UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
1 ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No: 0-16882
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
THE COMMERCE GROUP, INC. 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
THE COMMERCE GROUP, INC.
211 Main Street
Webster, MA 01570
TABLE OF CONTENTS
Page
Report of Independent
Auditors........................................................................ 1
Financial Statements:
Statement of Net Assets Available for Benefits as of December 31, 2000........ 2
Statement of Net Assets Available for Benefits as of December 31, 1999 ....... 3
Statement of Changes in Net Assets Available for Benefits for the
Year ended December 31, 2000 .............................................. 4
Statement of Changes in Net Assets Available for Benefits for the Year Ended
December 31, 1999........................................................... 5
Statement of Changes in Net Assets Available for Benefits for the Period from
September 1, 1998 (Date of Inception) through December 31, 1998............. 6
Notes to Financial Statements ............................................... 7
Supplemental Schedule as of December 31, 2000:
Line 27a - Schedule of Assets Held for Investment Purposes.................. 11
Consent of Independent
Auditors........................................................................ 12
Signatures ..................................................................... 13
REPORT OF INDEPENDENT AUDITORS
The Benefits Committee
The Commerce Group, Inc.
We have audited the accompanying statements of net assets available for
benefits of The Commerce Group, Inc. 401(k) Plan (the Plan) as of
December 31, 2000 and 1999, and the related statements of changes in net
assets available for benefits for the years then ended and for the
period from September 1, 1998 (date of inception) through December 31,
1998. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 net assets available for benefits
of the Plan at December 31, 2000 and 1999, and the changes in its net
assets available for benefits for the years then ended and for the
period from September 1, 1998 (date of inception) through December 31,
1998, in conformity with accounting principles generally accepted in the
United States.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental
schedule of assets held for investment purposes as of December 31, 2000
is presented for purposes of additional analysis and is not a required
part of the financial statements, but is supplementary information
required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security
Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to
auditing procedures applied in our audits of the financial statements
and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
June 19, 2001
1
The Commerce Group, Inc. 401 (k) Plan
Statement of Net Assets Available for Benefits
December 31, 2000
Common Common
Stock of Mutual Collective
Employer Funds Trust
Assets:
Investments, at fair value
Merrill Lynch Fund:
Self-Direct Brokerage (cost: $38,807).......... $ 38,807
Cash..............................................
Net assets available for benefits...... $ 0 $ 38,807 $ 0
Contribution
Receivable Cash Total
Assets:
Investments, at fair value
Merrill Lynch Fund:
Self-Direct Brokerage (cost: $38,807)...... $ 38,807
Cash.............................................. $ 91,785 $ 5,508,923 5,600,708
Net assets available for benefits...... $ 91,785 $ 5,508,923 $ 5,639,515
The accompanying notes are an integral part of these financial statements.
2
The Commerce Group, Inc. 401 (k) Plan
Statement of Net Assets Available for Benefits
December 31, 1999
Common Common
Stock of Mutual Collective
Employer Funds Trust
Assets:
Investments, at fair value
Merrill Lynch Funds:
Commerce Group, Inc. Common Stock Fund (cost: $238,920)........ $ 237,017
Retirement Preservation Trust (cost: $272,023)................. $ 272,023
Corporate Bond Fund (cost: $464,461)........................... $ 447,424
Capital Fund (cost: $120,790).................................. 113,846
Basic Value Fund (cost: $502,800)............................. 492,702
Global Allocation Fund (cost: $103,002)........................ 103,938
S & P 500 Index Fund (cost: $371,014).......................... 417,318
MFS Massachusetts Investors Growth Stock Fund (cost: $633,682)..... 771,229
GAM International Fund (cost: $400,493)............................ 471,736
Lord Abbett Developing Growth Fund (cost: $616,727)............... 820,321
Cash..................................................................
Accrued investment income.............................................
Net assets available for benefits.......................... $ 237,017 $3,638,514 $ 272,023
The accompanying notes are an integral part of these financial statements.
3A
The Commerce Group, Inc. 401 (k) Plan
Statement of Net Assets Available for Benefits
December 31, 1999
Cash and Accrued
Contribution Investment
Receivable Income Total
Assets:
Investments, at fair value
Merrill Lynch Funds:
Commerce Group, Inc. Common Stock Fund (cost: $238,920).... $ 1,560 $ 238,577
Retirement Preservation Trust (cost: $272,023)............. 2,111 274,134
Corporate Bond Fund (cost: $464,461)....................... 3,709 451,133
Capital Fund (cost: $120,790).............................. 859 114,705
Basic Value Fund (cost: $502,800)......................... 3,767 496,469
Global Allocation Fund (cost: $103,002).................... 841 104,779
S & P 500 Index Fund (cost: $371,014)...................... 2,812 420,130
MFS Massachusetts Investors Growth Stock Fund (cost: $633,682). 4,627 775,856
GAM International Fund (cost: $400,493)........................ 3,415 475,151
Lord Abbett Developing Growth Fund (cost: $616,727)........... 5,341 825,662
Cash.............................................................. $ 18,579 18,579
Accrued investment income......................................... 895 895
Net assets available for benefits...................... $ 29,042 $ 19,474 $4,196,070
The accompanying notes are an integral part of these financial statements.
3B
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2000
Merrill Lynch Funds
Commerce
Group, Inc. Retirement Corporate
Common Stock Preservation Bond Capital
Fund Trust Fund Fund
Additions to net assets
attributed to:
Dividends................................ $ 25,040 $ 18,861 $ 31,172 $ 17,394
Other additions.......................... - - - -
25,040 18,861 31,172 17,394
Participant contributions................ 107,017 173,111 273,276 55,622
Total additions......................... 132,057 191,972 304,448 73,016
Deductions to net assets
attributed to:
Benefits paid to participants.......... 39,460 22,919 39,113 15,742
Net realized investment (gains) losses.. 28,012 - (351) 18,404
Net (appreciation) depreciation
in fair value of investments:......... (1,903) - (17,037) (6,944)
Total deductions.................... 65,569 22,919 21,725 27,202
Net increase before transfers.......... 66,488 169,053 282,723 45,814
Transfers between funds at
participants' election, net ............ (327,634) (474,873) (737,251) (160,519)
Transfers from (to) other plans............. 22,569 31,686 3,395 -
Net increase (decrease)............... (238,577) (274,134) (451,133) (114,705)
Net assets available for benefits
at beginning of year.................... 238,577 274,134 451,133 114,705
Net assets available for
benefits at end of year.................. $ 0 $ 0 $ 0 $ 0
The accompanying notes are an integral part of these financial statements.
4A
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2000
Merrill Lynch Funds
Merrill
Global S & P 500 Lynch
Basic Value Allocation Index Self-Direct
Fund Trust Fund Brokerage
Additions to net assets attributed to:
Dividends.............................. $ 114,487 $ 21,006 $ 4,962 $ -
Other additions........................ - - - 694
114,487 21,006 4,962 694
Participant contributions.............. 276,237 59,745 244,484 -
Total additions....................... 390,724 80,751 249,446 694
Deductions to net assets
attributed to:
Benefits paid to participants......... 43,171 14,186 54,244 -
Net realized investment (gains)
losses............................. 132,419 13,544 27,794 -
Net (appreciation) depreciation
in fair value of investments:......... (10,098) 936 46,304 -
Total deductions.................... 165,492 28,666 128,342 -
Net increase before transfers......... 225,232 52,085 121,104 694
Transfers between funds at
participants' election, net ............ (742,454) (156,864) (570,299) 38,113
Transfers from (to) other plans............. 20,753 - 29,065 -
Net increase (decrease)............... (496,469) (104,779) (420,130) 38,807
Net assets available for benefits
at beginning of year.................... 496,469 104,779 420,130 -
Net assets available for
benefits at end of year................. $ 0 $ 0 $ 0 $ 38,807
The accompanying notes are an integral part of these financial statements.
4B
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2000
MFS
Massachusetts Lord Abbett Cash
Investors GAM Developing and
Growth Stock International Growth Contributions
Fund Trust Fund Receivable Total
Additions to net assets
attributed to:
Dividends............................... $ 91,533 $ 105,446 $ 31,293 $ - $ 461,194
Other additions......................... - - - 2,012 2,706
91,533 105,446 31,293 2,012 463,900
Participant contributions............... 377,031 245,487 385,926 91,785 2,289,721
Total additions........................ 468,564 350,933 417,219 93,797 2,753,621
Deductions to net assets
attributed to:
Benefits paid to participants........... 82,275 45,847 93,914 7,523 458,394
Net realized investment (gains) losses.. 93,540 184,013 110,758 - 608,133
Net (appreciation) depreciation
in fair value of investments:.......... 137,547 71,243 203,594 - 423,642
Total deductions..................... 313,362 301,103 408,266 7,523 1,490,169
Net increase before transfers......... 155,202 49,830 8,953 86,274 1,263,452
Transfers between funds at
participants' election, net............. (978,739) (530,870) (857,146) 5,498,536 -
Transfers from (to) other plans............. 47,681 5,889 22,531 (3,576) 179,993
Net increase (decrease)............... (775,856) (475,151) (825,662) 5,581,234 1,443,445
Net assets available for benefits
at beginning of year.................... 775,856 475,151 825,662 19,474 4,196,070
Net assets available for
benefits at end of year................. $ 0 $ 0 $ 0 $5,600,708 $5,639,515
The accompanying notes are an integral part of these financial statements.
4C
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 1999
Merrill Lynch Funds
Commerce
Group, Inc. Retirement Corporate
Common Stock Preservation Bond Capital
Fund Trust Fund Fund
Additions to net assets
attributed to:
Dividends.................................. $ 6,896 $ 8,716 $ 17,185 $ 11,676
Net realized investment gains (losses)..... (645) - (649) (422)
Net appreciation (depreciation) in fair
value of investments..................... (13,694) - (16,690) (8,491)
Other additions............................. - - - -
(7,443) 8,716 (154) 2,763
Participant contributions.................. 139,993 182,544 290,642 72,109
Total additions........................... 132,550 191,260 290,488 74,872
Deductions to net assets
attributed to:
Benefits paid to participants.............. 4,779 10,256 9,170 1,715
Net increase before transfers............ 127,771 181,004 281,318 73,157
Transfers between funds at
participants' election, net ............... 13,143 (8,847) 16,847 (7,655)
Transfers from other plans..................... 10,196 36,957 20,228 2,016
Net increase............................. 151,110 209,114 318,393 67,518
Net assets available for benefits
at beginning of year....................... 87,467 65,020 132,740 47,187
Net assets available for
benefits at end of year.................... $ 238,577 $ 274,134 $ 451,133 $ 114,705
The accompanying notes are an integral part of these financial statements.
5A
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 1999
Merrill Lynch Funds
MFS
Massachusetts
Global S & P 500 Investors
Basic Value Allocation Index Growth Stock
Fund Trust Fund Fund
Additions to net assets
attributed to:
Dividends................................. $ 36,467 $ 11,920 $ 8,298 $ 56,617
Net realized investment gains (losses).... 1,445 164 499 5,316
Net appreciation (depreciation) in fair
value of investments..................... (15,260) 1,484 39,635 122,361
Other additions............................ - - 3,013 -
22,652 13,568 51,445 184,294
Participant contributions................. 287,727 60,215 238,516 372,404
Total additions.......................... 310,379 73,783 289,961 556,698
Deductions to net assets
attributed to:
Benefits paid to participants............. 7,691 1,619 3,363 22,170
Net increase before transfers........... 302,688 72,164 286,598 534,528
Transfers between funds at
participants' election, net .............. 23,209 6,795 18,740 (9,382)
Transfers from other plans.................... 44,958 - 26,963 57,309
Net increase............................ 370,855 78,959 332,301 582,455
Net assets available for benefits
at beginning of year...................... 125,614 25,820 87,829 193,401
Net assets available for
benefits at end of year................... $ 496,469 $ 104,779 $ 420,130 $ 775,856
The accompanying notes are an integral part of these financial statements.
5B
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 1999
Lord Abbett Cash
GAM Developing and Accrued
International Growth Investment
Fund Fund Income Total
Additions to net assets
attributed to:
Dividends.................................... $ - $ 19,523 $ 691 $ 177,989
Net realized investment gains
(losses).................................. (2,580) 8,902 - 12,030
Net appreciation (depreciation) in fair
value of investments....................... 65,760 168,871 - 343,976
Other additions............................... - 7 - 3,020
63,180 197,303 691 537,015
Participant contributions.................... 280,771 403,697 - 2,328,618
Total additions............................. 343,951 601,000 691 2,865,633
Deductions to net assets
attributed to:
Benefits paid to participants................ 16,113 18,479 (14,712) 80,643
Net increase before transfers.............. 327,838 582,521 15,403 2,784,990
Transfers between funds at participants'
election, net ................................. (26,882) (25,968) - -
Transfers from other plans....................... 40,709 51,728 175 291,239
Net increase............................... 341,665 608,281 15,578 3,076,229
Net assets available for benefits
at beginning of year......................... 133,486 217,381 3,896 1,119,841
Net assets available for
benefits at end of year...................... $ 475,151 $ 825,662 $ 19,474 $ 4,196,070
The accompanying notes are an integral part of these financial statements.
5C
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the period from September 1, 1998 through December 31, 1998
Merrill Lynch Funds
Commerce
Group, Inc. Retirement Corporate
Common Stock Preservation Bond Capital
Fund Trust Fund Fund
Additions to net assets
attributed to:
Dividends.................................. $ 581 $ 677 $ 994 $ 736
Net realized investment gains
(losses)................................ 15 - (1) -
Net appreciation (depreciation) in fair
value of investments..................... 11,791 - (347) 1,547
12,387 677 646 2,283
Participant contributions.................. 44,360 155,275 81,847 27,295
Total additions........................... 56,747 155,952 82,493 29,578
Deductions to net assets
attributed to:
Benefits paid to participants.............. 94 45 131 -
Net increase before transfers............ 56,653 155,907 82,362 29,578
Transfers between funds at
participants' election, net ............... 5,440 (95,590) 27,600 -
Transfers from other plans..................... 25,374 4,703 22,778 17,609
Net increase............................. 87,467 65,020 132,740 47,187
Net assets available for benefits
at beginning of period..................... - - - -
Net assets available for
benefits at end of period.................. $ 87,467 $ 65,020 $ 132,740 $ 47,187
The accompanying notes are an integral part of these financial statements.
6A
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the period from September 1, 1998 through December 31, 1998
Merrill Lynch Funds
MFS
Massachusetts
Global S & P 500 Investors
Basic Value Allocation Index Growth Stock
Fund Fund Fund Fund
Additions to net assets
attributed to:
Dividends..................................... $ 1,587 $ 1,944 $ 3,060 $ 12,855
Net realized investment gains
(losses)................................... 24 (2) 24 43
Net appreciation (depreciation) in fair
value of investments........................ 5,162 (548) 6,669 15,186
6,773 1,394 9,753 28,084
Participant contributions..................... 85,145 23,677 63,288 98,847
Total additions.............................. 91,918 25,071 73,041 126,931
Deductions to net assets
attributed to:
Benefits paid to participants................. 238 - 269 168
Net increase before transfers............... 91,680 25,071 72,772 126,763
Transfers between funds at
participants' election, net .................. 15,128 (40) 288 15,721
Transfers from other plans........................ 18,806 789 14,769 50,917
Net increase................................ 125,614 25,820 87,829 193,401
Net assets available for benefits
at beginning of period........................ - - - -
Net assets available for
benefits at end of period..................... $ 125,614 $ 25,820 $ 87,829 $ 193,401
The accompanying notes are an integral part of these financial statements.
6B
The Commerce Group, Inc. 401 (k) Plan
Statement of Changes in Net Assets Available for Benefits
For the period from September 1, 1998 through December 31, 1998
Lord Abbett Cash
GAM Developing and Accrued
International Growth Investment
Fund Fund Income Total
Additions to net assets
attributed to:
Dividends.................................. $ - $ - $ 204 $ 22,638
Net realized investment gains (losses)..... 3 534 - 640
Net appreciation (depreciation) in fair
value of investments..................... 5,483 34,723 - 79,666
5,486 35,257 204 102,944
Participant contributions.................. 92,362 146,679 - 818,775
Total additions........................... 97,848 181,936 204 921,719
Deductions to net assets
attributed to:
Benefits paid to participants.............. 141 278 (292) 1,072
Net increase before transfers............ 97,707 181,658 496 920,647
Transfers between funds at
participants' election, net ............... 15,389 16,064 - -
Transfers from other plans..................... 20,390 19,659 3,400 199,194
Net increase............................. 133,486 217,381 3,896 1,119,841
Net assets available for benefits
at beginning of period..................... - - - -
Net assets available for
benefits at end of period.................. $ 133,486 $ 217,381 $ 3,896 $ 1,119,841
The accompanying notes are an integral part of these financial statements.
6C
THE COMMERCE GROUP, INC. 401 (k) PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE A - Description of Plan
1. General
The Commerce Group, Inc. 401(k) Plan (the "Plan") was adopted by
The Commerce Group, Inc. (the "Company") effective September 1,
1998. It is subject to many of the reporting and disclosure,
minimum coverage, vesting, fiduciary responsibility and civil
enforcement provisions of the Employee Retirement Income Security
Act of 1974. The Plan is a voluntary retirement savings account
which allows each participant to direct the investment of their
account balances among options which include money market funds,
self directed brokerage and mutual funds, one of which consists
entirely of the common stock of the Company. No matching
contributions are made by the Company to the Plan. The Plan may be
amended and/or terminated by the Company at any time; however, no
such event may adversely affect the rights of Participants in the
Plan with respect to contributions made prior to the date of such
event. All administrative expenses of the Plan are paid for by the
Company.
On August 18, 2000, the Board of Directors of the Company (the
"Board") voted to replace Merrill Lynch Trust Co., FSB ("Merrill
Lynch") with Fidelity Management Trust Company ("Fidelity") as the
Trustee of the Plan, effective January 1, 2001. The Board also
amended the Plan by adopting the Fidelity Corporate Plan for
Retirement also effective as of January 1, 2001. A blackout
period, for the Month of December, 2000, was imposed on the Plan in
order to facilitate the transfer. During this period, participants
could not make any investment changes or additional contributions
to Merrill Lynch. On November 16, 2000, the Plan Investment
Committee approved moving investments held in the form of the
Company's stock over to The Commerce Group, Inc. Employee Stock
Ownership Plan ("ESOP") in the form of a KSOP amendment. The KSOP,
which will be a component of the ESOP, will allow employees to
participate in the purchase of Company stock on a pre-tax basis for
their retirement. Fidelity prohibits company stock purchases in a
401(k) plan administered by them. Funds, other than Company stock,
were cashed out and transferred to Fidelity effective January 1,
2001. As a result of the fact that Company stock will no longer be
purchased as part of the Plan, the Company will no longer be
required to file Form 11-K in the future.
2. Investment Options Available to Plan Participants
The Company has a Trust Agreement with Merrill Lynch as Trustee,
providing for the management, investment and reinvestment of Plan
assets. The investment options available to Plan Participants are
as follows:
a. Commerce Group, Inc. Common Stock Fund - The fund invests
in the common stock of the Company.
b. Merrill Lynch Retirement Preservation Trust - Seeks to
provide preservation of capital, liquidity and current income
levels that are typically higher than those by money market funds.
c. Merrill Lynch Corporate Bond Fund - Seeks a high level of
current income and as a secondary objective, the fund seeks capital
appreciation.
d. Merrill Lynch Capital Fund - Seeks the highest total
investment return consistent with prudent risk through a fully
managed investment policy in equity, fixed income and convertible
securities.
e. Merrill Lynch Basic Value Fund - Seeks capital appreciation
and secondary income by investing primarily in large cap equities
that appear to be undervalued.
f. Merrill Lynch Global Allocation Fund - Seeks high total
investment return utilizing U.S. and foreign equity, fixed income
and money market securities. The investment approach provides the
fund with the opportunity to benefit from anticipated shifts in the
relative performance of different types of securities and different
markets.
g. Merrill Lynch Self-Direct Brokerage - Enables the
participant to purchase and hold investments that are not offered
as part of the Plan's core investment options.
h. Merrill Lynch S&P 500 Index Fund - The fund is a passive
mutual fund which invests in the largest 500 U.S. publicly traded
companies.
i. MFS Massachusetts Investors Growth Stock Fund - Seeks
long-term growth of capital through companies believed to have
better than average long-term growth potential. Emphasis is placed
on high-quality companies with characteristics such as: strong
management, history of consistent long-term earnings growth and
market leadership.
j. GAM International Fund - Seeks long-term capital
appreciation primarily in equity securities in foreign countries,
focusing on Canada, the United Kingdom, continental Europe and the
Pacific Basin.
k. Lord Abbett Developing Growth Fund - Seeks to provide long-
term capital appreciation by primarily investing in the stocks of
small companies with above average long-term rates, strong
management, undervalued assets and companies with exciting
prospects.
7
THE COMMERCE GROUP, INC. 401 (k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2000
NOTE A - Description of Plan (continued)
3. Eligibility
Employees of the Company become eligible to participate in the
Plan after (1) three months of service with the Company, and,
(2) upon attaining 18 years of age (changed from 21 years of age
effective December 31, 1998). Employees cease to be eligible to
participate in the Plan upon termination of their employment with
the Company.
4. Contributions
Eligible employees may contribute a portion of their pay to the
Plan on a tax deferred basis, so that the eligible employee is not
taxed on the money they contribute until funds are distributed.
Eligible employees are allowed to contribute from 1% up to a
maximum of 15% of their covered compensation, subject to annual
maximum limits imposed by the Internal Revenue Service. Eligible
employees may also contribute up to 100% of their pretax cash bonus
which they may be eligible to receive twice yearly or the same
percentage as is applied to their regular pay, also subject to a
maximum dollar amount on all contributions allowable by the
Internal Revenue Code. Eligible employees may also make rollover
contributions under the Plan from another qualified plan or an
individual retirement account. The Company does not match employee
contributions.
5. Vesting
Because participants' account balances consist solely of amounts
they have deferred from their own compensation (and the investment
income derived therefrom) participating employees are 100% vested
in their accounts at all times.
6. Distributions
Participating employees may withdraw funds from the Plan prior
to retirement only in the circumstance of a demonstrated financial
hardship. Upon termination of employment for reasons other than
death, disability or retirement, former participants may also
request an eligible rollover distribution.
7. Federal Income Tax Status
The Plan has received a determination letter from the Internal
Revenue Service dated August 4, 1999, stating that the Plan is
qualified under Section 401(a) of the Internal Revenue Code (the
"Code") and, therefore the related trust is exempt from taxation.
Once qualified, the Plan is required to operate in conformity with
the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the
applicable requirements of the Code and, therefore, believes that
the Plan is qualified and the related trust is tax exempt.
8. Risks and Uncertainties
The Plan provides for various investment options in registered
investment companies. Investment securities are exposed to various
risks, such as interest rate, market and credit risks. Due to the
level of risks associated with investment securities, it is
reasonably possible that changes in their values will occur in the
near term and that such changes could materially affect
Participants' account balances and the amounts reported in the
statement of net assets available for benefits.
8
THE COMMERCE GROUP, INC. 401 (k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2000
Note B - Significant Accounting Policies
1. Basis of Accounting
The financial statements of the Plan have been prepared on the
accrual basis. All expenses associated with the administration of
the Plan, with the exception of the charge for partial or total
distribution from a participating employee's account, are paid
directly by the Company and accordingly, are not reflected in the
accompanying statements.
2. Valuation of Investments
The Plan's investments, including the common stock of the
Company, are stated at fair value, based on quoted market prices.
The shares of the registered investment companies are valued at
quoted market prices, which represent the net asset values of the
shares held by the Plan at December 31, 1999 and 2000. The Merrill
Lynch Retirement Preservation Trust is valued at cost, which
approximates fair value.
3. Use of Estimates
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Note C - Investments
Accumulated unrealized gains at December 31, 2000 and 1999 and
the net increase (decrease) in unrealized gains in 1999 and 2000
were as follows:
Unrealized gains at December 31, 1998.............................. $ 79,666
Unrealized gains at December 31, 1999.............................. 423,642
Net increase in unrealized gains...................... $ 343,976
Unrealized gains at December 31, 1999.............................. $ 423,642
Unrealized gains at December 31, 2000.............................. 0
Net decrease in unrealized gains..................... $(423,642)
The proceeds from sales of investments, the cost of investments sold and net
realized investment gains (losses) determined on an average cost basis were as
follows:
Proceeds Cost of Net Realized
From Investments Investment
Sales Sold/Transferred Gains(Losses)
Year ended December 31, 2000
Common stock of employer... $ 433,301 $ 461,313 $ (28,012)
Common/Collective trust... 656,657 656,657 0
Mutual funds.............. 5,328,088 5,908,209 (580,121)
Total...... $ 6,418,046 $ 7,026,179 $ (608,133)
Year ended December 31, 1999
Common stock of employer... $ 6,662 $ 7,307 $ (645)
Common/Collective trust.... 43,811 43,811 0
Mutual funds............... 222,497 209,822 12,675
Total.......... $ 272,970 $ 260,940 $ 12,030
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THE COMMERCE GROUP, INC. 401 (k) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2000
Note D - American Commerce Insurance Company 401(k) Plan
On January 29, 1999, the Company, in a joint venture with AAA
Southern New England, acquired Automobile Club Insurance Company, whose
name was changed to American Commerce Insurance Company ("American
Commerce") upon completion of the acquisition.
American Commerce maintained a separate 401(k) plan for the benefit
of substantially all of its employees. Subsequent to December 31,
1999, the Directors of American Commerce voted to merge the American
Commerce 401(k) plan with the Company's Plan on January 1, 2001.
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THE COMMERCE GROUP, INC. 401(k) PLAN
EIN NO.: 04-2599931 Plan No: 002
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 2000
Units/ Current
Investments Shares Cost Value
Merrill Lynch Funds:
Self-Direct Brokerage............. 38,807 $38,807 $38,807
Total Investments..... 38,807 $38,807 $38,807
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-62367) pertaining to The Commerce
Group, Inc. 401(k) Plan of our report dated June 19, 2001, with
respect to the financial statements and schedule of The Commerce
Group, Inc. 401(k) Plan included in this Annual Report (Form 11-K)
for the year ended December 31, 2000.
Boston, Massachusetts
June 27, 2001
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities
Exchange Act of 1934, the trustees (or other persons who
administer the employee benefit plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly
authorized.
Dated: June 27, 2001
THE COMMERCE GROUP, INC. 401(k) PLAN
By
Randall V. Becker
By
(Randall V. Becker)
Treasurer and Chief Accounting Officer
13