<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 1-13953
W. R. GRACE & CO. SALARIED EMPLOYEES
SAVINGS AND INVESTMENT PLAN
W. R. Grace & Co.
1750 Clint Moore Road
Boca Raton, Florida 33487-2707
<PAGE>
Financial Statements and Exhibits
(a) Financial Statements. Filed as part of this Report on Form 11-K
are the financial statements of the W. R. Grace & Co. Salaried Employees
Savings and Investment Plan, as required by Form 11-K, together with the report
thereon of Price Waterhouse LLP, independent certified public accountants,
dated May 27, 1998.
(b) Exhibits. The Consent of Price Waterhouse LLP is being filed as an
exhibit to this Report.
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES
SAVINGS & INVESTMENT PLAN
DECEMBER 31, 1997 AND 1996
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
May 27, 1998
To the Participants and Administrative Committee of the
W. R. Grace & Co. Salaried Employees
Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits appearing on pages F-2 through F-5 of this report present fairly, in
all material respects, the net assets available for plan benefits of the W. R.
Grace & Co. Salaried Employees Savings and Investment Plan (the "Plan") at
December 31, 1997 and 1996, and the changes in net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Plan administrator and/or other plan fiduciaries (the "Plan Fiduciaries"); our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by the Plan Fiduciaries, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Fund Information in the statements
of net assets available for plan benefits and the statements of changes in net
assets available for plan benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for plan benefits of each fund. The Fund
Information has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Price Waterhouse LLP
F-1
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED EMPLOYEE FIDELITY
INCOME GRACE STOCK BALANCED
FUND ADS FUND STOCK FUND OWNERSHIP PLAN FUND
--------------- ------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $329,352,449
Commercial paper, at cost 5,198,287 $172,283 $584,960 $1,322,376
W. R. Grace & Co. Common Stock
(cost: $101,544,649) 48,560,663 166,507,984
FMC ADS
(cost: $4,503,591) 5,870,456
Fidelity mutual funds
(cost: $178,868,115) $32,269,412
Participant loans
Contributions receivable 797,037 170,834 613,433 126,112
--------------- ------------ ------------ ---------------- ----------------
Net assets available for plan benefits $335,347,773 $6,042,739 $49,316,457 $168,443,793 $32,395,524
=============== ============ ============ ================ ================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
GROWTH & INCOME BLUE CHIP FIDELITY OTC PARTICIPANT
FUND GROWTH FUND CONTRAFUND FUND LOANS TOTAL
--------------- ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $329,352,449
Commercial paper, at cost 7,277,906
W. R. Grace & Co. Common Stock
(cost: $101,544,649) 215,068,647
FMC ADS
(cost: $4,503,591) 5,870,456
Fidelity mutual funds
(cost: $178,868,115) $47,666,141 $74,168,388 $46,472,627 $15,403,666 215,980,234
Participant loans $8,770,156 8,770,156
Contributions receivable 182,588 311,814 236,346 89,766 2,527,930
--------------- ------------ ------------- ------------- ------------ -------------
Net assets available for plan benefits $47,848,729 $74,480,202 $46,708,973 $15,493,432 $8,770,156 $784,847,778
=============== ============ ============= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED EMPLOYEE FIDELITY
INCOME GRACE STOCK BALANCED
FUND ADS FUND STOCK FUND OWNERSHIP PLAN FUND
------------- ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $327,663,929
Commercial paper, at cost 5,662,090 $344,577 $916,378 $1,134,035
W. R. Grace & Co. Common Stock
(cost: $99,285,962) 32,308,042 122,519,885
FMC ADS
(cost: $7,142,342) 12,048,356
Fidelity mutual funds
(cost: $142,696,863) $27,379,765
Participant loans
Contributions receivable 822,321 29 157,198 616,826 165,102
------------- ------------ ------------- --------------- ------------
Net assets available for plan benefits $334,148,340 $12,392,962 $33,381,618 $124,270,746 $27,544,867
============= ============ ============= =============== ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
GROWTH & INCOME BLUE CHIP FIDELITY OTC PARTICIPANT
FUND GROWTH FUND CONTRAFUND FUND LOANS TOTAL
------------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $327,663,929
Commercial paper, at cost 8,057,080
W. R. Grace & Co. Common Stock
(cost: $99,285,962) 154,827,927
FMC ADS
(cost: $7,142,342) 12,048,356
Fidelity mutual funds
(cost: $142,696,863) $30,487,468 $56,715,995 $37,215,990 $10,856,984 162,656,202
Participant loans $8,090,709 8,090,709
Contributions receivable 147,544 310,905 224,817 72,562 2,517,304
------------------- ------------- ------------ ------------ ------------ ------------
Net assets available for plan benefits $30,635,012 $57,026,900 $37,440,807 $10,929,546 $8,090,709 $675,861,507
=================== ============= ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND
INFORMATION
DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMPLOYEE
FIXED STOCK FIDELITY
INCOME GRACE OWNERSHIP BALANCED
FUND ADS FUND STOCK FUND PLAN FUND
------------------ ---------------- ---------------- ------------------ -----------------
Contributions:
<S> <C> <C> <C> <C> <C>
Participants $ 10,650,939 $ - $ 2,301,944 $ - $ 1,650,266
Transfers among funds 7,106,961 (4,021,935) (5,436,510) (15,388,919) 162,307
Company - - - 8,213,477 -
------------------ ---------------- ---------------- ------------------ -----------------
Total 17,757,900 (4,021,935) (3,134,566) (7,175,442) 1,812,573
------------------ ---------------- ---------------- ------------------ -----------------
Income/(loss) from
investments:
Interest 24,676,286 - 55,485 119,815 40,063
Dividends - - - (*) - 3,939,582
Net realized gain - 1,806,038 8,108,020 13,338,128 711,285
Change in unrealized
appreciation - (3,457,906) 13,447,634 (*) 48,627,301 1,570,434
------------------ ---------------- ---------------- ------------------ -----------------
Total 24,676,286 (1,651,868) 21,611,139 62,085,244 6,261,364
------------------ ---------------- ---------------- ------------------ -----------------
Less:
Participant withdrawals 41,057,623 664,814 2,534,603 10,635,565 3,217,912
Administrative expenses 177,130 11,606 7,131 101,190 5,368
------------------ ---------------- ---------------- ------------------ -----------------
Net increase/(decrease) 1,199,433 (6,350,223) 15,934,839 44,173,047 4,850,657
------------------ ---------------- ---------------- ------------------ -----------------
Net assets available for plan benefits:
Beginning of year 334,148,340 12,392,962 33,381,618 124,270,746 27,544,867
------------------ ---------------- ---------------- ------------------ -----------------
End of year $ 335,347,773 $ 6,042,739 $ 49,316,457 $ 168,443,793 $ 32,395,524
================== ================ ================ ================== =================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIDELITY
GROWTH & FIDELITY FIDELITY
INCOME BLUE CHIP FIDELITY OTC PARTICIPANT
FUND GROWTH FUND CONTRAFUND FUND LOANS
----------------- ----------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 2,480,815 $ 4,177,594 $ 3,177,377 $ 1,219,604 $ -
Transfers among funds 8,062,935 3,816,496 1,392,088 3,598,085 708,492
Company - - - - -
----------------- ----------------- ----------------- ---------------- ---------------
Total 10,543,750 7,994,090 4,569,465 4,817,689 708,492
----------------- ----------------- ----------------- ---------------- ---------------
Income/(loss) from
investments:
Interest 30,813 68,937 44,324 8,780 -
Dividends 2,100,654 3,622,609 4,450,163 1,031,731 -
Net realized gain 1,899,844 2,881,590 2,016,408 330,564 -
Change in unrealized
appreciation 5,858,538 8,640,119 1,651,353 (567,662) -
----------------- ----------------- ----------------- ---------------- ---------------
Total 9,889,849 15,213,255 8,162,248 803,413 -
----------------- ----------------- ----------------- ---------------- ---------------
Less:
Participant withdrawals 3,214,583 5,749,750 3,446,191 1,056,057 29,045
Administrative expenses 5,299 4,293 17,356 1,159 -
----------------- ----------------- ----------------- ---------------- ---------------
Net increase/(decrease) 17,213,717 17,453,302 9,268,166 4,563,886 679,447
----------------- ----------------- ----------------- ---------------- ---------------
Net assets available for plan benefits:
Beginning of year 30,635,012 57,026,900 37,440,807 10,929,546 8,090,709
----------------- ----------------- ----------------- ---------------- ---------------
End of year $ 47,848,729 $ 74,480,202 $ 46,708,973 $ 15,493,432 $ 8,770,156
================= ================= ================= =============== ===============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TOTAL
------------------
<S> <C>
Contributions:
Participants $ 25,658,539
Transfers among funds -
Company 8,213,477
------------------
Total 33,872,016
------------------
Income/(loss) from
investments:
Interest 25,044,503
Dividends 15,144,739
Net realized gain 31,091,877
Change in unrealized
appreciation 75,769,811
------------------
Total 147,050,930
------------------
Less:
Participant withdrawals 71,606,143
Administrative expenses 330,532
------------------
Net increase/(decrease) 108,986,271
------------------
Net assets available for plan benefits:
Beginning of year 675,861,507
------------------
End of year $ 784,847,778
==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
(*) Dividends received are reinvested in shares of Grace Common Stock and
reflected as part of change in unrealized appreciation.
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND
INFORMATION
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OLD GRACE
OLD EMPLOYEE
FIXED GRACE STOCK
INCOME STOCK OWNERSHIP ADS GRACE
FUND FUND (*) PLAN (*) FUND STOCK FUND
-------------------- -------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 12,156,713 $ 1,673,617 $ - $ - $ 745,932
Transfers among funds 2,426,969 (31,146,063) (80,367,475) 6,248,865 25,620,990
Company - - 6,558,277 454 -
-------------------- -------------- ----------------- ------------------- -------------------
Total 14,583,682 (29,472,446) (73,809,198) 6,249,319 26,366,922
-------------------- -------------- ----------------- ------------------- -------------------
Income/(loss) from
investments:
Interest 26,113,816 42,640 106,582 - 11,466
Dividends - - (**) - - - (**)
Net realized gain/(loss) - 10,544,939 39,074,138 1,192,706 671,777
Change in unrealized
appreciation - (12,426,449) (**) (61,197,108) 5,190,321 6,332,441 (**)
-------------------- -------------- ----------------- ------------------- -------------------
Total 26,113,816 (1,838,870) (22,016,388) 6,383,027 7,015,684
-------------------- -------------- ----------------- ------------------- -------------------
Less:
Participant withdrawals 38,006,893 2,064,119 9,215,678 234,423 -
Administrative expenses 248,966 17,817 104,929 4,961 988
-------------------- -------------- ----------------- ------------------- -------------------
Net increase/(decrease) 2,441,639 (33,393,252) (105,146,193) 12,392,962 33,381,618
-------------------- -------------- ----------------- ------------------- -------------------
Net assets available for plan benefits:
Beginning of year 331,706,701 33,393,252 105,146,193 - -
-------------------- -------------- ----------------- ------------------- -------------------
End of year $ 334,148,340 $ - $ - $ 12,392,962 $ 33,381,618
==================== ============== ================= =================== ===================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
EMPLOYEE
STOCK FIDELITY FIDELITY FIDELITY
OWNERSHIP BALANCED GROWTH & INCOME BLUE CHIP FIDELITY
PLAN FUND FUND GROWTH FUND CONTRAFUND
-------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ - $ 2,410,884 $ 2,240,247 $ 4,642,360 $ 3,395,399
Transfers among funds 69,616,800 (6,236,322) 7,989,173 (2,946,713) 4,420,470
Company 2,636,616 - - - -
-------------------- ------------------ ------------------ ------------------ ------------------
Total 72,253,416 (3,825,438) 10,229,420 1,695,647 7,815,869
-------------------- ------------------ ------------------ ------------------ ------------------
Income/(loss) from
investments:
Interest 28,351 51,901 35,617 90,514 59,278
Dividends - 1,377,709 1,512,921 4,177,116 2,948,875
Net realized gain/(loss) 1,751,040 (69,983) 997,011 1,749,481 1,187,406
Change in unrealized
appreciation 52,100,037 1,034,839 2,252,690 1,841,167 2,393,368
-------------------- ------------------ ------------------ ------------------ ------------------
Total 53,879,428 2,394,466 4,798,239 7,858,278 6,588,927
-------------------- ------------------ ------------------ ------------------ ------------------
Less:
Participant withdrawals 1,829,054 3,927,296 2,816,501 5,885,607 3,665,872
Administrative expenses 33,044 8,969 5,582 6,311 21,145
-------------------- ------------------ ------------------ ------------------ ------------------
Net increase/(decrease) 124,270,746 (5,367,237) 12,205,576 3,662,007 10,717,779
-------------------- ------------------ ------------------ ------------------ ------------------
Net assets available for plan benefits:
Beginning of year - 32,912,104 18,429,436 53,364,893 26,723,028
-------------------- ------------------ ------------------ ------------------ ------------------
End of year $ 124,270,746 $ 27,544,867 $ 30,635,012 $ 57,026,900 $ 37,440,807
==================== ================== ================== ================== ==================
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIDELITY
OTC PARTICIPANT
FUND LOANS TOTAL
------------------- ---------------- -------------
<S> <C> <C> <C>
Contributions:
Participants $ 1,106,457 $ - $ 28,371,609
Transfers among funds 2,420,802 1,952,504 -
Company - - 9,195,347
------------------- ---------------- -------------
Total 3,527,259 1,952,504 37,566,956
------------------- ---------------- -------------
Income/(loss) from
investments:
Interest 24,451 - 26,564,616
Dividends 1,334,930 - 11,351,551
Net realized gain/(loss) 231,785 - 57,330,300
Change in unrealized
appreciation 347,745 - (2,130,949)
------------------- ---------------- -------------
Total 1,938,911 - 93,115,518
------------------- ---------------- -------------
Less:
Participant withdrawals 975,675 1,392,765 70,013,883
Administrative expenses 911 - 453,623
------------------- ---------------- -------------
Net increase/(decrease) 4,489,584 559,739 60,214,968
------------------- ---------------- -------------
Net assets available for plan benefits:
Beginning of year 6,439,962 7,530,970 615,646,539
------------------- ---------------- -------------
End of year $ 10,929,546 $ 8,090,709 $ 675,861,507
=================== ================ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
(*) Fund represents investments in Old Grace common stock. See Note 1.
(**) Dividends received are reinvested in shares of Grace Common Stock and
reflected as part of change in unrealized appreciation.
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF THE PLAN:
The following description of the W. R. Grace & Co. Salaried Employees Savings
and Investment Plan ("Plan") provides only general information. Participants
should refer to the text of the Plan and the Summary Plan Description and
Prospectus Supplement for the Plan for more complete information.
GENERAL
The Plan is a defined contribution plan originally adopted effective September
1, 1976, and has been amended from time to time. The Plan is subject to certain
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
ELIGIBILITY AND VESTING
Within those units of W. R. Grace & Co., a Delaware corporation ("Grace"), and
its subsidiaries (collectively, the "Company") designated as participating
units in the Plan, any salaried employee (or any salesman paid on a commission
basis) and any other employee in an eligible employment classification who has
completed 12 months of employment (including 1,000 hours of service) is
eligible to participate in the Plan, subject to certain exceptions and special
provisions.
A participant's interest in the Plan is always fully vested.
NMC TRANSACTION
In September 1996, a predecessor of Grace ("Old Grace") completed a transaction
("NMC Transaction") as a result of which each of its common shareholders
received shares of Grace Common Stock, American Depositary Shares ("ADSs") of
Fresenius Medical Care AG ("FMC"), and shares of preferred stock ("New
Preferred Shares") of Fresenius National Medical Care Holdings, Inc., a
subsidiary of FMC. FMC is a German corporation that owns National Medical Care,
Inc. (a subsidiary of Old Grace) and other businesses. ADSs represent shares of
FMC. The common stock of Old Grace was canceled in the NMC Transaction.
The Old Grace Stock Fund and the Old Grace Employee Stock Ownership Plan were
previously invested in common stock of Old Grace; as noted above, such common
stock was canceled in the NMC Transaction and was therefore eliminated from the
Plan following the NMC Transaction. The Grace Common Stock, ADSs and New
Preferred Shares received with respect to the shares of common stock of Old
Grace held in the Old Grace Employee Stock Ownership Plan were credited to the
Employee Stock Ownership Plan. All such ADSs and New Preferred Shares were sold
within 90 days following the NMC Transaction, and the proceeds were invested in
Grace Common Stock and credited to the Employee Stock Ownership Plan.
The Grace Common Stock and New Preferred Shares received with respect to the
shares of common stock of Old Grace held in the Old Grace Stock Fund were
credited to the Grace Stock Fund. All such New Preferred Shares were sold
within 90 days following the NMC Transaction, and the proceeds were invested in
Grace Common Stock and credited to the Grace Stock Fund. The ADSs received with
respect to such shares of common stock of Old Grace were credited to the ADS
Fund.
F-6
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
CONTRIBUTIONS TO THE PLAN
Plan participants may elect to contribute to the Plan from 2% to 16% of their
compensation (which, for purposes of the Plan, consists of salary and/or
commissions, incentive compensation, special bonus awards, shift differential
and overtime pay).
Participant contributions may be made from before-tax and/or after-tax income,
as provided under Sections 401(k) and 401(m) of the Internal Revenue Code of
1986, as amended (the "Code"), subject to an annual dollar limit on before-tax
contributions of $9,500 for 1997 and 1996. In addition, for both 1997 and 1996,
federal income tax law limited to $150,000 the annual compensation on which
tax-qualified plan benefits may be based.
A Company contribution equal to 50% of each participant's contribution is made
to the Plan; however, no Company contribution is made with respect to a
participant's contribution in excess of 6% of his compensation. Therefore, the
maximum Company contribution is 3% of each participant's compensation, subject
to the annual dollar limitations noted above.
INVESTMENT OPTIONS
Participants may elect to have their contributions invested in any one or more
of the following funds in which the Plan participates:
FIXED INCOME FUND
The Fixed Income Fund is invested in fixed income securities or
obligations, interest-bearing bank accounts or guaranteed income funds
established or maintained by licensed insurance companies. Excess cash
may be invested in short-term fixed income securities.
GRACE STOCK FUND
The Grace Stock Fund is invested in Grace Common Stock. Pending
investment, cash credited to this fund may be invested in short-term
securities.
The Plan also offers the following five Fidelity Mutual Funds to Plan
participants:
FIDELITY BALANCED FUND is invested in both fixed income
securities and equity securities at all times.
FIDELITY GROWTH & INCOME FUND is invested in equity securities at
all times and may be invested in fixed income securities,
depending upon market conditions.
FIDELITY BLUE CHIP GROWTH FUND is invested in equity securities
of companies with higher than average earnings growth.
FIDELITY CONTRAFUND is invested in equity securities of companies
generally out of favor with the market that are judged by the
Fund's investment manager to be capable of above average growth
in value.
F-7
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
FIDELITY OTC PORTFOLIO is invested in equity securities of
smaller companies traded in the over-the-counter market.
The plan also maintains an ADS Fund as a result of the NMC Transaction.
ADS FUND
The ADS Fund holds the ADSs that were credited to the accounts of each
participant who had a balance in the Old Grace Stock Fund immediately
prior to the NMC Transaction. Participants may transfer balances out
of the ADS Fund at any time, but may not deposit or transfer any funds
into the ADS Fund. The ADS Fund will be eliminated from the Plan on
December 31, 1998; any balances remaining in such fund on that date
will be credited to the Fixed Income Fund. Pending investment, cash
credited to this Fund may be invested in short-term securities.
At December 31, 1997 and 1996, the number of participants in the various Funds
(including former employees whose funds have not yet been distributed and who
no longer contribute to the Plan) was as follows:
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
Fixed Income Fund 6,470 6,886
Grace Stock Fund 2,432 2,423
Employee Stock Ownership Plan 7,638 8,401
Fidelity Balanced Fund 2,083 2,191
Fidelity Growth & Income Fund 2,315 2,091
Fidelity Blue Chip Growth Fund 3,637 3,548
Fidelity Contrafund 2,562 2,524
Fidelity OTC Fund 1,392 1,313
ADS Fund 1,729 2,134
The Plan provides that a statement of each participant's account be sent to the
participant at least once a year. Presently, such statements are sent at the
end of each calendar quarter.
On any business day, participants may allocate their future contributions among
the Funds and transfer the amounts related to their prior contributions in any
of the Funds to other Funds (other than the ADS Fund). Transfers may be in
whole dollar amounts or in multiples of 5% of the participant's account
balance.
Company contributions are generally credited to the Employee Stock Ownership
Plan ("ESOP"). The ESOP is invested in Grace Common Stock. The ESOP is an
Employee Stock Ownership Plan, within the meaning of the Code.
Eligible employees (generally, those age 50 and older) may elect to transfer
all or a portion of their Company contributions once each year from the ESOP
Fund to any of the other Funds except the Grace Stock Fund and the ADS Fund.
Such transfers may be in whole dollar amounts or multiples of 5% of the
participant's account balance.
F-8
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
PARTICIPANT LOANS
Participants may borrow up to one-half of the value of their account balance up
to $50,000. Loans may be for a term of one to five years for a general purpose
loan and up to twenty years for a loan to purchase a principal residence. The
interest rate for the loans is fixed for the term of the loan and the loans are
repaid in periodic installments, depending on the loan provisions. Participants
can repay the outstanding loan balance in full at any time without penalty.
Loans are considered to be in default and treated as a distribution for tax
purposes if no payment is received for ninety days. If employment with the
Company ends, any outstanding loan balance will be considered a distribution if
not repaid within ninety days.
Interest paid on loans is credited to the individual funds from which the loan
was taken and is shown as interest income within those funds.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounts of the Plan are maintained on the accrual basis of accounting
which is acceptable under U.S. Department of Labor Regulations and is in
accordance with generally accepted accounting principles ("GAAP").
Investments in publicly traded securities are valued at the last reported sales
price on the last day of the year. Investments in the Fidelity Mutual Funds are
valued at their respective market prices quoted at year-end which represent the
net asset value of the securities held in such Funds. Investments in commercial
paper, U.S. Treasury bills and U.S. government securities mutual funds are
valued at cost, which approximates market value. Investments in insurance
company contracts are stated at contract value, which represents contributions
made under the contract plus interest at the contract rate, less funds used for
withdrawals. Participant loans are valued at cost, which approximates fair
value.
The assets of the Plan are commingled in the Trust Fund of the W. R. Grace &
Co. Profit Sharing and Savings and Investments Plans ("Trust Fund") with the
assets of other tax-qualified profit sharing and savings and investment plans
maintained by the Company. The Trust Fund is administered by The Fidelity
Management Trust Company ("Trustee"). For each Fund, assets and investment
returns are allocated to each plan pro rata, based upon each plan's daily net
asset balance in the Fund and the Trust Fund's daily total net asset balance
attributable to the Fund.
F-9
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
The following tables present the fair values of investments and investment
income for the Trust Fund:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
INVESTMENTS AT FAIR VALUE:
Guaranteed investment contracts $ 339,227,904 $ 336,477,479
Commercial paper, at cost 7,576,304 8,371,661
W. R. Grace & Co. Common Stock 229,580,586 164,826,752
Fresenius Medical Care ADS 6,337,059 13,023,675
Fidelity mutual funds 224,084,198 168,769,016
------------- -------------
$ 806,806,051 $ 691,468,583
============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 25,789,788 $ 27,299,403
Dividends 15,748,378 11,744,003
Net realized gain 32,937,076 58,391,340
Change in unrealized appreciation 80,093,404 (404,809)
------------- -------------
$ 154,568,646 $ 97,029,937
============= =============
</TABLE>
Income of each Fund is reinvested in that Fund, except that dividends paid on
shares of Grace Common Stock held in the ESOP Fund are paid to participants
within 90 days after the end of the calendar year in which the dividends are
received. The ESOP Fund dividends are not treated as income to the Plan or as
distributions to participants. The Trustee manages the Grace Stock Fund and the
ESOP Fund by purchasing shares of Grace Common Stock and by selling shares to
the extent necessary to obtain cash for disbursements and transfers from the
Funds. Investment management of the Fixed Income Fund and investment oversight
of the Fidelity Mutual Funds is the responsibility of the Investment and
Benefits Committee appointed by the Grace Board of Directors, or as delegated
by that Committee.
The Plan recognizes benefits when paid.
The Plan recognizes a gain or loss on Grace Common Stock distributed to
participants in an amount equal to the difference between the market value at
the distribution date and the average cost of the shares distributed. The cost
of securities sold is determined on the basis of average cost, and a gain or
loss is recorded equal to the difference between average cost and the proceeds
from the sale.
Amounts transferred to successor trustees are deducted from the Plan's net
assets upon the divestiture of, or discontinuance of participation by, a
participating unit.
The preparation of financial statements in conformity with GAAP requires the
Plan Fiduciaries to make estimates and assumptions that affect the reported
amounts of assets and liabilities, on the date of the financial statements.
Actual amounts may differ from the estimates used.
F-10
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
NOTE 3 - GUARANTEED INVESTMENT CONTRACTS:
Investments in the Fixed Income Fund consist primarily of guaranteed investment
contracts ("GICs") issued by various insurance companies. In accordance with
GAAP as proscribed for defined contribution plans, the Plan's GICs are stated
at contract value, which may or may not equal fair value. Contract value
includes principal invested, plus interest credited, less benefit payments and
administrative expenses. Listed below are the Plan's investments in GICs:
<TABLE>
<CAPTION>
VALUE AT DECEMBER 31,
-------------------------------
ISSUER RATE 1997 1996 MATURITY
------ ---- ---- ---- --------
<S> <C> <C> <C> <C>
Metropolitan Life Insurance Co. 6.88% $ 19,986,014 $ -- Jun-2002
7.00% 51,106,892 47,906,997 Dec-2000
Peoples Security Life Insurance Co. 6.87% 37,002,452 43,443,713 Dec-2001
6.40% 12,309,697 -- Dec-2002
Prudential Life Insurance Co. 9.13% 85,563,609 133,321,676 Jun-2000
New York Life Insurance Co. 5.91% 21,717,053 20,566,711 Dec-1999
6.63% 19,661,763 -- Jun-2003
John Hancock Mutual Life Ins. Co. 6.01% 21,347,025 20,197,323 Jun-1998, Jun-2000
7.02% 24,164,144 22,646,956 Jun-2001
7.85% 21,279,854 39,580,553 Feb-1998
Pacific Mutual Life Insurance Co. 6.87% 15,213,946 -- Jun-2002
------------ ------------
TOTAL CONTRACTS $329,352,449 $327,663,929
============ ============
</TABLE>
NOTE 4 - FEDERAL INCOME TAXES:
On July 13, 1995, the Internal Revenue Service issued a letter stating that the
Plan, as then in effect, was in compliance with the applicable requirements of
the Code. The Plan has been amended since the issuance of this determination
letter. However, the Plan Fiduciaries believe that the Plan is currently
designed and is currently being operated in compliance with the applicable
requirements of the Code. Therefore, the Plan Fiduciaries believe the Plan
continues to be qualified, and the related Trust continues to be tax exempt.
F-11
<PAGE>
W. R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
NOTE 5 - PLAN TERMINATION:
Grace anticipates that the Plan will continue indefinitely, but reserves the
right to amend or discontinue the Plan at any time. A participating unit may
terminate its participation in the Plan with the approval of Grace's Board of
Directors.
NOTE 6 - SUBSEQUENT EVENT:
On March 31, 1998, Grace completed transactions in which each holder of Grace
Common Stock received the following in exchange for each share of Grace Common
Stock: (a) one share of common stock of the "new W. R. Grace & Co." ("New
Grace") created as a result of the transactions, (b) a fraction of a share of
common stock of Sealed Air Corporation ("Sealed Air") and (c) a fraction of a
share of preferred stock of Sealed Air. Sealed Air owns the Company's former
Cryovac flexible packaging business and other businesses.
The Plan established the New Grace Stock Fund to hold the New Grace common
stock, the Sealed Air Common Stock Fund to hold the Sealed Air common stock,
and the Sealed Air Preferred Stock Fund to hold the Sealed Air preferred stock
that was credited to the accounts of each participant who had a balance in the
Grace Stock Fund on March 31, 1998.
The Plan established the New Grace Employee Stock Ownership Plan to hold the
New Grace common stock and the Sealed Air common and preferred stock that was
credited to the accounts of each participant who had a balance in the Employee
Stock Ownership Plan on March 31, 1998. All such Sealed Air common and
preferred stock has been sold, and the proceeds were invested in New Grace
common stock and credited to the New Grace Employee Stock Ownership Plan.
Also as a result of the transactions with Sealed Air, approximately $203.5
million (representing the fair value of assets credited to the accounts of
former Company employees who became employees of Sealed Air) were transferred
to Sealed Air.
F-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee has duly caused this annual report to be signed on
its behalf by the undersigned thereunto duly authorized.
W. R. GRACE & CO.
SALARIED EMPLOYEES
SAVINGS AND INVESTMENT PLAN
By: /s/ P. C. DONAYRI
-------------------------------
P. C. Donayri
Chairman, Administrative
Committee
Date: June 26, 1998
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 333-49703) of
W. R. Grace & Co. of our report dated May 27, 1998 appearing on page F-1 of the
Annual Report of the W. R. Grace & Co. Salaried Employees Savings and
Investment Plan on Form 11-K for the year ended December 31, 1997.
PRICE WATERHOUSE LLP
/s/ PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
June 26, 1998
