<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                                    FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934


                   For the fiscal year ended December 31, 2000

                                       OR

[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  For the transition period from ____________ to ____________


                  Commission file number  0 - 6234

                                ACMAT CORPORATION
                -------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Connecticut                                   06-0682460
--------------------------                           ---------------
(State of incorporation)                   (I.R.S. Employer Identification No.)

233 Main Street
New Britain, Connecticut                               06050-2350
-------------------------                              -----------
(Address of principal executive offices)                (Zip Code)


               Registrant's telephone number, including area code
                                 (860) 229-9000

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:
                                                Common Stock, without par value
                                               Class A Stock, without par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) or 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  [XX]     No  [_]


The aggregate market value as of March 15, 2001 of the Common Stock and Class A
Stock held by non-affiliates of the registrant was $15,980,458.

As of March 15, 2001 there were 557,589 shares of the registrant's Common Stock
and 1,952,254 shares of registrant's Class A Stock, each without par value,
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:  None
<PAGE>   2
<TABLE>
<S>                                                                                                        <C>
                                                    PART I
Item 1.  Business                                                                                            3
       General                                                                                               3
       Financial Information about Operating Segments                                                        3
                United Coastal Liability Insurance                                                           3
                ACSTAR Bonding                                                                               5
                Insurance and Bonding Performance Ratios                                                     5
                Underwriting                                                                                 6
                Reinsurance                                                                                  6
                Claims                                                                                       6
                Reserves for Losses and Loss Adjustment Expenses                                             6
                IRIS Ratios                                                                                  9
                A.M. Best Ratings                                                                            9
                Risk-Based Capital                                                                           9
         ACMAT Contracting                                                                                   9
                General                                                                                      9
                Backlog                                                                                      9
                Materials                                                                                   10
                Contract Acquisition                                                                        10
                Warranty                                                                                    10
                Asbestos Abatement Operations                                                               10
         Marketing                                                                                          10
         Competition                                                                                        11
         Regulation                                                                                         11
         Investments                                                                                        12
         Environmental Compliance                                                                           14
         Employees                                                                                          14

Item 2. Properties                                                                                          14

Item 3. Legal Proceedings                                                                                   14

Item 4. Submission of Matters to a Vote of Security Holders                                                 14

                                                    PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder matters                            15

Item 6. Selected Financial Data                                                                             15

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations               16
         Reserves for Losses and Loss Adjustment Expenses                                                   18
         Liquidity and Capital Resources                                                                    19
         Regulatory Environment                                                                             19

Item 7a. Quantatative and Qualitative Discussions about Market Risk                                         20

Item 8. Financial Statements and Supplementary Data                                                         21

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                48

                                                   PART III

Item 10. Directors and Executive Officers of the Registrant                                                 48

Item 11. Executive Compensation                                                                             51

Item 12. Security Ownership of Certain Beneficial Owners and Management                                     53

Item 13. Certain Relationships and Related Transactions                                                     54

                                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                                    54
</TABLE>
<PAGE>   3
                                     PART I
                                ITEM 1. BUSINESS

General

ACMAT Corporation ("ACMAT" or the "Company") provides specialized commercial
insurance and bonding coverage for contractors, architects, engineers and other
professionals in the construction and environmental fields and other specialty
insurance such as products liability. The Company derives its underwriting
expertise from its construction and remediation operations. Through United
Coastal Insurance Company ("United Coastal Insurance"), the Company provides a
broad line of general, professional, environmental and other liability insurance
primarily to environmental contractors and specialty trade contractors and
architects, engineers and other professionals. Through ACSTAR Insurance Company
("ACSTAR Insurance"), the Company provides surety bonds for general building,
specialty trade and environmental contractors and all forms of commercial
surety. Both United Coastal Insurance and ACSTAR Insurance are rated A-
(excellent) by The A.M. Best Co., Inc. ("A.M. Best").

The Company is also engaged in construction contracting which consists of
interior contracting services involving the design and furnishing of building
interiors and asbestos abatement services for commercial, industrial and
institutional buildings.

Financial Information about Operating Segments

Financial information relating to the three business segments is set forth in
Note 15 to the consolidated financial statements on page 39 of this document.

The Company has three reportable operating segments: United Coastal Liability
Insurance, ACSTAR Bonding and ACMAT Contracting. The Company's reportable
segments are primarily the three main legal entities of the Company which offer
different products and services. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies.

The United Coastal Liability Insurance operating segment offers specific lines
of liability insurance as an approved non-admitted excess and surplus lines
insurer in forty-six states, Puerto Rico, the Virgin Islands and the District of
Columbia. United Coastal offers claims made and occurrence policies for specific
specialty lines of liability insurance through certain excess and surplus lines
brokers who are licensed and regulated by the state insurance department(s) in
the state(s) in which they operate. United Coastal offers general, asbestos,
lead, pollution and professional liability insurance nationwide to specialty
trade contractors, environmental contractors, property owner, storage and
treatment facilities and professionals. United Coastal also offers products
liability insurance to manufacturers and distributors.

The Bonding operating segment provides, primarily through ACSTAR, surety bonds
written for prime, specialty trade, environmental, asbestos and lead abatement
contractors and miscellaneous obligations. ACSTAR also offers other
miscellaneous surety such as workers' compensation bonds, supply bonds,
subdivision bonds and license and permit bonds.

ACMAT Contracting provides construction contracting services to commercial and
governmental customers. ACMAT Contracting also provides underwriting services to
its insurance subsidiaries. In addition, ACMAT Contracting owns a commercial
office building in New Britain, Connecticut and leases office space to its
insurance subsidiaries as well as third parties.

                       UNITED COASTAL LIABILITY INSURANCE

The liability insurance lines of the Company, which consist primarily of
contractor policies and professional liability policies, are discussed more
fully below:

Contractors

-     General Liability - Policies are offered to general contractors and
      specialty trade contractors involved in plumbing, heating, electrical,
      framing, roofing, drilling, excavation, demolition, road work, and other
      contracting activities. Coverage is also offered for other specialized
      non-contractor general liability risks. Coverage is limited to third-party
      bodily injury and property damage arising out of covered operations.
      General liability insurance is offered on either a claims-made or
      occurrence basis.


                                       3
<PAGE>   4
-     Contractor Pollution Liability - Policies are offered to contractors
      involved in hazardous waste remediation or cleanup, installation or
      removal of storage tanks, or the transportation of hazardous waste.
      Coverage is provided for third party-bodily injury or property damage
      liability caused by release of, or exposure to, pollutants as a result of
      contractors' operations. Contractor pollution liability insurance is
      offered on a claims-made basis.

-     Asbestos and Lead Abatement Liability - Policies are offered to
      contractors involved in the removal or encapsulation of asbestos and/or
      lead containing materials from structures or their containment through
      appropriate encapsulation or repair. Coverage is provided for third-party
      bodily injury and property damage liability as a result of a release of
      asbestos or lead which arises out of the contractors' operations. Asbestos
      and lead abatement liability insurance is provided on either a claims-made
      or occurrence basis.

Professionals

-     Architects and Engineers Professional Liability - Policies are offered to
      architects and engineers and consultants in the fields of architecture;
      civil, electrical, mechanical, structural and process engineering;
      construction/property management; design/build services; laboratory
      testing and surveying. Project professional liability policies are also
      offered for architect and engineer design teams and owner controlled
      wrap-ups. All policies are written on a claims-made basis.

-     Environmental Asbestos and/or Lead Consultants Professional Liability -
      Policies are offered to consultants involved in providing services such as
      environmental assessments, design/build services, asbestos or lead
      consulting, remedial investigations and feasibility studies, and storage
      tank consulting. Coverage is provided for liability arising out of the
      acts, errors or omissions of a consultant in the performance of
      professional services. All professional liability coverages are written on
      a claims-made basis.

Owners and Lenders

-     Hazardous Waste Storage and Treatment Pollution Liability - Policies are
      offered on a claims-made basis in response to the insurance requirements
      of the Environmental Protection Agency in connection with facilities
      subject to the Resource Conservation and Recovery Act of 1976 ("RCRA").

-     Site Specific Pollution Liability - These policies cover pollution claims
      arising or emanating from a specific site and are provided on a
      claims-made basis. Comprehensive site evaluations are required prior to
      providing coverage for any site.

-     Lenders Pollution Liability - Policies are offered to financial
      institutions for pollution occurring at property owned or controlled by
      the institution as a result of foreclosure or otherwise. Lender pollution
      liability coverage is offered on a claims-made basis.

Products Liability

-     Products Liability - Policies are offered on a claims-made or occurrence
      basis to manufacturers for a variety of products including chemicals,
      fertilizers, pesticides, pollution control devices, storage tanks and
      other.


                                       4
<PAGE>   5
The Company customizes many of its insurance policies to suit the individual
needs of its insureds. Combined policies insuring multiple exposures under one
policy form and one combined policy limit are available.

                                 ACSTAR Bonding

Surety bonds are written for general, specialty trade, environmental, asbestos
and lead abatement contractors. The Company also offers a wide variety of
miscellaneous bonds. Many bonds are supported by various levels of collateral
based upon the financial condition of the customer.

The Company often requires cash or irrevocable letters of credit to
collateralize a portion of most bonds issued. In addition, the Company will only
accept irrevocable letters of credit from financial institutions which have a
rating of C "sound credit risk" or higher as determined by Thomson BankWatch,
Inc. However, no assurance can be made that such financial institutions will
maintain their financial strength and, thus, that funds guaranteed under letters
of credit will be available, if needed, to offset any potential claims.

The Company provides the following types of bonds:

-     Payment and performance bonds - Bonds are provided for general building
      and specialty trade contractors, environmental remediation and asbestos
      abatement contractors and consultants, lead abatement contractors and
      solid waste disposal contractors. A payment and performance bond
      guarantees satisfactory performance and completion of the contractor's
      work and payment of the contractor's debts and obligations relating to the
      performance of the contract covered by the bond.

-     Closure and post-closure bonds - Bonds are provided for owners of solid
      and hazardous waste landfills as required to meet certain requirements
      under RCRA and remediation bonds in connection with the Comprehensive
      Environmental Response, Compensation and Liability Act of 1980 ("CERCLA").
      Closure bonds usually guarantee that a property owner will restore
      property to a specified level or condition. Post-closure bonds guarantee
      cultivation and maintenance of a closed site.

-     Supply and other specialty bonds - Bonds are provided for contractors,
      manufacturers and other owners in their normal course of operations,
      usually to guaranty the supply of equipment and material.

-     Miscellaneous surety, license, permit, self insurer, supersedeas and other
      bonds - Miscellaneous bonds are provided for applicants based on those
      requirements specified in the bond form and the applicant's financial
      strength.

The underwriting department and management are responsible for the development
of new insurance products and enhancements. Underwriting profitability is
enhanced by the creation of niche products focused on classes of business which
traditionally have provided underwriting profits.

Insurance and Bonding Performance Ratios

The following table sets forth the combined ratios of the Company, prepared in
accordance with generally accepted accounting principles and statutory
accounting principles prescribed or permitted by state insurance authorities.
The combined ratio is a traditional measure of underwriting profitability. When
the combined ratio is under 100%, underwriting results are generally considered
profitable. Conversely, when the combined ratio is over 100%, underwriting
results are considered unprofitable. The combined ratio does not reflect
investment income, federal income taxes or other non-operating income or
expense.


<TABLE>
<CAPTION>
                                                    Year
                                              Ended December 31,
                                   -------------------------------------
                                    2000           1999           1998
                                   ------         ------         ------
<S>                                <C>            <C>            <C>
GAAP Ratios:
    Loss ratio                       16.4%          17.6%          19.6%
    Expense ratio                    58.9           56.6           51.8
                                   ------         ------         ------
    GAAP combined ratio              75.3           74.2           71.4
                                   ======         ======         ======
Statutory Ratios:
   Loss ratio                        16.4           17.6           19.9
   Expense ratio                     63.6           63.3           59.2
                                   ------         ------         ------
   Statutory combined ratio          80.0%          80.9%          79.1%
                                   ======         ======         ======
</TABLE>

The increase in the combined GAAP ratio over the past three years results
primarily from the decline in written premiums partially offset by the release
of reserves on older underwriting years. See Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


                                       5
<PAGE>   6
Underwriting

The Company's underwriting practices rely heavily upon the knowledge base which
it has developed in over fifty years of construction contracting. Accordingly,
ACMAT, in addition to its construction contracting operations, provides risk
evaluation, loss adjustment, underwriting, claims handling and monitoring
services for its insurance subsidiaries, United Coastal Insurance and ACSTAR
Insurance. Contractors seeking liability insurance and bonding through the
Company are carefully reviewed with respect to their past practices, claims
history and records. Other factors considered are the contractors' and
professionals' financial conditions, training techniques, safety procedures,
histories of violations, record keeping, supervisory qualifications and
experience. Historically, the Company has issued policies and bonds to fewer
than twenty-five percent of its applicants.

Underwriting procedures for products liability insurance involve conducting an
in-depth review of the product that is being manufactured or distributed. Such
review involves examining an applicant's past record of recalls, claims history
and litigation.

The Company's underwriting and pricing strategy is designed to produce an
underwriting profit resulting in a Company-wide combined ratio well below 100%.
The Company has a conservative underwriting philosophy which, in the opinion of
management, is one of the primary reasons for the favorable loss ratios relative
to the property and casualty insurance industry over the last three years.

The Company continually monitors financial stability of contractors with surety
bonds outstanding. Work in progress reports and updated financial information
are reviewed by the Company to ensure that the contractor continues to meet the
underwriting guidelines.

Reinsurance

In the normal course of business, the Company assumes and cedes reinsurance with
other companies. Reinsurance ceded primarily represents excess of loss
reinsurance with companies with "A" ratings from the insurance rating
organization, A.M. Best Company, Inc. Reinsurance ceded also includes a
facultative reinsurance treaty which is applicable to excess policies written
over a primary policy issued by the Company for specific projects. Reinsurance
is ceded to limit losses from large exposures and to permit recovery of a
portion of direct losses; however, such a transfer does not relieve the
originating insurer of its liability. The Company participates in assumed quota
share reinsurance arrangements covering marine and property catastrophe risks
with one of its excess of loss reinsurers.

Effective May 1, 2000, the Company cedes significantly more of its bond exposure
than under its previous reinsurance treaties. Such reinsurance is applicable on
a per principal basis for losses in excess of $1,000,000 up to $13,000,000.
Prior to May 1, 2000, reinsurance was applicable to losses in excess of
$2,000,000 on a per bond basis with the Company retaining approximately
$5,000,000 of losses up to $13,000,000.

The availability and price of reinsurance fluctuates according to market
conditions. Depending on the availability and cost of reinsurance, the Company
may, from time to time, elect to cede greater or lesser portions of its
underwriting risk.

Claims

The Company directly handles substantially all claims of its insureds, except
that independent claims adjusters and/or counsel selected for their experience
and reputation in the locality of the claim are retained to conduct initial
fact-finding investigations. All decisions respecting payment of claims are made
by experienced employees of the Company.

Reserves for Losses and Loss Adjustment Expenses

Reserves for losses and loss adjustment expenses are estimates at any given
point in time of what the Company may have to ultimately pay on incurred losses,
including related settlement costs, based on facts and circumstances then known.
The Company also reviews its claims reporting patterns, past loss experience,
risk factors and current trends and considers their effect in the determination
of estimates of incurred but not reported losses. Ultimate losses and loss
adjustment expenses are affected by many factors which are difficult to predict,
such as claim severity and frequency, inflation levels and unexpected and
unfavorable judicial rulings. Reserves for surety claims also consider the
amount of collateral held as well as the financial strength of the contractor
and its indemnitors. Management believes that the reserves for losses and loss
adjustment expenses at December


                                       6
<PAGE>   7
31, 2000 are adequate to cover the unpaid portion of the ultimate net cost of
losses incurred through that date and related adjustment expenses incurred,
including losses incurred but not reported.

Reserves for losses and loss adjustment expenses are established with respect to
both reported and incurred but not reported claims for insured risks. The amount
of loss reserves for reported claims is primarily based upon a case-by-case
evaluation of the type of risk involved, knowledge of the circumstances
surrounding each claim and the policy provisions relating to the type of claim.
In determining appropriate adjustments to reserves historical data is reviewed
and consideration is given to the anticipated impact of various factors such as
legal developments and economic conditions, including the effects of inflation.
Reserves are monitored and recomputed periodically using new information on
reported claims.

The following table sets forth a reconciliation of beginning and ending reserves
for losses and loss adjustment expenses for the periods indicated on a GAAP
basis for the business of the Company.

<TABLE>
<CAPTION>
                                         2000                 1999                 1998
                                     ------------         ------------         ------------
<S>                                  <C>                  <C>                  <C>
Balance at January 1                 $ 38,544,491         $ 43,115,062         $ 48,900,713
 Less reinsurance recoverable           3,924,064            2,224,116            3,478,121
                                     ------------         ------------         ------------
 Net balance at January 1              34,620,427           40,890,946           45,422,592

Incurred related to:
         Current year                   2,441,000            3,091,120            4,508,667
         Prior years                     (934,092)          (1,418,233)          (2,321,939)
                                     ------------         ------------         ------------
Total incurred                          1,506,908            1,672,887            2,186,728
Payments related to:
         Current year                     791,546               81,569               18,260
         Prior years                    8,605,571            7,861,837            6,700,114
                                     ------------         ------------         ------------
Total Payments                          9,397,117            7,943,406            6,718,374

Net balance at December 31             26,730,218           34,620,427           40,890,946
 Plus reinsurance recoverable           2,580,388            3,924,064            2,224,116
                                     ------------         ------------         ------------
 Balance at December 31              $ 29,310,606         $ 38,544,491         $ 43,115,062
                                     ============         ============         ============
</TABLE>

The decrease of incurred losses and loss adjustment expenses of prior years
represents a release of surety loss reserves on older years that are no longer
needed and a reallocation of reserves among accident years. Management believes
that the reserves for losses and loss adjustment expense are adequate to cover
the unpaid portion of the ultimate net cost of losses and loss adjustment
expenses, including losses incurred but not reported.

The Company has no exposure to any asbestos or environmental claims associated
with general liability policies issued with the pre-1986 pollution exclusion.
Policies written with the exclusion are typically associated with mass tort
environmental and asbestos claims. The Company has never issued a policy with
the pre-1986 pollution exclusion. The Company's exposure to asbestos and
environmental liability claims is primarily limited to asbestos and
environmental liability insurance for contractors and consultants involved in
the remediation, removal, storage, treatment and/or disposal of environmental
and asbestos hazards.

As of December 31, 2000, 1999 and 1998 reserves for the combined losses and loss
adjustment expenses of the Company's insurance operations as determined in
accordance with accounting principles and practices prescribed or permitted by
insurance regulatory authorities ("Statutory basis reserves") were $29,375,218,
$40,715,475 and $49,758,263, respectively. As of December 31, 2000, 1999 and
1998 reserves determined in accordance with generally accepted accounting
principles ("GAAP basis reserves") were $29,310,606, $38,544,491 and
$43,115,062, respectively. The difference between the Statutory basis reserves
and the GAAP basis reserves result from the minimum statutory, or "Schedule P",
loss reserves required to be maintained by the Company's insurance subsidiaries,
partially offset by the netting of reinsurance recoverable against losses and
loss adjustment expense reserves for statutory purposes.

The following losses and loss adjustment expense reserve runoff table is for the
combined insurance operations of the Company's insurance subsidiaries. The data
for 1992 and prior periods are presented on a net basis in the reserve run-off
table. Restatement of prior periods is not practicable.


                                       7
<PAGE>   8
Each column shows the reserve held at the indicated calendar year-end and
cumulative data on payments and reestimated liabilities for that accident year
and all prior accident years making up that calendar year-end reserve.
Therefore, the redundancy (deficiency) is also a cumulative number for that year
and all prior years. It would not be appropriate to use this cumulative history
to project future performance.

<TABLE>
<CAPTION>
                               1990     1991     1992     1993     1994     1995     1996     1997     1998     1999     2000
                              ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ------
                                              (thousands)
<S>                           <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Liability for unpaid
 losses and loss
 adjustment expenses          21,378   26,234   29,240   30,437   36,726   41,363   44,119   45,423   40,891   34,620   26,730

Liability reestimated
 as of:

 One year later               21,378   26,234   29,240   30,437   35,825   40,193   43,282   43,106   37,816   33,503
 Two years later              21,378   26,234   29,240   28,337   34,659   37,872   40,865   35,698   36,741
 Three years later            21,378   26,234   26,000   27,170   29,913   35,354   33,359   33,735
 Four years later             21,378   22,094   24,833   23,550   27,193   28,149   30,999
 Five years later             16,642   20,927   22,284   20,880   19,486   25,057
 Six years later              15,475   18,841   19,914   13,673   16,254
 Seven years later            13,394   16,932   13,148   11,915
 Eight years later            12,845   11,761   11,163
 Nine years later             10,138   10,412
 Ten years later               9,588

Cumulative Redundancy
  (deficiency):               11,790   15,822   18,077   18,522   20,472   16,306   13,122   11,688    4,152    1,125

Paid (cumulative)
  as of:

 One year later                1,357    3,216    6,142    1,560    2,361    3,067    2,942    6,703    7,903    8,610
 Two years later               4,067    8,699    7,574    3,655    4,582    5,256    8,951   13,928   14,843
 Three years later             8,954    9,576    8,603    5,022    6,412    8,922   16,047   16,655
 Four years later             10,233   10,488    9,554    6,189    7,969   15,601   18,597
 Five years later             10,554   10,816    9,818    6,869   12,425   17,564
 Six years later              10,858   10,856   10,034    9,723   13,094
 Seven years later            10,874   10,949   10,761   10,296
 Eight years later            10,874   11,445   10,787
 Nine years later             10,884   11,449
 Ten years later              10,888

Gross liability -
  end of year                                            34,730   40,955   45,235   47,960   48,901   43,115   38,544   29,311
Reinsurance recoverable                                   4,293    4,229    3,872    3,841    3,478    2,224    3,924    2,581
                                                         ------   ------   ------   ------   ------   ------   ------   ------
Net liability - end of year                              30,437   36,726   41,363   44,119   45,423   40,891   34,620   26,730
</TABLE>

In 1995, the Company changed its method of reporting estimated liabilities for
claims-made policies which is reflected in the reserve run-off table. For
calendar years 1994 and prior, reserves associated with claims-made policies
were reported based on accident year basis consistent with the Company's
treatment in Schedule P to the Company's Statutory Annual Statement. At the
request of the Arizona Insurance Department, ("Department") the Company was
required to change its method of reporting in Schedule P to the Annual
Statement, reserve and payment data associated with claims-made policies to a
report year basis versus an accident year basis in order to comply with the
National Association of Insurance Commissioners ("NAIC") guidelines. The
Company's prior treatment of claims-made loss data on an accident basis was
approved by the Department during years prior to 1995. For its 1995 statutory
filing, the Company restated loss data reported in Schedule P to comply with the
Department's request. As a result of the change to Schedule P for claims-made
policies, the Company has also changed the method for reporting claims-made loss
payment data in the reserve run-off table to conform to a report year basis for
claims-made policies. Occurrence policies were and continue to be reported on an
accident year basis. The 1995 reestimated liabilities for each calendar year
have been restated to reflect the new method of reporting.

Because of the change in reporting loss data for claims-made policies from an
accident year basis to a report year basis, prior accident year reserves have
been moved forward to fall within the report year resulting in no change to
total reserve amounts or estimates. Management believes that the aggregate
reserves for losses and loss adjustment expenses for all accident years are
adequate.


                                       8
<PAGE>   9
IRIS Ratios

The National Association of Insurance Commissioners ("NAIC") has developed the
Insurance Regulatory Information System ("IRIS"), intended to assist state
insurance departments in executing their statutory mandates to oversee the
financial condition of insurance companies operating in their respective states.
IRIS identifies eleven industry ratios and specifies "usual values" for each
ratio. When an insurance company's ratio falls outside the "usual value," it is
designated an "unusual value," which event alerts state insurance departments to
potential problems. For the year ended December 31, 2000, none of the Company's
insurance subsidiaries' IRIS ratios were designated an "unusual value".

A.M. Best Ratings

A.M. Best ratings are indications of the solvency of an insurer based on an
analysis of the financial condition and operations of a company relative to the
industry in general. Occasionally, the requirement for an A.M. Best's-rated
insurer is a condition imposed upon the contractor by the party engaging the
contractor. Certain insurance brokers also restrict the business they will place
with insurers which are not A.M. Best's-rated. The 2000 Best letter ratings
range from A++ (superior) to F (in liquidation). United Coastal Insurance and
ACSTAR Insurance each have an A.M. Best's rating of A- (excellent).

Risk-Based Capital

Risk-based capital requirements are used as early warning tools by the National
Association of Insurance Commissioners and the states to identify companies that
require further regulatory action. The ratio for each of the Company's insurance
subsidiaries as of December 31, 2000 was above the level which might require
regulatory action.

                                ACMAT CONTRACTING

General

The Company provides a broad range of general building construction and
coordinated interior contracting services. The Company began to offer asbestos
abatement services in the 1970's and the Company continues to be active in the
asbestos abatement field. The Company provides new and renovation general
construction and installs interiors for office buildings, retail establishments,
schools, colleges, churches, hospitals and other buildings. The Company's
general building construction and interior contracting is provided both in
connection with new buildings and in connection with the remodeling and
renovation of interiors of existing buildings usually under contracts with
building owners and building occupants. The Company provides a broad range of
coordinated interior contracting services, many of which are performed by
subcontractors.

Backlog

The following table sets forth the Company's backlog of unbilled contract
amounts, the total number of contracts and the number of contracts with unbilled
amounts in excess of $400,000 as of December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                          December 31, 2000      December 31, 1999
                                          -----------------      -----------------
<S>                                       <C>                    <C>
Total Number of Contracts.                            20                     13
Total unbilled contract amounts.             $16,800,000            $10,100,000
Number of contracts with unbilled
amounts in excess of $400,000.                         3                      4
Aggregate unbilled amount of
contracts in excess of $400,000.             $15,900,000            $ 9,800,000
</TABLE>

The Company estimates that all of the December 31, 2000 backlog will be
completed prior to December 31, 2001.


                                       9
<PAGE>   10
Materials

The Company purchases the materials it installs in the course of its
construction contracting operations from a number of suppliers. Most of the
Company's materials are standard building components which historically have
been readily available from several suppliers. Some components are manufactured
to the Company's specifications. Most of the materials used by the Company are
shipped directly to the job site by the manufacturer.

Contract Acquisition

The Company's work projects are obtained by lump sum fixed price bids, unit
prices or are negotiated. Contract prices are usually determined by competition
with other contractors.

Warranty

Each project usually contains a one-year warranty or guaranty period, wherein
the Company and its subcontractors warrant that the work is free from defects
and was performed in accordance with the plans and specifications. Occasionally,
the Company is required to make minor corrections or adjustments, but has never
incurred any significant costs in connection with any such work.

Asbestos Abatement Operations

Both the Company's insurance and construction contracting operations have
involved risks associated with asbestos. The Company has in the past insured and
continues to insure risks associated with asbestos abatement or containment
operations on both a claims-made and occurrence basis. Since harm from exposure
to asbestos fibers may not be detectable in humans for as much as thirty years,
losses under insurance contracts written on an occurrence basis may not be known
for some time.

The Company's construction contracting operations involve the removal of
asbestos. As asbestos containing materials deteriorate or become disturbed by
incidental or intentional contact, asbestos fibers may enter the air and can
circulate into the breathing zone of building occupants. Exposure to asbestos is
thought by some to be a cause of cancer. In the mid 1970's, the Company became
engaged in the removal of asbestos in addition to its other contracting
operations. Since that time, it has been engaged in hundreds of contracts
involving the removal of asbestos. Claims by non-employees related to asbestos
have been made against the Company from time to time and are pending and there
can be no assurance that claims will not be made in the future.

The Company believes that it is fully covered by workers' compensation insurance
with respect to any claims by current and former employees relating to asbestos
operations. The Company currently obtains its workers' compensation insurance in
those states in which it performs work either from state insurance funds or one
of several insurance companies designated in accordance with the Assigned Risk
Pool. The amount of workers' compensation insurance maintained varies from state
to state but is generally greater than the maximum recovery limits established
by law and is not subject to any aggregate policy limits. In the past, the
Company has received a number of asbestos-related claims from employees, all of
which have been fully covered by its workers' compensation insurance. The
Company believes, although no assurances can be given, that workers'
compensation insurance sufficient to cover all future claims will remain
available in accordance with applicable state laws.

                                    MARKETING

Insurance and Bonding

As an excess and surplus lines carrier, United Coastal Insurance markets its
policies through excess and surplus lines brokers only in those states in which
it is permitted to write coverage. Currently, United Coastal Insurance is
permitted to write excess and surplus lines insurance as a non-admitted insurer
in forty-six states, the District of Columbia, Puerto Rico and the Virgin
Islands.

ACSTAR Insurance offers payment and performance bonds through carefully selected
insurance agents which specialize in the needs of contractors. All underwriting
approvals and issuance of policies and bonds are performed directly by the
Company's insurance subsidiaries.

The Company's insurance products are marketed in all 50 states.

ACMAT Contracting

The Company markets its construction contracting services directly to building
owners and building occupants. Project opportunities are brought to the
attention of the Company through various sources such as F. W. Dodge Company,
which publishes lists of projects available for bid, architects, owners, general
contractors, or engineers who are familiar with the Company. The Company also
depends upon repeat business and responses to the Company's advertising program
which is intended to emphasize ACMAT's packaged interior renovation capability.
ACMAT's sales force


                                       10
<PAGE>   11
consists of its senior management and project managers, all of whom function as
construction consultants and work closely with owners, tenants and architects.

                                   COMPETITION

Insurance and Bonding

The property and casualty insurance industry is highly competitive. The Company
competes with large national and smaller regional insurers in each state in
which it operates, as well as monoline specialty insurers. The Company's
principal competitors include certain insurance subsidiaries of American
International Group, Inc. ("AIG"), Reliance Insurance Group, Zurich Insurance
Group, Design Professionals Insurance Company, CNA Insurance Companies and
Lloyd's of London. Many of its competitors are larger and have greater financial
resources than the Company. Among other things, competition may take the form of
lower prices, broader coverage, greater product flexibility, higher quality
services or the insurer's rating by independent rating agencies. The Company
competes with admitted insurers, surplus line insurers, new forms of insurance
organizations such as risk retention groups, and alternative self-insurance
mechanisms.

Competition in the field of surety bonding is intense and many of the Company's
competitors are larger and have greater surplus than the Company, thereby
allowing them to provide bonds with higher limits than those which the Company
is able to provide. The Company's principal competitors include the St. Paul
Companies, Inc., Reliance Insurance Group, AIG, CNA and Frontier Insurance
Company. The Company's insurance subsidiaries hold primary and reinsurance
certificates of authority as acceptable sureties on Federal bonds as do
approximately 250 to 300 other surety companies. The certificates give the
Company an advantage over companies which are not certified by the United States
Treasury Department with respect to surety bonding on Federal projects in that
such certification has become a standard with respect to both Federal and other
bonds. Approximately one-half of the surety bonds written by the Company's
subsidiaries are required to be provided by a Treasury listed company. With
respect to other bonds, the Company faces competition from as many as 1,000
additional non-certified surety companies.

ACMAT Contracting

Competition in the interior construction business serviced by ACMAT generally is
intense. Historically, a majority of the Company's construction business was
performed on projects on which the Company had been in competition with other
contractors. The Company focuses its efforts on privately negotiated contracts
obtained through advertising and its reputation. Quality of service and pricing
are the Company's principal methods of competition.

The economic climate of the Northeast has increased the competitive pressure on
all aspects of the Company's contracting operations. The Company has responded
with marketing efforts seeking to obtain business when the Company's reputation
and experience allow it to privately negotiate contracts at prices which are
sufficiently profitable.

                                   REGULATION

The business of ACMAT's insurance subsidiaries is subject to comprehensive and
detailed regulation and supervision throughout the United States. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative authority which includes, but is not limited to, the power to
regulate licenses, to transact business, trade practices, agent licensing,
policy forms, claim practices, underwriting practices, reserve requirements, the
form and content of required financial statements and the type and amounts of
investments permitted. The insurance companies are required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
they do business, and their operations and accounts are subject to examination
by such agencies at regular intervals.

As a nonadmitted excess and surplus lines insurer, United Coastal Insurance is
not subject to the comparatively more extensive state regulations to which
ACSTAR Insurance is subject. The regulations and restrictions to which ACSTAR
Insurance and United Coastal Insurance are subject include provisions intended
to assure the solvency of ACSTAR Insurance and United Coastal Insurance and are
primarily for the protection of policyholders and loss claimants rather than for
the benefit of investors.

State insurance regulations impose certain restrictions upon the types of
investments that the Company's insurance subsidiaries can acquire and the
percentage of their capital or assets that may be placed in any particular
investment or type of investment. Certain states also require insurance
companies to furnish evidence of financial security by means of a deposit of
marketable securities with the state insurance regulatory authority. On December
31, 2000, the Company's insurance subsidiaries had securities with an aggregate
book value of approximately $10 million on deposit with various state regulatory
authorities.


                                       11
<PAGE>   12
The insurance subsidiaries of ACMAT are restricted as to the amount of cash
dividends they may pay. United Coastal Insurance is restricted by the Arizona
Insurance Holding Company Systems Act as to the amount of dividends it may pay
without the prior approval of the Arizona Department. During 2000, United
Coastal Insurance paid $8,000,000 in dividends. At January 1, 2001,
approximately $2,350,000 is available for the payment of dividends by United
Coastal Insurance in 2001 without the prior approval of the Arizona Insurance
Department.

Under applicable insurance regulations in its domicile state of Illinois, ACSTAR
Insurance is also restricted as to the amount of dividends it may pay. ACSTAR
may pay or declare a dividend only up to the amount of any available surplus
funds derived from realized net profits on its business, as determined in
accordance with statutory accounting principles. During 2000, ACSTAR paid
$2,500,000 in dividends to ACSTAR Holdings. At January 1, 2001, approximately
$4,550,000 is available for the payment of dividends by ACSTAR Insurance in 2001
without the prior approval of the Illinois Insurance Department.

New regulations and legislation are being proposed to limit damage awards, to
control plaintiffs' counsel fees, to bring the industry under regulation by the
federal government and to control premiums, policy terminations and other policy
terms. It is not possible to predict whether these proposals will be adopted or
their likely effect, if any, on the Company.

                                   INVESTMENTS

The Company's investment strategy is to maintain a conservative investment
policy by generally acquiring high quality securities, primarily bonds, with
fixed effective maturities of approximately three years or less. The investment
portfolio is well diversified and is in compliance with regulatory requirements.
The Company's bond portfolio is composed primarily of investments rated AA or
better by Standard and Poor's. Management has also decided to avoid long-term
investing at what management believes to be low long-term interest rates.

The Company's investment portfolio is subject to several risks including
interest rate and reinvestment risk. Fixed maturity security values generally
fluctuate inversely with movements in interest rates. The Company's corporate
and municipal bond investments may contain call and sinking fund features which
may result in early redemptions and the Company's mortgage-backed securities
investments held by the Company are subject to prepayment risk. Declines in
interest rates could cause early redemptions or prepayments which would require
the Company to reinvest at lower rates.

Investment securities are classified as held to maturity, available for sale or
trading. The Company currently classifies all investment securities as available
for sale. Investment securities available for sale are carried at fair value and
unrealized gains and losses are included in other comprehensive income, net of
estimated income taxes.


                                       12
<PAGE>   13
The Company invests in tax-exempt securities as part of its strategy to maximize
after-tax income. Such strategy considers, among other factors, the impact of
the alternative minimum tax. The following table summarizes the fair value fixed
maturity investments portfolio at December 31, 2000 and 1999 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                               December 31,
                                                     -------------------------------------------------------------
                                                              2000                                  1999
                                                     ------------------------             ------------------------
                                                                       Percent                              Percent
                                                                          Of                                  Of
                                                      Amount            Total             Amount             Total
                                                     -------            -----             -------            -----
<S>                                                  <C>                 <C>              <C>                 <C>
Fixed maturities available for sale (1):
  U.S. government and government
     agencies and authorities                        $17,271             22.7%            $18,569             20.6%
  State and political subdivisions                    28,341             37.2              36,608             40.7
  Industrial and Miscellaneous                        19,825             26.0              27,007             30.0
  Mortgage-backed securities                           4,934              6.5               5,643              6.3
                                                     -------            -----             -------            -----
Total fixed maturities available for sale             70,371             92.4              87,827             97.6
Equity securities(2)                                   2,221              2.9               1,615              1.8
Mortgages (3)                                            290               .4                  --               --
Short-term investments (4)                             3,249              4.3                 518               .6
                                                     -------            -----             -------            -----
Total investments                                    $76,131            100.0%            $89,960            100.0%
                                                     =======            =====             =======            =====
</TABLE>

(1)      Fixed maturities available for sale are carried at fair value. Total
         cost of fixed maturities was approximately $70,488,000 at December 31,
         2000 and $89,291,000 at December 31, 1999.

(2)      Equity securities are carried at fair value. Total cost of equity
         securities was approximately $2,560,000 at December 31, 2000 and
         $2,065,000 at December 31, 1999.

(3)      Mortgage loans are carried at amortized cost which approximate fair
         value at December 31, 2000.

(4)      Short-term investments, consisting primarily of money market
         instruments maturing within one year are carried at cost which, along
         with accrued interest, approximates fair value.

The following table sets forth the fair value of fixed maturities in the fixed
maturity investment portfolio at December 31, 2000 and 1999 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                               December 31,
                                                     -------------------------------------------------------------
                                                              2000                                  1999
                                                     ------------------------             ------------------------
                                                                       Percent                              Percent
                                                                          Of                                  Of
                                                      Amount            Total             Amount             Total
                                                     -------            -----             -------            -----
<S>                                                  <C>                 <C>              <C>                 <C>
Due in (1):

One year or less                                     $23,926              34.0%             16,908              19.3%
After one year through five years                     39,014              55.4              64,139              73.0%
After five years through ten years                     3,132               4.5               3,719               4.2%
After ten years                                        4,299               6.1               3,061               3 5%
                                                     -------             -----             -------             -----
                                                     $70,371             100.0%            $87,827             100.0%
                                                     =======             =====             =======             =====
</TABLE>

      (1)   Based on effective maturity dates. Actual maturities may differ
            because borrowers may have the right to call or prepay obligations
            with or without call or prepayment penalties.

The Company's insurance subsidiaries are subject to state laws and regulations
that require diversification of its investment portfolio and limit the amount of
investments in certain investment categories. Failure to comply with these laws
and regulations would cause non-conforming investments to be treated as
non-admitted assets for purposes of measuring statutory surplus and, in some
instances, would require divestiture. As of December 31, 2000, the Company's
investments complied with such laws and regulations.


                                       13
<PAGE>   14
Investment results for the years ended December 31, 2000, 1999 and 1998 are
shown in the following table (dollars in thousands):

<TABLE>
<CAPTION>
                                               2000                 1999                 1998
                                             -------             --------             --------
<S>                                         <C>                 <C>                  <C>
            Invested assets (1)              $90,619             $111,559             $126,371
            Investment income (2)            $ 4,571             $  5,390             $  6,138

            Average yield                       5.04%                4.83%                4.86%
</TABLE>

(1)   Average of the aggregate invested amounts at the beginning and end of the
      period including cash and cash equivalents.

(2)   Investment income is net of investment expenses and does not include
      realized investment gains or losses or provision for income taxes.

The yields reflect the Company's investment strategy of acquiring high quality
tax-exempt securities with fixed effective maturities of approximately three
years or less. Invested assets are attributable to the net cash flow generated
by written premiums, cash collateral and the reinvestment of investment income
offset in part by cash used to repay debt and repurchase stock.

                            ENVIRONMENTAL COMPLIANCE

The Company does not expect that its compliance with federal, state or local
environmental laws or regulations will have any material effect upon its capital
expenditures, earnings or competitive position.

                                    EMPLOYEES

As of December 31, 2000, the Company employed approximately 30 persons, all in
the United States. None of its current employees are employed subject to
collective bargaining agreements. The Company believes that its relations with
all of its employees are excellent.

ITEM 2. PROPERTIES

The Company and its subsidiaries occupy a 7 story office building located at 233
Main Street, in New Britain, Connecticut. ACMAT leases approximately 67% of the
building to unaffiliated tenants. The office building is suitable and adequate
for ACMAT's current and future requirements.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to legal actions arising in the ordinary course of its
business. In management's opinion, the Company has adequate legal defenses
respecting those actions where the Company is a defendant, has appropriate
insurance reserves recorded, and does not believe that their settlement will
materially affect the Company's operations or financial position.

The Company has, together with many other defendants, been named as a defendant
in actions brought by injured or deceased individuals or their representatives
based on product liability claims relating to materials containing asbestos. No
specific claims for monetary damages are asserted in these actions. Although it
is early in the litigation process, the Company does not believe that its
exposure in connection with these cases is significant.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 2000.


                                       14
<PAGE>   15
                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

ACMAT's Class A Stock trades on the Nasdaq Stock Market under the symbol ACMTA.
The Common Stock trades on the over-the-counter market. The following table sets
forth the quarterly high and low closing prices of the Company's Common Stock
and Class A Stock as reported by Nasdaq.

<TABLE>
<CAPTION>
                                           2000                               1999

                                  HIGH              LOW               HIGH              LOW
<S>                             <C>               <C>             <C>                <C>
COMMON STOCK
  1st Quarter                      19                19              20-5/8           20-1/2
  2nd Quarter                      19                19              20-1/2             19
  3rd Quarter                      19                17             20-7/16             20
  4th Quarter                      26                19                19               19

CLASS A STOCK
  1st Quarter                    13-1/16           6-1/8             16-1/4             15
  2nd Quarter                     8-3/4            7-1/8             15-1/4           14-3/4
  3rd Quarter                     8-3/8            6-1/2             14-7/8            7-1/2
  4th Quarter                      10             6-13/16              9               6-3/4
</TABLE>

No dividends have been paid in the past five years and there is no intention of
paying dividends in the near future. As of March 15, 2001, there were 285 Common
Stock shareholders of record and 639 Class A Stock shareholders of record.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                       2000                1999                1998                1997                1996
                                  ------------        ------------        ------------        ------------        ------------
<S>                               <C>                 <C>                 <C>                 <C>                 <C>
Revenues                          $ 26,341,755        $ 25,500,249        $ 28,752,273        $ 33,552,135        $ 37,035,305
Total Assets                       112,216,369         125,855,611         146,126,465         176,208,762         184,359,566
Long-Term Debt                      27,696,587          30,792,720          37,200,000          48,212,727          35,807,419
Stockholders'  Equity               37,483,665          36,126,992          37,622,926          39,577,739          49,702,404

Net Earnings                         2,224,317           3,013,723           2,120,529           4,456,949           5,293,111
Basic Earnings Per Share                   .80                1.02                 .66                1.29                1.56
Diluted Earnings Per Share                 .78                 .99                 .65                1.12                1.22
</TABLE>

Note:  No cash dividends were paid during any of the periods above.


                                       15
<PAGE>   16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS:


Net earnings were $2,224,317 in 2000, $3,013,723 in 1999 and $2,120,529 in 1998.
The decrease in 2000 net earnings compared to the 1999 net earnings was due in
part to realized capital losses in 2000 compared with capital gains in 1999. The
increase in 1999 net earnings compared to the 1998 net earnings was due to the
improved gross margins in the contracting business, the elimination of the
limited partnership in 1998 and the reduction in interest expense related to the
reduction of long-term debt partially offset by the decrease in investment
income. Net earnings included approximately $1,000,000 of loss in 1998 related
to the Company's share of a limited partnership. The limited partnership
invested in small cap equities and incurred the loss in 1998 due to volatility
in the small cap market. The Company sold its investment in the limited
partnership on December 31, 1998.

Revenues were $26,341,755 in 2000, $25,500,249 in 1999 and $28,752,273 in 1998.
The increase in 2000 revenues compared to the 1999 revenues is due primarily to
an increase in contract revenues. Earned premiums were $9,215,904 in 2000,
$9,414,192 in 1999 and $10,962,663 in 1998. The decrease in earned premiums over
the past two years reflects the Company's strategy to avoid the
unfavorable pricing in the Company's casualty insurance operations. Contract
revenues were $11,790,207 in 2000, $9,223,457 in 1999 and $12,139,924 in 1998.
Contract revenue depends greatly on the successful securement of contracts bid.

Investment income was $4,570,927 in 2000, $5,389,732 in 1999 and $6,138,105 in
1998. The decrease in investment income was primarily related to a continued
decrease in invested assets as the Company continues to reduce long-term debt.
Net realized capital gains (losses) were ($123,125) in 2000, $252,190 in 1999
and $266,169 in 1998.

Other income (expense) was $887,842 in 2000, $1,220,678 in 1999 and ($754,588)
in 1998. Other income consists primarily of rental income. Other income in 1999
also included a one-time benefit of approximately $330,000. The fluctuations in
other income (expense) are attributable to a pre-tax loss of approximately
$1,400,000 in 1998 related to the Company's share of a limited partnership. The
Company sold its investment in the limited partnership on December 31, 1998.

Losses and loss adjustment expenses were $1,506,908 in 2000, $1,672,887 in 1999
and $2,186,728 in 1998. The decreases in losses and loss adjustment expenses are
attributable to the decline in earned premiums and the release of surety loss
reserves on older years that are no longer needed. Amortization of policy
acquisition costs were $2,375,038 in 2000, $2,223,918 in 1999 and $2,112,857 in
1998. The increase in amortization of policy acquisition costs is primarily
attributable to the increase in commissions paid to agents.

Costs of contract revenues were $11,006,382 in 2000, $8,261,408 in 1999 and
$11,635,879 in 1998. The gross profit margins on construction projects were 6.6%
in 2000, 10.4% in 1999 and 4.2% in 1998. Gross margins fluctuate each year based
upon the profitability of specific projects.

General and administrative expenses were $4,997,849 in 2000, $5,385,409 in 1999
and $5,355,183 in 1998. The decrease in general and administrative expenses in
2000 compared to 1999 is due primarily to the decrease in amortization expense.
The increase in general and administrative expenses in 1999 compared to 1998 is
due primarily to the increase in salary expense.

Interest expense was $2,982,824 in 2000, $3,738,740 in 1999 and $4,621,401 in
1998. The decrease in interest expense is due to the decrease in long-term debt.

Income tax expense was $1,248,437 in 2000, $1,204,164 in 1999 and $719,696 in
1998, representing effective tax rates of 35.9% 28.6% and 25.3%, respectively.
The fluctuation in the effective tax rate reflects a one-time charge related to
an IRS examination completed in 2000.


Results of Operations by Segment:

<TABLE>
<CAPTION>
ACSTAR BONDING:                   2000              1999              1998
                              ----------        ----------        ----------
<S>                           <C>               <C>               <C>
    Revenue                   $6,284,212        $6,227,462        $5,286,955
                              ----------        ----------        ----------

    Operating Earnings        $2,436,708        $2,968,882        $2,314,485
                              ----------        ----------        ----------
</TABLE>


                                       16
<PAGE>   17
Revenues for the ACSTAR Bonding segment were $6,284,212 in 2000, $6,227,462 in
1999 and $5,286,955 in 1998. The 2000 increase in revenue reflects a slight
increase in earned premium. The 1999 increase in revenue reflects a slight
increase in earned premiums and investment income compared to 1998. Included in
1998 revenues is a pre-tax loss of approximately $570,000 for net loss of the
limited partnership investment.

Investment income was $1,253,329 in 2000, $1,268,175 in 1999 and $1,169,977 in
1998. The slight decrease in 2000 investment income was primarily related to a
continued decrease in invested assets offset in part by an increase in the
effective yield on those invested assets. Net realized capital gains (losses)
were $5,622 in 2000, $51,616 in 1999 and $68,040 in 1998.

Operating earnings for the ACSTAR Bonding segment were $2,436,708 in 2000,
$2,968,882 in 1999 and $2,314,485 in 1998. The decrease in 2000 operating
earnings compared to 1999 operating earnings reflects the Company's new
reinsurance program and an increase in the amortization of policy acquisition
costs. The increase in 1999 operating earnings compared to 1998 operating
earnings is due primarily to an increase in earned premiums and investment
income offset in part by an increase in the amortization of policy acquisition
costs.

Losses and loss adjustment expenses were $251,876 in 2000, $238,520 in 1999 and
$230,912 in 1998. Amortization of policy acquisition costs were $2,001,561 in
2000, $1,543,783 in 1999 and $1,225,718 in 1998. The increase in amortization of
policy acquisition costs in 2000 compared to 1999 is primarily attributable to
the increase in direct written premiums and commissions paid to agents.

General and administrative expenses were $1,594,067 in 2000, $1,476,277 in 1999
and $1,515,840 in 1998. The increase in general and administrative expenses in
2000 compared to 1999 is due primarily to the implementation of a Funds Control
Agreement with ACMAT. Under this agreement, ACMAT collects funds from certain
obligees of ACSTAR and makes payments directly to the vendors and subcontractors
of selected principals for certain bond obligations. The decrease in general and
administrative expenses in 1999 compared to 1998 is due primarily to the
decrease in bad debt expense.


United Coastal

<TABLE>
<CAPTION>
LIABILITY INSURANCE:            2000              1999               1998
                             ----------        ----------        -----------
<S>                          <C>               <C>               <C>
   Revenue                   $7,080,714        $8,529,279        $10,315,294
                             ----------        ----------        -----------
   Operating Earnings        $3,549,472        $4,578,802        $ 5,176,870
                             ----------        ----------        -----------
</TABLE>

Revenues for the United Coastal Liability Insurance segment were $7,080,714 in
2000, $8,529,279 in 1999 and $10,315,294 in 1998. The 2000 decrease in revenue
reflects a 12% decrease in earned premiums and a 16% decrease in investment
income compared to 1999. The 1999 decrease in revenue reflects a 27% decrease in
earned premiums and a 20% decrease in investment income compared to 1998.
Included in 1998 revenues is a pre-tax loss of approximately $830,000 for net
loss of the limited partnership investment. The decrease in revenues over the
past two years reflects the Company's strategy to avoid the unfavorable
pricing in the Company's casualty insurance market.

Investment income was $3,001,161 in 2000, $3,557,332 in 1999 and $4,430,026 in
1998. The decrease in investment income was primarily related to a decrease in
invested assets as a result of dividends distributed to the parent company to
reduce corporate debt. Net realized capital gains (losses) were ($117,503) in
2000, $200,574 in 1999 and $198,129 in 1998.

Operating earnings for the United Coastal Liability Insurance segment were
$3,549,472 in 2000, $4,578,802 in 1999 and $5,176,870 in 1998. The decrease in
2000 operating earnings compared to 1999 operating earnings is due primarily to
a decrease in earned premiums and investment income. The decrease in 1999
operating earnings compared to 1998 is due to a decrease in earned premiums.

Losses and loss adjustment expenses were $1,255,032 in 2000, $1,434,367 in 1999
and $1,955,816 in 1998. The decrease in losses and loss adjustment expenses is
attributable to the decrease in earned premiums. Amortization of policy
acquisition costs were $1,303,916 in 2000, $1,528,179 in 1999 and $1,852,218 in
1998. The decrease in amortization of policy acquisition costs is primarily
attributable to the decrease in earned premiums.

General and administrative expenses were $972,294 in 2000, $987,931 in 1999 and
$1,330,390 in 1998. The decrease in general and administrative expenses is due
primarily to the overall decrease in business activities.


                                       17
<PAGE>   18
<TABLE>
<CAPTION>
ACMAT CONTRACTING:                2000               1999               1998
                              -----------        -----------        -----------
<S>                           <C>                <C>                <C>
    Revenue                   $15,898,910        $13,154,753        $15,801,541
                              -----------        -----------        -----------
    Operating Earnings        $ 1,111,731        $   907,228        $   501,712
                              -----------        -----------        -----------
</TABLE>

Revenues for the ACMAT Contracting segment were $15,898,910 in 2000, $13,154,753
in 1999 and $15,801,541 in 1998. The 2000 increase in revenue reflects a 28%
increase in contract revenues compared to 1999. The decrease in 1999 revenue
compared to the 1998 revenue is due primarily to a 24% decrease in contract
revenues in 1999. Contract revenue depends greatly on the successful
securement of contracts bid.

Operating earnings for the ACMAT Contracting segment were $1,111,731 in 2000,
$907,228 in 1999 and $501,712 in 1998. The increase in 2000 operating earnings
compared to 1999 operating earnings is due to implementation of the Funds
Administration Agreement with ACSTAR offset in part by lower gross margins on
2000 projects. The increase in 1999 operating earnings compared to 1998
operating earnings is due primarily to improved gross margins on the 1999
projects.

Cost of contract revenues were $11,006,382 in 2000, $8,261,408 in 1999 and
$11,635,879 in 1998. The gross profit margin on construction projects was 6.6%
in 2000, 10.4% in 1999 and 4.2% in 1998. Gross margin fluctuations each year
based upon the profitability of specific projects.

General and administrative expenses were $3,780,797 in 2000, $3,886,117 in 1999
and $3,488,950 in 1998. The decrease in general and administrative expenses in
2000 compared to 1999 is due primarily to the decrease in amortization of
intangibles. The increase in general and administrative expenses in 1999
compared to 1998 is due primarily to the increase in salary expense and the
amortization of intangibles.

RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES:

Reserves for losses and loss adjustment expenses are established with respect to
both reported and incurred but not reported claims for insured risks. The amount
of loss reserves for reported claims is primarily based upon a case-by-case
evaluation of the type of risk involved, knowledge of the circumstances
surrounding each claim and the policy provisions relating to the type of claim.
As part of the reserving process, historical data is reviewed and consideration
is given to the anticipated impact of various factors such as legal developments
and economic conditions, including the effects of inflation. Reserves are
monitored and evaluated periodically using current information on reported
claims.

Management believes that the reserves for losses and loss adjustment expenses at
December 31, 2000 are adequate to cover the unpaid portion of the ultimate net
cost of losses and loss adjustment expenses, including losses incurred but not
reported. Reserves for losses and loss adjustment expenses are estimates at any
given point in time of what the Company may have to pay ultimately on incurred
losses, including related settlement costs based on facts and circumstances then
known. The Company also reviews its claims reporting patterns, past loss
experience, risk factors and current trends and considers their effect in the
determination of estimates of incurred but not reported reserves. Ultimate
losses and loss adjustment expenses are affected by many factors which are
difficult to predict, such as claim severity and frequency, inflation levels and
unexpected and unfavorable judicial rulings. Reserves for surety claims also
consider the amount of collateral held as well as the financial strength of the
principal and its indemnitors.

The combined ratio is one means of measuring the underwriting experience of a
property and casualty insurer. The combined ratio, consisting of the ratio of
losses and loss adjustment expenses to premiums earned (the "loss ratio") plus
the ratio of underwriting expenses to premiums written (the "expense ratio")
reflects relative underwriting profit or loss. The Company's insurance
subsidiaries' loss ratios under generally accepted accounting principles
("GAAP") were 16.4%, 17.6% and 19.6% for the years ended December 31, 2000, 1999
and 1998, respectively. These loss ratios are below industry averages and are
believed to be the result of conservative underwriting. The decrease in the loss
ratios is due to the release of surety reserves. There can be no assurance that
such loss ratios can continue. The Company's insurance subsidiaries' expense
ratios under GAAP were 58.9%, 56.6% and 51.8% for the years ended December 31,
2000, 1999 and 1998, respectively. The increase in the expense ratios is due to
the decline in premiums. The Company's insurance subsidiaries' combined ratios
under GAAP were 75.3%, 74.2% and 71.4% for the years ended December 31, 2000,
1999 and 1998, respectively. The increase in the 2000 combined ratio results
primarily from the decline in premiums and an increase in commissions paid to
agents and brokers.


                                       18
<PAGE>   19
LIQUIDITY AND CAPITAL RESOURCES:

The Company internally generates sufficient funds for its current operations and
maintains a relatively high degree of liquidity in its investment portfolio. The
primary sources of funds to meet the demands of claim settlements and operating
expenses are premium collections, investment earnings and maturing investments.
The Company has no material commitments for capital expenditures and, in the
opinion of management, has adequate sources of liquidity to fund its operations
over the next 12 months.

ACMAT, exclusive of its subsidiaries, has incurred negative cash flows from
operating activities primarily because of interest expense related to notes
payable and long-term debt incurred by ACMAT to acquire and capitalize its
insurance subsidiaries and to repurchase Company stock. ACMAT has also incurred
negative working capital as a result of holding short-term debt related to its
operations.

ACMAT's principal sources of funds are dividends from its wholly owned
subsidiaries, intercompany and short-term borrowings, insurance underwriting
fees from its subsidiaries, construction contracting operations and rental
income. Management believes that these sources of funds are adequate to serve
its indebtedness. ACMAT has recently utilized short-term borrowings to
repurchase its stock. ACMAT has also relied on dividends from its insurance
subsidiaries to repay debt.

The Company used cash flow from other sources to support operations in the
amount of $8,190,436 in 2000, compared to cash flow realized from operations of
$7,065,427 in 1999 and $530,977 in 1998. The cash flow from operations is due
primarily to the return of cash collateral and the payment of claims.
Substantially all of the Company's cash flow is used to repay short-term and
long-term debt, repurchase stock and purchase investments. Purchases of
investments are made based upon excess cash available after the payment of
losses and loss adjustment expenses and other operating and non-operating
expenses. The Company's short term investment strategy coincides with the
relatively short maturity of its liabilities which are comprised primarily of
reserves for losses covered by claims-made insurance policies, reserves related
to surety bonds and collateral held for surety obligations.

Net cash provided by investing activities was $14,008,674 in 2000, $20,580,662
in 1999 and $21,326,746 in 1998.

The terms of the Company's note agreements contain limitations on payment of
cash dividends, re-acquisition of shares, borrowings and investments and require
maintenance of specified ratios and minimum net worth levels, including cross
default provisions. The payment of future cash dividends and the re-acquisition
of shares are restricted each to amounts of an available fund ("Available
Fund"). The Available Fund is a cumulative fund which is increased each year by
20% of the Consolidated Net Earnings (as defined). The Company is in compliance
with all of these covenants at December 31, 2000, except for the ratio of
Earnings Before Interest Expense, Taxes, Depreciation and Amortization to Fixed
Charges. The Company has received a waiver for this covenant.

The Company maintains a short-term unsecured bank credit line of $10 million to
fund interim cash requirements. There were no borrowings outstanding under this
line of credit as of December 31, 2000.

During 2000, the Company purchased, in the open market and privately negotiated
transactions, 27,239 shares of its Common Stock at an average price of $19.08.
The Company also purchased, in open market and privately negotiated
transactions, 253,833 shares of its Class A Stock at an average price of $7.29
per share.

The Company's principal source of cash for repayment of long-term debt is
dividends from its two insurance companies. During 2000, ACMAT received
$7,780,000 as dividends from its subsidiaries. Under applicable insurance
regulations, ACMAT's insurance subsidiaries are restricted as to the amount of
dividends they may pay to their respective holding companies, without the prior
approval of their domestic state insurance department. For 2001, the amount of
dividends ACMAT's insurance subsidiaries may pay, without prior approval of
their domestic state insurance departments, is limited to approximately
$6,900,000.

In 2001, the Company anticipates that internally generated funds and short-term
borrowings will be utilized for repayment of long-term debt. Principal
repayments on long-term debt is scheduled to be $3,143,108 in 2001.

REGULATORY ENVIRONMENT

Risk-based capital requirements are used as early warning tools by the National
Association of Insurance Commissioners and the states to identify companies that
require further regulatory action. The ratio for each of the Company's insurance
subsidiaries as of December 31, 2000 was above the level which might require
regulatory action.


                                       19
<PAGE>   20
Item 7a. Quantatative and Qualitative Discussion about Market Risk:

MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates, foreign currency exchange rates, and other
relevant market rate or price changes. Market risk is directly influenced by the
volatility and liquidity in the markets in which the related underlying assets
are traded. The following is a discussion of the Company's primary market risk
exposures and how those exposures are currently managed as of December 31, 2000.
The Company's market risk sensitive instruments are entered into for purposes
other than trading.

The carrying value of the Company's investment portfolio as of December 31, 2000
was $76,130,538, 92% of which is invested in fixed maturity securities. The
primary market risk to the investment portfolio is interest rate risk associated
with investments in fixed maturity securities. The Company's exposure to equity
price risk and foreign exchange risk is not significant. The Company has no
direct commodity risk.

For the Company's investment portfolio, there were no significant changes in the
Company's primary market risk exposures or in how those exposures are managed
compared to the year December 31, 1999. The Company does not anticipate
significant changes in the Company's primary market risk exposures or in how
those exposures are managed in future reporting periods based upon what is known
or expected to be in effect in future reporting periods.

The primary market risk for all of the Company's long-term debt is interest rate
risk at the time of refinancing. As the majority of the Company's debt is fixed
rate debt, the Company's exposure to interest rate risk on its long-term debt is
not significant. The Company continually monitors the interest rate environment
and evaluates refinancing opportunities as the maturity dates approach.

SENSITIVITY ANALYSIS

Sensitivity analysis is defined as the measurement of potential loss in future
earnings, fair values or cash flows of market sensitive instruments resulting
from one or more selected hypothetical changes in interest rates and other
market rates or prices over a selected time. In the Company's sensitivity
analysis model, a hypothetical change in market rates is selected that is
expected to reflect reasonably possible near-term changes in those rates. The
term "near term" means a period of time going forward up to one year from the
date of the consolidated financial statements.

In this sensitivity analysis model, the Company uses fair values to measure its
potential loss. The sensitivity analysis model includes the following financial
instruments: fixed maturities, interest-bearing non-redeemable preferred stocks,
short-term securities, cash, investment income accrued, and long-term debt. The
primary market risk to the Company's market sensitive instruments is interest
rate risk. The sensitivity analysis model uses a 100 basis point change in
interest rates to measure the hypothetical change in fair value of financial
instruments included in the model.

For invested assets, duration modeling is used to calculate changes in fair
values. Durations on invested assets are adjusted for call, put and interest
rate reset features. Duration on tax exempt securities is adjusted for the fact
that the yield on such securities is less sensitive to changes in interest rates
compared to Treasury securities. Invested asset portfolio durations are
calculated on a market value weighted basis, including accrued investment
income, using holdings as of December 31, 2000.

The sensitivity analysis model used by the Company produces a loss in fair value
of market sensitive instruments of $ .5 million based on a 100 basis point
increase in interest rates as of December 31, 2000, which is not considered
material. This loss value only reflects the impact of an interest rate increase
on the fair value of the Company's financial instruments, which constitute
approximately 68% of total assets. As a result, the loss value excludes a
significant portion of the Company's consolidated balance sheet which would
partially mitigate the impact of the loss in fair value associated with a 100
basis point increase in interest rates.

For example, certain non-financial instruments, primarily insurance accounts for
which the fixed maturity portfolio's primary purpose is to fund future claims
payments related thereto, are not reflected in the development of the above loss
value. These non-financial instruments include premium balances receivable,
reinsurance recoverables, claims and claim adjustment expense reserves and
unearned premium reserves.


                                       20
<PAGE>   21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements and Schedules

ACMAT Corporation and Subsidiaries:

The following Consolidated Financial Statements of the Company, related notes
and Independent Auditors' Report are included herein:

      Independent Auditors' Report

      Consolidated Statements of Earnings for the years ended December 31, 2000,
      1999 and 1998

      Consolidated Balance Sheets as of December 31, 2000 and 1999

      Consolidated Statements of Stockholders' Equity for the years ended
      December 31, 2000, 1999 and 1998

      Consolidated Statements of Cash Flows for the years ended December 31,
      2000, 1999 and 1998

      Notes to Consolidated Financial Statements - December 31, 2000, 1999 and
      1998

      Consolidated Schedules included in Part II of this Report - Years ended
      December 31, 2000, 1999 and 1998:

            I  - Condensed Financial Information of Registrant

            II - Valuation and Qualifying Accounts and Reserves

            V  - Supplemental Information Concerning Property-Casualty
                 Insurance Operations


                                       21
<PAGE>   22
INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
ACMAT Corporation:


We have audited the consolidated financial statements of ACMAT Corporation and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACMAT Corporation
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.


KPMG LLP


Hartford, Connecticut
February 23, 2001



                                       22
<PAGE>   23
                       ACMAT CORPORATION AND SUBSIDIARIES


Consolidated Statements of Earnings
Years Ended December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                     2000               1999               1998
                                                ------------         ----------        -----------
<S>                                             <C>                  <C>               <C>
Earned premiums                                 $  9,215,904          9,414,192         10,962,663
Contract revenues                                 11,790,207          9,223,457         12,139,924
Investment income, net                             4,570,927          5,389,732          6,138,105
Net realized capital gains (losses)                 (123,125)           252,190            266,169
Other income (expense)                               887,842          1,220,678           (754,588)
                                                ------------         ----------        -----------
                                                  26,341,755         25,500,249         28,752,273

Losses and loss adjustment expenses                1,506,908          1,672,887          2,186,728
Cost of contract revenues                         11,006,382          8,261,408         11,635,879
Amortization of policy acquisition costs           2,375,038          2,223,918          2,112,857
General and administrative expenses                4,997,849          5,385,409          5,355,183
Interest expense                                   2,982,824          3,738,740          4,621,401
                                                ------------         ----------        -----------
                                                  22,869,001         21,282,362         25,912,048
                                                ------------         ----------        -----------

Earnings before income taxes                       3,472,754          4,217,887          2,840,225

Income taxes                                       1,248,437          1,204,164            719,696
                                                ------------         ----------        -----------

Net earnings                                    $  2,224,317          3,013,723          2,120,529
                                                ============         ==========        ===========


Basic earnings per share                        $        .80               1.02                .66
                                                ------------         ----------        -----------

Diluted earnings per share                      $        .78                .99                .65
                                                ------------         ----------        -----------
</TABLE>


See Notes to Consolidated Financial Statements.


                                       23
<PAGE>   24
                       ACMAT CORPORATION AND SUBSIDIARIES


Consolidated Balance Sheets
December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                               2000                      1999
                                                                          -------------             -------------
<S>                                                                       <C>                       <C>
ASSETS
Investments:
 Fixed maturities - available for sale at fair value
  (Cost of $70,487,764 in 2000 and $89,290,810 in 1999)                   $  70,370,912                87,826,920
 Equity securities - available for sale at fair value
  (Cost of  $2,561,512 in 2000 and $2,065,262 in 1999 )                       2,220,936                 1,614,763
 Mortgages                                                                      289,625                        --
 Short-term investments, at cost which approximates fair value                3,249,065                   518,557
                                                                          -------------             -------------
  Total Investments                                                          76,130,538                89,960,240

Cash and cash equivalents                                                     7,446,941                 7,054,911
Accrued interest receivable                                                   1,033,411                 1,324,356
Receivables, net of allowance for doubtful accounts of
  $147,346 in 2000 and $195,118 in 1999                                       4,140,363                 2,823,381
Reinsurance recoverable                                                       2,580,388                 3,924,064
Income tax refund receivable                                                         --                   173,465
Prepaid expenses                                                                133,018                   106,049
Deferred income taxes                                                           833,865                 1,560,324
Property and equipment, net                                                  12,624,792                12,675,956
Deferred policy acquisition costs                                             1,438,747                 1,323,780
Other assets                                                                  3,612,239                 2,360,366
Intangibles, net                                                              2,242,067                 2,568,719
                                                                          -------------             -------------
                                                                          $ 112,216,369               125,855,611
                                                                          =============             =============

Liabilities & Stockholders' Equity
Accounts payable                                                          $   2,407,958                 1,923,081
Reserves for losses and loss adjustment expenses                             29,310,606                38,544,491
Unearned premiums                                                             5,442,777                 5,262,468
Collateral held                                                               8,673,378                11,954,554
Income taxes                                                                     22,582                        --
Other accrued liabilities                                                     1,178,816                 1,251,305
Long-term debt                                                               27,696,587                30,792,720
                                                                          -------------             -------------
 Total Liabilities                                                           74,732,704                89,728,619

Commitments and contingencies

Stockholders' Equity:
  Common Stock (No par value; 3,500,000 shares authorized;
     557,589 and 584,828 shares issued and outstanding)                         557,589                   584,828
  Class A Stock (No par value; 10,000,000 shares authorized;
     2,057,254 and 2,304,587 shares issued and outstanding)                   2,057,254                 2,304,587
  Retained earnings                                                          35,326,305                35,151,966
  Accumulated other comprehensive income (loss)                                (457,483)               (1,914,389)
                                                                          -------------             -------------
     Total Stockholders' Equity                                              37,483,665                36,126,992
                                                                          -------------             -------------

                                                                          $ 112,216,369             $ 125,855,611
                                                                          =============             =============
</TABLE>


See Notes to Consolidated Financial Statements.


                                       24
<PAGE>   25
                       ACMAT CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                                                                           other
                                                    Common      Class A      Additional                comprehensive      Total
                                                   Stock par     Stock         paid-in      Retained      income       stockholders'
                                                     value      par value     capital       earnings      (loss)         equity
                                                   ---------    ----------    --------    -----------    ----------    -----------
<S>                                                <C>          <C>          <C>          <C>          <C>             <C>
Balance as of December 31, 1997                    $ 596,857     2,712,174          --     36,033,153       235,555     39,577,739

Comprehensive income:
  Net unrealized appreciation of debt and
      equity securities, net of reclassification
      adjustment                                          --            --          --             --       259,937        259,937
  Net earnings                                            --            --          --      2,120,529            --      2,120,529
                                                                                                                       -----------
Total comprehensive income                                --            --          --             --            --      2,380,466

Acquisition and retirement of
    4,769 shares of Common Stock                   $  (4,769)           --          --        (93,697)           --        (98,466)
Acquisition and retirement of
    342,366 shares of Class A Stock                       --      (342,366)   (841,980)    (3,985,447)           --     (5,169,793)
Issuance of 91,000 shares of Class A Stock
    pursuant to stock options                             --        91,000     841,980             --            --        932,980
                                                   ---------    ----------    --------    -----------    ----------    -----------

Balance as of December 31, 1998                    $ 592,088     2,460,808          --     34,074,538       495,492     37,622,926

Comprehensive income:
    Net unrealized losses on debt and
      equity securities, net of reclassification
      adjustment                                          --            --          --             --    (2,409,881)    (2,409,881)
    Net earnings                                          --            --          --      3,013,723            --      3,013,723
                                                                                                                       -----------
Total comprehensive income                                --            --          --             --            --        603,842

    Acquisition and retirement of 7,260
      shares of Common Stock                       $  (7,260)           --          --       (144,658)           --       (151,918)
    Acquisition and retirement of 189,221
      shares of Class A Stock                             --      (189,221)   (388,500)    (1,791,637)           --     (2,369,358)
    Issuance of 15,000 shares of Class A
      Stock pursuant to investment agreement              --        15,000     206,250             --            --        221,250
    Issuance of 18, 000 shares of Class A
      Stock pursuant to stock options                     --        18,000     182,250             --            --        200,250
                                                   ---------    ----------    --------    -----------    ----------    -----------

Balance as of December 31, 1999                    $ 584,828     2,304,587          --     35,151,966    (1,914,389)    36,126,992

Comprehensive income:
    Net unrealized losses on debt and
      equity securities, net of reclassification
      adjustment                                          --            --          --             --     1,456,906      1,456,906
    Net earnings                                          --            --          --      2,224,317            --      2,224,317
                                                                                                                       -----------
Total comprehensive income                                --            --          --             --            --      3,681,223

Acquisition and retirement of 27,239 shares
    of Common Stock                                  (27,239)           --     (38,025)      (454,566)           --       (519,830)
Acquisition and retirement of 253,833
    shares of Class A Stock                               --      (253,833)         --     (1,595,412)           --     (1,849,245)
Issuance of 6,500 shares of Class A Stock
    pursuant to stock options                             --         6,500      38,025             --            --         44,525
                                                   ---------    ----------    --------    -----------    ----------    -----------
Balance as of December 31, 2000                    $ 557,589     2,057,254          --     35,326,305      (457,483)    37,483,665
                                                   =========    ==========    ========    ===========    ==========    ===========
</TABLE>


See Notes to Consolidated Financial Statements.


                                       25
<PAGE>   26
                       ACMAT CORPORATION AND SUBSIDIARIES


Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                      2000                 1999                1998
                                                                  ------------         ------------         -----------
<S>                                                               <C>                  <C>                  <C>
Cash Flows From Operating Activities:
    Net earnings                                                  $  2,224,317            3,013,723           2,120,529
    Adjustments to reconcile net earnings to net
         Cash provided by (used for) operating activities:
         Depreciation and amortization                               1,547,144            1,829,646           1,412,004
         Net realized capital (gains) losses                           123,125             (252,190)           (266,169)
         Limited partnership investment                                     --                   --           1,429,288
         Deferred income taxes                                         726,459              428,918              73,041
    Changes In:
         Accrued interest receivable                                   290,945               27,978             105,830
         Receivables, net                                           (1,316,982)             914,246           3,380,900
         Reinsurance recoverable                                     1,343,676           (1,699,948)          1,254,005
         Deferred policy acquisition costs                            (114,967)             226,309             528,316
         Prepaid expenses and other assets                          (1,293,362)             741,366             951,605
         Accounts payable and other liabilities                        412,388             (874,280)           (389,056)
         Collateral held                                            (3,281,176)          (5,389,822)         (2,931,326)
         Reserves for losses and loss adjustment expenses           (9,233,885)          (4,570,571)         (5,785,651)
         Income taxes                                                  201,573               72,165             594,431
        Unearned premiums                                              180,309           (1,532,967)         (3,008,724)
                                                                  ------------         ------------         -----------
             Net cash used for operating activities                 (8,190,436)          (7,065,427)           (530,977)
                                                                  ------------         ------------         -----------

Cash Flows From Investing Activities:
    Proceeds from investments sold or matured:
          Fixed maturities - sold                                   16,465,522           63,593,712          40,118,160
          Fixed maturities - matured                                13,431,000           11,692,000          38,383,281
          Equity securities                                            325,000               24,405           1,022,466
          Short-term investments                                    21,932,313          143,866,543          79,604,384
  Purchases Of:
          Fixed maturities                                         (11,821,523)         (66,790,040)        (75,373,107)
          Equity securities                                           (821,250)             (24,405)         (2,060,000)
          Mortgages                                                   (289,625)                  --                  --
          Short-term investments                                   (24,662,821)        (131,437,187)        (60,129,984)
  Capital expenditures                                                (549,942)            (344,366)           (238,454)
                                                                  ------------         ------------         -----------
            Net cash provided by investing activities               14,008,674           20,580,662          21,326,746
                                                                  ------------         ------------         -----------

Cash Flows From Financing Activities:
    Borrowings under line of credit                                         --            9,000,000           7,000,000
    Repayments under line of credit                                         --           (9,000,000)        (12,000,000)
    Repayments on long-term debt                                    (3,096,133)         (10,907,280)        (23,812,727)
    Issuance of long-term debt                                              --            4,500,000          12,800,000
    Issuance of Class A Stock                                           39,000              162,000             696,000
    Payments for acquisition and retirement of stock                (2,369,075)          (2,521,276)         (5,268,259)
                                                                  ------------         ------------         -----------
            Net cash used for financing activities                  (5,426,208)          (8,766,556)        (20,584,986)
                                                                  ------------         ------------         -----------

Net change in cash and cash equivalents                                392,030            4,748,679             210,783

Cash and cash equivalents, beginning of year                         7,054,911            2,306,232           2,095,449
                                                                  ------------         ------------         -----------

Cash and cash equivalents, end of year                            $  7,446,941            7,054,911           2,306,232
                                                                  ============         ============         ===========
</TABLE>


See Notes to Consolidated Financial Statements.


                                       26
<PAGE>   27
                       ACMAT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2000, 1999 AND 1998

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include ACMAT Corporation ("ACMAT" or the
"Company"), its subsidiaries, including AMINS, Inc., ACSTAR Holdings, Inc.
("ACSTAR Holdings") and ACSTAR Holdings' wholly-owned subsidiary, ACSTAR
Insurance Company ("ACSTAR"); and United Coastal Insurance Company ("United
Coastal Insurance").

These consolidated financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). All significant intercompany
accounts and transactions have been eliminated in consolidation.

(b) Business

The Company has three reportable operating segments: ACMAT Contracting, ACSTAR
Bonding and United Coastal Liability Insurance. The Company's reportable
segments are primarily the three main legal entities of the Company which offer
different products and services. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies.

ACMAT Contracting provides construction contracting services to commercial and
governmental customers. ACMAT Contracting also provides underwriting services to
its insurance subsidiaries. In addition, ACMAT Contracting owns a commercial
office building in New Britain Connecticut and leases office space to its
insurance subsidiaries as well as third parties.

The United Coastal Liability Insurance operating segment offers specific lines
of liability insurance as an approved non-admitted excess and surplus lines
insurer in forty-six states, Puerto Rico, the Virgin Islands and the District of
Columbia. United Coastal offers claims made and occurrence policies for specific
specialty lines of liability insurance through certain excess and surplus lines
brokers who are licensed and regulated by the state insurance department(s) in
the state(s) in which they operate. United Coastal offers general, asbestos,
lead, pollution and professional liability insurance nationwide to specialty
trade contractors, environmental contractors, property owner, storage and
treatment facilities and professionals. United Coastal also offers products
liability insurance to manufacturers and distributors.

The Bonding operating segment provides, primarily through ACSTAR, surety bonds
written for prime, specialty trade, environmental, asbestos and lead abatement
contractors and miscellaneous obligations. ACSTAR also offers other
miscellaneous surety such as workers' compensation bonds, supply bonds,
subdivision bonds and license and permit bonds.

During 2000, 1999 and 1998, customers who individually accounted for more than
10% of consolidated construction contracting revenue are as follows; in 2000 -
three customers provided 33%, 22% and 19%, respectively. In 1999 - two customers
provided 51% and 24%, respectively. In 1998 - three customers provided 52%, 19%
and 17%, respectively. No customers accounted for more than 10% of the
consolidated insurance revenues in any year.

(c) Investments

Investments are classified as "available for sale" and are reported at fair
value, with unrealized gains or losses charged or credited directly to
stockholders' equity.

The fair value of investment securities are based on quoted market prices.
Premiums and discounts on debt securities are amortized into interest income
over the term of the securities in a manner that approximates the interest
method. Realized gains and losses on sales of securities are computed using the
specific identification method. Any security which management believes has
experienced a decline in value which is other than temporary is written down to
its market value through a charge to income.

Short-term investments, consisting primarily of money market instruments
maturing within one year are carried at cost which, along with accrued interest,
approximates fair value. Cash and cash equivalents include cash on hand and
short-term highly liquid investments of maturities of three months or less when
purchased. These investments are carried at cost plus accrued interest which
approximates fair value.


                                       27
<PAGE>   28
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(d) Policy Acquisition Costs

Policy acquisition costs, representing commissions and certain underwriting
costs, are deferred and amortized on a straight-line basis over the policy term.
During the years ended December 31, 2000, 1999 and 1998, deferrable costs
capitalized were $2,490,005, $1,997,609, and $1,584,541, respectively. The
amortization of deferred policy acquisition costs charged to operations for the
years ended December 31, 2000, 1999 and 1998 was $2,375,038, $2,223,918 and
$2,112,857, respectively.

(e) Property and Equipment

Property and equipment are reported at depreciated cost. Depreciation is
computed using the straight-line method at rates based upon the respective
estimated useful lives of the assets. Maintenance and repairs are expensed as
incurred.

(f) Intangibles

All intangibles are stated at amortized cost and are being amortized using the
straight-line method. Intangibles include insurance operating licenses and
goodwill, which represents the excess of cost over the fair market value of net
assets acquired. These intangible assets are amortized over periods ranging from
15 to 25 years. The carrying amounts of these intangibles are regularly reviewed
for indicators of other-than-temporary impairments in value.

(g) Insurance Reserve Liabilities

Reserves for losses and loss adjustment expenses are established with respect to
both reported and incurred but not reported claims for insured risks. The amount
of loss reserves for reported claims is primarily based upon a case-by-case
evaluation of the type of risk involved, knowledge of the circumstances
surrounding the claim and the policy provisions relating to the type of claim.
As part of the reserving process, historical data is reviewed and consideration
is given to the anticipated impact of various factors such as legal developments
and economic conditions, including the effects of inflation. Reserves are
monitored and recomputed periodically using new information on reported claims.

Reserves for losses and loss adjustment expenses are estimates at any given
point in time of what the Company may have to pay ultimately on incurred losses,
including related settlement costs, based on facts and circumstances then known.
The Company also reviews its claims reporting patterns, past loss experience,
risk factors and current trends and considers their effect in the determination
of estimates of incurred but not reported losses. Ultimate losses and loss
adjustment expenses are affected by many factors which are difficult to predict,
such as claim severity and frequency, inflation levels and unexpected and
unfavorable judicial rulings. Reserves for surety claims also consider the
amount of collateral held as well as the financial strength of the contractor
and its indemnitors. Management believes that the reserves for losses and loss
adjustment expenses are adequate to cover the unpaid portion of the ultimate net
cost of losses and loss adjustment expenses incurred, including losses incurred
but not reported.

(h) Collateral Held

The carrying amount of collateral held approximates its fair value because of
the short maturity of these instruments. Collateral held represents cash and
investments retained by the Company for surety bonds issued by the Company.


                                       28
<PAGE>   29
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(i) Reinsurance

In the normal course of business, the Company assumes and cedes reinsurance with
other companies. Reinsurance ceded primarily represents excess of loss
reinsurance with companies with "A" ratings from the insurance rating
organization, A.M. Best Company, Inc. Reinsurance ceded also includes a
facultative reinsurance treaty which is applicable to excess policies written
over a primary policy issued by the Company for specific projects. Reinsurance
is ceded to limit losses from large exposures and to permit recovery of a
portion of direct losses; however, such a transfer does not relieve the
originating insurer of its liability. The Company participates in assumed quota
share reinsurance arrangements covering marine and property catastrophe risks
with one of its excess of loss reinsurers.

Effective May 1, 2000, the Company cedes significantly more of its bond exposure
than under its previous reinsurance treaties. Such reinsurance is applicable on
a per principal basis for losses in excess of $1,000,000 up to $13,000,000.
Prior to May 1, 2000, reinsurance was applicable to losses in excess of
$2,000,000 on a per bond basis with the Company retaining approximately
$5,000,000 of losses up to $13,000,000.

Reinsurance recoverables include ceded reserves for losses and loss adjustment
expenses. Ceded unearned premiums of $938,797 and $453,588 at December 31, 2000
and 1999, respectively, are included in other assets. All reinsurance contracts
maintained by the Company qualify as short-duration prospective contracts. A
summary of reinsurance premiums written and earned is provided below:

<TABLE>
<CAPTION>
                                              Premiums Written                                      Premiums Earned
                            ----------------------------------------------       ------------------------------------------------
                                 2000              1999             1998             2000               1999             1998
                            ------------       ----------       ----------       ------------       -----------       -----------
<S>                         <C>                <C>              <C>             <C>                 <C>               <C>
            Direct          $ 10,453,336        8,968,024        8,324,506       $ 10,247,698        10,528,702        11,211,803
            Assumed               12,743          124,763          528,220             40,897            97,052           656,023
            Ceded             (1,555,074)      (1,002,787)        (649,109)        (1,072,691)       (1,211,562)         (905,163)
                            ------------       ----------       ----------       ------------       -----------       -----------
                Totals      $  8,911,004        8,090,000        8,203,617       $  9,215,904         9,414,192        10,962,663
                            ============       ==========       ==========       ============       ===========       ===========
</TABLE>

Ceded incurred losses and loss adjustment expenses totaled $175,397, $215,292
and $180,553 for the years ended December 31, 2000, 1999 and 1998, respectively.

(j) Revenue Recognition

Revenue on construction contracts is recorded using the percentage of completion
method. Under this method revenues with respect to individual contracts are
recognized in the proportion that costs incurred to date relate to total
estimated costs. Revenues and cost estimates are subject to revision during the
terms of the contracts, and any required adjustments are made in the periods in
which the revisions become known. Provisions are made, where applicable, for the
entire amount of anticipated future losses on contracts in progress.
Construction claims are recorded as revenue at the time of settlement and profit
incentives and change orders are included in revenues when their realization is
reasonably assured. Selling, general and administrative expenses are not
allocated to contracts.

Insurance premiums are recognized over the coverage period. Unearned premiums
represent the portion of premiums written that is applicable to the unexpired
terms of policies in force, calculated on a prorata basis.

(k) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(l) Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those estimates.


                                       29
<PAGE>   30
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(m) Comprehensive Income (Loss)


The following table summarizes reclassification adjustments for other
comprehensive income (loss) and the related tax effects for the years ended
December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                            2000             1999          1998
                                                                                        -----------       ----------       -------
<S>                                                                                     <C>               <C>              <C>
            Unrealized gains (losses) on investments:
            Unrealized holding gain (loss) arising during period net of income tax
            expense of $224,405 for 1998                                                $ 1,538,168       (2,243,436)      435,609
            Less reclassification adjustment for gains included in net earnings,
            net of income tax expense (benefit) of ($41,863), $85,745 and $90,497
            for 2000, 1999 and 1998, respectively                                           (81,262)         166,445       175,672
                                                                                        -----------       ----------       -------
            Other comprehensive income (loss)                                           $ 1,456,906       (2,409,881)      259,937
                                                                                        ===========       ==========       =======
</TABLE>

(n) Future Accounting Standard

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133).
In June 1999, the FASB issued Statement of Financial Accounting Standards No.
137, "Deferral of the Effective Date of FASB Statement No. 133", which allows
entities which have not yet adopted FAS 133 to defer its effective date to all
fiscal quarters of all fiscal years beginning after June 15, 2000. In June 2000,
the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities, an amendment
of FASB Statement No. 133", which amends the accounting and reporting standards
of FAS 133. FAS 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized asset or liability
or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a recognized asset or liability or of a forecasted transaction, or (c)
a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The accounting for changes
in the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. Upon initial
application of FAS 133, hedging relationships must be designated anew and
documented pursuant to the provisions of this statement. The Company will adopt
FAS 133, as amended, as of January 1, 2001. The Company has determined that the
cumulative effect of FAS 133, as amended, will not be significant.


                                       30
<PAGE>   31
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2)  INVESTMENTS


      INVESTMENTS AT DECEMBER 31, 2000 AND 1999 FOLLOWS:

<TABLE>
<CAPTION>
                                                                   AMORTIZED           ESTIMATED            CARRYING
                                                                     COST              FAIR VALUE             VALUE
                                                                  -----------          -----------          -----------
<S>                                                               <C>                  <C>                  <C>
      2000
      Fixed maturities - available for sale:
      Bonds:
       States, municipalities and political subdivisions          $28,385,622          $28,340,477          $28,340,477
       United States government and government agencies            17,215,078           17,270,789           17,270,789
       Mortgage-backed securities                                   4,938,654            4.934,265            4,934,265
       Industrial and miscellaneous                                19,948,410           19,825,381           19,825,381
                                                                  -----------          -----------          -----------
        Total fixed maturities                                     70,487,764           70,370,912           70,370,912
      Equity securities - common stocks:
       Banks, trusts and insurance                                      5,262               15,926               15,926

      Equity securities - redeemable preferred stocks:
       Banks, trusts and insurance                                  1,060,000              908,760              908,760
       Industrial and miscellaneous                                 1,496,250            1,296,250            1,296,250
                                                                  -----------          -----------          -----------
        Total equity securities                                     2,561,512            2,220,936            2,220,936
      Mortgage                                                        289,625              289,625              289,625
      Short-term investments                                        3,249,065            3,249,065            3,249,065
                                                                  -----------          -----------          -----------
        Total investments                                         $76,587,966           76,130,538           76,130,538
                                                                  ===========          ===========          ===========

      1999
      Fixed maturities - available for sale:
      Bonds:
       States, municipalities and political subdivisions          $37,020,634           36,607,995           36,607,995
       United States government and government agencies            18,885,440           18,568,888           18,568,888
       Mortgage-backed securities                                   5,816,255            5,642,888            5,642,888
       Industrial and miscellaneous                                27,568,481           27,007,149           27,007,149
                                                                  -----------          -----------          -----------
        Total fixed maturities                                     89,290,810           87,826,920           87,826,920
      Equity securities - common stocks:
       Banks, trusts and insurance                                      5,262               14,763               14,763
      Equity securities - redeemable preferred stocks:
       Banks, trusts and insurance                                  1,060,000              860,000              860,000
       Industrial and miscellaneous                                 1,000,000              740,000              740,000
                                                                  -----------          -----------          -----------
        Total equity securities                                     2,065,262            1,614,763            1,614,763
      Short-term investments                                          518,557              518,557              518,557
                                                                  -----------          -----------          -----------
        Total investments                                         $91,874,629           89,960,240           89,960,240
                                                                  ===========          ===========          ===========
</TABLE>


Fair value estimates are made based on quoted market prices and information
about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

On December 31, 2000, the Company's insurance subsidiaries had securities with
an aggregate book value of approximately $10 million on deposit with various
state regulatory authorities.


                                       31

<PAGE>   32
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and fair value of fixed maturities at December 31, 2000 and
1999, by effective maturity, follows:

<TABLE>
<CAPTION>
                                                                   2000                                     1999
                                                      -------------------------------          ------------------------------
                                                       Amortized             Fair              Amortized             Fair
                                                         Cost                Value                Cost               Value
                                                      -----------          ----------          ----------          ----------
<S>                                                   <C>                  <C>                 <C>                 <C>
      Due in one year or less                         $24,468,676          23,925,468          16,692,346          16,907,611
      Due after one year through five years            38,570,751          39,014,149          65,642,615          64,139,194
      Due after five years through ten years            3,125,942           3,131,895           3,843,840           3,719,256
      Due after ten years                               4,322,395           4,299,400           3,112,009           3,060,859
                                                      -----------          ----------          ----------          ----------
          Total                                       $70,487,764          70,370,912          89,290,810          87,826,920
                                                      ===========          ==========          ==========          ==========
</TABLE>


The Company's portfolio is comprised primarily of fixed maturity securities
rated AA or better by Standard and Poor's and includes mostly U.S. Treasuries
and tax-free municipal securities

A summary of gross unrealized gains and losses at December 31, 2000 and 1999
follows:


<TABLE>
<CAPTION>
                                                       2000                               1999
                                            --------------------------           --------------------------
                                              Gains            Losses            Gains             Losses
                                            --------          --------           ------          ----------
<S>                                         <C>               <C>                <C>             <C>
      States, municipalities and
        political subdivisions              $ 33,854           (78,999)           8,870            (421,509)
      United States government and
        government agencies                   77,320           (21,609)             103            (316,655)
      Industrial and miscellaneous                --          (123,029)              --            (173,367)
      Mortgage-backed securities               6,356           (10,745)              --            (561,332)
                                            --------          --------           ------          ----------
          Total                              117,530          (234,382)           8,973          (1,472,863)
      Equity securities                       10,664          (351,240)           9,501            (460,000)
                                            --------          --------           ------          ----------
      Total                                 $128,194          (585,622)          18,474          (1,932,863)
                                            ========          ========           ======          ==========
</TABLE>

(3)  INVESTMENT INCOME AND REALIZED CAPITAL GAINS AND LOSSES

A summary of net investment income for the years ended December 31, 2000, 1999
and 1998 follows:

<TABLE>
<CAPTION>
                                                  2000                 1999                 1998
                                              -----------           ----------           ----------
<S>                                           <C>                    <C>                  <C>
      Tax-exempt interest                     $ 1,268,898            1,680,051            2,045,722
      Taxable interest                          3,279,902            3,680,987            4,080,814
      Dividends on equity securities              112,639              112,130               56,603
      Investment expenses                         (90,512)             (83,436)             (45,034)
                                              -----------           ----------           ----------
        Net investment income                 $ 4,570,927            5,389,732            6,138,105
                                              ===========           ==========           ==========
</TABLE>

Realized capital gains (losses) for the years ended December 31, 2000, 1999 and
1998 follows:

<TABLE>
<CAPTION>
                                                         2000              1999              1998
                                                      ---------           -------          --------
<S>                                                   <C>                 <C>               <C>
      Fixed maturities                                $(123,125)          252,190           225,701
      Equity securities                                      --                --            44,653
      Other                                                  --                --            (4,185)
                                                      ---------           -------          --------
         Net realized capital gains (losses)          $(123,125)          252,190           266,169
                                                      =========           =======          ========
</TABLE>


                                       32

<PAGE>   33
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gross gains of $14,162, $349,413 and $229,063 and gross losses of $137,287,
$97,223 and $3,362 were realized on fixed maturity sales for the years ended
December 31, 2000, 1999 and 1998, respectively. There were no gross gains
realized on the sale of equity securities for the years ended December 31, 2000
and 1999. Gross gains of $44,653 were realized on sale of equity securities for
the year ended December 31, 1998. There were no losses realized on equity
security sales for the years ended December 31, 2000, 1999 and 1998.

(4)  RECEIVABLES

A summary of receivables at December 31, 2000 and 1999 follows:


<TABLE>
<CAPTION>
                                                                                       2000                 1999
                                                                                   -----------           ----------
<S>                                                                                <C>                    <C>
      Insurance premiums due from agents                                           $ 1,531,017            1,526,145
      Receivables under construction contracts:
         Amounts billed                                                              2,162,875            1,335,451
         Recoverable costs in excess of billings on uncompleted contracts              152,897               67,885
         Billings in excess of costs on uncompleted contracts                         (294,055)            (489,650)
         Retainage, due on completion of contracts                                     552,624              463,959
                                                                                   -----------           ----------
              Total receivables under construction contracts                         2,574,341            1,377,645
      Other                                                                            182,351              114,709
                                                                                   -----------           ----------
              Total receivables                                                      4,287,709            3,018,499
      Less allowances for doubtful accounts                                           (147,346)            (195,118)
                                                                                   -----------           ----------
              Total receivables, net                                               $ 4,140,363            2,823,381
                                                                                   ===========           ==========
</TABLE>

The balances billed but not paid by customers pursuant to retainage provisions
in construction contracts will be due upon completion of the contracts and
acceptance by the owner. In management's opinion, the majority of contract
retainage is expected to be collected in 2001.

Recoverable costs in excess of billings on uncompleted contracts are comprised
principally of amounts of revenue recognized on contracts for which billings had
not been presented to the contract owners as of the balance sheet date. These
amounts will be billed in accordance with the contract terms.

(5)  PROPERTY AND EQUIPMENT

A summary of property and equipment at December 31, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                                 2000                1999
                                             -----------          ----------
<S>                                          <C>                  <C>
      Building                                15,039,038          14,912,042
      Land                                       800,000             800,000
      Equipment and vehicles                   1,512,260           1,255,128
      Furniture and fixtures                     840,114             888,824
                                             -----------          ----------
                                              18,191,412          17,855,994
      Less accumulated depreciation            5,566,620           5,180,038
                                             -----------          ----------
                                             $12,624,792          12,675,956
                                             ===========          ==========
</TABLE>

Future minimum rental income to be generated by leasing a portion of the
building under non-cancelable operating leases as of December 31, 2000 are
estimated to be $545,090 for 2001, $549,890 for 2002, $428,690 for 2003 and
$53,200 for 2004. Rental income earned in 2000, 1999 and 1998 was $768,496,
$688,102 and $626,730, respectively.

(6)  INTANGIBLES

A summary of intangibles, acquired primarily in connection with purchases of the
Company's insurance subsidiaries, at December 31, 2000 and 1999 follows:


<TABLE>
<CAPTION>
                                                2000               1999
                                             ----------          ---------
<S>                                          <C>                 <C>
      Insurance licenses                     $4,188,926          4,188,926
      Goodwill                                2,441,310          2,524,872
                                             ----------          ---------
                                              6,630,236          6,713,798
      Less accumulated amortization           4,388,169          4,145,079
                                             ----------          ---------
                                             $2,242,067          2,568,719
                                             ==========          =========
</TABLE>


      Intangible assets are written off when they become fully amortized.


                                       33

<PAGE>   34
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7)  RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

The following table sets forth a reconciliation of beginning and ending reserves
for unpaid losses and loss adjustment expenses for the periods indicated on a
GAAP basis for the business of the Company.

<TABLE>
<CAPTION>
                                                      2000                  1999                  1998
                                                 ------------           -----------           -----------
<S>                                              <C>                    <C>                   <C>
       Balance at January 1                      $ 38,544,491            43,115,062            48,900,713
           Less reinsurance recoverable             3,924,064             2,224,116             3,478,121
                                                 ------------           -----------           -----------
      Net balance at January 1                     34,620,427            40,890,946            45,422,592

      Incurred related to:
         Current year                               2,441,000             3,091,120             4,508,667
         Prior years                                 (934,092)           (1,418,233)           (2,321,939)
                                                 ------------           -----------           -----------
      Total incurred                                1,506,908             1,672,887             2,186,728

      Payments related to:
          Current year                                791,546                81,569                18,260
          Prior years                               8,605,571             7,861,837             6,700,114
                                                 ------------           -----------           -----------
          Total payments                            9,397,117             7,943,406             6,718,374

          Net balance at December 31               26,730,218            34,620,427            40,890,946
          Plus reinsurance recoverable              2,580,388             3,924,064             2,224,116
                                                 ------------           -----------           -----------
      Balance at December 31                     $ 29,310,606            38,544,491            43,115,062
                                                 ============           ===========           ===========
</TABLE>

The decrease of incurred losses and loss adjustment expenses of prior years
represents a release of surety loss reserves on older years that are no longer
needed and a reallocation of reserves among accident years. Management believes
that the reserves for losses and loss adjustment expenses are adequate to cover
the unpaid portion of the ultimate net cost of losses and loss adjustment
expenses, including losses incurred but not reported.

The Company has no exposure to any asbestos or environmental claims associated
with general liability policies issued with the pre-1986 pollution exclusion.
Policies written with the exclusion are typically associated with mass tort
environmental and asbestos claims. The Company has never issued a policy with
the pre-1986 pollution exclusion. The Company's exposure to asbestos and
environmental liability claims is primarily limited to asbestos and
environmental liability insurance for contractors and consultants involved in
the remediation, removal, storage, treatment and/or disposal of environmental
and asbestos hazards.

(8)  NOTES PAYABLE TO BANKS

At December 31, 2000, the Company has a $10,000,000 bank line of credit with a
financial institution. The line of credit does not require the Company to
maintain a compensating balance. There were no outstanding borrowings under this
line of credit at December 31, 2000 and 1999. Under the terms of the line of
credit, interest on the outstanding balance is calculated based upon the London
Inter-Bank Offering Rate (LIBOR) plus 160 basis points in effect during the
borrowing period.

(9)  LONG-TERM DEBT

A summary of long-term debt at December 31, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                             2000                1999
                                         -----------          ----------
<S>                                      <C>                  <C>
      Term Loan due 2004                 $ 3,250,000           4,250,000
      Senior Notes due 2005                2,400,000           3,900,000
      Mortgage Note due 2009               6,646,587           7,242,720
      Convertible Note due 2022           15,400,000          15,400,000
                                         -----------          ----------
                                         $27,696,587          30,792,720
                                         ===========          ==========
</TABLE>


                                       34

<PAGE>   35
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On September 1, 1999, the Company obtained a $4,500,000 term loan from a
financial institution, which is currently payable in quarterly installments of
$250,000 which commenced December 1, 1999. The term loan, due 2004 has a balance
of $3,250,000 at December 31, 2000. The interest rate is fixed at 7.25%. The
loan agreement contains certain limitations on borrowings, minimum statutory
capital levels and requires maintenance of certain ratios. The proceeds were
used to replace a $5,000,000, five year term loan obtained on December 9, 1998.

On December 23, 1998, the Company obtained a permanent mortgage loan from a
financial institution. The $7,800,000 mortgage note, with interest fixed at
6.95% is payable in monthly installments of principal and interest over 10
years. The mortgage note, due 2009, has a balance of $6,646,587 at December 31,
2000. The loan agreements contain certain limitations on borrowings, minimum
statutory capital levels and require maintenance of specified ratios. The
proceeds were used to repay the existing mortgage note.

On February 5, 1997, ACMAT Corporation purchased 1,099,996 shares of Class A
Stock which AIG Life Insurance Company (366,663 shares) and American
International Life Assurance Company of New York, (733,333) had acquired over
the last three years through conversion options (See Note 12). The shares were
purchased at an average price of $14.70 per share, for a total purchase price of
$16,174,942. The purchase price of $16,174,942 consisted of $4,174,942 in cash
and promissory notes totaling $12,000,000. The promissory notes are with AIG
Life Insurance Company and American International Life Assurance Company of New
York and are payable over eight years with annual payments of $1,500,000 which
commenced on January 31, 1998, with interest at prime rate (8-1/2%). The Company
voluntarily prepaid the installments due January 31 on December 31 in 2000, 1999
and 1998. The Company also made a voluntary prepayment of $3,600,000 on December
31, 1999. The interest rate is equal to the prime rate, however, the interest
rate shall not exceed 9-1/4% and it shall not be less than 7-1/4%. The senior
notes have a balance of $2,400,000 at December 31, 2000.

The terms of the note agreements with AIG Life Insurance Company and American
International Life Assurance Company of New York contain limitations on payment
of cash dividends, re-acquisition of shares, borrowings and investments and
require maintenance of specified ratios and a minimum tangible net worth of
$12,000,000. ACMAT may also require its insurance subsidiaries to pay dividends
to the extent of funds legally available therefore, in order to enable ACMAT to
have funds to pay on a timely basis all amounts due with respect to the notes.
The Company is in compliance with all of these covenants at December 31, 2000,
except for the ratio of Earnings Before Interest Expense, Taxes, Depreciation
and Amortization to Fixed Charges. The Company has received a waiver for this
covenant.

On July 1, 1992, the Company issued a 30-year unsecured $16,500,000, 11.5%
subordinated debenture to the Sheet Metal Workers' National Pension Fund
("Fund") to purchase 3,000,000 shares of United Coasts Corporation's outstanding
common stock held by the Fund. Annual principal payments of $1,650,000 per year
for ten years are due beginning on July 1, 2012. The note is convertible into
ACMAT Class A stock at $11 per share. The conversion price of $11 per share
would be adjusted at the time of conversion to reflect any stock dividends,
recapitalizations or additional stock issuance. The Company can prepay the note
and the Fund has the option to accept the prepayment or convert the note to
stock. The Company made a voluntary principal payment of $1,100,000 on July 31,
1998. At December 31, 2000, the Company had reserved 1,400,000 shares of Class A
Stock for issuance pursuant to such conversion option.

Principal payments on long-term debt are $3,143,108, $2,589,256, $1,738,716,
$1,041,724 and $848,536 for the years 2001 through 2005, respectively. Interest
expense paid in 2000, 1999 and 1998 amounted to $2,815,876, $3,751,313, and
$5,121,093, respectively.

The fair value at December 31, 2000 of the mortgage, the term loan and the
senior notes approximate carrying value. It is not practicable to estimate the
fair value of convertible note at December 31, 2000 because of the complex and
unique terms associated with this debt instrument.


                                       35
<PAGE>   36
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10)  INCOME TAXES

The components of income tax expense for each year follows:

<TABLE>
<CAPTION>
                                  2000               1999             1998
                               ----------          ---------          -------
<S>                            <C>                 <C>                <C>
      Current Taxes:
         Federal               $  456,978            725,246          584,655
         State                     65,000             50,000           62,000
                               ----------          ---------          -------
                                  521,978            775,246          646,655
                               ----------          ---------          -------
      Deferred Taxes:
         Federal                  726,459            428,918           73,041
      Total                    $1,248,437          1,204,164          719,696
                               ==========          =========          =======
</TABLE>


The effective income tax rate, as a percentage of earnings before income taxes
follows:

<TABLE>
<CAPTION>
                                                 2000              1999              1998
                                                ------            ------            ------
<S>                                             <C>               <C>               <C>
      Federal statutory tax rate                  34.0%             34.0%             34.0%
      State income tax                             1.2                .8               1.4
      Effect of tax-exempt interest              (10.6)            (11.5)            (20.8)
      Dividend received deduction                   --                --              (4.8)
      Amortization of goodwill                     3.4               2.8               3.9
      Officers life insurance premiums             2.6               2.0               2.8
      Other, net                                   5.3                .5               8.8
                                                ------            ------            ------
        Effective income tax rate                 35.9%             28.6%             25.3%
                                                ======            ======            ======
</TABLE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2000 and
1999 are presented below:

<TABLE>
<CAPTION>
                                                                                              2000                1999
                                                                                           ----------          ----------
<S>                                                                                        <C>                 <C>
      Deferred Tax Assets:
         Reserves for losses and loss adjustment expenses,
              Principally due to reserve discounting                                       $1,404,681           2,037,064
          Unearned premiums                                                                   306,271             327,004
          Accounts receivable, principally due to allowance for doubtful accounts              50,098              66,340
          Unrealized losses on investments                                                    155,544             650,892
          State net operating loss carryforward                                             6,717,085           8,709,178
          Other                                                                                77,476              60,020
                                                                                           ----------          ----------
             Total gross deferred tax assets                                                8,711,155          11,850,498
             Less valuation allowance                                                       6,872,629           9,360,070
                                                                                           ----------          ----------
             Net deferred tax assets                                                       $1,838,526           2,490,428
      Deferred Tax Liabilities:
          Plant and equipment                                                                 515,487             480,019
          Deferred policy acquisition costs                                                   489,174             450,085
                                                                                           ----------          ----------
              Total gross deferred tax liabilities                                          1,004,661             930,104
                                                                                           ----------          ----------

      Net deferred tax assets                                                              $  833,865           1,560,324
                                                                                           ==========          ==========
</TABLE>


A valuation allowance is provided for the state net operating loss carryforward
and the unrealized loss on investments which is not considered realizable. In
assessing the realization of deferred tax assets, management considers whether
it is more likely than not that the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax
liabilities, tax planning strategies and anticipated future taxable income in
making this assessment and believes it is more likely than not the Company will
realize the benefits of its deductible temporary differences, net of the
valuation allowance, at December 31, 2000.

State net operating loss carryforwards as of December 31, 2000, 1999 and 1998
were $19,756,132, $23,081,405 and $25,615,231 expiring through 2020, 2003 and
2002, respectively.

Taxes paid in 2000, 1999 and 1998 were $320,405, $703,081 and $52,227,
respectively.


                                       36

<PAGE>   37
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11)  PENSION AND PROFIT SHARING PLANS

Effective January 1, 2000, the Company adopted the ACMAT 401(k) plan for the
benefit of non-union employees. The Company contributed $75,000 to the ACMAT
401(k) Plan in 2000. The thrift, profit sharing and retirement plan was
terminated on February 29, 2000. The Company's contributions, established by the
Board of Directors, were $85,000 in 1999 and 1998.

The Company participated in various multi-employer defined contribution plans
for its union employees. Upon withdrawal from these plans, the Company may be
liable for its share of the unfunded vested liabilities of the plans. Such
obligations, if any, of the Company are not determinable at December 31, 2000.

(12)  STOCKHOLDERS' EQUITY

The Company has two classes of common stock; the Common Stock and the Class A
Stock, each without par value. The rights of the Common Stock and the Class A
Stock are identical, except with respect to voting rights. Holders of the Class
A Stock are entitled to one-tenth vote per share in relation to the Common
Stock, holders of which are entitled to one vote per share.

During 2000, 1999 and 1998, ACMAT repurchased, in open market and privately
negotiated transactions 27,239, 7,260, and 4,769 respectively, shares of its
Common Stock at an average price of $19.08, $20.93 and $20.65 per share,
respectively. The Company also repurchased during 2000, 1999 and 1998, in open
market and privately negotiated transactions 253,833, 189,221, and 342,366,
respectively, shares of its Class A Stock at an average price of $7.29, $12.52
and $15.10 per share, respectively.

On April 1, 1999, the Company purchased a 40% interest in Allied Surety Agency,
Inc. The Company issued 15,000 shares of Class A Stock for the ownership
interest. The Company may issue an additional 20,000 shares of Class A Stock if
certain performance goals are met by Allied Surety Agency, Inc. The purchase was
a non-cash transaction and is not reflected in the Consolidated Statements of
Cash Flow.

The stockholders have periodically approved the distribution of non-qualified
stock options to certain officers and directors giving such individuals the
right to purchase restricted shares of the Company's Common and Class A Stock.
Transactions regarding these stock options are summarized below:

<TABLE>
<CAPTION>
                                                                 2000                     1999                 1998
                                                                -------              -----------              -------
<S>                                                             <C>                  <C>                  <C>
      Options outstanding at December 31                        337,500                  274,000              292,000
      Weighted average price per share of
         options outstanding                                    $  8.27              $      8.48              $ 10.20
      Expiration dates                                          1/2001-12/2010       1/2001-7/2006            1/2001-7/2006
      Options exercisable at December 31                        267,500                       --              292,000
      Options granted                                            70,000                       --                   --
      Options exercised or surrendered                            6,500                   18,000               91,000
      Price ranges of options exercised or surrendered          $  6.00              $      6.00              $  8.50
</TABLE>

The exercise price of each option equals the market price of the Company's stock
on the date of grant and the option's term is ten years. The options vest six
months after the date of grant. The Board of Directors granted 70,000 options to
certain directors and officers on December 16, 2000. There were no stock options
granted in 1999 or 1998, however, the exercise price of the Class A Stock
options were re-priced at $7.25 on December 16, 1999.


                                       37

<PAGE>   38
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under applicable insurance regulations, ACMAT's insurance subsidiaries are
restricted as to the amount of dividends they may pay, without the prior
approval of any insurance department and are limited to approximately $6,900,000
in 2001.

The Company's insurance subsidiaries, United Coastal Insurance and ACSTAR, are
domiciled in Arizona and Illinois, respectively. The statutory financial
statements of United Coastal Insurance and ACSTAR are prepared in accordance
with accounting practices prescribed by the Arizona Department of Insurance and
the Illinois Department of Insurance, respectively. Prescribed statutory
accounting practices include a variety of publications of the National
Association of Insurance Commissioners (NAIC), as well as the state laws,
regulations, and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed. In 2000, United
Coastal Insurance paid dividends of $8,000,000, a portion of which is considered
extraordinary. United Coastal Insurance applied and received approval from the
Arizona Insurance Department for the extraordinary portion of dividends paid.

The NAIC recently completed a process intended to codify statutory accounting
practices for certain insurance enterprises. As a result, the NAIC issued a
revised statutory Accounting Practices and Procedures Manual - version effective
January 1, 2001 (the revised Manual) that will be effective for years beginning
January 1, 2001. The States of Illinois and Arizona will require that, effective
January 1, 2001, insurance companies domiciled in Illinois and Arizona prepare
their statutory basis financial statements in accordance with the revised Manual
subject to any deviations prescribed or permitted by the Illinois and Arizona
insurance commissioner. The Company has determined the change on the statutory
capital and surplus of its insurance subsidiaries will be to increase statutory
capital and surplus by approximately $3,900,000.

In accordance with statutory accounting principles, ACMAT's insurance
subsidiaries' statutory capital and surplus was $50,646,755 and $49,130,735 at
December 31, 2000 and 1999, respectively, and their statutory net income for the
years ended December 31, 2000, 1999 and 1998 was $7,641,075, $11,231,410 and
$12,078,378, respectively. The primary differences between amounts reported in
accordance with GAAP and amounts reported in accordance with statutory
accounting principles are excess statutory reserves over statement reserves
(Schedule P Liability), carrying value of fixed maturity investments; assets not
admitted for statutory purposes such as agents balances over 90 days, furniture
and fixtures and certain notes receivable; and deferred acquisition costs and
deferred taxes which are recognized for GAAP only.

Pursuant to various debt covenants, previously described, ACMAT is restricted
from purchasing treasury stock and paying dividends greater than 20% of
consolidated net earnings.

(13)  EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share ("EPS") computations for the years ended
December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                     Average
                                                                     Shares            Per-Share
                                                     Earnings        Outstanding       Amount
                                                     --------        -----------       ------
<S>                                                 <C>              <C>               <C>
      2000:
      Basic EPS:
          Earnings available to stockholders        $2,224,317        2,796,654          .80

      Effect of Dilutive Securities:
          Stock options                                     --           38,554
                                                    ----------        ---------

                                                    $2,224,317        2,835,208          .78
                                                    ==========        =========        =====
      Diluted EPS:
          Earnings available to stockholders

      1999:
      Basic EPS:
          Earnings available to stockholders        $3,013,723        2,961,817        $1.02

      Effect of Dilutive Securities:
          Stock options                                     --           80,323
                                                    ----------        ---------

      Diluted EPS:
          Earnings available to stockholders        $3,013,723        3,042,140        $ .99
                                                    ==========        =========        =====
</TABLE>



                                       38

<PAGE>   39
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                     Average
                                                                     Shares            Per-Share
                                                     Earnings        Outstanding       Amount
                                                     --------        -----------       ------
<S>                                                 <C>              <C>               <C>
      1998:
      Basic EPS:
          Earnings available to stockholders        $2,120,529        3,199,906        $.66

      Effect of Dilutive Securities:
          Stock options                                     --           79,029
                                                    ----------        ---------

      Diluted EPS:
          Earnings available to stockholders        $2,120,529        3,278,935        $.65
                                                    ==========        =========        ====
</TABLE>


The Convertible Notes were anti-dilutive in 2000, 1999 and 1998.

(14)  COMMITMENTS AND CONTINGENCIES

The Company is a party to legal actions arising in the ordinary course of its
business. In management's opinion, the Company has adequate legal defenses
respecting those actions where the Company is a defendant, has appropriate
insurance reserves recorded, and does not believe that their settlement will
materially affect the Company's operations or financial position.

Many construction projects in which the Company has been engaged have included
asbestos exposures which the Company believes to involve a particularly high
degree of risk because of the hazardous nature of asbestos. The Company believes
it has reduced the risks associated with asbestos through proper training of its
employees and by maintaining general liability and workers' compensation
insurance. From 1986 to 1996, the Company obtained its general liability
insurance from its insurance subsidiaries. Since 1996, the Company obtained its
general liability insurance from unaffiliated insurance companies. Since 1989,
the Company has obtained its surety bonds from its insurance subsidiary.

The Company has, together with many other defendants, been named as a defendant
in actions by injured or deceased individuals or their representatives based on
product liability claims relating to materials containing asbestos. No specific
claims for monetary damages are asserted in these actions. Although it is early
in the litigation process, the Company does not believe that its exposure in
connection with these cases is significant.

(15)  SEGMENT REPORTING

The Company has three reportable operating segments: ACMAT Contracting, ACSTAR
Bonding and United Coastal Liability Insurance. The Company's reportable
segments are primarily the three main legal entities of the Company which offer
different products and services. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies.

ACMAT Contracting provides construction contracting services to commercial and
governmental customers. ACMAT Contracting also provides underwriting services to
its insurance subsidiaries. In addition, ACMAT Contracting owns a commercial
office building in New Britain Connecticut and leases office space to its
insurance subsidiaries as well as third parties.

The United Coastal Liability Insurance operating segment offers specific lines
of liability insurance as an approved non-admitted excess and surplus lines
insurer in forty-six states, Puerto Rico, the Virgin Islands and the District of
Columbia. United Coastal offers claims made and occurrence policies for specific
specialty lines of liability insurance through certain excess and surplus lines
brokers who are licensed and regulated by the state insurance department(s) in
the state(s) in which they operate. United Coastal offers general, asbestos,
lead, pollution and professional liability insurance nationwide to specialty
trade contractors, environmental contractors, property owner, storage and
treatment facilities and professionals. United Coastal also offers products
liability insurance to manufacturers and distributors.

The Bonding operating segment provides, primarily through ACSTAR, surety bonds
written for prime, specialty trade, environmental, asbestos and lead abatement
contractors and miscellaneous obligations. ACSTAR also offers other
miscellaneous surety such as workers' compensation bonds, supply bonds,
subdivision bonds and license and permit bonds.


                                       39

<PAGE>   40
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates performance based on earnings before income taxes and
excluding interest expense. The Company accounts for intersegment revenue and
expenses as if the products/services were to third parties. Information relating
to the three segments is summarized as follows:

<TABLE>
<CAPTION>
                                                                                   2000                 1999               1998
                                                                              -------------         ------------        -----------
<S>                                                                           <C>                   <C>                 <C>
      Revenues:
          ACSTAR Bonding                                                      $   6,284,212            6,227,462          5,286,955
          United Coastal Liability Insurance                                      7,080,714            8,529,279         10,315,294
          ACMAT Contracting                                                      15,898,910           13,154,753         15,801,541
                                                                              -------------         ------------        -----------
                                                                              $  29,263,836           27,911,494         31,403,790
                                                                              =============         ============        ===========
      Operating Earnings:
          ACSTAR Bonding                                                      $   2,436,708            2,968,882          2,314,485
          United Coastal Liability Insurance                                      3,549,472            4,578,802          5,176,870
           ACMAT Contracting                                                      1,111,731              907,228            501,712
                                                                              -------------         ------------        -----------
                                                                              $   7,097,911            8,454,912          7,993,067
                                                                              =============         ============        ===========

      Depreciation and Amortization:
          ACSTAR Bonding                                                      $     535,913              451,506            442,457
          United Coastal Liability Insurance                                        371,721              385,502            279,422
          ACMAT Contracting                                                         639,510              992,638            690,125
                                                                              -------------         ------------        -----------
                                                                              $   1,547,144            1,829,646          1,412,004
                                                                              =============         ============        ===========

      Identifiable Assets:
          ACSTAR Bonding                                                      $  41,801,164           44,594,402         50,312,769
          United Coastal Liability Insurance                                     52,781,561           63,335,872         78,888,156
          ACMAT Contracting                                                      17,633,644           17,925,337         16,925,540
                                                                              -------------         ------------        -----------
                                                                              $ 112,216,369          125,855,611        146,126,465
                                                                              =============         ============        ===========
      Capital Expenditures:
          ACSTAR Bonding                                                      $     298,558              250,475              3,364
          United Coastal Liability Insurance                                         92,143                6,969             49,044
          ACMAT Contracting                                                         159,241               86,922            186,046
                                                                              -------------         ------------        -----------
                                                                              $     549,942              344,366            238,454
                                                                              =============         ============        ===========
</TABLE>


      The components of revenue for each segment are as follows:

<TABLE>
<CAPTION>
                                                                                   2000                 1999               1998
                                                                              -------------         ------------        -----------
<S>                                                                           <C>                   <C>                 <C>
          ACSTAR Bonding:
              Premiums                                                        $   5,032,465            4,770,401          4,618,281
              Investment income, net                                              1,253,329            1,268,175          1,169,977
              Equity income (loss) from limited partnership investment                   --                   --           (569,343)
              Capital gains (losses)                                                 (5,622)              51,616             68,040
              Other                                                                   4,040              137,270                 --
                                                                              -------------         ------------        -----------
                                                                              $   6,284,212            6,227,462          5,286,955
                                                                              =============         ============        ===========
          United Coastal Liability Insurance:
              Premiums                                                        $   4,183,439            4,743,791          6,519,382
              Investment income, net                                              3,001,161            3,557,332          4,430,026
              Equity income (loss) from limited partnership investment                   --                                (832,243)
              Capital gains (losses)                                               (117,503)             200,574            198,129
              Other                                                                  13,617               27,582                 --
                                                                              -------------         ------------        -----------
                                                                              $   7,080,714            8,529,279         10,315,294
                                                                              =============         ============        ===========
          ACMAT Contracting:
              Contract revenues                                               $  11,790,207            9,223,457         12,139,924
              Investment income, net                                                 91,655               78,702             65,342
              Inter-segment revenue:
                 Rental income                                                    1,260,434            1,258,637          1,251,299
                 Underwriting services and agency commissions                     1,596,960            1,538,131          1,697,978
             Other                                                                1,159,654            1,055,826            646,998
                                                                              -------------         ------------        -----------
                                                                              $  15,898,910           13,154,753         15,801,541
                                                                              =============         ============        ===========
</TABLE>


                                       40

<PAGE>   41
ACMAT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a reconciliation of segment totals for revenue and operating
income to corresponding amounts in the Company's statement of earnings:

<TABLE>
<CAPTION>
                                                                          2000                1999                1998
                                                                     ------------         -----------         -----------
<S>                                                                  <C>                   <C>                 <C>
      Revenue:
              Total revenue for reportable segments                  $ 29,263,836          27,911,494          31,403,790
              Inter-segment eliminations                               (2,922,081)         (2,411,245)         (2,651,517)
                                                                     ------------         -----------         -----------
                                                                     $ 26,341,755          25,500,249          28,752,273
                                                                     ============         ===========         ===========

      Operating Earnings:
             Total operating earnings for reportable segments        $  7,097,911           8,454,912           7,993,067
              Interest expense                                         (2,982,824)         (3,738,740)         (4,621,401)
              Intersegment interest expense                              (207,194)                 --             (52,774)
             Other operating expenses                                    (435,139)           (498,285)           (478,667)
                                                                     ------------         -----------         -----------
                                                                     $  3,472,754           4,217,887           2,840,225
                                                                     ============         ===========         ===========
</TABLE>

Operating earnings for ACMAT contracting are operating revenues less cost of
contract revenues and identifiable selling, general and administrative expenses.
Operating earnings for the bonding and liability insurance segments are revenues
less losses and loss adjustment expenses, amortization of policy acquisition
costs and identifiable selling, general and administrative expenses. The
adjustments and eliminations required to arrive at consolidated amounts shown
above consist principally of the elimination of the intersegment revenues
related to the performance of certain services and rental charges. Identifiable
assets are those assets that are used by each segment's operations. Foreign
revenues are not significant.

(16)  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

A summary of the unaudited quarterly results of operations for 2000 and 1999
follows:

<TABLE>
<CAPTION>
                                         MARCH 31          JUNE 30        SEPTEMBER 30     DECEMBER 31
                                         --------          -------        ------------     -----------
<S>                                     <C>               <C>             <C>              <C>
      2000

      Operating Revenues                $6,081,307        6,775,713        7,664,456        5,820,279
                                        ----------        ---------        ---------        ---------

      Operating Earnings                $1,619,190        1,520,220        1,715,735        1,600,433
                                        ----------        ---------        ---------        ---------

      Net Earnings                      $  610,307          562,609          547,359          504,042
                                        ----------        ---------        ---------        ---------

      Basic Earnings Per Share          $      .21              .20              .20              .19
                                        ----------        ---------        ---------        ---------

      Diluted Earnings Per Share        $      .21              .19              .20              .18
                                        ----------        ---------        ---------        ---------

      1999

      Operating Revenues                $6,575,571        6,265,327        7,002,716         5,656,65
                                        ----------        ---------        ---------        ---------

      Operating Earnings                $2,108,544        2,119,645        2,033,631        1,694,807
                                        ----------        ---------        ---------        ---------

      Net Earnings                      $  881,058          894,276          683,046          555,343
                                        ----------        ---------        ---------        ---------

      Basic Earnings Per Share          $      .30              .30              .23              .19
                                        ----------        ---------        ---------        ---------

      Diluted Earnings Per Share        $      .26              .27              .22              .19
                                        ----------        ---------        ---------        ---------
</TABLE>

Note: Operating earnings represent operating revenues less the cost of contract
revenues, losses and loss adjustment expenses and amortization of policy
acquisition costs and selling, general and administrative expenses.


                                       41
<PAGE>   42
Schedule I

                       ACMAT CORPORATION AND SUBSIDIARIES


                  Condensed Financial Information of Registrant

                  As of December 31, 2000 and 1999 and for the

                  years ended December 31, 2000, 1999 and 1998



The following presents the condensed financial position of ACMAT Corporation
(parent company only) as of December 31, 2000 and 1999 and its condensed
statements of earnings and cash flows for the years ended December 31, 2000,
1999 and 1998.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     2000               1999
                                                                 -----------        -----------
<S>                                                              <C>                <C>
                                    Assets

Current assets:
      Cash                                                       $ 1,058,211        $ 2,418,839
      Receivables                                                  2,751,297          1,486,959
      Other current assets                                           493,003             94,249
                                                                 -----------        -----------
                     Total current assets                          4,302,511          4,000,047

Property and equipment, net                                       11,998,123         12,289,154
Investments in and advance from subsidiaries                      50,630,763         51,721,904
Intangibles                                                          214,912            394,959
Other assets                                                       1,836,562          1,701,635
                                                                 -----------        -----------
                                                                  68,982,871        $70,107,699
                                                                 ===========        ===========



                     Liabilities and Stockholders' Equity

Current liabilities:
      Current portion of long-term debt                            3,143,108          1,600,052
      Other current liabilities                                    3,802,619          3,187,987
                                                                 -----------        -----------
                     Total current liabilities                     6,945,727          4,788,039
Long-term debt                                                    24,553,479         29,192,668
                                                                 -----------        -----------
Total liabilities                                                 31,499,206         33,980,707

Commitments and contingencies
Stockholders' equity                                              37,483,665         36,126,992
                                                                 -----------        -----------



                                                                 $68,982,871        $70,107,699
                                                                 ===========        ===========
</TABLE>


See Notes to Condensed Financial Statements.


                                       42
<PAGE>   43
                                                           Schedule I, continued


                       ACMAT CORPORATION AND SUBSIDIARIES

            Condensed Financial Information of Registrant, Continued

                              STATEMENT OF EARNINGS


<TABLE>
<CAPTION>
                                                                       2000               1999                1998
                                                                  ------------         ----------         -----------
<S>                                                               <C>                  <C>                 <C>
Contract revenues                                                 $ 11,790,207          9,223,457          12,139,924
Cost of contract revenues                                           11,006,382          8,361,408          11,810,879
                                                                  ------------         ----------         -----------
        Gross profit                                                   783,825            862,049             329,045


Selling, general and administrative expenses                         4,096,369          4,206,660           3,841,623
                                                                  ------------         ----------         -----------
        Operating loss                                              (3,312,544)        (3,344,611)         (3,512,578)


Interest expense                                                    (3,190,018)        (3,738,740)         (4,674,175)
Interest income                                                         91,655             78,622              46,854
Underwriting fees                                                    1,268,243          1,214,697           1,260,399
Other income                                                         2,420,088          2,335,099           1,898,297
                                                                  ------------         ----------         -----------
        Loss before income taxes and equity in net
              earnings of subsidiaries                              (2,722,576)        (3,454,933)         (4,981,203)



Income tax benefit                                                    (585,000)        (1,010,000)         (1,435,000)
                                                                  ------------         ----------         -----------

        Loss before equity in net earnings of subsidiaries          (2,137,576)        (2,465,569)         (3,546,203)

Equity in net earnings of subsidiaries                               4,361,893          5,479,292           5,666,732
                                                                  ------------         ----------         -----------

        Net earnings                                              $  2,224,317          3,013,723           2,120,529
                                                                  ============         ==========         ===========
</TABLE>


See Notes to Condensed Financial Statements.



                                       43
<PAGE>   44
                                                           Schedule I, Continued


                       ACMAT CORPORATION AND SUBSIDIARIES

            Condensed Financial Information of Registrant, Continued

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                      2000                1999                1998
                                                                  -----------         -----------         -----------
<S>                                                               <C>                 <C>                 <C>
Cash flows from operating activities:
          Net earnings                                            $ 2,224,317           3,013,723           2,120,529
          Depreciation and amortization                               650,304             990,461             688,862
          Equity in undistributed earnings of subsidiaries         (4,361,893)         (5,479,292)         (5,666,732)
          (Increase) decrease in accounts receivable               (1,264,338)             62,054           1,404,622
          (Increase) decrease in other assets                        (548,201)            (51,879)            787,299
          Increase (decrease) in other liabilities                    614,632            (659,180)            159,662
                                                                  -----------         -----------         -----------
                 Net cash used for operating activities            (2,685,179)         (2,124,113)           (505,758)
                                                                  -----------         -----------         -----------

Cash flows from investing activities:
          Capital expenditures                                       (159,241)            (86,922)           (186,046)
          Decrease in investment in subsidiaries                    6,910,000          13,000,000          20,851,120
                                                                  -----------         -----------         -----------
                 Net cash provided by investing activities          6,750,759          12,913,078          20,665,074

Cash flows from financing activities:
          Borrowings under lines of credit                                 --           9,000,000           7,000,000
          Repayments of lines of credit                                    --          (9,000,000)        (12,000,000)
          Repayment of long-term debt                              (3,096,133)        (10,907,280)        (23,812,727)
          Issuance of long-term debt                                       --           4,500,000          12,800,000
          Issuance of Class A stock, net of taxes                      39,000             162,000             696,000
          Payments for acquisition and retirement of stock         (2,369,075)         (2,521,276)         (5,268,259)
                                                                  -----------         -----------         -----------
                 Net cash used for financing activities            (5,426,208)         (8,766,556)        (20,584,986)
                                                                  -----------         -----------         -----------

Net increase (decrease) in cash                                    (1,360,628)          2,022,409            (425,670)

Cash, beginning of year                                             2,418,839             396,430             822,100
                                                                  -----------         -----------         -----------

Cash, end of year                                                 $ 1,058,211           2,418,839             396,430
                                                                  ===========         ===========         ===========
</TABLE>


See Notes to Condensed Financial Statements.


                                       44
<PAGE>   45
                                                           Schedule I, Continued


                       ACMAT CORPORATION AND SUBSIDIARIES
                         Condensed Financial Information
                     Notes to Condensed Financial Statements


The accompanying condensed financial statements should be read in conjunction
with the Consolidated Financial Statements and Notes thereto in the Company's
2000 Annual Report.

(1)   SUPPLEMENTAL CASH FLOW INFORMATION

      Income taxes received from subsidiaries during the years ended December
      31, 2000, 1999 and 1998 were $118,150, $1,157,813, and $2,355,403,
      respectively. Interest paid during the years ended December 31, 2000, 1999
      and 1998 was $3,023,070, $3,751,313 and $5,173,867, respectively. Interest
      paid in 2000 included $207,194 paid to subsidiaries for intercompany
      loans.

(2)   LONG-TERM DEBT

      A summary of long-term debt at December 31, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                           2000              1999
                                       -----------        ----------
<S>                                    <C>                <C>
      Term Loan Due 2004               $ 3,250,000         4,250,000
      Senior Notes Due 2005              2,400,000         3,900,000
      Mortgage Note Due 2008             6,646,587         7,242,720
      Convertible Note Due 2022         15,400,000        15,400,000
                                       -----------        ----------
                                       $27,696,587        30,792,720
                                       ===========        ==========
</TABLE>


      See Note 9 to the Consolidated Financial Statements in the Annual Report
      for a description of the long-term debt and aggregate maturities for 2001
      to 2005 and thereafter.

(3)   INCOME TAXES

      See Note 10 to the Consolidated Financial Statements in the Annual Report
      for a description of income taxes.

(4)   COMMITMENTS AND CONTINGENCIES

      See Note 14 to the Consolidated Financial Statements in the Annual Report
      for a description of the commitments and contingencies.


                                       45
<PAGE>   46
                                                                     SCHEDULE II


                       ACMAT CORPORATION AND SUBSIDIARIES

                 Valuation and Qualifying Accounts and Reserves

                  Years ended December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                Balance           Additions
                                  at               charged                                 Balance
                               beginning           to costs                                  At
                                  of                 and                                   end of
      Description               period             expenses            Deductions (a)      period
                               --------             -------            --------------      -------
   Allowance for
doubtful accounts:
<S>                            <C>                  <C>                 <C>               <C>
      2000                     $195,118             (21,702)             26,070            147,346
                               ========            ========             =======            =======


      1999                     $257,617             180,000             242,499            195,118
                               ========            ========             =======            =======


      1998                     $309,746             293,149             345,278            257,617
                               ========            ========             =======            =======
</TABLE>


(a) Deductions represent accounts written off.


                                       46
<PAGE>   47
ACMAT CORPORATION AND SUBSIDIARIES                                   Schedule V


   Supplemental Information concerning property-casualty insurance operations

         As of and for the years ended December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                               Discount Ded.
                                           Reserves for         from Unpaid
                            Deferred       Unpaid Losses          Losses
   Affiliation                Policy          and Loss           and Loss                                           Net
      with                 Acquisition       Adjustment         Adjustment     Unearned          Earned          Investment
   Registrant                 Costs           Expenses           Expenses      Premiums         Premiums           Income
  ------------             ------------    --------------      ------------    --------         ---------        ----------
<S>                        <C>              <C>                <C>             <C>              <C>              <C>
United Coastal
Liability Insurance:
      2000                  $  700,835        21,367,394              --        3,061,557        4,183,439        3,001,161
                            ==========        ==========        ========        =========        =========        =========

      1999                  $  692,351        27,889,335              --        3,290,024        4,743,791        3,557,332
                            ==========        ==========        ========        =========        =========        =========

      1998                  $1,004,850        31,471,445              --        4,650,438        6,519,382        4,430,026
                            ==========        ==========        ========        =========        =========        =========



ACSTAR Bonding:

      2000                  $  737,912         7,943,212              --        2,831,843        5,032,465        1,253,329
                            ==========        ==========        ========        =========        =========        =========

      1999                  $  631,429        12,571,156              --        2,193,118        4,770,401        1,268,175
                            ==========        ==========        ========        =========        =========        =========

      1998                  $  545,239        14,512,333              --        2,889,186        4,618,281        1,169,977
                            ==========        ==========        ========        =========        =========        =========
</TABLE>


<TABLE>
<CAPTION>

                                                                Amortization         Paid
                             Losses & Loss       Adjustment     of Deferred          Losses
   Affiliation                  Expenses          Incurred          Policy          and Loss
      with                       Related             to          Acquisition       Adjustment        Premiums
   Registrant                  Current Year       Prior Years       Costs           Expenses         Written
  ------------               --------------      ------------   ------------      -----------        ----------
<S>                          <C>                 <C>            <C>               <C>                 <C>
United Coastal
Liability Insurance:
      2000                      1,070,000           185,032         1,303,916        7,252,037        3,887,000
                                =========        ==========         =========        =========        =========

      1999                      1,660,000          (225,633)        1,528,179        5,315,006        3,544,657
                                =========        ==========         =========        =========        =========

      1998                      3,123,183        (1,167,367)        1,852,218        6,572,054        4,351,983
                                =========        ==========         =========        =========        =========



ACSTAR Bonding:

      2000                      1,371,000        (1,119,124)        2,001,561        2,145,080        5,024,005
                                =========        ==========         =========        =========        =========

      1999                      1,431,120        (1,192,600)        1,543,783        2,669,290        4,645,343
                                =========        ==========         =========        =========        =========

      1998                      1,385,484        (1,154,572)        1,225,718          146,320        4,026,634
                                =========        ==========         =========        =========        =========
</TABLE>


                                       47

<PAGE>   48
      ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE: None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table shows for each director (a) his or her age, (b) the year in
which the director first served as a director of the Company, (c) position with
the Company and business experience during the past five years, including
principal occupation, (d) his or her committee assignments, and (e) his or her
other directorships. Each director is elected for a term of one year and until
his or her successor shall be elected.

<TABLE>
<CAPTION>
             NAME                         AGE        DIRECTOR    POSITION WITH THE COMPANY AND BUSINESS EXPERIENCE
                                                      SINCE      DURING LAST FIVE YEARS, INCLUDING OCCUPATION
<S>                                      <C>         <C>         <C>
    HENRY W. NOZKO, SR. (1)               81           1951      Chairman of the Board, President and Chief Executive
                                                                 Officer of the Company.  Chairman of the Board and
                                                                 Director of United Coastal Insurance Company, ACSTAR
                                                                 Holdings, Inc. and ACSTAR Insurance Company.
                                                                 Co-Chief Executive Officer of United Coastal
                                                                 Insurance Company.

    HENRY W. NOZKO, JR. (1)                54          1971      Executive Vice President, Chief Operating Officer,
                                                                 and Treasurer of the Company.  Member of the Audit
                                                                 Committee.  President, Co-Chief Executive Officer and
                                                                 Treasurer of United Coastal Insurance Company.
                                                                 President and Treasurer of ACSTAR Holdings, Inc. and
                                                                 ACSTAR Insurance Company.  Member, Boards of
                                                                 Directors of United Coastal Insurance Company, ACSTAR
                                                                 Holdings, Inc., ACSTAR Insurance Company.

    VICTORIA C. NOZKO (1)                  82          1982      Housewife during past five years.

    JOHN C. CREASY                         81          1987      Retired Chief Executive Officer of Danbury Hospital,
                                                                 Member, Board of United Coastal Insurance Company.
                                                                 Member of the Compensation Committee and Audit
                                                                 Committee.

    ARTHUR R. MOORE                        67         1999       Former General President of Sheet Metal Workers'
                                                                 International Association.  Member of the Audit
                                                                 Committee.

    ALFRED T. ZLOTOPOLSKI                  54         1999       General Secretary-Treasurer of the Sheet Metal
                                                                 Workers' International Association as of March 1,
                                                                 1999.  Previously was the Business Manager and
                                                                 President of Local 36 of the Sheet Metal Workers'
                                                                 International Association.  Member of the Audit
                                                                 Committee.
</TABLE>


(1)   Mr. Henry W. Nozko, Sr. and Mrs. Victoria C. Nozko are husband and wife
      and Mr. Henry W. Nozko, Jr. is their son.


                                       48
<PAGE>   49
Executive Officers of the Registrant:

The following are the Company's Executive Officers, their age, and offices held.
Officers are appointed to serve until the meeting of the Board of Directors
following the next Annual Meeting of Stockholders and until their successors
have been elected.

<TABLE>
<CAPTION>
         NAME                          AGE          OFFICES HELD
         ----                          ---     ------------
<S>                                    <C>     <C>
         Henry W. Nozko, Sr.            81     President, Chief Executive
                                               Officer, Director and
                                               Chairman of the Board
                                               since 1951.

         Henry W. Nozko, Jr.            54     Executive Vice President since
                                               1982. Treasurer since 1973.
                                               Director since 1971, and Chief
                                               Operating Officer since 1985.

         Robert H. Frazer               54     Vice President since 1982.
                                               Secretary since 1992. General
                                               Counsel since 1977.

         Michael P. Cifone              42     Vice President-Finance since
                                               1990. Corporate Controller
                                               since 1989.
</TABLE>


                                       49
<PAGE>   50
The following table provides information on option grants during 2000 to the
named Executive Officers.


                       OPTIONS GRANTED IN LAST FISCAL YEAR

                                INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
                          STOCK       PERCENTAGES OF TOTAL      EXERCISE       EXPIRATION        POTENTIAL REALIZABLE VALUE AT
                         OPTIONS       OPTIONS GRANTED TO         PRICE           DATE         ASSUMED ANNUAL RATES OF STOCK PRICE
                         GRANTED      INDIVIDUALS IN FISCAL       ($/SH)                         APPRECIATION FOR OPTION TERM (B)
                           (A)               YEAR
                                                                                                        5%                 10%
                                                                                                     -------            --------
<S>                      <C>          <C>                       <C>          <C>               <C>                      <C>
Henry W. Nozko, Sr.      10,000              14.29%                $7.25        12/14/2010           $46,720            $115,546
Henry W. Nozko, Jr.      10,000              14.29%                $7.25        12/14/2010           $46,720            $115,546
Michael P. Cifone        10,000              14.29%                $7.25        12/14/2010           $46,720            $115,546
</TABLE>


(A)   Options were granted at an exercise price equal to the fair market value
      per share of ACMAT Corporation's Class A Stock as of the date of grant and
      are exercisable starting six months after the grant date.

(B)   Potential realizable values are net of exercise price, but before taxes
      associated with exercise. Amounts represent hypothetical gains that could
      be achieved for the respective options if exercised at the end of the
      option term. The assumed 5% and 10% rates of stock price appreciation are
      provided in accordance with rules of the Securities and Exchange
      Commission and do not represent the Company's estimate or projection of
      the future stock price. Actual gains, if any, on stock option exercises
      are dependent on the future performance of the stock, overall market
      conditions and the option holders' continued employment through the
      vesting period. This table does not take into account any appreciation in
      the price of the Class A Stock from the date of grant to date.


                                       50
<PAGE>   51
ITEM 11. EXECUTIVE COMPENSATION

Directors who are not employees of the Company are paid an annual fee of $4,000.

The following table provides certain summary information regarding compensation
of the Company's Chief Executive Officer and each of the four most highly
compensated executive officers of the Company for the periods indicated.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL                                                         ANNUAL                          ALL OTHER
POSITION                                                               COMPENSATION (A)                 COMPENSATION (B)
                                                    YEAR             SALARY              BONUS
<S>                                                 <C>             <C>                 <C>             <C>
      Henry W. Nozko, Sr.                           2000            $460,700            $200,000            $10,432
      Chairman, President                           1999            $447,200            $395,000            $10,532
      And Chief Executive Officer                   1998            $447,200            $     --            $12,238


      Henry W. Nozko, Jr.                           2000            $332,000            $150,000            $10,432
      Executive Vice President and Chief            1999            $322,500            $315,000            $10,430
      Operating Officer                             1998            $322,500            $     --            $12,120


      Robert H. Frazer, Esq                         2000            $136,069            $     --            $ 6,648
      Vice President, Secretary and                 1999            $171,600            $ 25,000            $10,392
      General Counsel                               1998            $171,600            $     --            $12,075


      Michael P. Cifone                             2000            $154,500            $100,000            $10,432
      Vice President-Finance                        1999            $150,000            $155,000            $10,289
                                                    1998            $114,400            $     --            $10,202
</TABLE>

(A) Amounts shown include cash compensation earned and received by the executive
officers. There are no other forms of non-cash compensation or other perquisites
for any executive officer.

The Company has a Management Compensation Plan based upon earnings of the
Company. As a guideline, the plan provides that participants may share in an
incentive fund equal to 12% of pretax earnings, provided such pretax earnings
amount to at least a 10% return on the Company's equity. However, both the
participants and the amount of bonus are discretionary, provided the total
amount of bonuses paid do not exceed the total incentive fund available. In
addition, the Company may offer separate incentives and commissions on an
individual basis.

(B) The amounts shown in this column represent contributions made by the Company
to the Company's Thrift, Profit Sharing and Retirement Plan ("Plan"). The Plan
provides that all nonunion employees employed on a full time or part time
salaried basis are eligible to participate on the first day of January or July
after twelve consecutive months of employment. The Company contributes amounts,
as determined by the Board of Directors, to be allocated among the participants
according to a formula based upon the employee's years of service and
compensation. A participant becomes vested at the rate of 20% per year
commencing after two years of service.


                                       51
<PAGE>   52
The following table provides information on options during 2000 by the named
Executive Officers and the value of their unexercised options at December 31,
2000.


                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                     AND FISCAL YEAR END 2000 OPTION VALUES

<TABLE>
<CAPTION>
                                                           Number of
                                                          Unexercised                  Value of Unexercised
                                                          Options at                   In-the-Money Options
Name                                                     12/31/00 (1)                      at 12/31/00 (2)
----                                                     ------------                 ----------------------
                                                    Exercisable/Unexercisable        Exercisable/Unexercisable
<S>                                                 <C>                              <C>
Henry W. Nozko, Sr.
    - ACMAT Class A Stock Options                          46,000/10,000                         -/-
    - ACMAT Common Stock Options                           50,000/-                          $412,500/-

Henry W. Nozko, Jr.
    - ACMAT Class A Stock Options                          45,000/10,000                        -/-
    - ACMAT Common Stock Options                           50,000/-                          $412,500/-

Robert H. Frazer
    - ACMAT Class A Stock Options                          35,000/-                             -/-

Michael P. Cifone
    - ACMAT Class A Stock Options                          10,000/10,000                        -/-
</TABLE>

(1)   Represents the number of options held at year end.

(2)   Represents the total gain that would have been realized if all options for
      which the year-end stock price was greater than the exercise price were
      exercised on the last day of the year.


                                       52
<PAGE>   53
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

As of March 15, 2001, no person was known to the Company to be the beneficial
owner of more than five percent of its outstanding shares of Common Stock or
Class A Stock except as set forth in the following table which also shows, as of
that date, the total number of shares of each class of stock of the Company
beneficially owned, and the percent of the outstanding class of stock so owned,
by each director, and by all directors and officers of the Company, as a group:

<TABLE>
<CAPTION>
                                                                                             PERCENTAGE              PERCENTAGE
                                        CLASS                NUMBER OF SHARES                OF CLASS                 OF TOTAL
          BENEFICIAL OWNER            OF STOCK             BENEFICIALLY OWNED (1)           OUTSTANDING            VOTING POWER (15)
          ----------------            --------             ----------------------           ------------           -----------------
<S>                                   <C>                  <C>                              <C>                    <C>
Henry W. Nozko, Sr.                   Common                    417,980 (4)                    68.79%                    52.46%
                                      Class A                    61,000 (3)                     3.04
Henry W. Nozko, Jr.                   Common                    196,924 (2)(4)                 32.41                     26.45
                                      Class A                   169,074 (2)(5)                  8.42
Victoria C. Nozko                     Class A                    52,000 (6)                     2.63                       .69
John C. Creasy                        Common                         --                           --                       .35
                                      Class A                    26,500 (7)                     1.34
Arthur R. Moore                       Class A                    10,000 (8)                      .51                       .13
Alfred T. Zlotopolski                 Class A                    10,000 (8)                      .51                       .13
Sheet Metal Workers'
  National Pension Fund               Class A                 1,400,000 (9)                    41.76                     15.68
Franklin Resources, Inc.              Class A                   443,500 (10)                   22.72                      5.89
Queensway Financial
   Holdings Limited                   Class A                   314,050(11)                    16.09                      4.17
EQSF Advisors, Inc.                   Class A                   200,678 (12)                   10.28                      2.67
First Manhattan Co.                   Class A                   175,513 (13)                    8.99                      2.33
Old Kent Financial Corp.              Class A                   130,000 (14)                    6.66                      1.73
All Directors and
  Officers (8 persons)
  As a Group                          Common                    614,904                        93.51                     74.53
                                      Class A                   384,289                        17.55
</TABLE>


(1)   The person listed has the sole power to vote the shares of Common Stock
      and Class A Stock listed above as beneficially owned by such person and
      has sole investment power with respect to such shares.

(2)   Does not include 400 shares of Class A Stock and 5,925 shares of Common
      Stock held by his wife, Gloria C. Nozko.

(3)   Includes options to purchase 56,000 shares of Class A Stock.

(4)   Includes options to purchase 50,000 shares of Common Stock.

(5)   Includes options to purchase 55,000 shares of Class A Stock.

(6)   Includes options to purchase 25,000 shares of Class A Stock.

(7)   Includes options to purchase 26,500 shares of Class A Stock.

(8)   Includes option to purchase 10,000 shares of Class A Stock.

(9)   Assumes the full conversion of $15,400,000 principal amount of 11.5%
      Convertible Note into 1,400,000 shares of Class A Stock. The Address of
      the Fund is Suite 500, 601 North Fairfax Street, Alexandria, VA 22314.

(10)  Address of Franklin Resources, Inc. is 777 Mariners Island Blvd. San
      Mateo, CA 94404.

(11)  Address of Queensway Financial Holdings Limited is 90 Adelaide Street
      West, Toronto, Ontario M5H3V9.

(12)  Address of EQSF Advisors, Inc. is 767 Third Avenue, New York, NY
      10017-2023.

(13)  Address of First Manhattan Co. is 437 Madison Avenue, New York, NY 10022.

(14)  Address of Old Kent Financial Corp. is 111 Lyon Street N.W., Grand Rapids,
      MI 49503.

(15)  Based upon one vote for each share of Common Stock and one-tenth vote for
      each share of Class A Stock.


                                       53
<PAGE>   54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

Sheet Metal Workers' National Pension Fund

The Pension Fund has the right to convert indebtedness of ACMAT to the Pension
Fund in the principal amount of $15,400,000 into shares of Class A Stock at the
current conversion price of $11.00 per share pursuant to the terms of a 30-year
unsecured, subordinated debenture dated July 1, 1992 and bearing interest at the
annual rate of 11.5%.

Henry W. Nozko, Sr., Henry W. Nozko, Jr. and the Pension Fund are parties to a
voting agreement pursuant to which the parties have agreed to vote their
respective shares of Class A Stock in favor of the Pension Fund's nominees to
the ACMAT Board of Directors.

AIG Life Insurance Company

On February 5, 1997, ACMAT Corporation purchased 1,099,996 shares of its own
Class A Stock from AIG Life Insurance Company (366,663 shares) and American
International Life Assurance Company of New York (733,333 shares). The 1,099,996
shares of Class A Stock were acquired throughout the past two years by AIG Life
Insurance Company and American International Life Assurance Company of New York
pursuant to the conversion options of the Convertible Senior Notes. The shares
were purchased by the Company at an average price of $14.70 per share for a
total purchase price of $16,174,942.

The purchase price of $16,174,942 consisted of $4,174,942 in cash and promissory
notes totaling $12,000,000. The promissory notes are with AIG Life Insurance
Company and American International Life Assurance Company of New York and are
payable over eight years with interest at prime rate. The interest rate is equal
to the prime rate, however, it shall not exceed 9-1/4% and it shall not be less
than 7-1/4%.

American International Group, Inc., a holding company for AIG Life Insurance
Company and American International Life Assurance Company of New York, is a
substantial owner of Transatlantic Reinsurance Company, a reinsurer to which the
Company, through Coastal Insurance and ACSTAR Insurance, ceded approximately
$389,000 in reinsurance premiums in the year ended December 31, 2000.

Other Relationships

During the year ended December 31, 2000, the Company paid to Dr. Arthur Cosmas
$157,781 in fees in connection with consulting services rendered by Dr. Cosmas
with respect to inspection and engineering services relating to ACMAT's asbestos
abatement activities. Dr. Cosmas is the son-in-law of Henry W. Nozko, Sr. and
Victoria C. Nozko and the brother-in-law of Henry W. Nozko, Jr.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a)   1. Consolidated Financial Statements

            Included in Part II of this Report:

            Independent Auditors' Report
            Consolidated Statements of Earnings for the years ended
              December 31, 2000, 1999 and 1998
            Consolidated Balance Sheets as of December 31, 2000 and 1999
            Consolidated Statements of Stockholders' Equity for the years
              ended December 31, 2000, 1999 and 1998
            Consolidated Statements of Cash Flows for the years ended
              December 31, 2000, 1999 and 1998
            Notes to Consolidated Financial Statements - December 31, 2000,
              1999 and 1998


                                       54
<PAGE>   55
            2. Financial Statement Schedules

            Consolidated Schedules included in Part II of this Report-Years
            ended December 31, 2000, 1999 and 1998:

              I -   Condensed Financial Information of Registrant
             II -   Valuation and Qualifying Accounts and Reserves
              V -   Supplemental Information Concerning Property-Casualty
                    Insurance Operations

All other schedules are omitted as the required information is not applicable or
the information is presented in the Consolidated Financial Statements or related
notes.

      (b)   Reports on Form 8-K

            The Company did not file a report on Form 8-K during the fourth
            quarter of 2000.

<TABLE>
<CAPTION>
      (c)   Exhibits
            ---------
<S>         <C>
      (3)   Certificate Amending and Restating the Company's Bylaws as filed as
            an Exhibit to the Company's Form 10-Q for the Quarter ended March
            31, 1989 is incorporated herein by reference.

      (3a)  Certificate Amending and Restating the Company's Certificate of
            Incorporation as amended May 1, 1991 as filed as an Exhibit to the
            Company's Form 10-Q for the Quarter ended March 31, 1991 is
            incorporated by reference.

      (4b)  Promissory Note between ACMAT Corporation and Webster Bank as filed
            as an Exhibit to the Company's Form 10-k for the year ended December
            31, 1998 is incorporated by reference.

      (4c)  Open-end Mortgage Deed and Security Agreement between ACMAT
            Corporation and Webster Bank as filed as an Exhibit to the Company's
            Form 10-K for the year ended December 31, 1999 is incorporated by
            reference.

      (4d)  Commercial Credit Agreement between ACMAT Corporation and Webster
            Bank as filed as an Exhibit to the Company's Form 10-K for the year
            ended December 31, 1999 is incorporated by reference.

      (4e)  Revolving Credit Note between ACMAT Corporation and Webster Bank as
            filed as an Exhibit to the Company's Form 10-K for the year ended
            December 31, 1999 is incorporated by reference.

      (4f)  Term Note between ACMAT Corporation and Webster Bank as filed as an
            Exhibit to the Company's Form 10-K for the year ended December 31,
            1999 is incorporated by reference.

      (10a) Annual Management Compensation Plan as filed as an Exhibit to the
            Company's 1984 Form 10-K is incorporated herein by reference.

      (10b) Stock Purchase Agreement dated as of July 1, 1992 between ACMAT
            Corporation and the Sheet Metal Workers' National Pension Fund
            together with Note Agreement Re: 11 1/2% Convertible Subordinated
            Notes due 2012 filed as Exhibit 10g to the Company's Form 10-K for
            the year ended December 31, 1992 is incorporated herein by
            reference.

      (21)  Subsidiaries of ACMAT.

      (27)  Financial Data Schedule.
</TABLE>


                                       55
<PAGE>   56
                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant had duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                            ACMAT CORPORATION


      Dated:  March 30, 2001                By: /s/ Henry W. Nozko, Sr.
                                                ------------------------------
                                            Henry W. Nozko, Sr., President
                                            and Chief Executive Officer


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.


<TABLE>
<S>                                       <C>                              <C>
                                          Chairman of the Board,
 /s/ Henry W. Nozko, Sr                   President, Chief Executive
------------------------------            Officer and Director             March 30, 2001
Henry W. Nozko, Sr.




                                          Chief Operating Officer,
 /s/ Henry W. Nozko, Jr.                  Executive Vice President
------------------------------            Treasurer and Director           March 30, 2001
Henry W. Nozko, Jr.




                                          Vice President - Finance
 /s/ Michael P. Cifone                    (Principal Financial and
----------------------                    Accounting Officer)              March 30, 2001
Michael P. Cifone



 /s/ Victoria C. Nozko                    Director
------------------------------                                             March 30, 2001
Victoria C. Nozko



 /s/ John C. Creasy                       Director                         March 30, 2001
-----------------------------
John C. Creasy
</TABLE>



                                       56
<PAGE>   57
                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Regulation S-K Exhibit                        Page Number
----------------------                        -----------
<S>                                 <C>                                                          <C>
    Exhibit 3                       -  Bylaws                                                    Incorporated by Reference

    Exhibit 3a                      -  Certificate of Incorporation
                                        as amended May 1, 1991                                   Incorporated by Reference

    Exhibit 4b                      -  Promissory Note between ACMAT
                                        and Webster Bank                                         Incorporated by Reference

    Exhibit 4c                      -  Open-end Mortgage Deed/Security
                                        Agreement between ACMAT and
                                        Webster Bank.                                            Incorporated by Reference

    Exhibit 4d                      -  Commercial Credit Agreement between
                                        ACMAT and Webster Bank                                   Incorporated by Reference

    Exhibit 4e                      -  Revolving Credit Note between ACMAT
                                        and Webster Bank                                         Incorporated by Reference

    Exhibit 4f                      -  Term Note between ACMAT and Webster Bank                  Incorporated by Reference

    Exhibit 10a                     -  Annual Management                                         Incorporated by Reference
                                        Compensation Plan

    Exhibit 10b                     -  Stock Purchase and Note Agreement                         Incorporated by Reference
                                        between ACMAT Corporation
                                        and The Sheet Metal Workers'
                                        National Pension Fund

    Exhibit 21                      -  Subsidiaries of ACMAT                                     Page 58
</TABLE>


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