FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
| ý | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______to ______
Commission file number 0-14697
| | A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
| | B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Harleysville Group Inc.
355 Maple Avenue
Harleysville, Pennsylvania 19438-2297
HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
FORM 11-K
DECEMBER 31, 2007
Financial Statements
| | | Page |
| | | |
| Report of Independent Registered Public Accounting Firm | | 3 |
Statements of Financial Condition as of December 31, 2007 and 2006 | | 4 |
Statements of Income and Changes in Plan Equity for each of the | | |
| years in the three-year period ended December 31, 2007 | | 5 |
Notes to Financial Statements | | 6 |
Exhibit Index - | | |
| Exhibit 23 - Consent of Independent Registered Public Accounting Firm | | |
Schedules - | | |
Schedules I, II and III have been omitted because they are not required, are not applicable, or the required information is shown in the financial statements or notes thereto. | | |
| | |
| | |
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Report of Independent Registered Public Accounting Firm
The Administrative Committee
Harleysville Group Inc.:
We have audited the accompanying statements of financial condition of Harleysville Group Inc. Employee Stock Purchase Plan (the Plan) as of December 31, 2007 and 2006, and the related statements of income and changes in plan equity for each of the years in the three-year period ended December 31, 2007. 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 the standards of the Public Company Accounting Oversight Board (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 financial position of the Harleysville Group Inc. Employee Stock Purchase Plan as of December 31, 2007 and 2006, and the income and changes in its plan equity for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Philadelphia, PA
June 27, 2008
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HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
| | | As of December 31, | |
| | | 2007 | | 2006 | |
| | | | | | | | |
| Assets | | | | | | | |
| Receivable from Harleysville Group Inc. | | $ | 578,461 | | $ | 599,180 | |
| | | | | | | | |
| | | | | | | | |
| Plan Equity | | | | | | | |
| Net assets available for plan participants | | $ | 578,461 | | $ | 599,180 | |
See accompanying notes to financial statements.
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HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
| | | Year Ended December 31, | |
| | | 2007 | | 2006 | | 2005 | |
| | | | | | | | | | | |
| Contributions – Employees | | $ | 1,269,193 | | $ | 1,368,881 | | $ | 1,486,308 | |
| | | | | | | | | | | |
Purchase and distribution of Harleysville Group Inc. stock to employees (45,824 shares 2007, 67,972 shares 2006 and 90,497 shares 2005) | | | (1,268,014 | ) | | (1,399,335 | ) | | (1,548,871) | ) |
| | | | | | | | | | | |
| Employee withdrawals and terminations | | | (21,898 | ) | | (58,037 | ) | | (52,292 | ) |
| | | | | | | | | | | |
| Net decrease | | | (20,719 | ) | | (88,491 | ) | | (114,855 | ) |
| | | | | | | | | | | |
| Plan equity beginning of year | | | 599,180 | | | 687,671 | | | 802,526 | |
| | | | | | | | | | | |
| Plan equity end of year | | $ | 578,461 | | $ | 599,180 | | $ | 687,671 | |
See accompanying notes to financial statements.
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HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
The following brief description of the Harleysville Group Inc. Employee Stock Purchase Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for complete information.
General
Harleysville Group Inc. (the “Company”) established the Plan effective February 22, 1995, for the benefit of the eligible employees of the Company, its parent and their respective subsidiaries. The purpose of the Plan is to provide each eligible employee with an opportunity to acquire or increase a proprietary interest in the Company. The Plan is intended to meet the requirements of Section 423 of the Internal Revenue Code of 1986, as amended. The Plan is administered by a Committee comprised of three employees appointed by the Company’s Board of Directors.
The total number of shares available under the Plan is 1,650,000 shares of common stock of the Company. At December 31, 2007, there are approximately 390,623 shares that remain available for issuance under the Plan.
Eligibility
All regular full-time employees and regular part-time employees who work at least twenty hours per week are eligible to participate in the Plan.
Participation
Eligible employees must authorize a payroll deduction equal to no more than 15 percent of their base pay during the enrollment periods to participate in the Plan. The enrollment periods are the 1st through 14th day of January and July of each plan year. Once enrolled, an eligible employee will continue to participate in the Plan for each succeeding subscription period until the employee terminates participation or ceases to be an eligible employee.
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HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
Subscription Period
Each subscription period will run from January 15 through July 14 or from July 15 through January 14. At the close of each pay period, the amount to be deducted from each participant’s base pay will be credited to such participant’s plan account. On the last day of each subscription period, the amount credited to each participant’s plan account will be divided by the subscription price for that subscription period and the participant’s account will be credited with the number of the whole and fractional shares which results.
If a participant desires to change the rate of contribution, the participant may do so effective for the next subscription period by filing a new subscription agreement during the applicable enrollment period. At any time, a participant may withdraw from the Plan and receive cash for the amount deducted from the participant’s base pay during that subscription period by giving written notice to the Company. Separation from employment for any reason including death, disability or retirement shall be treated as an automatic withdrawal from the Plan.
At December 31, 2007 and 2006, there were 450 and 486 participants in the Plan, respectively.
| 2. | Summary of Significant Accounting Policies |
Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting.
Administrative Expenses
The Company has borne all costs of administering the Plan.
Contributions
The contributions credited to the participant’s account are used to purchase shares of Harleysville Group Inc. common stock at a specified subscription price. The subscription price for each share of common stock shall be the lesser of 85 percent of the fair market value of such share on the last trading day before the first day of the subscription period or 85 percent of the fair market value of such share on the last day of the subscription period. The fair market value of a share shall be the closing price as reported on the NASDAQ National Market System on the applicable date.
The receivable from the Company represents the biweekly contributions from employees which are made in the form of regular payroll deductions and are recorded on the records of the Plan after each biweekly pay period.
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HARLEYSVILLE GROUP INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. Tax Status
The Plan is intended to qualify under the provisions of Section 423 of the Internal Revenue Code. No income will be realized for federal income tax purposes by a participant upon the purchase of shares under the Plan. Tax consequences to the Company and to plan participants upon disposition of shares under the Plan vary depending on the length of time shares are held and the fair market value at the time of disposition.
4. Plan Termination
The Plan was scheduled to expire at the earlier of July 31, 2008 or the date on which plan participants had subscribed for the total number of shares available for purchase under the Plan. On April 23, 2008, Company stockholders approved The Harleysville Group Inc. Amended and Restated Employee Stock Purchase Plan (the “amended Plan”). The amended Plan extends the termination date of the Plan to July 15, 2018. The total number of shares of Company common stock available for purchase under the amended Plan is 3,150,000 shares, which includes 1,500,000 additional shares approved by the Company’s stockholders on April 23, 2008.
5. Subsequent Events
On January 14, 2008, 22,145 shares of stock were purchased at a subscription price of $28.26 per share on behalf of the Plan participants for the subscription period ended January 14, 2008.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed by the undersigned hereunto duly authorized.
| | | HARLEYSVILLE GROUP INC. |
| | | | |
| | | EMPLOYEE STOCK PURCHASE PLAN |
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| Date: June 27, 2008 | | By: | /s/ ARTHUR E. CHANDLER |
| | | | Arthur E. Chandler Senior Vice President and Chief Financial Officer |
| | | | Harleysville Group Inc. |
| | | | |
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