<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
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from _______________ to _____________
Commission File 001-10968
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
GRANCARE, INC. 401(k) SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office.
MARINER POST-ACUTE NETWORK, INC.
One Ravinia Drive, Suite 1500
Atlanta, Georgia 30346
<PAGE>
Page No.
Items 1-3 not applicable under ERISA Filing.
Item 4. Financial Statements and Exhibits.
Index to Financial Statements 1
Signature Page 3
Index to Exhibits 5
<PAGE>
Audited Financial Statements and
Supplemental Schedules
GranCare, Inc. 401(k) Savings Plan
Period from January 1, 1999 to
January 29, 1999 and
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Audited Financial Statements
and Supplemental Schedules
Period from January 1, 1999 to January 29, 1999 and
years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors........................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits.......................... 2
Statements of Changes in Net Assets Available for Benefits............... 3
Notes to Financial Statements............................................ 4
Supplemental Schedules for the Period
from January 1, 1999 to January 29, 1999
Line 27d - Schedule of Reportable Transactions........................... 15
Supplemental Schedules for the Year Ended December 31, 1998
Line 27a - Schedule of Assets held for Investment Purposes............... 16
Line 27d - Schedule of Reportable Transactions........................... 17
<PAGE>
Report of Independent Auditors
Plan Administrator
GranCare, Inc. 401(k) Savings Plan
We have audited the accompanying statements of net assets available for benefits
of GranCare, Inc. 401(k) Savings Plan as of January 29, 1999, December 31, 1998
and December 31, 1997 and the related statements of changes in net assets
available for benefits for the period from January 1, 1999 to January 29, 1999
and for the years ended December 31, 1998 and 1997. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
January 29, 1999, December 31, 1998 and December 31, 1997 and the changes in its
net assets available for benefits for the period from January 1, 1999 to January
29, 1999 and for the years ended December 31, 1998 and 1997, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of
reportable transactions for the period from January 1, 1999 to January 29, 1999,
assets held for investment purposes as of December 31, 1998, and reportable
transactions for the year ended December 31, 1998 are presented for purpose of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ Ernst & Young LLP
June 25, 1999
1
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Statements of Net Assets Available For Benefits
January 29, December 31
1999 1998 1997
---------- -------- -----------
Assets
Investments, at fair value:
Money market funds $ - $147,323 $ 6,311,359
Mutual funds - - 18,093,560
Common stock - 17,871 3,051,593
Loans to participants - 953 4,398
---------- -------- -----------
166,147 27,460,910
Cash - 18,821 -
Contributions receivable:
Participants - - 400,485
Employer - - 1,093,451
---------- -------- -----------
- - 1,493,936
Interest and dividends receivable - 9,651 1,490
---------- -------- -----------
Net assets available for benefits $ - $194,619 $28,956,336
========== ======== ===========
See accompanying notes.
2
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
Period from
January 1,
1999 to Year ended
January 29, December 31
1999 1998 1997
----------- ------------ -----------
<S> <C> <C> <C>
Additions to net assets attributed to:
Contributions:
Participants $ - $ 4,602,769 $ 6,269,503
Employer - 403,265 1,914,252
Investment income 467 828,955 2,514,999
Other receipts 29,864 42,901 195,476
--------- ------------ -----------
Total additions 30,331 5,877,890 10,894,230
Deductions from net assets attributed to:
Benefits paid 28,193 7,952,634 5,922,338
Benefits paid to TeamCare participants - - 8,978,859
Administrative expenses 195,793 2,179 386,324
Transfers to related plan 24,293 26,332,703 -
--------- ------------ -----------
Total deductions 248,279 34,287,516 15,287,521
Net appreciation (depreciation)
in fair value of investments 23,329 (352,091) 3,447,679
--------- ------------ -----------
Decrease in net assets
available for benefits (194,619) (28,761,717) (945,612)
Net assets available for benefits:
Beginning of period 194,619 28,956,336 29,901,948
--------- ------------ -----------
End of period $ - $ 194,619 $28,956,336
========= ============ ===========
</TABLE>
3
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements
January 29, 1999 and December 31, 1998
1. Description of Plan
The following description of GranCare, Inc. 401(k) Savings Plan (the "Plan")
provides only general information. Participants should refer to the Summary
Plan Description, copies of which are available from the Plan Administrator, for
a more complete description of the Plan's provisions.
General
The Plan is a defined contribution 401(k) plan for eligible employees of
GranCare, Inc. and subsidiaries ("GranCare"). On November 4, 1997, GranCare
consummated a merger with Living Centers of America, Inc. ("LCA") following
LCA's leveraged recapitalization. In connection with the closing of these
transactions, LCA changed its name to Paragon Health Network, Inc. ("Paragon").
On July 31, 1998, Paragon consummated a merger with Mariner Health Group, Inc.
In connection with the merger Paragon changed its name to Mariner Post-Acute
Network, Inc. ("Mariner") and became the Plan sponsor. GranCare, Paragon, and
Mariner are referred to herein as the "Company".
The Plan was amended in February 1997 in conjunction with the sale of GranCare's
institutional pharmacy division, TeamCare, Inc. ("TeamCare"), to Vitalink
Pharmacy Services, Inc. ("Vitalink"). During 1997, assets in the Plan relating
to employees of TeamCare were transferred to Vitalink sponsored benefit plans or
other options at the election of the participants.
The Board of Directors of Mariner Post-Acute Network, on October 1, 1998,
approved the merger of the Plan with the Mariner Savings Plan effective November
1, 1998. The final transfer of assets took place on January 29, 1999. The
Company is the Plan Sponsor of the Mariner Savings Plan.
Employees become eligible to participate in the 401(k) component of the Plan
upon completion of one year of service comprised of at least 1,000 hours of
service.
Employees must be age 21 or older to participate in the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
4
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Contributions
An eligible employee may authorize pre-tax payroll deductions for the purposes
of the Plan of amounts up to 15% of eligible compensation or the Internal
Revenue Service maximum (adjusted annually for the cost of living), whichever is
less. The Company contributes, on a quarterly basis, an amount equal to 25% of
the first 4% of each participant's contribution to the Plan. To receive the
Company matching contributions, the participant must be employed on the last day
of each calendar quarter.
In addition to the contributions to the 401(k) portion of the Plan, discussed in
the preceding paragraph, the Company also makes a profit-sharing contribution
annually. Employees do not need to participate in the 401(k) component of the
Plan to receive a profit-sharing contribution. The annual contribution is at the
discretion of management. The Company did not make a 1998 annual contribution.
The 1997 annual contribution is equal to 1% of total compensation. To receive
the Company profit-sharing contribution, the employee must be employed on the
last day of the Plan year and have completed two years of employment and worked
at least 1,000 hours per year.
Participant Accounts
Each participant's account is credited with the participant's contribution, the
Company's contributions and an allocation of Plan investment results based on
the participant's account balance.
Vesting
Participants have a nonforfeitable interest at all times in the value of their
individual account. Company contributions immediately vest when contributed to
the participants' individual accounts.
5
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Investment Options
The Plan provides four investment options to participants. Upon enrollment in
the Plan, a participant may direct employer and employee contributions to be
invested 100% in any one, or in multiples of 1%, in any of the following:
Company Stock Fund (Mariner Post-Acute Network, Inc. common stock), two mutual
funds invested in equity securities (Income Fund of America and Investment
Company of America, referred to as pooled equity funds), and a Money Market
Fund. Participants may change their investment elections more than once each
plan year; however, any requested change is effective at the beginning of the
next quarter. The Plan's investments are held and transactions are executed by
United Missouri Bank, N.A. (the "Trustee").
Payment of Benefits
Upon termination of service, a participant may receive a lump-sum amount equal
to the vested value of his or her account, or upon death, disability, or
retirement elect to receive annual installments over a 10 year period. The
participant's contributions may also be withdrawn for certain hardship
situations.
Administrative Expenses
Prior to 1997, administrative expenses were paid by the Plan sponsor. In 1997
and 1998 certain administrative expenses were paid by the Plan.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will not have any decreased vested percentage in their accounts.
6
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
Investment Valuation and Income Recognition
The Plan's investments in the Company Stock Fund and pooled equity funds are
stated at fair value as reported by the Trustee and are based on quoted market
prices on the last day of the plan year.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the ex-
dividend date.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Reclassifications
Certain amounts in the 1997 financial statements have been reclassified to
conform with the current year presentation.
3. Investment in Master Trust
During the Plan year ended December 31, 1997, a master trust agreement was
created between the Company and the Trustee which included two plans. The
investment assets of the Plan and a plan sponsored by an affiliate are held in
the master trust. The assets of the Plan are maintained separately from those
of the affiliate's plan. As such, there are no allocations of the master trust's
investments or investment results. As of December 31, 1997, the Plan's interest
in the assets of the master trust was 93%.
7
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
3. Investment in Master Trust (continued)
Effective December 1, 1998, the Company adopted a master trust agreement by and
between Mariner Post-Acute Network, Inc. and Fidelity Institutional Retirement
Services Company for the Mariner Savings Plan, Evergreen Healthcare Employees'
401(k) Profit Sharing Plan and the LCA Retirement Savings Plan. The Plan's
assets were transferred out of the master trust on October 1, 1998 and
substantially all were merged into the Mariner Savings Plan. The Plan's
remaining assets were transferred to the Mariner Savings Plan on January 29,
1999.
The Plan's investments are presented in the following table. Investments of the
Plan that represent 5% or more of the Plan's net assets are separately
identified:
January 29, December 31, December 31,
1999 1998 1997
----------- ------------ ------------
Money Market Fund $ -- $ 24,257 $ 6,293,870
Income Fund of America:
Income Fund of America -- -- 7,450,252
Money Market Fund -- 48,416 16,183
Investment Company of
America:
Investment Company
of America -- -- 10,643,308
Money Market Fund -- 64,212 312
Company Stock Fund:
Paragon Health Network,
Inc. Stock -- -- 3,051,593
Mariner Post-Acute
Network, Inc. Stock -- 17,871 --
Money Market Fund -- 10,438 994
8
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
4. Separate Investment Fund Information
<TABLE>
<CAPTION>
Period from January 1, 1999 to January 29, 1999
---------------------------------------------------------------------
Investment Money Company
Income Fund Company of Market Stock
of America America Fund Fund Loan Fund Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income $ 3,203 $ 4,021 $ 2,672 $ 222 $ - $ 10,118
Other receipts - - 29,864 - - 29,864
--------------------------------------------------------------------------------------
Total additions 3,203 4,021 32,536 222 - 39,982
Deductions from net assets attributed to:
Benefits paid - - - 28,193 - 28,193
Administrative expenses 9,597 13,591 169,816 2,743 46 195,793
--------------------------------------------------------------------------------------
Total deductions 9,597 13,591 169,816 30,936 46 223,986
Net appreciation in fair value of investments - - - 23,329 - 23,329
Transfers to related plan (2,401) (2,096) (6,976) (11,863) (957) (24,293)
Interfund transfers (43,075) (58,553) 112,395 (10,817) 50 -
--------------------------------------------------------------------------------------
Decrease in investments (51,870) (70,219) (31,861) (30,065) (953) (184,968)
Investments, beginning of period 51,870 70,219 31,861 30,065 953 184,968
--------------------------------------------------------------------------------------
Investments, end of period $ - $ - $ - $ - $ - $ -
======================================================================================
</TABLE>
9
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
4. Separate Investment Fund Information (continued)
<TABLE>
<CAPTION>
Year ended December 31, 1998
----------------------------------------------------------------
Investment Money Company
Income Fund Company of Market Stock Loan
of America America Fund Fund Fund Total
----------- ------------ ----------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Contributions:
Participants $ 1,421,760 $ 2,045,401 $ 861,873 $ 673,940 $ 280 $ 5,003,254
Employer 348,264 456,579 520,414 171,459 - 1,496,716
Investment income 265,229 283,787 269,948 1,830 - 820,794
Other receipts - - 38,919 - 3,982 42,901
----------- ------------ ----------- ----------- ------- ------------
Total additions 2,035,253 2,785,767 1,691,154 847,229 4,262 7,363,665
Deductions from net assets attributed to:
Benefits paid 2,634,235 3,319,848 1,526,244 469,037 - 7,949,364
Administrative expenses - - 2,179 - - 2,179
Loan payments - - - - 3,270 3,270
----------- ------------ ----------- ----------- ------- ------------
Total deductions 2,634,235 3,319,848 1,528,423 469,037 3,270 7,954,813
Net appreciation (depreciation)
in fair value of investments (84,032) 683,579 - (951,638) - (352,091)
Transfers to related plan (6,900,755) (11,104,150) (5,884,606) (2,443,192) - (26,332,703)
Interfund transfers 169,204 381,251 (540,134) (5,884) (4,437) -
----------- ------------ ----------- ----------- ------- ------------
Decrease in investments (7,414,565) (10,573,401) (6,262,009) (3,022,522) (3,445) (27,275,942)
Investments, beginning of year 7,466,435 10,643,620 6,293,870 3,052,587 4,398 27,460,910
----------- ------------ ----------- ----------- ------- ------------
Investments, end of year $ 51,870 $ 70,219 $ 31,861 $ 30,065 $ 953 $ 184,968
=========== ============ =========== =========== ======= ============
</TABLE>
10
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
4. Separate Investment Fund Information (continued)
<TABLE>
<CAPTION>
Year ended December 31, 1997
----------------------------------------------------------------
Investment Money Company
Income Fund Company of Market Stock Loan
of America America Fund Fund Fund Total
----------- ------------ ----------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Contributions:
Participants $1,695,159 $ 2,310,118 $1,144,938 $ 607,374 $ - $ 5,757,589
Company 846,181 1,540,886 833,061 308,404 - 3,528,532
Investment income 1,067,500 1,123,509 319,639 4,261 - 2,514,909
Other receipts 59,156 122,765 4,384 22,466 5,165 213,936
---------- ----------- ---------- ---------- -------- -----------
Total additions 3,667,996 5,097,278 2,302,022 942,505 5,165 12,014,966
Deductions from net assets attributed to:
Benefits paid 1,971,432 2,386,321 1,152,459 412,126 - 5,922,338
Benefits paid to TeamCare participants 2,946,669 4,285,447 1,091,181 655,562 - 8,978,859
Administrative expenses 145,067 151,308 88,395 1,554 - 386,324
Loan payments - - - - 18,460 18,460
---------- ----------- ---------- ---------- -------- -----------
Total deductions 5,063,168 6,823,076 2,332,035 1,069,242 18,460 15,305,981
Net appreciation in fair value of investments 750,628 1,782,713 - 914,338 - 3,447,679
Interfund transfers (37,492) (107,561) 170,849 (20,679) (5,117) -
---------- ----------- ---------- ---------- -------- -----------
Increase (decrease) in investments (682,036) (50,646) 140,836 766,922 (18,412) 156,664
Investments, beginning of year 8,148,471 10,694,266 6,153,034 2,285,665 22,810 27,304,246
---------- ----------- ---------- ---------- -------- -----------
Investments, end of year $7,466,435 $10,643,620 $6,293,870 $3,052,587 $ 4,398 $27,460,910
========== =========== ========== ========== ======== ===========
</TABLE>
11
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
5. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
January 29, December 31, December 31,
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Net assets available for benefits per the financial statements $ - $194,619 $28,956,336
Amounts allocated to withdrawn participants - - (1,481,079)
-------------------------------------------------------
Net assets available for benefits per the Form 5500 $ - $194,619 $27,475,257
=======================================================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
For the period
ended Year ended Year ended
January 29, December 31, December 31,
1999 1998 1997
-------------------------------------------------------
<S> <C> <C> <C>
Benefits paid to participants per the financial statements $28,193 $ 7,952,634 $14,901,197
Less: Amounts allocated on Form 5500 to withdrawn
participants for prior period - (1,481,079) (1,647,287)
Add: Amounts allocated on Form 5500 to withdrawn
participants for current period - - 1,481,079
-------------------------------------------------------
Benefits paid to participants per the Form 5500 $28,193 $ 6,471,555 $14,734,989
=======================================================
</TABLE>
12
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
5. Differences Between Financial Statements and Form 5500 (continued)
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to year-
end but not yet paid. Amounts allocated to withdrawn participants do not
include hardship withdrawals as these amounts are paid when requested.
6. Party-In-Interest Transactions
One of the investment vehicles available to employees, the Company Stock Fund,
contains the stock of Paragon Health Network, Inc., the Plan sponsor. Prior to
GranCare's merger with Paragon, the Plan held stock of GranCare.
Participant contributions which have been allocated to the Income Fund of
America, the Investment Company of America, and the Company Stock Fund are
temporarily invested in the Plan Trustee's Money Market Fund until such time as
shares of those investment vehicles can be purchased.
In connection with the sale of TeamCare in February 1997 (see Note 1), the Plan
received 61,173 shares of Vitalink common stock in exchange for 127,977 shares
of GranCare common stock. All Vitalink shares held by the Plan were sold in
June 1997 and proceeds were used to acquire GranCare common stock.
7. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated February 1, 1999, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
13
<PAGE>
GranCare, Inc. 401(k) Savings Plan
Notes to Financial Statements (continued)
8. Year 2000 Issue (Unaudited)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Mariner Savings Plan ("MS Plan") information systems
are prepared to handle year 2000 dates. The Plan Sponsor is taking a two-phase
approach. The first phase addresses internal systems that must be modified or
replaced to function properly. Both internal and external resources are being
utilized to replace or modify existing software applications, and test the
software and equipment for the Year 2000 modifications. The Plan Sponsor
anticipates substantially completing this phase of the project by late 1999.
Costs associated with modifying software and equipment are not estimated to be
significant and will be paid by the Plan Sponsor.
For the second phase of the Project, the MS Plan management established formal
communications with its third-party service providers to determine that they
have developed plans to address their own Year 2000 problems as they relate to
the MS Plan's operations. All third party service providers have indicated that
they will be Year 2000 compliant during 1999. If modification of data
processing systems of either the MS Plan, the Plan Sponsor, or its service
providers are not completed in a timely manner, the Year 2000 problem could have
a material impact on the operations of the MS Plan. The MS Plan management has
not developed a contingency plan, because they are confident that all systems
will be Year 2000 ready.
14
<PAGE>
Supplemental Schedules
<PAGE>
GranCare, Inc. 401(k) Savings Plan
EIN: 39-1021771
Plan #: 001
Line 27d - Schedule of Reportable Transactions
For the period from January 1, 1999 to January 29, 1999
<TABLE>
<CAPTION>
Expense Current Value of
Identity of Party Description of Purchase Selling Cost of Lease Incurred with Asset on Net Gain
Involved Asset Price Price Asset Rental Transaction Transaction Date (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Category (i) - Individual security transactions in excess of 5% of Plan assets.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United Missouri Money Market Fund $14,098 $ - $14,098 $ - $ - $14,098 $ -
Bank, N.A. - 30,734 30,734 - - 30,734 -
United Missouri Income Fund of
Bank, N.A. America - 50,496 50,496 - - 50,496 -
United Missouri Investment 9,807 - 9,807 - - 9,807 -
Bank, N.A. Company of - 12,838 12,838 - - 12,838 -
America - 68,125 68,125 - - 68,125 -
</TABLE>
16
<PAGE>
GranCare, Inc. 401(k) Savings Plan
EIN: 39-1021771
Plan #: 001
Line 27d - Schedule of Reportable Transactions
For the period from January 1, 1999 to January 29, 1999
<TABLE>
<CAPTION>
Expense Current Value of
Description of Purchase Selling Cost of Lease Incurred with Asset on
Identity of Party Involved Asset Price Price Asset Rental Transaction Transaction Date Net Loss
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Category (iii) - Series of securities transactions in excess of 5% of Plan assets.
United Missouri Bank, N.A. Money Market Fund $14,535 $ - $14,535 $ - $ - $14,535 $ -
- 46,396 46,396 - - 46,396 -
United Missouri Bank, N.A. Income Fund of 12,878 - 12,878 - - 12,878 -
America - 64,748 64,748 - - 64,748 -
United Missouri Bank, N.A. Investment
Company of 18,626 - 18,626 - - 18,626 -
America - 88,845 88,845 - - 88,845 -
Mariner Post-Acute Common Stock 1,971 - 1,971 - - 1,971 -
Network, Inc. - 55,365 55,653 - - 55,365 (288)
There were no category (ii) or (iv) reportable transactions during the period from January 1, 1999 to January 29, 1999.
</TABLE>
17
<PAGE>
GranCare, Inc. 401(k) Savings Plan
EIN: 39-1021771
Plan #: 001
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Identity of Issue, Borrower, Description of Current
Lessor, or Similar Party Investment Cost Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* United Missouri Bank, N.A. Money Market Funds $147,323 $147,323
* Mariner Post-Acute Network, Inc. Common Stock 61,156 17,871
Loans to participants Interest at 10% - 953
-----------------------------------------
$208,479 $166,147
=========================================
</TABLE>
* Represents a party-in-interest to the Plan.
18
<PAGE>
GranCare, Inc. 401(k) Savings Plan
EIN: 39-1021771
Plan #: 001
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
<TABLE>
<CAPTION>
Current
Expense Value of
Incurred Asset on
Description of Purchase Selling Cost of Lease with Transaction
Identity of Party Involved Asset Price Price Asset Rental Transaction Date Net Gain
- -----------------------------------------------------------------------------------------------------------------------------------
Category (i) - Individual security transactions in excess of 5% of Plan assets.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United Missouri Bank, N.A. Money Market Fund $ - $ 6,505,731 $6,505,731 $ - $ - $6,505,731 $ -
United Missouri Bank, N.A. Income Fund of
America - 7,654,507 7,181,581 - - 7,654,507 472,926
United Missouri Bank, N.A. Investment Company of
America - 11,585,034 9,480,446 - - 11,585,034 2,104,588
Mariner Post-Acute
Network, Inc. Common Stock - 2,398,212 2,398,212 - - 2,398,212 -
</TABLE>
19
<PAGE>
GranCare, Inc. 401(k) Savings Plan
EIN: 39-1021771
Plan #: 001
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
<TABLE>
<CAPTION>
Current Value
Expense of Asset on
Description of Purchase Selling Cost of Lease Incurred with Transaction
Identity of Party Involved Asset Price Price Asset Rental Transaction Date Net Gain
- ------------------------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Category (iii) -- Series of transactions in excess of 5% of Plan assets.
United Missouri Bank, N.A. Money Market Fund $ 9,806,009 $ - $ 9,806,009 $ - $ - $ 9,806,009 $ -
- 16,068,018 16,068,018 - - 16,068,018 -
United Missouri Bank, N.A. Income Fund of 12,183,645 - 12,183,645 - - 12,183,645 -
America - 19,514,178 18,897,954 - - 19,514,178 616,224
United Missouri Bank, N.A. Investment 17,608,613 - 17,608,613 - - 17,608,613 -
Company of - 28,865,593 26,370,552 - - 28,865,593 2,495,041
America
Mariner Post-Acute Common Stock 1,640,574 - 1,640,574 - - 1,640,574 -
Network, Inc. - 3,711,458 3,680,512 - - 3,711,458 30,946
</TABLE>
20
<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed by the undersigned "hereunto duly authorized."
GRANCARE, INC. 401(K) SAVINGS PLAN
By /s/ Scott C. Harris
-----------------------------------
Scott C. Harris, Vice President of
Compensation Benefits and HRIS
Date: July 14, 1999
<PAGE>
EXHIBIT INDEX
Item
- ----
23 Consent of Ernst & Young LLP, Independent Auditors
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-39485), as amended, pertaining to the GranCare, Inc. 401(k) Savings
Plan of our report dated June 25, 1999, with respect to the financial statements
and schedules of the GranCare, Inc. 401(k) Savings Plan included in the Annual
Report (Form 11-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
Atlanta, Georgia
July 9, 1999
