10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2005

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [no fee required]

For the transition period from _________________ to ________________.

Commission file number 2-79192 .

HAMPSHIRE FUNDING, INC.

(Exact name of registrant as specified in its charter)

NEW HAMPSHIRE	02-0277842
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

ONE GRANITE PLACE, CONCORD, NEW HAMPSHIRE	03301
(Address of principal executive offices)	(Zip Code)

(603) 226-5000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock as of July 1, 2005: 50,000 shares, all of which are owned by Jefferson-Pilot Corporation.

DOCUMENTS INCORPORATED BY REFERENCE

The exhibit index appears on page 10

Hampshire Funding, Inc.

Index

Part I. Financial Information		Page
Item 1.	Financial Statements (Unaudited)
	Statements of Financial Condition - June 30, 2005 and December 31, 2004	3
	Statements of Income - Three-months ended June 30, 2005 and 2004	4
	Six-months ended June 30, 2005 and 2004
	Statements of Stockholder's Equity -Six-months ended June 30, 2005 and 2004	5
	Condensed Statements of Cash Flows - Six-months ended June 30, 2005 and 2004	6
	Notes to Unaudited Condensed Financial Statements - June 30, 2005	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosure of Market Risk	9
Item 4.	Controls and Procedures	9
Part II. Other Information
Item 1.	Legal Proceedings	10
Item 2.	Changes in Securities and Use of Proceeds	10
Item 3.	Defaults upon Senior Securities	10
Item 4.	Submission of Matters to a Vote of Security Holders	10
Item 5.	Other Information	10
Item 6.	Exhibits and Reports on Form 8-K	10-13
Signature		10

2

Hampshire Funding, Inc.

Statements of Financial Condition

	June 30,		December 31,
	2005		2004
	(Unaudited)		(Note A)
Assets
Cash and cash equivalents	$	100,471	$	194,347
Collateralized loans		9,411,437		12,303,907
Accrued interest receivable		323,713		416,296
Due from parent		317,374		21,983
Total assets	$	10,152,995	$	12,936,533
Liabilities and stockholder's equity
Liabilities:
Due to parent	$	-	$	3,201,853
Due to affiliates		70,556		26,704
Accrued expenses and other liabilities		524,537		320,807
Total liabilities		595,093		3,549,364
Stockholder's equity:
Common stock, par value $1 per share; authorized 100,000 shares; issued and outstanding 50,000 shares		50,000		50,000
Additional paid-in capital		789,811		789,811
Retained earnings		8,718,091		8,547,358
Total stockholder's equity		9,557,902		9,387,169
Total liabilities and stockholder's equity	$	10,152,995	$	12,936,533

See accompanying notes.

3

Hampshire Funding, Inc.

Statements of Income

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Operating revenues:
Loan sales and servicing	$	-	$	365,226	$	-	$	702,050
Interest		212,345		17,606		445,228		36,205
Program participant fees		8,467		15,168		18,511		30,819
		220,812		398,000		463,739		769,074
Operating expenses:
General and administrative		67,426		-		134,402		-
Interest on affiliate borrowings		4,337		5,642		17,544		11,386
		71,763		5,642		151,946		11,386
Income before income tax expense		149,049		392,358		311,793		757,688
Income tax expense		79,810		160,182		141,060		299,666
Net income	$	69,239	$	232,176	$	170,733	$	458,022

See accompanying notes.

4

Hampshire Funding, Inc.

Statements of Stockholder's Equity

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total
Balance at December 31, 2004	$	50,000	$	789,811	$	8,547,358	$	-		$	9,387,169
Net income						170,733					170,733
Balance at June 30, 2005	$	50,000	$	789,811	$	8,718,091	$	-		$	9,557,902
Balance at December 31, 2003	$	50,000	$	789,811	$	6,818,516	$	1,286,968		$	8,945,295
Net income						458,022					458,022
Change in unrealized loss on securities available for sale, net of tax of $186,985								(347,258	)		(347,258	)
Total comprehensive income						458,022		(347,258	)		110,764
Balance at June 30, 2004	$	50,000	$	789,811	$	7,276,538	$	939,710		$	9,056,059

See accompanying notes.

5

Hampshire Funding, Inc.

Condensed Statements of Cash Flows

(Unaudited)

	Six months ended June 30,
	2005			2004
Cash and cash equivalents provided by operating activities	$	532,881		$	620,518
Investing activity
Net decrease in collateralized loans		2,892,470			-
Financing activities
(Repayment of) proceeds from affiliated loan agreement		(3,519,227	)		261,596
Proceeds from sales of collateral loans receivable		-			766,118
Loans originated		-			(806,440	)
Net cash (used) provided by financing activities		(3,519,227	)		221,274
Net (decrease) increase in cash and cash equivalents		(93,876	)		841,792
Cash and cash equivalents at beginning of period		194,347			1,010,347
Cash and cash equivalents at end of period	$	100,471		$	1,852,139

See accompanying notes.

6

Hampshire Funding, Inc.

Notes to Unaudited Condensed Financial Statements

June 30, 2005

Note A. Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, refer to the financial statements and footnotes thereto included in the Hampshire Funding, Inc. annual report on Form 10-K for the year ended December 31, 2004.

Note B. Termination of Financing Agreement

On December 31, 1997, the Company entered into a Receivables Purchase Agreement (the "Agreement") with Preferred Receivables Funding Corporation ("PREFCO"), a wholly owned subsidiary of Bank One, formerly First National Bank of Chicago, (the "Bank"). This Agreement provided for an initial purchase of the Company's collateral loans receivable by PREFCO in the amount of $52,994,767 and for ongoing periodic purchases. Over the life of the Agreement, cash flows related to the repayment of loans were used to satisfy the collateral loan receivables due to PREFCO. The Agreement renewed annually and was scheduled to renew again on July 21, 2004.

The collateral loan receivable due to PREFCO had declined to $3,686,674 as of June 30, 2004. Accordingly, on July 9, 2004, the Company elected not to extend the Agreement. Upon termination of the Agreement, the Company borrowed funds through its existing inter-company loan agreement with its parent Jefferson-Pilot Corporation and paid PREFCO its outstanding collateral loan receivable balance of $3,686,537, net of a $137 interest payment, and re-established its collateral loan receivable. The Company's Collateralized loans receivable from Participants is $9,411,437at June 30, 2005.

7

PART I - FINANCIAL INFORMATION (continued)

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

Company Profile

Hampshire Funding, Inc. (the "Company") administers investment programs ("Programs") which coordinate the acquisition of mutual fund shares and insurance over a period of ten years. Under the Programs, Participants purchase life and health insurance from affiliated 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. The Program loan percentage rate charged to Participants was 9.00% on June 30, 2005. 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 Account Indebtedness, the Company will terminate the Programs and liquidate shares sufficient to repay the indebtedness.

Effective March 31, 1998, the Company discontinued the sale of Programs. The Company, however, will continue to make premium loans to current Participants and administer all Programs until their stated maturity or termination dates.

Critical Accounting Policies

The financial statements are prepared in accordance with U.S. generally accepted accounting principles. The majority of assets and liabilities are financial in nature and the valuations of these assets and liabilities are critical to the financial position and results of operations. However, certain accounting policies are particularly important to the portrayal of the Company's financial position and results of operations, and require the Company's management to apply significant judgment; as a result are subject to an inherent degree of uncertainty. Management evaluated estimates and judgments based upon historical experience, which formed the basis for making judgments about the carrying values of assets and liabilities that were not readily apparent from other sources.

Liquidity and Capital Resources

During 1998, the Company entered into an intercompany loan agreement with Jefferson-Pilot Corporation whereby it may borrow funds for working capital needs at short-term interest rates. At June 30, 2005 the Company had no loan outstanding under its loan agreement, as compared to borrowings of $3,201,853 at December 31, 2004.

The continuance of the Programs are dependent upon the Company's ability to borrow funds from Jefferson-Pilot Corporation or provide for the financing of insurance premiums for Participants. The Company expects that it will be able to continue to borrow funds through its existing inter-company loan agreement with Jefferson Pilot for the foreseeable future.

If the Company is unable to borrow funds in the future for the purpose of financing loans to Participants for the payment of insurance premiums, the Programs may be subject to termination.

The Company’s liabilities include amounts due to affiliates for premium loans and due to JP Life for expense reimbursements. Working capital in the second quarter of 2005 was provided by loan proceeds from Jefferson-Pilot Corporation, Program loan repayments, administrative fees, and interest earned on investments. Working capital through June 30, 2004 was provided by servicing fees from collateral loans sold, loans from Jefferson-Pilot Corporation, and interest earned on investments.

8

PART I - FINANCIAL INFORMATION (continued)

Results of Operations

The Company concluded the three- and six-months ended June 30, 2005 with net income of $69,239 and $170,733, as compared to net income of $232,176 and $458,022 for the same period in 2004.

Total revenues for the three- and six-months ended June 30, 2005 were $220,812 and $463,739, versus $398,000 and $769,074 for the same period in 2004. Prior to July 9, 2004, revenues were derived from income on its retained interest in the loans sold to PREFCO, a wholly owned subsidiary of Bank One (the”Bank”) and program fees. Subsequent to termination of the Agreement, the Company's revenues were derived from interest income on collateralized loans and program fees. Program fees include placement, administrative and termination fees as well as charges for special services. Program fees continue to decline as programs terminate and mature. As of June 30, 2005 and 2004 the number of Programs administered by the Company was 385 and 703, respectively.

The Company is responsible for servicing, managing and collecting all receivables and loan repayments and monitoring the underlying collateral. Prior to July 9, 2004, all activity was reported to the Bank for which it received an annual service fee (collected monthly in arrears) calculated as 2% of outstanding receivables. The Company received $60,920 in service fees for the period ended June 30, 2004. The service fee was eliminated upon termination of the Agreement when the Company purchased PREFCO’s remaining receivable balance of $3,686,537 and re-established its collateral loan receivable.

Interest expense on the Company’s intercompany loan agreement was $4,337 and $17,544 for the three- and six-months ended June 30, 2005, and $5,642 and $11,386 for the same periods in 2004. The average interest rates of 2.73% and 1.03% were paid on average outstanding loans due to affiliates of $1,372,706 and $2,191,554 for the six-months ended June 30, 2005 and 2004, respectively.

Employee services and office facilities are provided by JP Life under a Service Agreement with the Company. The Company pays JP Life a monthly fee (in arrears) for services 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 its duties. The Company paid JP Life servicing expenses of $183,528 and $190,320 during the six-months ended June 30, 2005 and 2004, respectively.

Prior to July 9, 2004, the Company capitalized the present value of expected service fee income in excess of related servicing expenses, which was reported as a Servicing Asset. Subsequent to July 9, 2004, the Company’s allocation of expenses are reported as Administrative expenses. Administrative expenses for the period ended June 30, 2005 were $134,402.

Item 3 - Quantitative and Qualitative Disclosure of Market Risk

Not required because Hampshire Funding, Inc. qualifies as a small business issuer under Regulation S-B.

Item 4 - Controls and Procedures

Within the 90 days prior to the filing date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-15. Based upon that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date we carried out this evaluation.

9

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings - None

Item 2 - Changes in Securities and Use of Proceeds - None

Item 3 - Defaults upon Senior Securities - Not Applicable

Item 4 - Submission of Matters to Vote of Security Holders - None

Item 5 - Other Information - None

Item 6 - Exhibits and Reports on Form 8-K.

(a)	Exhibits -	Exhibit 31.1:	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13A-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		Exhibit 31.2:	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13A-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		Exhibit 32:	Written Statement Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b)	Reports on Form 8-K
	No Reports on Form 8-K were filed by the Company during the quarter ended June 30, 2005.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HAMPSHIRE FUNDING, INC.

/s/ John A. Weston

John A. Weston

Treasurer

August 5, 2005

10

EX-31

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE

13A-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald R. Angarella, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hampshire Funding, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [wording omitted as with (b) below] for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Omitted pursuant to SEC Release 34-47986]

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Ronald R. Angarella

Ronald R. Angarella

Chairman and Chief Executive Officer

August 5, 2005

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE

13A-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Russell C. Simpson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hampshire Funding, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [wording omitted as with (b) below] for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [Omitted pursuant to SEC Release 34-47986]

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Russell C. Simpson

Russell C. Simpson

Chief Financial Officer

August 5, 2005

EX-32

EXHIBIT 32

WRITTEN STATEMENT PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hampshire Funding, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Ronald R. Angarella, Chairman and Chief Executive Officer of the Company, and Russell C. Simpson, Chief Financial Officer of the Company, each hereby certify that, to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ronald R. Angarella

Ronald R. Angarella

Chairman and Chief Executive Officer

August 5, 2005

/s/ Russell C. Simpson

Russell C. Simpson

Chief Financial Officer

August 5, 2005