Item 1 - Description of Business - --------------------------------
(a) General Development of Business -------------------------------
Hampshire Funding, Inc. ("the Company") was incorporated in the State of New Hampshire on December 8, 1969, as a wholly-owned subsidiary of Chubb Life Insurance Company of America ("CLA" or the "Parent" Corporation). The Company became a wholly-owned subsidiary of The Chubb Corporation on December 21, 1971, when CLA sold all the outstanding stock of the Company. On April 1, 1981, the Company's common stock was transferred by contribution to Chubb Life Insurance Company of New Hampshire ("CLNH"). On July 1, 1991, CLNH and CLA merged with and into The Volunteer State Life Insurance Company, which on the same date re-domesticated from Tennessee to New Hampshire and changed its name to Chubb Life Insurance Company of America (the "Parent Corporation"). As a result of said merger, all of the common stock of the company is owned by the Parent Corporation. In addition, the Company owns 100% of the outstanding shares of Hampshire Syndications, Inc., incorporated in New Hampshire on October 9, 1986.
On February 24, 1997, The Chubb Corporation announced that it had signed a definitive agreement to sell the Parent Corporation and its subsidiaries to Jefferson-Pilot Corporation subject to regulatory approvals.
The Company, in affiliation with the Parent Corporation, Chubb Colonial Life Insurance Company ("Colonial"), Chubb Sovereign Life Insurance Company ("Chubb Sovereign") (collectively "Insurance Companies") and Chubb Securities Corporation (the "Broker-Dealer"), a member of the National Association of Securities Dealers, Inc. ("NASD"), is primarily engaged in the offering and administration of programs which coordinate the acquisition of mutual fund shares and life or health insurance (the "Programs"). The Programs are intended, in part, to augment the sales activities of the Broker-Dealer and the Insurance Companies.
(b) Financial Information About Industry Segments ---------------------------------------------
Revenues, operating profit and loss, and identifiable assets for the three years ended December 31, 1996, are included in Item 6 - Selected Financial Data and Item 8 - Financial Statements and Supplementary Data.
(c) Narrative Description of Business ---------------------------------
The Company offers and administers Programs which involve initial and periodic cash purchases of mutual fund shares. Under the Programs, purchasers of a Program ("Participants") make initial and periodic purchases of mutual fund shares for cash with automatic reinvestment of all distributions. Participants obtain insurance coverage through a series of insurance premium loans offered by the Company. Loans to Participants are secured by Participants' initial and periodic purchases of mutual fund shares. The mutual fund shares are registered in the Company's name as Custodian for Participants.
The objective of a Program is the utilization of the appreciation, if any, in the value of the mutual fund shares and any dividends or capital gains distributions thereon to aid in offsetting the principal and accumulated interest on the loans.
The Programs are offered for sale by those agents of the Insurance Companies who qualify as registered representatives, through the Broker- Dealer, under the regulations of the NASD.
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Revenues derived from Participant Programs include loan interest and fees. For the years ended December 31, 1996, 1995 and 1994 such revenues were as follows:
Regulation ----------
The Company is authorized to offer Programs using insurance policies offered by the Insurance Companies. Insurance available for purchase in connection with a Program may vary from state to state, depending on whether the Parent Corporation, Colonial or Chubb Sovereign is licensed to sell insurance in a particular jurisdiction, and whether a jurisdiction in which one of the Insurance Companies is licensed has approved the sale of a particular insurance product.
Each Insurance Company offers several types of policies within the Program. The Insurance Companies are subject to the regulations of the insurance department of each state in which they are licensed to do business. In addition, the Parent Corporation, through Chubb Separate Account A, offers for sale a variable universal life insurance policy, which is subject to regulation by the Securities and Exchange Commission. Policies, including the variable universal life insurance product, issued under the Program may not be identical in each state or jurisdiction. Regulations that determine the types of policies and their provisions may differ in each state. As a result, the Insurance Companies have internal procedures designed to ensure that only approved policies are issued in each state.
The Company has filed a Registration Statement under the Securities Act of 1933, as amended, with the Securities and Exchange Commission. The Company is also subject to supervision by the Commissioners of Securities of the jurisdictions in which the Company is authorized to offer the Programs for sale.
The insurance agents who sell the Programs are subject to the oversight and regulation of the insurance department of each jurisdiction where they are licensed. In addition, only those agents who are registered representatives of the Broker-Dealer may sell Programs; thus the insurance agents are also subject to supervision and regulation of the NASD and securities department of each jurisdiction where they are licensed.
Dependence Upon a Single or a Few Customers -------------------------------------------
The Company is not dependent upon a single or a few customers. The loss of one or a few customers would not have a material adverse effect on the business of the Company.
Competition -----------
The Company faces limited competition in the sale of Programs, as the number of companies offering plans similar to the Programs is quite small. Historically, a large number of companies offered programs combining the purchase of insurance and mutual fund shares; however, in recent years the number of companies has reduced dramatically.
The business of the Insurance Companies is highly competitive. The Insurance Companies compete on a nationwide basis with a large number of insurance companies, and also compete with other financial service companies in the area of equities, retirement planning and financial planning. Finally, there has been a recent trend of greater involvement by banks and thrifts in the insurance industry. Competition is based upon cost of insurance, client service, performance of the cash value component of whole life insurance, and agent loyalty to a company.
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Employees ---------
The Company has no paid employees. Chubb America Service Corporation (the "Service Company"), a wholly-owned subsidiary of the Parent Corporation, is a management service company organized and operated to provide employee and office services, as well as certain operating assets, to the Company and its affiliates. The Service Company employs all of the personnel who perform business functions for the Company. The Service Company believes that its relationship with employees is good.
(d) Financial Information About Foreign and Domestic Operations and Export ---------------------------------------------------------------------- Sales -----
All sales and operations of the Company are conducted within the United States.
Item 2
Item 2 - Properties - -------------------
The Company does not own or lease any real property. The Company occupies a portion of the home office of the Parent Corporation located at One Granite Place, Concord, New Hampshire. The use by the Company of such facilities and the equipment and furnishings owned by the Service Company, the Parent Corporation, or any of the other Insurance Companies is subject to a pro-rata allocation of expenses.
Item 3
Item 3 - Legal Proceedings - --------------------------
The Company may become involved from time to time with legal proceedings arising out of the ordinary course of its business. For the year ended December 31, 1996, the Company was not involved in any legal proceedings.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------
Not Applicable.
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PART II
Item 5
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters - ------------------------------------------------------------------------------
(a) Holders -------
Not publicly traded.
(b) Market Information ------------------
1 (See Item 12, Security Ownership of Certain Beneficial Owners and Management.)
(c) Dividends ---------
The Company has not authorized or paid any dividends since inception. There are no restrictions presently known on the Company's ability to pay dividends except for general New Hampshire corporate laws relating to earnings.
Item 6
Item 6 - Selected Financial Data - --------------------------------
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Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - -------------
Liquidity and Capital Resources - -------------------------------
The Company offers investment programs (the "Programs") which coordinate the acquisition of mutual fund shares and insurance over a period of ten years. Under the Programs, purchasers of a Program ("Participants") purchase life and health insurance from affiliated insurance companies (the "Insurance Companies") and finance the premiums through a series of loans secured by mutual fund shares. Upon issuance of a policy by an Insurance Company, the Company makes a loan to the Participant in an amount equal to the selected premium mode. As each premium becomes due, if not paid in cash, a new loan equal to the next premium and administrative fee is made and added to the Participant's account indebtedness ("Account Indebtedness"). Thus, interest, as well as principal, is borrowed and mutual fund shares are pledged as collateral. Each loan made by the Company must initially be secured by mutual fund shares which have a value of at least 250% of the loan, except for the initial premium loan of Programs using certain no-load funds, where the collateral requirement is 1800%. In addition, the aggregate value of all mutual fund shares pledged as collateral must be at least 150% of the Participant's total Account Indebtedness. If the value of the shares pledged to the Company declines below 130% of the Company's indebtedness, the Company will terminate the Programs and liquidate shares sufficient to repay the indebtedness.
Collateral loans receivable from Participants were $52,979,267 (including accrued interest of $1,365,191) at December 31, 1996. Annual amounts due to the Company were as follows:
The Company's funds for financing the Programs are currently obtained through a Revolving Credit Agreement with a non-affiliated bank, SunTrust Bank of Atlanta, Georgia ("SunTrust"). The Company entered into this Revolving Credit Agreement on October 23, 1996 which provides for advances up to $60,000,000 and expires on October 22, 2001. The Revolving Credit Agreement contains restrictions on equity and indebtedness with other non-affiliates. All indebtedness and obligations of the Company under the Revolving Credit Agreement, are guaranteed by Chubb Life. The Revolving Credit Agreement with SunTrust replaced the Company's loan agreements with its affiliates, Chubb Life and Colonial, which provided for advances not to exceed $20,000,000 and $29,000,000, respectively. As all advances under affiliated loan agreements became due during October and November of 1996, the Company borrowed amounts under the new Revolving Credit Agreement with SunTrust and paid Chubb Life and Colonial the outstanding principal and interest. At December 31, 1996, the Company had no loans outstanding to affiliates. The interest rate on advances made under the SunTrust Revolving Credit Agreement is variable and based on short-term interest rates.
The continuance of the Program is dependent upon the Company's ability to provide, or arrange for the financing of insurance premiums for Participants. Prior to its Revolving Credit Agreement with SunTrust, such financing was available from its affiliates, Colonial and Chubb Life. The Company expects that it will be able to obtain this financing for the foreseeable future from non- affiliates or affiliates.
If the Company is unable to borrow funds in the future or continue to borrow funds under its credit agreement for the purpose of financing loans to Participants for the payment of insurance premiums, it may not be able to continue the sale of the Programs.
Although the Company's present financing arrangement with its lender does not include the assignment of a Participant's mutual fund shares to the lender as security, the Company is authorized to assign a Participant's mutual fund shares to a lender as collateral security for the Company's indebtedness pursuant to any financing arrangements. If any such assignment takes place and the Company subsequently defaults on an obligation for which the Participant's mutual fund shares have been pledged as security, the mutual fund shares may be redeemed by the lender to whom the obligation is owed. A lender may cease to provide financing if the Company is in default under its credit agreement. In this case, Programs will be terminated on their renewal dates.
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At December 31, 1996 the Company had borrowed $50,500,000 under its Credit Agreement with SunTrust. At December 31, 1995 the Company had borrowed $44,200,000 ($26,000,000 under its loan agreement with Colonial and $18,200,000 under its loan agreement with Chubb Life). The increase in amounts borrowed by the Company year to year was used to fund additional premium loans.
In addition to loans payable, the Company has other short-term amounts due to affiliates related to insurance premium payments and expense reimbursements to the Service Company.
The Service Company, a wholly-owned subsidiary of the Parent Corporation, is a management service company which provides employee services and office facilities to the Company and its affiliates under a Service Agreement. The Company pays the Service Company a monthly fee in accordance with mutually agreed upon cost allocation methods which the Companies believe reflect a proportional allocation of common expenses and are commensurate for the performance of the applicable duties.
Working capital in 1996 and 1995 was provided by Participants' loan repayments, administrative fees for the placement and maintenance of Programs and interest earned on investments.
Loan schedule as of December 31, 1996:
Results of Operations - ---------------------
The Company concluded the year ended December 31, 1996 with net operating income of $314,298 as compared to net operating income of $232,354 in 1995, and $458,294 in 1994.
Total revenues through December 31, 1996 were $4,957,607 versus $4,435,676 in 1995, and $3,590,273 in 1994. These revenues include interest on collateral loans receivable, program fees, interest on investments and partnership income. The largest source of revenue was represented by interest on collateral loans receivable.
The growth in collateral loan interest resulted from the increase in collateral loans receivable year to year. Collateral loans receivable as of December 31, 1996 were $52,979,267 as compared to $47,059,897 in 1995, and $40,805,159 in 1994. Comparatively, collateral loan interest was $4,412,729, $3,899,087 and $3,094,809 for the years ended December 31, 1996, 1995 and 1994. The average interest rate charged to each Participant's outstanding loan balance was 8.95%, 9.22% and 8.65% for the years 1996, 1995 and 1994, respectively.
The Company's collateral loans receivable, collateral loan interest and average interest rate charged to each Participant's loan balance for the three years ended December 31 are summarized as follows:
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Interest expense on the Loan Agreements increased each year since 1994 due to changes in interest rates and amounts borrowed by the Company. The Company's outstanding loans payable, interest expense and average cost of borrowings for the three years ended December 31 are summarized as follows:
The Company's ability to achieve and maintain a spread between its cost of funds necessary to finance premium loans and the lending rate charged to Program Participants may impact its future operating results. The interest rate spread is intended to provide sufficient revenue to offset the Company's general and administrative expenses. General and administrative expenses (including state taxes), arising from normal operating activities through December 31, 1996, were $1,516,065 as compared to $1,347,286 in 1995, and $1,308,976 in 1994.
The Company may increase the interest rate charged to Participants to a maximum of the prime interest rate plus 3% as its cost of borrowing increases. If the Company's cost of borrowing were to rise significantly above the prime interest rate, its ability to maintain an adequate interest rate spread would be difficult and future earnings could be adversely impacted.
Program fees include placement, administrative and termination fees as well as charges for special services. For the years ended December 31, 1996, 1995 and 1994 the number of Programs administered by the Company were 6,131, 6,521 and 6,662, respectively.
Investment income earned by the Company declined in 1996 as compared to 1995 due to a decrease in investment returns on cash equivalents held during 1996.
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Item 8
Item 8 - Financial Statements and Supplementary Data - ----------------------------------------------------
The financial statements included herein are listed in the following index.
All schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements, and the notes thereto.
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors Hampshire Funding, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Hampshire Funding, Inc. and Subsidiary as of December 31, 1996 and 1995, and the related consolidated statements of income and retained earnings, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hampshire Funding, Inc. and Subsidiary at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, in 1994 the Company changed its method of accounting for postemployment benefits.
Ernst & Young LLP
Boston, Massachusetts January 30, 1997, except for Note 7, as to which the date is February 24, 1997
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Hampshire Funding, Inc. and Subsidiary
Consolidated Balance Sheets
See accompanying notes.
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Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Income and Retained Earnings
See accompanying notes.
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Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Cash Flows
See accompanying notes.
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Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1996
1. Summary of Significant Accounting Policies ------------------------------------------
Principles of Consolidation - ----------------------------
The accompanying consolidated financial statements include the accounts of Hampshire Funding, Inc. (Hampshire) and its wholly-owned subsidiary, Hampshire Syndications, Inc. Hampshire is a wholly-owned subsidiary of Chubb Life Insurance Company of America (Chubb Life). Affiliates of Chubb Life include Chubb Colonial Life Insurance Company (Colonial), Chubb Sovereign Life Insurance Company (Chubb Sovereign), Chubb America Service Corporation (CASC), Chubb Investment Advisory Corporation and Chubb Securities Corporation (Chubb Securities), which are all 100% owned by Chubb Life. Chubb Life is 100% owned by The Chubb Corporation (Chubb).
The preparation of financial statements in conformity with generally accepted accounting principles requires Hampshire's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Nature of Operations and Transactions with Affiliates - -----------------------------------------------------
Hampshire offers and administers Programs whereby Participants obtain life insurance coverage solely from Chubb Life, Chubb Colonial and Chubb Sovereign. Under the Programs, insurance premiums are paid by Participants through a series of loans from Hampshire which are recorded as "collateral notes receivable." Loans to the Participants are secured by Participants' ownership in shares of regulated investment companies. The loans to Participants were funded substantially with the proceeds from loan arrangements with Chubb Colonial and Chubb Life. During 1996, Hampshire's loan agreements with Chubb Colonial and Chubb Life were replaced with a loan agreement with a non-affiliate. Hampshire borrowed amounts under its new loan agreement and repaid all principal and interest owed to affiliates (see Note 6). Chubb Securities is a registered broker-dealer that buys and sells the shares for Participants. The fair value of a Participant's secured investment company shares must exceed 150% of the total loan balance plus accrued interest (Participant's Total Account Indebtedness). If the value of the shares pledged as collateral to Hampshire declines below 130% of the Participant's Total Account Indebtedness, Hampshire will terminate the Program and liquidate shares sufficient to repay the indebtedness. All Programs are ten years in length. Upon Program conclusion, loan balances and accrued interest become due.
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1. Summary of Significant Accounting Policies (continued) ------------------------------------------------------
Nature of Operations and Transactions with Affiliates (continued) - ------------------------------------------------------------------
Collateral loans receivable from Participants were $52,979,267 (including accrued interest of $1,365,191) at December 31, 1996. Annual amounts due to Hampshire under collateral notes receivable were as follows:
Substantially all general and administrative expenses are allocated to Hampshire by CASC in accordance with mutually agreed upon cost allocation methods that Hampshire and CASC believe reflect a proportional allocation of common expenses and which are commensurate for the performance of the applicable duties.
Recognition of Revenues and Expenses - ------------------------------------
Interest on collateral notes receivable and administrative fees charged to Participants for establishing and maintaining Programs are recognized as revenue when earned. Partnership syndication fees represent fees earned by Hampshire Syndications, Inc. as a participating general partner of certain limited partnerships. No syndication fees were earned in either 1996 or 1994; $5,385 was earned in 1995.
Cash Equivalents - ----------------
Cash equivalents include cash invested in securities purchased under repurchase agreements and short-term corporate notes, all of which have remaining maturities of three months or less at the date of purchase.
On December 20, 1996, Hampshire entered into a reverse repurchase agreement with Fleet Bank (Bank) in the amount of $208,000. The agreement matures on January 24, 1997. This reverse repurchase agreement is included in cash equivalents in the accompanying consolidated balance sheet. Hampshire requires that the market value of the underlying securities provided as collateral for repurchase agreements be a minimum of 100% of their contractual resale price to the Bank.
Short-term corporate notes are carried at cost which approximates market value.
Reclassifications - -----------------
Certain previously reported amounts have been reclassified to conform with the 1996 presentation.
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2. Change in Accounting Principles -------------------------------
Effective January 1, 1994, Chubb Life and Hampshire adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits". SFAS No. 112 requires that the expected cost of providing post employment benefits, principally severance, disability and unemployment benefits, to former or inactive employees, their beneficiaries and covered dependents be accrued during the years that the employees render the necessary service. Prior to 1994, the pay as you go, or cash method was used to recognize the cost of these benefits. The cumulative effect of this change as of January 1, 1994 and Hampshire's allocated portion of such costs have been immaterial to Hampshire.
3. Federal Income Taxes --------------------
The operations of Hampshire are included in the consolidated federal income tax return of Chubb. Federal income tax is allocated by Chubb Life as if Hampshire filed a separate income tax return. Deferred tax assets and liabilities are recognized for the expected future tax effects attributable to temporary differences between the financial reporting and tax bases of assets and liabilities, based on enacted tax rates and other provisions of tax law. Federal income taxes have been provided at the statutory rate of 35% in 1996, 1995 and 1994.
Hampshire made income tax payments to Chubb of $134,982, $59,326 and $336,577 in 1996, 1995 and 1994, respectively.
4. Retirement Benefits -------------------
Hampshire participates in the Pension Plan for the Employees of Chubb Life and Participating Affiliates, a defined benefit plan, which covers substantially all of its employees. Accumulated plan benefits, plan net assets and net periodic pension costs by component for Hampshire are not determinable. Costs allocated by Chubb Life to Hampshire during 1996, 1995 and 1994 relative to the Pension Plan were $18,022, $24,218 and $24,269, respectively.
Certain health and life insurance benefits for all eligible retired employees are provided by Chubb Life. Benefits are paid as covered expenses are incurred. Health care coverage is contributory. Retiree contributions vary based upon a retiree's age, type of coverage and years of service with Hampshire. Life insurance is noncontributory. The expected cost of providing these postretirement benefits to employees and their beneficiaries and covered dependents are being accrued during the years that the employees render the necessary service.
5. Option and Incentive Plans --------------------------
As a subsidiary of Chubb, Hampshire and its employees are eligible to participate in the following option and incentive plans:
The Employee Stock Ownership Plan (ESOP) is funded through semi-annual contributions in amounts determined at the discretion of Chubb's Boards of Directors. A portion of Chubb common stock is allocated to eligible employees as contributions are made by Chubb.
The Capital Accumulation Plan, a savings plan, is funded by employee contributions. Hampshire makes a matching contribution equal to 100% of each eligible employee's pre-tax elective contributions, up to 4% of the employee's compensation. Contributions are invested at the election of the employee in Chubb's common stock or in various other investment funds.
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Hampshire's proportionate share of costs related to these option and incentive plans were $41,182, $36,247 and $39,394 for the years ended December 31, 1996, 1995 and 1994, respectively.
Total costs allocated by Chubb Life to Hampshire, during the year presented relative to the above benefits, have been included in General and Administrative expenses in the accompanying financial statements.
6. Loan Agreements ---------------
On October 23, 1996, Hampshire entered into a Revolving Loan Agreement with a non-affiliate, SunTrust Bank of Atlanta, Georgia ("SunTrust"). This revolving loan agreement provides loan arrangements for advances up to $60,000,000 and expires on October 22, 2001. The agreement contains restrictions on equity and indebtedness with other non-affiliates. All indebtedness and obligations of Hampshire, under the loan agreement, are guaranteed by Chubb Life. The revolving loan agreement with SunTrust replaced Hampshire's loan agreements with its affiliates, Chubb Life and Colonial, which provided for advances not to exceed $20,000,000 and $29,000,000, respectively. As all advances under affiliated loan agreements became due during October and November of 1996, Hampshire borrowed amounts under the new loan agreement with SunTrust and paid Chubb Life and Colonial the outstanding principal and interest. At December 31, 1996, Hampshire had no loans outstanding to affiliates.
The interest rate on advances made under the SunTrust loan agreement is variable and based on short-term interest rates. At December 31, 1996, Hampshire had borrowed $50,500,000 under the agreement at rates that ranged from 5.65% to 5.78%. The interest rates on amounts borrowed from affiliates during 1996 ranged from 5.05% to 8.95%. At December 31, 1995, Hampshire had borrowed $26,000,000 under it loan agreement with Colonial and $18,200,000 under its loan agreement with Chubb Life.
Interest paid, including prepayments, on loan agreements was $2,305,279, $2,420,786 and $1,751,527 in 1996, 1995 and 1994, respectively.
7. Subsequent Event ----------------
On February 24, 1997, The Chubb Corporation announced that it had signed a definitive agreement to sell Chubb Life and its subsidiaries to Jefferson-Pilot Corporation. The sale is subject to regulatory approvals.
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Item 9
Item 9 - Changes in and Disagreements With Accountants on Accounting and - ------------------------------------------------------------------------ Financial Disclosure - --------------------
Not Applicable PART III
Item 10
Item 10 - Directors and Executive Officers of the Registrant - ------------------------------------------------------------
The following sets forth information relating to Directors and Executive Officers of the Company as of December 31, 1996.
Ronald R. Angarella was elected President and Chairman of the Broker Dealer in October 1995. Mr. Angarella was elected Senior Vice President of the Parent Corporation and Vice Chairman of the Broker-Dealer in November 1994. Mr. Angarella served as Vice President, Staff Management of the Parent Corporation from September 1992 to November 1994, and Assistant Vice President, Staff Management of the Parent Corporation from February 1992 to September 1992. From March 1990 to February 1992 he served as Assistant Vice President, Marketing of the Broker-Dealer.
Ernest J. Tsouros was elected Director of the Company and the Broker-Dealer in May 1969. His principal occupation since 1982 has been as Vice President of the Parent Corporation. He also serves as Vice President of Colonial and the Service Company.
Frederick H. Condon was elected Director of the Company and the Broker-Dealer in February 1984. His principal occupation since 1985 has been as Senior Vice President, General Counsel and Secretary of the Parent Corporation. He serves as Senior Vice President, General Counsel and Secretary of Colonial, Chubb Sovereign, and the Service Company and as Vice President and Director of Hampshire Syndications, Inc.
John A. Weston was elected Treasurer of the Company and the Broker-Dealer in August 1988. His principal occupation since April of 1995 has been as Assistant Vice President of the Parent Corporation. He was elected Treasurer of Chubb Investment Funds, Inc. and Chubb America Fund, Inc. in April 1992, Treasurer of Chubb Investment Advisory Corporation in May 1992, and Hampshire Syndications, Inc. in July 1991. From July 1989 to April 1995 Mr. Weston was Mutual Fund Accounting Officer for the Parent Corporation.
Charles C. Cornelio was elected Vice President, General Counsel and Secretary of the Company, the Broker-Dealer, and Hampshire Syndications, Inc. in May 1993. His principal occupation since December, 1996 has been as Executive Vice President and Chief Administrative Officer of the Parent Corporation. From December, 1994 to September, 1996 he served as Senior Vice President and Chief Administrative Officer for the Parent Corporation. From March 1992 to December 1994 he served as Vice President, Counsel and Assistant Secretary for the Parent Corporation. He also serves as Executive Vice President and Chief Administrative Officer
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of Colonial and the Service Company and as Vice President, General Counsel to Chubb Investment Funds, Inc. and Chubb America Fund, Inc. From September 1988 to October 1989 Mr. Cornelio was Assistant Counsel of the Parent Corporation, and from October 1989 to June 1991 he was Associate Counsel of the Parent Corporation. He also serves as a Director of Hampshire Syndications, Inc.
Carol R. Hardiman was elected Vice President, Administration of the Company and the Broker-Dealer in June 1989. From October 1987 to May 1989, she was Assistant Vice President of the Company and the Broker-Dealer.
Shari J. Lease was elected Assistant Secretary of the Company and the Broker- Dealer in December 1994. Her principal occupation since April 1995 has been as Assistant Vice President and Counsel of the Parent Corporation. Ms. Lease was elected Secretary of Chubb Investment Funds, Inc. and Chubb America Fund, Inc., in April 1992 and Assistant Secretary of Hampshire Syndications, Inc. in May 1994. She served as Associate Counsel of the Parent Corporation from April 1994 to April 1995, Assistant Counsel of the Parent Corporation from October 1990 to April 1994 and Assistant Secretary of Chubb Investment Funds, Inc. and Chubb America Fund, Inc. from July 1991 to April 1992.
- --------------------------
/(1)/ There are no family relationships existing between or among any of the above-listed Directors or Executive Officers.
/(2)/ The term of office of each of the foregoing Directors and Executive Officers extends until the annual meetings of the shareholders and Board of Directors or until removed by the Board of Directors.
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Item 11
Item 11 - Executive Compensation - --------------------------------
(a) General -------
The Company pays no remuneration to its Directors and Officers, nor does it have any agreement, commitment, or plan to pay salaries or compensation to any Director or Officer on other than a nominal basis. The Service Company employs all of the personnel who perform business functions for the Company, which personnel also perform functions for affiliates of the Company.
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners -----------------------------------------------
The table below sets forth ownership of the Company's issued and outstanding common stock as of March 15, 1997.
(b) Security Ownership of Management --------------------------------
None.
Item 13
Item 13 - Certain Relationships and Related Transactions - --------------------------------------------------------
(a) Transactions With Management and Others ---------------------------------------
The Company, the Parent Corporation, Colonial and Chubb Sovereign all have agreements with the Service Company whereby the Service Company provides service and joint operations. In addition, the Company utilizes furniture, equipment and fixtures owned by one or more of the Insurance Companies. The Company pays the Service Company a fee, determined in accordance with mutually agreed upon cost allocation methods, which the Companies believe reflect a proportional allocation of common costs and are commensurate for the performance of the applicable duties.
Prior to October 23, 1996, the Company's funds for financing the Programs were obtained through Loan Agreements and Company-Lender Agreements (together the "Agreements") with Colonial and Chubb Life. The Agreements provided for revolving credit arrangements under which Colonial made advances to the Company in an amount not to exceed $29,000,000, and Chubb Life made advances to the Company in an amount not to exceed $20,000,000. The loans were made at short-term lending rates agreed upon by the Company.
On October 23, 1996, the Company entered into a Revolving Credit Agreement with SunTrust Bank. As all advances under affiliated loan agreements became due during October and November of 1996, the Company borrowed amounts under the new Revolving Credit Agreement with SunTrust Bank and paid Chubb Life and Colonial the outstanding principal and interest. At December 31, 1996, the Company had no loans outstanding to affiliates.
(b) Certain Business Relationships ------------------------------
See Item 10, Directors and Executive Officers of the Registrant.
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PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8K - -------------------------------------------------------------------------
(a) Documents filed as a part of this Report.
1. The following consolidated financial statements of Hampshire Funding, Inc. and Subsidiary are included in Item 8:
(i) Report of Independent Auditors
(ii) Consolidated Balance Sheets as of December 31, 1996 and
(iii) Consolidated Statements of Income and Retained Earnings for each of the three years in the period ended December 31, 1996.
(iv) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1996.
(v) Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All Schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and the notes thereto.
3. Exhibits
(i) Pursuant to Rule 12b-23 and General Instruction G, the following exhibits required to be filed with this Report pursuant to the Instructions for Item 14 above are incorporated by reference from the reference source cited in the table below.
Reg S-K Item 601
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No Reports on Form 8-K were filed by the Company during the quarter ended December 31, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE: March 18, 1997 HAMPSHIRE FUNDING, INC.
By: /s/ RONALD R. ANGARELLA ---------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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