either at the option of a Participant, or by the
Company) does not affect the insurance policy financed by a Program. However,
upon such termination, an alternative means of financing the premiums for such
insurance must be obtained.
7. RISK THAT THE COMPANY WILL NOT BE ABLE TO OBTAIN FINANCING
The continuance of the Programs is dependent upon the Company's ability to
provide, or arrange for the financing, on commercially reasonable terms, of
insurance premiums for Participants. At present, it is anticipated that HLIC, an
affiliate of the Company, will directly provide the funds necessary to the
Company's financing of the Programs or, alternatively, will arrange for such
funds to be provided. A Participant should carefully consider the Company's
ability to provide future loans and the consequences of its inability to do so.
Moreover, although the Company's present financing arrangement does not include
the assignment of a Participant's mutual fund shares to the lender as security,
the Agency Agreement does authorize the Company to assign a Participant's mutual
fund shares to any lender as collateral security for the Company's obligation
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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 entity to which the obligation is owed. A Participant should
carefully consider the extent to which the rights of an entity that might
receive such an assignment would have priority over his interests in the pledged
mutual fund shares.
Furthermore, a financing entity may cease to provide funds to the Company if the
Company is in default under its agreements. In this event, or any time the
Company is unable to obtain financing, Programs will be terminated on their
renewal dates. The Company is under no contractual obligation to continue to
make loans on future Program renewal dates; however, it intends to continue
making such loans as long as funds are available to it on commercially
reasonable terms.
8. RISK OF ADVERSE DETERMINATION UNDER STATE LAW
The Company cannot predict whether, or the extent to which, Programs commenced
in a state may have to be terminated as a result of a later determination by
that state that the Programs contravene any state statute or regulation.
9. DISADVANTAGES OF CANCELLING EXISTING INSURANCE
Although the only insurance policies currently available for purchase by
Participants in the Programs are those issued by the Insurance Companies, the
purchase of a policy in connection with a Program does not require the surrender
or cancellation of existing insurance policies. Before an existing insurance
policy is surrendered or cancelled in connection with the purchase of a new
policy, the following should be carefully considered:
(a) The amount of the premium for an existing policy may be less than called
for by a new policy. Any replacement of the same type of policy may
result in a higher premium rate based upon the insured's then attained
age.
(b) Since selling costs and other initial costs of life insurance policies
affect the cash value increases, if any, in the earlier policy years,
the replacement of an old policy by a new one results in the
policyholder's sustaining these costs (principally agents' commissions)
twice.
(c) Life insurance policies are contestable by the issuer for periods from
one to two years and are voided by suicide during those periods. These
provisions would apply for similar periods in any new policy
notwithstanding the fact that they had expired on existing policies.
(d) All of the policies offered in connection with the Programs are
non-participating, and therefore no dividends will be payable thereon.
Existing policies, on the other hand, may have participating features.
(e) It is unlikely that the cash surrender value of a comparable new policy
will equal the cash value of an existing policy had it remained in force
and effect.
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(f) Comparison should be made between settlement options available in the
policies offered in connection with the Programs and those provided in
existing policies.
(g) Comparison should also be made between any riders, such as those which
provide disability income benefits or which guarantee conversion
privileges, contained in policies offered in connection with the
Programs and those provided in existing policies.
(h) Although health insurance policies are not available for use in
connection with the Programs, they may be in the future. In that
regard, health insurance policies may exclude coverage for pre-existing
health conditions for a certain period of time or restrict rights to
renew policies in future years. These restrictions may not be included
in existing policies or may no longer apply.
(i) A Participant may not be able to procure a new insurance policy at all
if there has been a significant change in his health.
10. CASH SURRENDER VALUE OF AN INSURANCE POLICY OFFERED IN CONNECTION WITH A
PROGRAM
The cash surrender value, if any, of an insurance policy offered in connection
with a Program may not provide sufficient proceeds to pay the full amount of a
Participant's Account Indebtedness, but may be used to reduce the Account
Indebtedness if available to the Participant by terms of the policy. Cash
surrender values that are available also may be applied to reduce the amount of
premiums due during any period in which a Participant's ability to maintain a
Program might otherwise be impaired. Some insurance policies will have no cash
surrender value at any time, while others, may have minimal or no cash surrender
value during their early years. The cash surrender value of a policy offered in
connection with the Program will depend upon the age of the insured at the time
the policy is issued and the amount and type of insurance.
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11. RISKS ASSOCIATED WITH USING BORROWED FUNDS
Participation in a Program involves special risks in that the costs associated
with a Program may exceed the return on mutual fund shares pledged as
collateral. In order to offset the interest, service charges and administrative
fees a Participant incurs in a Program, without any additional investment on his
part, his mutual fund shares must yield dividends or capital gains
distributions, or experience growth to an extent in excess of such interest,
charges and fees. There is no assurance that this result will be attained. If
this result is not attained, the Participant may need to make additional
investments in mutual fund shares in order to avoid a termination of a Program
pursuant to the requirements set forth in "The Program -- Insurance Premium
Loans To Participants -- Margin and Collateral Requirements."
Additional special risks are involved where a Program is used to finance
premiums for a variable life insurance product. In that case, borrowed funds
secured by mutual fund shares that are susceptible to a decrease in value, are
used to purchase (albeit indirectly) units of the policy's underlying mutual
fund shares, which are also susceptible to a decrease in value.
12. TAX CONSIDERATIONS
The following are certain tax considerations which should be considered prior to
the initiation of a Program. These considerations are included for general
information and are not meant to be a description of all potential tax matters
related to the purchase of a Program or the underlying insurance, or to the use
(including any purchase) of mutual fund shares in connection with a Program.
Prospective Participants should consult their own tax advisers with respect to
tax matters, including the effect of state tax laws.
(a) Loan interest generally is not deductible for the purpose of determining
an individual's taxable income.
(b) Participants will be liable for federal income taxes and state taxes (if
applicable) on dividends and capital gains distributions on their mutual
fund shares even though they are automatically reinvested in additional
shares as required by the Programs, unless the Program was established
as part of a tax qualified retirement plan which allows for tax-deferred
accumulations.
(c) A Program established as part of a tax-qualified retirement plan may
result in unrelated business taxable income to said plan on the
accumulation value or proceeds of policies used in a Program.
(d) An involuntary termination of a Program may result in the recognition of
ordinary income or capital gains or losses which the Participant might
otherwise have wished to defer.
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SUMMARY OF CHARGES
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Purchasers should read the prospectuses for the mutual funds used, and variable
life insurance products offered in connection with the Programs before
initiating a Program.
1. SALES CHARGES
The total amount of sales charges relating to the Programs will vary with the
mutual funds used, and insurance policies purchased in connection with a
particular Program. Mutual fund shares purchased by Participants for use in
connection with Programs may have "front-end" sales charges that range up to
8.50% of the offering price of the shares. Front-end sales charges on insurance
contracts may range from 0% to 90% of the premium for a particular contract.
Prospective Participants are advised that some mutual funds and insurance
contracts which do not have a "front-end" sales charge may have a "back-end"
sales charge upon redemption of the shares or surrender of the contracts. These
sales charges would apply whether the mutual fund shares and insurance contracts
are purchased in connection with, or independent of a Program.
2. INTEREST
The mutual fund shares are pledged to secure loans to a Participant, plus
interest accruing thereon. Interest rates on a Participant's Account
Indebtedness are subject to change at any time during the Program at the
discretion of the Company, but are always subject to maximum permissible
interest rates under state law. The Agency Agreement provides that the interest
rate on a Program will not be less than 6% per annum, nor exceed three
percentage points above the prime, or base rate, as quoted in THE WALL STREET
JOURNAL. Such interest increases may occur without prior notice to the
Participants and may become effective immediately.
3. PLACEMENT FEE, ANNUAL ADMINISTRATIVE FEE, AND SPECIAL CHARGES
The Company charges a one-time placement fee of $25 for each insurance policy
issued in connection with the Programs. The placement fee is due at the time the
Company determines that a prospective Participant has qualified for a Program
(including approval of the insurance application by an Insurance Company). In
addition, the Company will charge a fee of $25 for adding a policy to an
existing Program.
An annual administrative fee is also charged by the Company for its services
under the Agency Agreement to cover the reasonable cost of administering the
Programs. The annual administrative fee is $50 and is due upon the initiation,
and on each anniversary date of the initiation of a Program, and may be paid in
a lump sum for the entire ten-year period at a reduced rate, currently $390.
Unless the Participant pays the annual administrative fee in cash, the Company,
at its discretion, may pay the fee from proceeds realized from the redemption of
mutual fund shares or by adding the fee to the Participant's Account
Indebtedness.
Charges will also be made for certain special services. The current charges are
$25 for each of the following services on a per fund and per policy basis and
are due upon the rendering of the service: (i) returned check charge (protested
check); (ii) transfer of registration of shares; (iii) reduction of loan
balance; (iv) conversion from one premium mode to another; (v) transfer of
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money from one fund to another; (vi) policy conversion; (vii) policy change;
(viii) redemption of shares; and (ix) other exceptional transactions requested
by the Participant. These charges are payable by a Participant in cash or, at
the Company's discretion, from proceeds realized from the redemption of mutual
fund shares or by adding the fee to the Participant's Account Indebtedness. The
Company reserves the right to adjust these charges at any time and from time to
time.
The charges, commissions and fees described above do not include certain fees
which are charged by:
(a) the Insurance Companies and are found in the
(i) policies of the applicable product, and
(ii) prospectuses of any variable life product offered in connection
with the Programs, and
(b) the mutual funds used in connection with the Programs, and are described
in the prospectuses of such funds.
4. TERMINATION FEE; LIQUIDATION CHARGE
The Company will charge a termination fee of $100 when a Program is terminated
by either the Participant or the Company, except for termination at the end of
ten years. A Participant also will be charged a $25 liquidation charge per fund
whenever a fund is liquidated, regardless of whether the Program is being
terminated, except for termination at the end of ten years. These
fees are based upon the Company's administrative costs for processing
terminations and liquidations.
5. INSURANCE COMMISSIONS
The Insurance Companies pay commissions to agents for policies sold in
connection with the Programs. All insurance commissions are included in the
annual premiums paid by the Participants. The first year's sales commissions
range from 3% to a maximum of 84.5% of the first year's premium and 0% to a
maximum of 8% of the annual premium for subsequent years. Commissions are paid
to the agent whether the policy was sold in connection with, or independent of a
Program.
6. NO UNDERWRITERS' FEES
No underwriting discounts, commissions, or fees are paid in connection with the
sale of the Programs themselves (as distinct from certain of the mutual fund
shares and insurance policies that may be purchased in connection with the
Programs).
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THE PROGRAMS
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1. GENERAL; DISTRIBUTION OF PROGRAMS
The securities offered by this Prospectus are personalized programs which
coordinate the use of mutual fund shares as collateral to finance insurance
premiums over a period of ten years, commencing with the due date of the initial
premium advanced under the Program.
The Company does not offer or finance the purchase of equity securities. This
Prospectus relates only to the Programs described herein. No offer is made
hereby of any security representing an interest in the Company or any of its
affiliates. Participants will have no voting rights or ownership interests in,
and will not share in profits or losses of either the Company or any of its
affiliates.
The Programs are neither distributed through underwriters nor traded in
securities markets. Unlike other securities, Participants may not sell or trade
their Programs. Rather, the Programs must be held for the ten year period
unless terminated earlier. They are offered only through registered
representatives (the "Representatives") of broker-dealers with which the Company
and the Insurance Companies have agreements.
The Representatives are required to be licensed to sell both mutual funds and
insurance, as well as to offer the Programs themselves. As licensed agents of at
least one of the Insurance Companies, they are authorized to sell various forms
of life, accident, and health insurance.
The Representatives offer the Programs on a best-efforts basis. Certain broker-
dealers may receive .50% of the first year annual premium financed in connection
with the Program as compensation for supervision of the sale of the Programs by
the registered representatives associated with such broker-dealers.
Broker-dealers typically receive a commission on the sale of mutual fund shares,
including any that may be purchased for use in connection with a Program. A
portion of any commission received by the broker-dealer is paid to the
Representative. In his capacity as a licensed insurance agent, the
Representative also receives commissions from one of the Insurance Companies on
insurance sold in connection with a Program. (See "Summary of Charges,"
page ____.)
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2. DETERMINATION OF SUITABILITY
Prior to sale of a Program, the broker-dealer is required to make an independent
assessment as to whether the entire transaction, including the loan arrangement,
is suitable for the prospective Participant; this in no way relieves the
prospective Participant from the responsibility of making his own considered
determination as to whether a particular Program is suitable for him. In
addition, a Representative may, without obligation, provide a Participant with a
written proposal prepared by the Company setting forth in detail, among other
things, the nature and extent of the prospective obligations, fees and charges
of the Program. Since the interest rate may fluctuate and mutual fund shares
used in the future may vary, the actual fees and charges may differ from those
shown in the proposal. (See "Summary of Charges," page ____ and "The
Programs--Insurance Premium Loans to Participants," page ____.)
At the request of a Participant, a Representative is required to review his
Program at any time during the term thereof, upon submission of appropriate
current data, in order to permit a Participant to determine continued
suitability. The Participant is free to adopt or reject any suggested changes.
Depending on the changes adopted, the costs and expenses of a revised Program
may be more or less than those of the original Program.
3. MUTUAL FUNDS
(a) Types of Mutual Funds That May Be Used
Mutual fund shares that may be used in connection with the Programs
include the shares of open-end investment companies registered under the
Investment Company Act of 1940, which provide for automatic reinvestment
of dividends and capital gains distributions. Some mutual fund shares
purchased are subject to "front-end" sales charges from which a
broker-dealer is paid its commissions. Many funds which do not have a
"front-end" sales charge will charge a "back-end" sales charge upon
redemption of the shares, in which the amount is contingent on the
number of years the Participant has held the shares. Prospectuses for any
mutual fund shares that may be purchased for use in connection with a
Program should be obtained through a Representative.
The mutual funds that may be used in connection with the Programs have
portfolio securities which have been selected by the management of each
fund on the basis of its belief as to either potential dividend income or
capital appreciation or both. Certain of the mutual funds have portfolios
which are selected from the common stocks and/or debt instruments of
large, well-known, publicly held corporations with established records of
dividend and/or interest payments. The portfolio stocks included in
certain other mutual funds generally afford lower yields and pay smaller
or no dividends since their major objective is capital appreciation.
Instead, earnings, if any, may be reinvested by the issuers of such
securities for purposes of their expansion, research and the general
development of their operations. The element of risk connected with such
an investment may, therefore, be higher than that experienced with a more
conservative portfolio of securities having higher yields and lower
price-earnings ratios. The investment policy, objectives, performance
history, and the
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qualifications of the management of each mutual fund whose shares may be
used in connection with the Programs, as well as the sales charges and
details as to the automatic reinvestment plans, are required to be set
forth in the prospectuses and statements of additional information
("S.A.I.") of the respective funds. Mutual fund investments are, of
course, subject to the market fluctuations and risks inherent in any
investment in securities. There is no assurance that the objectives of
any of the mutual funds which may be used in connection with the Programs
will be realized, nor are any representations as to their performance
made in this prospectus. If a prospective Participant elects to purchase
mutual fund shares for use in connection with a Program, he should choose
the mutual fund or funds which are most suitable for his particular
needs, and reference should be made to the specific fund prospectus and
S.A.I. for information on its investment objectives and policies, sales
charges, and other relevant information about such fund.
(b) Minimum Required Amount of Pledged Shares
If a Participant decides to begin a Program, the Participant is required
to pledge mutual fund shares in an amount equal to at least 250% of the
initial insurance premium. The minimum value of mutual fund shares
required to be pledged initially is $2,500-250% of the minimum $1,000
annual premium required for an insurance policy's eligibility for use in
connection with a Program. Unless the pledged shares appreciate in value
in an amount sufficient to cover the margin requirements applicable to
subsequent premiums, of which there can be no assurance, additional
shares will be required to be pledged in connection with subsequent
premiums due during the term of a Program. (See "The Programs --
Insurance Loans to Participants -- Margin and Collateral Requirements,"
page ____.)
Prospective Participants who plan to purchase mutual fund shares for use
in connection with a Program are cautioned that the minimum investment
required by certain mutual funds may exceed the $2,500 minimum value of
pledged shares required to begin a Program.
(c) Shares Eligible for Use
In connection with a Program, a prospective Participant may use mutual
fund shares already owned, or may purchase shares specifically for use in
connection with a Program. In either case, to be eligible for use, the
shares must be of funds which provide for reinvestment of dividends and
capital gains distributions. During the term of a Program, such
reinvestment of dividends and distributions will be required, and the
shares purchased pursuant thereto shall become part of the collateral.
Ordinary income dividends generally are reinvested either at net asset
value or at the public offering price, which usually includes the sales
charge. Capital gains distributions generally are reinvested at net
asset value. If a service charge is applicable, it is assessed
irrespective of the Program.
In addition to the reinvestment requirement, to be Qualified Shares
eligible for use in connection with a Program, the shares must have been
held by the prospective Participant
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for at least 31 days.
If a prospective Participant elects to purchase mutual fund shares for
use as collateral in connection with a Program, such shares need not be
purchased until he is approved for insurance. However, such shares would
not be eligible for use in connection with a Program until 31 days after
such purchase.
(d) Company Administrative and Confirmation Requirements
The only mutual funds which may be used in connection with the Programs
are those which agree to use the Company's administrative and
confirmation requirements.
4. ACQUISITION OF INSURANCE
A Program allows a Participant to purchase insurance by financing the premiums
through a loan secured by his mutual fund shares. The minimum annual premium
required for an insurance policy's eligibility for use in connection with a
Program is $1,000.
Insurance available for purchase in connection with a Program may vary from
state to state, depending on which of the Insurance Companies are licensed to
sell insurance in a particular jurisdiction, and whether that jurisdiction has
approved a particular insurance product.
Generally, most policy forms issued by the Insurance Companies are available for
purchase in connection with a Program. These include interest sensitive life,
universal life, and variable life. The Insurance Companies continually offer
new types of policies which, at the option of the Company, may be available for
use in connection with the Programs. All policies issued by the Insurance
Companies are non-participating. Generally, the life insurance contracts contain
the following features: (i) INCONTESTABILITY--the policies are incontestable
after a period of two years from the date of issue except as to any additional
benefits covered by a rider in the event of accidental death or disability, or a
waiver of premium (see below); (ii) SUICIDE--if within two years from the date
of issue, or less if so provided by the laws of a particular state, the insured
dies by suicide, the amount payable under the policy is limited to the amount of
the premiums which have been paid; (iii) CHANGE OF BENEFICIARY--the owner of the
policy may change the beneficiary under the policy at any time by written notice
to the issuing insurance company; (iv) AUTOMATIC PREMIUM LOAN OPTION--any
premium not paid by the end of the grace period (31 or 61 days) is automatically
paid by a policy loan (which is unrelated to a Program) if there is a sufficient
cash value; (v) NONFORFEITURE OPTIONS--upon failure to continue a required
premium payment, the owner of the policy may surrender the policy for its cash
value, if any, or elect to receive paid up life insurance of a reduced face
amount, or extended term insurance in the original face amount, but for a
limited period of time; and (vi) SETTLEMENT OPTIONS--providing for various
methods pursuant to which the owner of the policy may choose to have the
proceeds of the policy paid, upon the insured's death.
Certain life policies issued by the Insurance Companies provide for interest,
based on current interest rate levels, to be credited to the cash value element
or account value of the policies. The
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Insurance Companies may adjust the interest rate as economic conditions change.
Also, the variable life policies issued by the Insurance Companies provide for
an accumulation of cash value based on the investment experience of the
underlying funds in which the premiums are invested.
Because the build-up of cash value within these types of policies may vary,
there is a possibility that the policy may become paid-up before the Program's
ten year termination. In this case, the Program may terminate at the Company's
option. In the event of such termination, as discussed below, a Participant's
Account Indebtedness must be paid within seven business days after notice of
termination. However, if the Company opts not to terminate the Program, the
Account Indebtedness will continue to accrue interest (and applicable collateral
requirements must be met), but no further loans will be made to the Participant.
If the Program is so extended, there may be no need to provide additional
collateral, although the Participant may continue investing in mutual fund
shares.
Also, since there is no guarantee of an increase in cash value with a variable
life policy, it is possible that the policy would lapse by its terms during the
course of the Program. Please see the prospectus of any variable life policy
purchased in connection with a Program for further information.
Policyholders of insurance policies that may be purchased in connection with the
Programs which have cash values may borrow against these cash values. Such loans
outstanding as of the date of this Prospectus generally bear interest at a rate
of 8% per annum. Certain policies provide for a variable loan interest rate. A
prospective Participant should inquire as to the policy loan interest rate
provision of the policy to be used in connection with the Program. Participants
should also consider that loans taken out of some life insurance policies may be
subject to income and other taxes and should consult their tax advisers for
further information. Policy loans may be available to a Participant to reduce
the unpaid balance of his Account Indebtedness or to purchase additional mutual
fund shares in the event of an impending involuntary termination of his Program
due to insufficient collateral.
No fees charged at the initiation of a Program apply to insurance. Thus, no
conditional receipt for insurance coverage will be issued; that is, the
Participant will be without insurance coverage until (i) the application for
insurance is approved and (ii) the mutual fund shares to be used as collateral
have been held for at least 31 days. If, however, a Participant wishes to
conditionally obtain insurance coverage prior to completion of the underwriting
process and is eligible for such conditional coverage under rules in effect for
that Insurance Company, he may pay the appropriate binding amount as determined
by the rules of the Insurance Company in order to conditionally obtain coverage.
Such conditional insurance coverage may not be available in all cases.
Maximum limits with respect to the amount of life insurance available in
connection with a Program shall be determined by the Insurance Companies.
However, the Insurance Companies will not allow any amount greater than that
which, in its opinion, is suitable to the particular needs of the proposed
insured and financial abilities of the prospective policyowner.
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The amount of the premium which is due on any insurance contract will, of
course, vary with the size and type of the policy, the age of the insured, and
the extent of any additional benefits desired, such as: (i) waiver of premium in
the event of disability so that the policy will remain in force without payment
of premium; (ii) double indemnity in the event of accidental death as the result
of bodily injury; (iii) supplemental term insurance coverage; or (iv) disability
income protection. The basic effect of using term insurance is that for any
given premium the death benefit is substantially increased while the cash value
accumulated is either greatly reduced or eliminated.
5. AGENCY AGREEMENT AND LIMITED POWER OF ATTORNEY
An Agency Agreement is executed by a Participant contemporaneously with the
assignment of mutual fund shares to be used as collateral in the Program. It is
also signed by the Company and is thereafter effective until terminated by the
Participant or the Company. Upon giving written notice, a Participant may
terminate the Agency Agreement at any time, which automatically results in
termination of a Program, but the Company may do so only for reasons discussed
under "The Programs--Termination," page ____.
Under the Agency Agreement, the Participant assigns to the Company an account or
accounts (the "Account(s)") in which shares to be used as collateral are
maintained. The Company then effects registration of the Account(s) in its
name, or that of its assignee, as custodian for the Participant under the Agency
Agreement. Shares (selected at the Company's discretion) in the Account(s) are
then deemed pledged to the extent required, as described under "Margin and
Collateral Requirements," page ____, as security for loans to pay premiums and
unpaid Program-related charges, and the interest thereon.
If at any time the redemption value of all the Qualified Shares held in the
Participant's Account exceeds 250% of the Participant's Account Indebtedness,
the Participant may, upon written request to the Company, have such excess
returned to him. Shares are valued at their net asset value for redemption value
purposes.
In addition, under the Agency Agreement, the Company, as attorney-in-fact of the
Participant, has the power to:
(a) effect loans to Participants to pay insurance premiums and administrative
fees, if not paid in cash, as they become due or excess premiums as
agreed to by the Company; and
(b) pledge the Participant's mutual fund shares securing his Account
Indebtedness, if necessary to third parties, for the purpose of obtaining
funds to finance the Programs.
After execution of the Agency Agreement, no further notice is given to a
Participant prior to the loans made by the Company to a Participant.
The foregoing is a summary of certain provisions of the Agency Agreement.
Prospective Participants are advised to review the Agency Agreement in its
entirety prior to initiating a
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Program.
6. INSURANCE PREMIUM LOANS TO PARTICIPANTS
(a) Loans Under the Agency Agreement
Upon issuance of a policy by an Insurance Company and contingent upon
acceptance of the policy by the Participant, the Company makes a loan to
the Participant under the Agency Agreement in an amount equal to the
selected premium. The Participant's Account(s) is then assigned to the
Company to secure the loan.
As each premium becomes due, a new loan equal to such premium, plus any
fees and accrued interest, if not paid in cash, is made. This loan
becomes part of the Participant's Account Indebtedness and accrues
interest from the premium due date. It is intended that such loans will
recur each premium due date until the expiration of ten years after the
due date of the initial premium advanced under the Program, unless the
Program is terminated sooner. Thus, interest, as well as principal, is
borrowed, and all mutual fund shares pledged in connection with the
Program having redemption value of up to 250% of the Participant's
Account Indebtedness are used as collateral for such loans. Shares
representing any excess in redemption value over 250% of the
Participant's Account Indebtedness are not required to be pledged as
collateral.
Pursuant to the Agency Agreement, except as described under
"Termination," page ____, the Company will renew a Participant's Program
at the due date for the insurance premium, in accordance with the same
Program terms and conditions (including but not limited to the "Margin
and Collateral Requirements" discussed below) for a period of time ending
as of the due date of the next insurance premium. For example, if the
insurance premium payment mode is annual, the renewal of the Program will
be for a period of one year. Until the Program is terminated, it is
intended that such loans will be extended over the life of the Program.
(b) Margin and Collateral Requirements
Under SEC Rule 11d1-2, any mutual fund shares used to secure premium
loans must have been owned by the Participant for a minimum holding
period of 31 days before credit secured by such mutual fund shares is
extended to the Participant. The holding period applies to all purchases
of mutual fund shares, whether to secure initial premiums, renewals, or
to meet margin requirements unless such purchases were made in exchange
for shares of another fund within the same mutual fund complex which had
already been owned for 31 days .
The Company's present policy is to make an initial loan not to exceed 40%
of the value of the mutual fund shares pledged as security, 50% is the
maximum credit allowed by Regulation G (adopted by the Federal Reserve
Board and applicable to loans made under the Programs). If the Federal
Reserve Board should increase margin requirements beyond
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the Company's requirement, a Participant would be required to pledge more
securities to finance the premiums due and to maintain the ratio required
to prevent involuntary termination of the plan. It is possible that such
increased margin requirements might require the Company to discontinue
offering the Programs and terminate Programs then outstanding. It is also
possible that periods may exist when the Federal Reserve Board margin
regulations will preclude the financing of additional premiums.
As a matter of policy, independent of Federal regulations, the Company
currently requires Participants to provide Qualified Shares with values
exceeding the amount of their indebtedness by specific margins in three
different situations: at initiation, at renewal, and between renewal
dates.
(i) INITIATION REQUIREMENT--Each initial loan by the Company to pay
insurance premiums must be secured by Qualified Shares which have
a value of at least 250% of the premium to be financed.
Accordingly, a Participant must pledge Qualified Shares having a
value of at least $2,500.00 to initiate a Program to finance an
insurance policy or policies with an annual premium of $1,000.00,
the minimum annual premium which can be financed in connection
with a Program.
(ii) MAINTENANCE MARGIN REQUIREMENT--The Company requires Participants to
maintain Qualified Shares with a value of at least 130% of Account
Indebtedness at all times. The Company intends to terminate
Programs that fail to maintain the 130% requirement. The Company
currently intends to notify a Participant of a decline in value in
his mutual fund shares, although it is not required and undertakes
no obligation to do so. If the value of shares pledged with the
Company declines below 130% of a Participant's Account
Indebtedness, the entire Account Indebtedness will automatically
become due and payable, and the Company intends to terminate such
Programs and sell or redeem the pledged shares, which are in the
Company's name, necessary to satisfy the debt, all without notice
to the Participant. The Company intends to act promptly but
accepts no responsibility for any loss incurred by a Participant
due to a reduction in the value of mutual fund shares arising from
delays in redemption which are beyond the control of the Company.
Any shares not required to be redeemed to satisfy the Account
Indebtedness will be released from pledge and returned to the
Participant.
The Company intends to enforce its rights whenever the 130% requirement
is breached. If the Company is holding additional Qualified Shares
available for pledge, it will deem additional shares pledged in order to
maintain a Participant's 130% margin requirement. No mutual fund shares
pledged to the Company to secure payment of one Participant's Account
Indebtedness may be redeemed in order to satisfy the payment of another
Participant's Account Indebtedness.
(iii) ACCOUNT INDEBTEDNESS AT RENEWAL--At the time of renewal, a
Participant must have Qualified Shares pledged to the Company
equal to at least 150% of the Participant's Account Indebtedness.
The 150% renewal requirement may be met in one of four
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ways: (a) a Participant's Qualified Shares already deemed pledged
in the Program may have a value in excess of 150% of the Account
Indebtedness; (b) if the Company is holding additional Qualified
Shares available for pledge as custodian for the Participant under
the Agency Agreement, then the Company may automatically pledge
sufficient additional shares to cover the 150% requirement; (c)
if the Company is not holding enough Qualified Shares, then the
Participant may make the necessary shares available for pledge by
adding to the Account(s) shares that will have been owned at least
31 days prior to the renewal date; or (d) a Participant may make a
cash payment to reduce the Account Indebtedness to no more than
66.66% of the value of the shares pledged in the Program.
If the 150% margin requirement is not met in one of these four ways,
prior to the renewal of a loan, the Company intends to terminate the
Program. The Company may notify a Participant 31 days prior to a renewal
date if it appears that the 150% requirement may not be met, but the
Company is under no obligation to provide such notice.
(iv) RENEWAL LOAN MARGIN REQUIREMENT--The Company requires, at renewal,
that a new premium loan be secured by Qualified Shares which have
not been previously pledged to the Program. The new Qualified
Shares must have a value of at least 250% of the new premium loan.
If Qualified Shares are not available to be pledged by the Company
as custodian for the Participant, then the Participant must
provide additional Qualified Shares with a value of at least 250%
of the new premium loan before another premium loan will be
extended.
(c) A Participant's Personal Deficiency Resulting from the Loans
THE LOANS WHICH THE COMPANY MAKES TO PARTICIPANTS TO FINANCE INSURANCE
PREMIUMS ARE MADE WITHOUT RECOURSE. CONSEQUENTLY, A PARTICIPANT WILL NOT
BE RESPONSIBLE FOR PAYMENT OF A DEFICIENCY IN THE EVENT THE VALUE OF THE
PLEDGED SHARES IS NOT SUFFICIENT TO PAY HIS ENTIRE ACCOUNT INDEBTEDNESS.
A PARTICIPANT SHOULD NOT INFER FROM THIS THAT A PROGRAM WILL NOT RESULT
IN A LOSS TO HIM. THE APPRECIATION IN VALUE OF MUTUAL FUND SHARES AND THE
COSTS AND EXPENSES OF THE PROGRAM (INCLUDING INTEREST AND FEES) ALL WILL
HAVE A BEARING ON WHETHER THE PARTICIPANT INCURS A LOSS IN A PROGRAM.
7. ADDITIONAL MUTUAL FUND SHARES
A Participant is under no obligation to purchase or otherwise make available
mutual fund shares once a Program is initiated, except to the extent necessary
to meet the margin and collateral requirements described above. Failure to make
additional shares available may result in termination of a Participant's Program
since the amount of collateral required to secure a Participant's Account
Indebtedness will increase correspondingly with the amount of each borrowing.
Similarly, failure to purchase or otherwise make available additional mutual
fund shares in order to prevent a decline in the aggregate redemption value of
the pledged shares below 130% of a Participant's Account Indebtedness will
result in a sale of existing collateral and termination of the Participant's
Program. Accordingly, to the extent they do not already own
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mutual fund shares available for use as collateral, Participants generally will
be required to make investments, some as often as monthly, in shares which are
transferred into the name of the Company as custodian for the Participant and
held until they become Qualified Shares. These Qualified Shares then will be
deemed to be pledged to the Company if the value of the shares previously
pledged with the Company declines below the margin and collateral requirements.
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8. STATUS REPORTS
The Company, upon request, will furnish to each Participant annually a statement
of his Program account indicating the amount of his Account Indebtedness and a
current prospectus of the Company with respect to the Programs. Current
prospectuses and any other required reports with respect to any variable life
insurance policy will be forwarded to the policy owner directly by the issuing
Insurance Company. The Company will, at any time upon request, furnish a
Participant with a statement of the total redemption value of his pledged shares
compared with his Account Indebtedness. The Company may charge up to $25 per
such request in excess of four requests per calendar year. Annual reports of
the Company containing financial statements reported upon by independent
auditors will also be furnished to Participants at any time upon request.
9. PROGRAM MODIFICATION
Subject to the minimum premium requirement of $1,000.00 annually and the
Insurance Companies' administrative guidelines, the amount of insurance and the
premium(s) to be financed may be reduced. If increased insurance protection is
desired, a Participant may add, subject to the Company's approval, a new policy,
but only within six weeks of the annual anniversary date of his Program. The
cost of acquisition (including the placement fee) must be paid by a Participant
upon the issuance of a new policy. If a Participant who is also the owner of the
insurance policy, the premiums for which are financed by a Program, desires to
terminate the Program or modify the insurance protection, he may be able to
surrender the policy (providing it has sufficient cash value) and obtain
extended term coverage (if available), an insurance policy with reduced
coverage, or a paid-up policy for a reduced amount.
A Participant may substitute as collateral shares of one mutual fund for those
of another. This may be accomplished in one of two ways: (i) transferring monies
from one fund into the Account to another fund in the Account or (ii) assigning
another mutual fund account to the Company by transferring registration of that
account. The Company assesses charges in connection with each of the foregoing
means of collateral substitution to redeem shares of one mutual fund so that a
Participant may purchase another mutual fund's shares. See "Summary of Charges,"
page ____. Presently there is no limit on the number of times a Participant may
modify his Program; however, the Company reserves the right at any time to limit
the number of times a Participant may modify his Program.
10. PARTIAL PAYMENT OF ACCOUNT INDEBTEDNESS
A Participant may at any time prior to the termination of a Program elect to pay
the interest in his Account Indebtedness in cash or to repay in cash the Account
Indebtedness in full or in part, provided that all applicable fees and charges
as described herein are paid. However, partial payment of Account Indebtedness
is not permitted in the event the 130% maintenance margin requirement described
above is not met, since in such event, the Program will be terminated by the
Company. If the Account Indebtedness is paid in full, the Program will
terminate.
11. TERMINATION
<PAGE>
Page 30
- --------------------------------------------------------------------------------
Programs are entirely voluntary and may be terminated at any time by a
Participant, upon written notice mailed to the Company. A Program may be
terminated by the Company upon the occurrence of any of the following: (i) the
death of all Participants in that Program; (ii) termination of all policies in
that Program; (iii) failure to meet minimum collateral requirements due to a
decline in the value of the mutual fund shares or an increase in the Account
Indebtedness; (iv) failure to meet the minimum annual premium requirement unless
waived by the Company to the extent permitted by law; (v) failure to provide
sufficient collateral to secure loans for premiums due under the Program; (vi)
inability of the Company to provide or arrange for financing of premiums; (vii)
failure of the Participant's bank to honor checks made payable to the Company
from the Participant's bank account. A Participant should clearly understand
that in the event of any of the above circumstances a Program may be terminated
by the Company without prior notice to the Participant. Programs shall be
terminated not later than ten years from the due date of the initial premium
financed (unless extended at the option of the Company).
The Company intends to provide notice of a Program's termination to a
Participant in a timely fashion so as to provide the Participant with enough
time to pay the premiums on his insurance policy to prevent it from being
cancelled.
If a Participant terminates his Program, he must pay his Account Indebtedness in
full, including interest to the date of payment. The Company also charges a $100
termination fee and a $25 liquidation charge per mutual fund unless the
termination is at the end of the tenth year of the Program. If the Company
terminates a Program with prior notice to a Participant, the Participant must
pay his Account Indebtedness within seven business days after a notice of
termination. In either case, if a Participant's Account Indebtedness is not
paid, the Company has the right to redeem as many of the Participant's Qualified
Shares as necessary to pay his debt.
To pay his Account Indebtedness, a Participant may: (i) redeem his mutual fund
shares only and independently continue the insurance; (ii) redeem such shares
and, if he has the right, borrow on or withdraw from the cash surrender value,
if any, of the insurance policy, thereby independently keeping the policy in
force (however, the cash value of the insurance policy alone will usually not
provide adequate funds to liquidate all of the accumulated indebtedness); (iii)
retire the debt from funds unrelated to the mutual fund shares or the insurance
policy and independently continue the policy; (iv) redeem his mutual fund shares
and surrender his life insurance policy for its cash surrender value, if any; or
(v) retain his mutual fund shares and, if he has the right, surrender the
insurance policy for its cash surrender value, if any.
The continuance of the Program is dependent upon the Company's ability to
provide, or to arrange for, the financing of insurance premiums for
Participants. A Participant's Program may be involuntarily terminated if such
financing cannot be obtained by the Company. (See "The Program--Financing of the
Programs by the Company," page ____.)
Termination of a program (either at the option of a Participant, or by the
Company) does not affect the insurance policy financed by a Program. However,
upon such termination, an alternative means of financing the premiums for such
insurance must be obtained.
<PAGE>
Page 31
- --------------------------------------------------------------------------------
A Participant must maintain certain margin and collateral requirements in order
to avoid termination of his Program. See "The Programs--Insurance Premium Loans
to Participants," page ____.)
12. RIGHTS OF PARTICIPANTS
(a) Program Rights
Participants in the Programs have certain rights in connection with the
Programs themselves (as distinct from the mutual funds shares used, and
insurance offered in connection with the Programs). These rights include
the right to receive status reports, the right to modify a Program, and
the right to terminate a Program entirely. (See generally "The
Programs--Status Reports" page ____; --"Program Modification" page ____;
and --Termination," page ____.) However, Participants are not
stockholders in the Company or any of its affiliates and have no voting
rights or other interests therein.
(b) Voting of Mutual Fund Shares
The mutual fund(s) used by a Participant in connection with a Program
will be requested by the Company to advise him of any meeting where his
shares may be voted and furnish him with a proxy statement and
appropriate voting forms. It is the responsibility of the Participant to
complete and return the proxy statement in order to vote his mutual fund
shares. The Company will vote the Participant's shares in the Account(s)
only if the Participant gives the Company specific written instructions
accompanied by a signed proxy. If such instructions and the signed proxy
are not received, the Company will take no action with respect to voting
the Participant's shares.
13. FINANCING OF THE PROGRAMS BY THE COMPANY
The Company's funds for financing the Programs are currently obtained through
finance arrangements with HLIC, an affiliate of the Company and, may, in the
future, be obtained from other affiliated or unaffiliated sources of funds (the
"Arrangements"). The Company anticipates that funds will be made available at
favorable commercial rates which are subject to change in accordance with the
Arrangements. The Arrangements may contain minimum collateral requirements
coextensive with the minimum collateral requirements for Participants set forth
herein. If the value of any Participant's shares pledged to the Company
declines below 130% of the Company's indebtedness, HLIC and any other sources of
funds, in addition to the Company's rights described above, may demand that the
Company sell or redeem shares from that Participant's Program which does not
meet the Company's margin and collateral requirements and liquidate that portion
of the Company's indebtedness.
Under the Arrangements, the failure of the Company to fulfill its obligations
may give one of the other parties to the Arrangements the right to terminate the
obligation to provide future funding. In this event, the Company may decide not
to renew any Programs by making further loans to
<PAGE>
Page 32
- --------------------------------------------------------------------------------
Participants, and may redeem the Qualified Shares to satisfy its obligations.
If the Company is unable to borrow or obtain funds at a reasonable cost in the
future or to continue to arrange for funds under the Arrangements for the
purpose of financing loans to Participants for the payment of insurance
premiums, it may cease to continue offering the Programs. In addition, its
ability to renew existing loans may be impaired to the point of terminating,
without prior notice to Participants, all Programs at their loan renewal dates.
The Company is under no contractual obligation to continue to make loans on
future Program renewal dates; however, it intends to continue making such loans
as long as funds are available to it on commercially reasonable terms.
The Company may in the future borrow funds from affiliated or non-affiliated
companies. There is no assurance that (i) the Company will obtain financing from
non-affiliated companies upon terms, conditions and rates as favorable as those
from affiliated companies; (ii) all future material affiliated transactions and
loans will be generally available on terms no less favorable to the Company than
those from unaffiliated third parties;(iii) all future material affiliated
transactions and loans, and any forgiveness of loans, will be approved by a
majority of the Company's Board of Directors.
------------------------------------------------------------
LEGAL MATTERS
------------------------------------------------------------
In the ordinary course of business, legal proceedings involving the Company
periodically may arise. Currently, the Company is not the subject of any pending
legal proceedings.
------------------------------------------------------------
EXPERTS
------------------------------------------------------------
The financial statements included in this Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
------------------------------------------------------------
AVAILABLE INFORMATION
------------------------------------------------------------
The Company has filed with the Securities and Exchange Commission
(the"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Programs offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Programs offered hereby, reference is hereby made
to the Registration Statement and the exhibits and schedules filed as a part
thereof. Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are
<PAGE>
Page 33
- --------------------------------------------------------------------------------
not necessarily complete. With respect to each such contract, agreement, or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved. The
Registration Statement may be inspected, without charge, at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following regional offices
at the Commission: 13th Floor, Seven World Trade Center, New York, New York
10048; and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the Commission, at 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees.
The Company will become subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will file periodic reports, proxy statements and other
information with the Commission. Such reports and other information to be filed
by the Company with the Commission will be available for inspection at the above
Commission offices.
The Company will furnish, upon request, holders of the Programs annual reports
containing audited financial statements following the end of the fiscal year as
well as quarterly reports containing unaudited consolidated financial statements
for the first three quarters of each fiscal year following the end of each such
quarter.
<PAGE>
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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...........
The registrant meets the conditions set forth in General Instruction J (1) (a)
and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
Commission file number 33-58862
HL FUNDING COMPANY, INC.
Incorporated in the State of Connecticut 06-1362143
(I.R.S. Employer Identification No.)
P.O. Box 2999, Hartford, Connecticut 06104-2999
(Principal Executive Offices)
Telephone number 860-843-8213
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes X No .
--- ---
As of March 25, 1996 there were outstanding 100 shares of common stock, $1 par
value per share, of the registrant, all of which were directly owned by Hartford
Life Insurance Company.
1
<PAGE>
HL FUNDING COMPANY, INC.
Annual Report for 1995 on Form 10-K
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Item Page
---- ----
<S> <C> <C>
Part I 1 Business of HL Funding Company, Inc.** 3
2 Properties ** 3
3 Legal Proceedings 3
4 *
Part II 5 Market for HL Funding Company's Common Stock
and Related Stockholder Matters 4
6 *
7 Management's Narrative Analysis of Results of Operations** 4
8 Financial Statements and Supplementary Data 4
9 Disagreements on Accounting and Financial Disclosure 4
Part III 10 *
11 *
12 *
13 *
Part IV 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K 4
Signatures II-1
Exhibit Index II-2
</TABLE>
* Omitted pursuant to General Instruction J(2) of Form 10-K
** Item prepared in accordance with General Instruction J(2) of
Form 10-K.
2
<PAGE>
Part I
Item 1. Business of HL Funding Company, Inc.
A. Organization
HL Funding Company, Inc. (the Company or HLFC) offers and administers programs
whereby participants obtain life insurance coverage from various ITT Hartford
Group, Inc. affiliated insurance companies. Under the programs, insurance
premiums are paid by participants through a series of loans from HLFC. Loans to
participants are secured by participants' ownership in shares of regulated
investment companies. The loans to participants are funded with proceeds from a
loan arrangement with HLIC. All programs are ten years in length. Upon program
conclusion, loan balances and accrued interest become due.
HLFC is a corporation formed in the State of Connecticut on February 8, 1993.
HLFC is a wholly owned subsidiary of Hartford Life Insurance Company (HLIC),
which is ultimately a subsidiary of Hartford Fire Insurance Company (Hartford
Fire) and ITT Hartford Group, Inc. HLFC's registration statement became
effective on March 16, 1994.
Item 2. Properties
The Company occupies office space in Simsbury, Ct, leased by Hartford Fire.
Expenses associated with these offices are allocated on a direct and indirect
basis to the life insurance subsidiaries of Hartford Fire.
Item 3. Legal Proceedings
HLFC is not involved in any pending or threatened litigation in which claims for
monetary damages are or would be asserted.
3
<PAGE>
Part II
Item 5. Market for HL Funding Company's Common Stock and Related Stockholder
Matters
All of HLFC's outstanding shares are ultimately owned by Hartford Fire which is
ultimately a subsidiary of ITT Hartford Group, Inc.
HLFC has issued and outstanding 100 shares of common stock at a par value of $1
per share.
Item 7. Management's Narrative Analysis of Results of Operations
For the years ended December 31, 1995 and 1994, HL Funding Company, Inc. had
losses of $171,027 and $243,825, respectively. The 1995 and 1994 losses
reflect operating expenses for the accounting and administration of HLFC's
programs exceeding net interest and program income in each year. Ten programs
were sold during 1995 and a total of thirteen active programs existed as of
December 31, 1995. At December 31, 1995, premium loans receivable were
$189,361 and interest loans were $2,972.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements.
Item 9. Disagreements on Accounting and Financial Disclosures
None.
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) Documents Filed
(1) See Index to Financial Statements
(2) See Exhibit Index
(b) No reports on Form 8-K have been filed during the last quarter of 1995
4
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-2
Statements of Income (Loss) for the years ended December 31, 1995 and
December 31, 1994, and for the period from inception, February 8, 1993,to
December 31, 1993 F-3
Balance Sheets as of December 31, 1995 and December 31, 1994 F-4
Statements of Changes in Stockholder's Equity for the years
ended December 31, 1995 and December 31, 1994, and for the period
from inception, February 8, 1993, to December 31, 1993 F-5
Statements of Cash Flows for the years ended December 31, 1995 and
December 31, 1994, and for the period from inception,
February 8, 1993, to December 31, 1993 F-6
Notes to Financial Statements F-7-8
All schedules have been omitted because they are not applicable or the amounts
are insignificant, immaterial or the information has been otherwise supplied in
the financial statements or notes thereto.
REPORT OF MANAGEMENT
The management of HL Funding Company, Inc. (the Company) is responsible for the
preparation and integrity of the information contained in the accompanying
financial statements and other sections of the Annual Report. The financial
statements are prepared in accordance with generally accepted accounting
principles, and, where necessary, include amounts that are based on
management's informed judgments and estimates. Other information in the Annual
Report is consistent with the financial statements.
The Company's financial statements are audited by Arthur Andersen LLP,
independent public accountants. Management has made available to Arthur
Andersen LLP the Company's financial records and related data and believes that
the representations made to the independent public accountants are valid and
complete.
The Company's system of internal controls is a major component of management's
responsibility for the fair presentation of the financial statements. The
internal controls, including accounting controls and the internal auditing
program, are designed to provide reasonable assurance that the assets are
safeguarded, transactions are executed in accordance with management's
authorization and are properly recorded, and fraudulent financial reporting is
prevented or detected.
The Company's internal controls provide for the careful selection and training
of personnel and for appropriate segregation of responsibilities. The controls
are documented in written codes of conduct, policies, and procedures that are
communicated to the Company's employees. Management continually monitors the
system of internal controls for compliance. The Company's internal auditors
perform independent tests of accounting procedures and records to assess the
overall effectiveness of the Company's internal controls. They also make
recommendations for improving internal controls, policies and practices.
Management takes appropriate action in response to each recommendation from the
internal auditors and the independent public accountants.
F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Not applicable.
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VIII, Section 1 of the By-laws of Hartford Funding Company,
Inc. provides for indemnification of Directors and Officers as
follows:
"Section 12. Indemnification. Each Director, Officer or employee of
the Company, and his heirs, executors or administrators, shall be
indemnified or reimbursed by the Company for all expenses necessarily
incurred by him in connection with the defense or reasonable
settlement of any action, suit or proceeding in which he is made a
party by reason of his being or having been a Director, Officer or
employee of the Company, or of any other company which he was serving
as a Director or Officer at the request of the Company, except in
relation to matters as to which such Director, Officer or employee is
finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of the duties of such
Director, Officer or employee. The foregoing right of indemnification
or reimbursement shall not be exclusive of any other rights to which
he may be entitled under any statute, by-law, agreement, vote of
stockholders or otherwise.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit
Number Description Method of Filing
------- ----------- ----------------
1 Underwriting Agreement Incorporated by reference to
Amendment No 5, to the
Registration Statement File
No. 58862, dated April 28,
1995
3(a) Articles of Incorporation Incorporated by reference as
stated above.
3(b) By-laws Incorporated by reference as
stated above.
<PAGE>
- 2 -
4 Agency Agreement and Incorporated by reference as
Limited Power of Attorney stated above.
(Revised)
5 Opinion re: legality Filed with this
Registration Statement
10 Loan Agreement between Incorporated by reference as
Hartford Life Insurance stated above.
Company and HL Funding
Company, Inc.
23 Consents of experts Filed with this Registration
Statement.
25 Power of Attorney Filed with this Registration
Statement.
Item 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
i. To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement, including (but
not limited to) any addition or deletion of a managing
underwriter;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3
or Form S-8, and the information required to be included in
a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registration pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are
<PAGE>
- 3 -
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Hartford Funding Co.
<PAGE>
- 4 -
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut on this 22 day of April, 1996.
HL FUNDING COMPANY, INC.
*By: /s/ Thomas M. Marra *By: /s/ Lynda Godkin
------------------------------------------ --------------------
Thomas M. Marra, Executive Vice President Lynda Godkin
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
Lowndes A. Smith
President, Chairman
Director *
John P. Ginnetti
Executive Vice President, *By: /s/ Lynda Godkin
Director* ----------------------
Lynda Godkin
Attorney-in-Fact
George R. Jay
Controller, Director* Dated: April 22, 1996
---------------------
Donald E. Waggaman
Treasurer, Director *
HL Funding
<PAGE>
[Exhibit 5]
March 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: HL FUNDING COMPANY, INC.
FILE NO. 33-58862
Dear Sirs:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, that will be offered and sold by HL Funding
Company, Inc. ("HL Funding").
1. HL Funding was duly organized and is a validly existing corporation under
the laws of the State of Connecticut.
2. The provision for the offer of Programs to fund insurance premiums to
purchase whole life insurance, term insurance, variable life insurance, and
certain other insurance contracts through premium financing arrangements
that will be issued by HL Funding have been filed in states where it is
eligible for approval and upon issuance will be valid and binding upon HL
Funding.
I hereby consent to the use of this opinion as an exhibit to the Securities Act
Registration Statement on Form S-1 and to the reference to my name under the
heading "Legal Opinions" in the prospectus included in the Securities Act
Registration Statement.
Very truly yours,
/s/ Lynda Godkin
Lynda Godkin
Associate General Counsel & Secretary
<PAGE>
[Exhibit 23]
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-58862 for HL Funding Company, Inc. on
Form S-1.
/s/ Arthur Andersen LLP
Hartford, Connecticut
<PAGE>
[Exhibit 24]
HL FUNDING COMPANY, INC.
POWER OF ATTORNEY
John P. Ginnetti
George R. Jay
Lowndes A. Smith
Donald E. Waggaman
do hereby jointly and severally authorize Lynda Godkin and/or Scott K.
Richardson to sign as their agent, any Registration Statement, pre-effective
amendment, and any post-effective amendment of the HL Funding Company, Inc.
under the Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ John P. Ginnetti Dated April 8, 1996
- -------------------------------- ----------------------
John P. Ginnetti
/s/ George R. Jay Dated April 8, 1996
- -------------------------------- ----------------------
George R. Jay
/s/ Lowndes A. Smith Dated April 8, 1996
- ------------------------------ ----------------------
Lowndes A. Smith
/s/ Donald E. Waggaman Dated April 8, 1996
- -------------------------------- ----------------------
Donald E. Waggaman
