<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1997
Commission file number: 1-12238
Mental Health Management, Inc. Employees' Savings Plan
MHM Services, Inc.
8000 Towers Crescent Drive, Suite 800
Vienna, Virginia 22182
<PAGE> 2
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
SEPTEMBER 30, 1997 AND 1996
INDEX
Independent Auditors' Report
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits as of September 30,
1997 and 1996
Statements of Changes in Net Assets Available for Plan Benefits for the
years ended September 30, 1997, 1996 and 1995
Notes to Financial Statements
SCHEDULE I -- ITEM 27a
Schedule of Assets Held for Investment Purposes as of September 30, 1997
SCHEDULE II -- ITEM 27d
Schedule of Reportable Transactions for the year ended September 30, 1997
SIGNATURE
EXHIBIT__
Consent of Independent Auditors-KPMG Peat Marwick LLP
Consent of Independent Auditors-Deloitte & Touche LLP
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of the
Mental Health Management, Inc. Employees' Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Mental Health Management, Inc. Employees' Savings Plan (the
"Plan") as of September 30, 1997 and 1996, and the related statements of changes
in net assets available for plan benefits for the years then ended. 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. The accompanying statement of changes in net assets available for
plan benefits for the year ended September 30, 1995, was audited by other
auditors whose report thereon dated April 13, 1996, expressed an unqualified
opinion on that statement.
We conducted our audits in accordance with generally accepted auditing
standards. 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 1997 and 1996 financial statements referred to above present
fairly, in all material respects, the net assets available for plan benefits as
of September 30, 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.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
foregoing table of contents are presented for the purpose of additional analysis
and are not a required part of the basic 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. The 1997 and 1996 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 supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
McLean, Virginia
May 22, 1998
KPMG Peat Marwick LLP
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of the
Mental Health Management, Inc. Employees' Savings Plan:
We have audited the accompanying statement of changes in net assets available
for plan benefits for the year ended September 30, 1995 of the Mental Health
Management, Inc. Employees' Savings Plan (the "Plan"). This financial statement
is the responsibility of the Plan's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statement presents fairly in all material
respects, the changes in net assets available for plan benefits of the Mental
Health Management, Inc. Employees' Savings Plan for the year ended September 30,
1995 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
April 13, 1996
<PAGE> 5
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
September 30, 1997
<TABLE>
<CAPTION>
========================================================================================================================
Supplemental Information by Fund
---------------------------------------------------------------------------
Large Large Small Intermediate
Cap. Value Cap. Growth Cap. Growth International Fixed
Assets Equity Equity Equity Equity Income
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments - at fair value $ 412,921 295,688 387,113 149,232 101,050
Participant loans - - - - -
Employee contributions receivable 1,121 1,007 1,517 904 579
Employer contributions receivable - - - - -
Other receivables (payables) - - - - -
- ------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits $ 414,042 296,695 388,630 150,136 101,629
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================
Supplemental Information by Fund
----------------------------------------------------
MHM MEDIQ
Stable Common Common Loan
Assets Value Stock Stock Fund Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments - at fair value 162,901 109,563 116,962 - 1,735,430
Participant loans - - - 36,320 36,320
Employee contributions receivable 1,459 353 - - 6,940
Employer contributions receivable - 11,166 - - 11,166
Other receivables (payables) (810) - - - (810)
- -------------------------------------------------------------------------------------------------
Net assets available for plan benefits 163,550 121,082 116,962 36,320 1,789,046
=================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
September 30, 1996
<TABLE>
<CAPTION>
====================================================================================================================
Supplemental Information by Fund
------------------------------------------------------------------------
Large Large Small Intermediate
Cap. Value Cap. Growth Cap. Growth International Fixed
Assets Equity Equity Equity Equity Income
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments-at fair value $ 371,834 275,488 442,430 141,842 126,218
Participant loans - - - - -
Employer contributions receivable - - - - -
Other receivables (payables) - - - - (629)
- --------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits $ 371,834 275,488 442,430 141,842 125,589
====================================================================================================================
<CAPTION>
====================================================================================================================
Supplemental Information by Fund
---------------------------------------------------
MHM MEDIQ
Stable Common Common Loan
Assets Value Stock Stock Fund Total
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments-at fair value 134,976 35,369 91,709 - 1,619,866
Participant loans - - - 58,575 58,575
Employer contributions receivable - 9,798 - - 9,798
Other receivables (payables) (1,182) 86 (6) - (1,731)
- -----------------------------------------------------------------------------------------------
Net assets available for plan benefits 133,794 45,253 91,703 58,575 1,686,508
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended September 30, 1997
<TABLE>
<CAPTION>
==============================================================================================================================
Supplemental Information by Fund
---------------------------------------------------------------------
Large Large Small Intermediate
Cap. Value Cap. Growth Cap. Growth International Fixed
Equity Equity Equity Equity Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits, October 1,
1996 $ 371,834 275,488 442,430 141,842 125,589
Additions:
Employee contributions 45,155 37,673 43,086 27,893 20,941
Employer contributions - - - - -
Investment income 21,798 9,435 47,584 9,145 7,203
Net realized/unrealized gains (losses) 99,786 65,551 4,742 7,169 1,170
Transfers in 22,168 7,718 13,980 5,077 17,364
- ------------------------------------------------------------------------------------------------------------------------------
Total additions 188,907 120,377 109,392 49,284 46,678
- ------------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 145,051 91,817 136,727 37,513 55,524
Transfers out 1,648 7,353 26,465 3,477 15,114
- ------------------------------------------------------------------------------------------------------------------------------
Total deductions 146,699 99,170 163,192 40,990 70,638
- ------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions) 42,208 21,207 (53,800) 8,294 (23,960)
- ------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, September 30,
1997 $ 414,042 296,695 388,630 150,136 101,629
==============================================================================================================================
<CAPTION>
=============================================================================================================
Supplemental Information by Fund
----------------------------------------------------
MHM MEDIQ
Stable Common Common Loan
Value Stock Stock Fund Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits, October 1,
1996 133,794 45,253 91,703 58,575 1,686,508
Additions:
Employee contributions 51,006 7,093 - - 232,847
Employer contributions - 37,656 - - 37,656
Investment income 6,206 103 - - 101,474
Net realized/unrealized gains (losses) (869) 41,474 37,552 - 256,575
Transfers in 5,370 - - - 71,677
- -------------------------------------------------------------------------------------------------------------
Total additions 61,713 86,326 37,552 - 700,229
- -------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 27,421 8,397 12,293 11,271 526,014
Transfers out 4,536 2,100 - 10,984 71,677
- -------------------------------------------------------------------------------------------------------------
Total deductions 31,957 10,497 12,293 22,255 597,691
- -------------------------------------------------------------------------------------------------------------
Net additions (deductions) 29,756 75,829 25,259 (22,255) 102,538
- -------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, September 30,
1997 163,550 121,082 116,962 36,320 1,789,046
=============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 8
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended September 30, 1996
<TABLE>
<CAPTION>
===================================================================================================================================
Supplemental Information by Fund
-------------------------------------------------------------------------
Large Large Small Intermediate
Cap. Value Cap. Growth Cap. Growth International Fixed
Equity Equity Equity Equity Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits, October 1,
1995 $ 433,267 360,562 411,985 185,718 155,727
Additions:
Employee contributions 66,842 72,511 106,125 31,623 52,458
Employer contributions - - - - -
Investment income 13,975 16,405 61,099 7,724 10,734
Net realized/unrealized gains (losses) 42,746 32,660 23,436 1,749 (4,743)
Transfers in 2,017 664 34,141 7,011 6,984
- -----------------------------------------------------------------------------------------------------------------------------------
Total additions (deductions) 125,580 122,240 224,801 48,107 65,433
- -----------------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 168,071 199,264 192,263 88,558 94,865
Transfers out 18,942 8,050 2,093 3,425 706
- -----------------------------------------------------------------------------------------------------------------------------------
Total deductions 187,013 207,314 194,356 91,983 95,571
- -----------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions) (61,433) (85,074) 30,445 (43,876) (30,138)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, September 30,
1996 $ 371,834 275,488 442,430 141,842 125,589
===================================================================================================================================
<CAPTION>
===============================================================================================================
Supplemental Information by Fund
-----------------------------------------------------
MHM MEDIQ
Stable Common Common Loan
Value Stock Stock Fund Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits, October 1,
1995 192,641 176,222 198,568 64,242 2,178,932
Additions:
Employee contributions 53,481 9,382 - - 392,422
Employer contributions - 67,316 - - 67,316
Investment income 7,552 - - - 117,489
Net realized/unrealized gains (losses) (1,105) (157,132) 3,445 - (58,944)
Transfers in 20,002 72 - 16,634 87,525
- ---------------------------------------------------------------------------------------------------------------
Total additions (deductions) 79,930 (80,362) 3,445 16,634 605,808
- ---------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 136,624 50,447 80,615 - 1,010,707
Transfers out 2,153 160 29,695 22,301 87,525
- ---------------------------------------------------------------------------------------------------------------
Total deductions 138,777 50,607 110,310 22,301 1,098,232
- ---------------------------------------------------------------------------------------------------------------
Net additions (deductions) (58,847) (130,969) (106,865) (5,667) (492,424)
- ---------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, September 30,
1996 133,794 45,253 91,703 58,575 1,686,508
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 9
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
September 30, 1995
<TABLE>
<CAPTION>
===================================================================================================================================
Supplemental Information by Fund
---------------------------------------------------------------------
Large Large Small Intermediate
Cap. Value Cap. Growth Cap. Growth International Fixed
Equity Equity Equity Equity Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits, October 1, 1994 $ 394,731 326,340 305,840 184,491 176,251
Additions:
Employee contributions 91,920 90,926 91,627 70,766 59,521
Employer contributions - - - - -
Investment income 15,177 2,511 1,531 5,402 10,428
Net realized/unrealized gains (losses) 66,824 80,743 105,592 (807) 5,288
Transfers in 6,038 5,118 20,291 4,479 5,295
- -----------------------------------------------------------------------------------------------------------------------------------
Total additions 179,959 179,298 219,041 79,840 80,532
- -----------------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 122,620 129,311 112,339 77,058 83,613
Transfers out 18,803 15,765 557 1,555 17,443
- -----------------------------------------------------------------------------------------------------------------------------------
Total deductions 141,423 145,076 112,896 78,613 101,056
- -----------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions) 38,536 34,222 106,145 1,227 (20,524)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, September 30, 1995 $ 433,267 360,562 411,985 185,718 155,727
===================================================================================================================================
<CAPTION>
==================================================================================================================
Supplemental Information by Fund
-------------------------------------------------------
MHM MEDIQ
Stable Common Common Loan
Value Stock Stock Fund Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits, October 1, 1994 125,311 100,180 209,279 48,318 1,870,741
Additions:
Employee contributions 49,381 6,841 - - 460,982
Employer contributions - 80,757 - - 80,757
Investment income 7,070 - - - 42,119
Net realized/unrealized gains (losses) - 35,036 62,402 - 355,078
Transfers in 4,149 17 - 40,429 85,816
- ------------------------------------------------------------------------------------------------------------------
Total additions 60,600 122,651 62,402 40,429 1,024,752
- ------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments (13,504) 46,541 72,767 - 630,745
Transfers out 6,774 68 346 24,505 85,816
- ------------------------------------------------------------------------------------------------------------------
Total deductions (6,730) 46,609 73,113 24,505 716,561
- ------------------------------------------------------------------------------------------------------------------
Net additions (deductions) 67,330 76,042 (10,711) 15,924 308,191
- ------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, September 30, 1995 192,641 176,222 198,568 64,242 2,178,932
==================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
MENTAL HEALTH MANAGEMENT, INC.
EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
September 30, 1997 and 1996
(1) DESCRIPTION OF THE PLAN
The following description of the Mental Health Management, Inc. Employees'
Savings Plan (the Plan) provides only general information. Participants
should refer to the Summary Plan Description for a more complete
description of the Plan provisions.
GENERAL
The effective date of the Plan was September 1, 1993. The Plan is a defined
contribution plan. Employees are eligible to join the Plan upon completion
of one year of service during which they have worked a minimum of 1,000
hours and are age 21 or older. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS
Participants may contribute to the Plan from 1 percent to 15 percent of
their salaries to be invested, as they choose, in the various funds
described in note 3. The Plan provides that MHM Services, Inc. (formerly
Mental Health Management, Inc.) (the Company) will make a matching
contribution equal to $.50 for each $1.00 contributed by a participant, not
to exceed 3 percent of the participant's compensation. The Company's
matching contribution is made in cash to be used to purchase shares of the
common stock of the Company for the accounts of the participants.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions
and allocations of the Company's contribution and Plan earnings, and
charged with an allocation of administrative expenses. Allocations are
based on participant earnings or account balances, as defined. The benefit
to which a participant is entitled is the benefit that can be provided from
the participant's vested account.
VESTING
A participant's accrued benefit is at all times fully vested and
nonforfeitable upon death, retirement, disability or termination of
employment.
(Continued)
<PAGE> 11
MENTAL HEALTH MANAGEMENT, INC.
EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
(1) CONTINUED
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to
a maximum equal to the lesser of $50,000 or 50 percent of their account
balance. Loan terms range from one to five years or up to ten years for the
building, rehabilitation or purchase of a primary residence. The loans are
secured by the balances in the participants' accounts and bear interest at
a rate commensurate with local prevailing rates. Principal and interest are
paid ratably through payroll deductions.
PAYMENT OF BENEFITS
Upon termination of service, participants may elect to receive a lump-sum
payout of their accounts. If the account balance at termination exceeds
$3,500, a participant may leave the money in the Plan after leaving the
Company. Participants may also qualify for up to two hardship withdrawals
per Plan year with respect to amounts attributable to basic contributions.
In order to obtain a hardship withdrawal, participants must exhaust the
possibility of all other withdrawals (other than hardship withdrawals)
under the Plan. Upon receiving a hardship distribution, participants are
suspended from making contributions to the Plan for one year.
Distributions from the funds, with the exception of the MHM Services, Inc.
(MHM) stock fund, are made in cash. Distributions from the MHM stock fund
are in the form of the securities held; however, distributions of the
Company's common stock shall be made in cash whenever the number of shares
to be distributed is 100 or less.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method
of accounting.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
<PAGE> 12
MENTAL HEALTH MANAGEMENT, INC.
EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
(2) CONTINUED
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value which is determined by
closing prices as of the last trading day of the Plan year. Purchases and
sales of securities are recorded on a trade-date basis. Participant loans
are valued at cost which approximates fair market value. Dividends and
interest are recorded when earned.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
(3) INVESTMENT OPTIONS
Contributions are invested in accordance with the written directions of the
participants in one or more of the following funds:
LARGE CAPITALIZATION VALUE EQUITY FUND
The objective of this fund is to seek total return consisting of capital
appreciation and dividend income by investing primarily in a diversified
portfolio of highly liquid common stocks. The portfolio's assets will be
invested primarily in common stocks of issuers with total market
capitalization of $1 billion or greater at the time of purchase.
LARGE CAPITALIZATION GROWTH EQUITY FUND
This fund seeks substantial capital appreciation over time by investing
primarily in a diversified portfolio of common stocks, characterized by a
growth of earnings at a rate faster than that of the S&P 500 index. The
Portfolio's assets will be invested primarily in common stocks of issuers
with total market capitalization of $1 billion or greater at the time of
purchase.
SMALL CAPITALIZATION GROWTH EQUITY FUND
This fund seeks to achieve maximum long-term capital appreciation through
investing primarily in the common stock of "emerging growth" companies
(total market capitalization of $550 million or less).
INTERNATIONAL EQUITY FUND
This fund seeks to achieve long-term capital appreciation through investing
primarily in equity securities of companies domiciled outside the United
States.
(Continued)
<PAGE> 13
MENTAL HEALTH MANAGEMENT, INC.
EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
(3) CONTINUED
INTERMEDIATE FIXED INCOME FUND
This fund seeks a high level of current income, with potential for some
capital appreciation, while keeping risk at a minimum. The fund invests in
high quality, intermediate-term fixed income securities.
STABLE VALUE FUND
This fund seeks to provide stable investment returns with a high degree of
capital protection by investing primarily in contracts (GIC's and BIC's)
that are guaranteed by high rated, major life insurance companies and
banks, other GIC Collective Funds, and in cash equivalents.
MHM SERVICES, INC. STOCK FUND
Purchase of MHM common stock allows employees to invest in their Company
stock over and above the matching contribution.
MEDIQ STOCK FUND
In August of 1993, the company spun off from MEDIQ Incorporated and formed
a separate entity. This fund contains the common stock of MEDIQ
Incorporated.
Investment in each of these funds (with the exception of the MHM Services,
Inc. Stock Fund) represents 5 percent or more of the Plan's net assets
available for plan benefits at September 30, 1997.
Pursuant to the Plan, with the exception of the Company's matching
contributions, the selection of investment options is the sole
responsibility of each participant. Neither the trustees nor the Company
have any responsibility to select investment options or to advise
participants in selecting their investment options. Subject to the
applicable provisions of law, each participant assumes all risks connected
with any decrease in the market value of any securities in these funds, and
distributions from such funds are the sole source of payments made under
the Plan.
(Continued)
<PAGE> 14
MENTAL HEALTH MANAGEMENT, INC.
EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
(4) EXPENSES
Brokerage commissions and other expenses incurred in connection with the
purchase or sale of securities, are charged directly to the Plan. The Plan
also pays certain administrative expenses that amounted to $10,246, $13,865
and $12,403 as of September 30, 1997, 1996 and 1995, respectively. Other
costs and expenses of the Plan are paid for by the Company.
(5) INVESTMENTS
Investment income and net realized/unrealized gains (losses) are comprised
of the following for the years ended September 30, 1997, 1996 and 1995,
respectively:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends $ 24,215 31,011 29,012
Capital gains distributions 77,259 86,478 13,107
---------------------------------------------------------------------------
$ 101,474 117,489 42,119
---------------------------------------------------------------------------
Realized/unrealized gains (losses):
Realized gains 63,488 68,174 10,761
Unrealized gains (losses) 203,333 (113,253) 356,720
Administrative expense (10,246) (13,865) (12,403)
---------------------------------------------------------------------------
$ 256,575 (58,944) 355,078
---------------------------------------------------------------------------
</TABLE>
(6) 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.
(7) DIFFERENCES BETWEEN IRS FORM 5500 AND AUDITED FINANCIAL STATEMENTS
Benefit claims payable to persons who have withdrawn from participating in
a defined contribution plan are disclosed in the footnotes to the financial
statements rather than on the statement of net assets available for plan
benefits as a liability of the Plan. The benefits payable to persons who
have withdrawn from participation is $2,717 and $44,662 as of September 30,
1997 and 1996, respectively. IRS Form 5500 requires the reporting of
benefits payable as a liability to the Plan. (Continued)
<PAGE> 15
MENTAL HEALTH MANAGEMENT, INC.
EMPLOYEES' SAVINGS PLAN
Notes to Financial Statements
(8) TAX STATUS
The Plan has adopted a standardized 401(k) plan provided by Smith Barney
Shearson. This standardized plan has received an opinion letter from the
IRS dated August 2, 1993, which indicates that the Plan and the related
trust are designed in accordance with applicable sections of the Internal
Revenue Code (IRC). The Plan has been amended since receiving the
determination letter. However, the Plan Administrator believes that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the IRC. Therefore, no provision for income tax
has been included in the Plan's financial statements.
Employee salary reduction contributions to the Plan, subject to an annual
limitation of 15 percent of annual compensation, are not subject to income
tax until withdrawn from the Plan as permitted under Section 401(k) of the
IRC. Additionally, employees are not subject to federal income tax on the
employer's contributions to the Plan or income earned thereon until
withdrawn from the Plan.
(9) SUBSEQUENT EVENTS
Effective October 1, 1997, MHM Services, Inc. adopted a new 401(k) plan
document. The plan provisions have basically remained the same. In
addition, the trustee was changed in December 1997, as were the types of
funds available for investment by the participants.
<PAGE> 16
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
September 30, 1997
<TABLE>
<CAPTION>
=============================================================================================================
Current
Issuer Shares or units Description Cost value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
*Smith Barney 26,167 Large Capitalization Value Equity Fund $ 275,246 412,921
*Smith Barney 16,282 Large Capitalization Growth Equity Fund 191,819 295,688
*Smith Barney 19,443 Small Capitalization Growth Equity Fund 298,305 387,113
*Smith Barney 13,230 International Equity Fund 136,257 149,232
*Smith Barney 12,445 Intermediate Fixed Income Fund 100,254 101,050
*Smith Barney 162,782 Stable Value Fund 162,901 162,901
*MHM Services, Inc. 79,682 MHM Common Stock 127,368 109,563
MEDIQ, Inc. 13,863 MEDIQ Common Stock 56,316 116,962
- ------------------------------------------------------------------------------------------------------------
Total investments $ 1,348,466 1,735,430
=============================================================================================================
Plan 36,320 Loan Fund (interest rates ranging from
7% to 10%, maturing through 2000) $ 36,320 36,320
=============================================================================================================
</TABLE>
*Party-in-interest
<PAGE> 17
MENTAL HEALTH MANAGEMENT, INC. EMPLOYEES' SAVINGS PLAN
Item 27d - Schedule of Reportable Transactions
Year ended September 30, 1997
<TABLE>
<CAPTION>
===========================================================================================================================
Number of Sales Gain
Number of shares or -------------------------------
Description transactions units Purchases Cost Proceeds (Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Large Capitalization Value Equity Fund 74 6,649 $ 89,052 - - -
Large Capitalization Value Equity Fund 38 11,468 - 111,827 150,378 38,551
Large Capitalization Growth Equity Fund 73 3,463 54,295 - - -
Large Capitalization Growth Equity Fund 39 6,733 - 73,957 101,567 27,610
Small Capitalization Growth Equity Fund 78 6,173 103,499 - - -
Small Capitalization Growth Equity Fund 31 9,894 - 149,017 166,372 17,355
International Equity Fund 66 4,024 42,244 - - -
International Equity Fund 35 4,026 - 41,178 43,041 1,863
Intermediate Fixed Income Fund 72 5,549 44,540 - - -
Intermediate Fixed Income Fund 37 8,901 - 71,795 71,877 82
Stable Value Fund 73 67,289 67,289 - - -
Stable Value Fund 30 36,827 - 36,827 36,827 -
===========================================================================================================================
</TABLE>
<PAGE> 18
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Mental Health Management, Inc.
Employees' Savings Plan
Date: By:
------------------- -------------------------------
Cleveland E. Slade
Vice President and
Chief Financial Officer
MHM Services, Inc.
<PAGE> 1
[KPMG PEAT MARWICK LLP LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
MHM Services, Inc.
We consent to the use of our report dated May 22, 1998, on the statements of net
assets available for plan benefits as of September 30, 1997 and 1996, and the
related statements of changes in net assets available for plan benefits for the
years then ended for the Mental Health Management, Inc. Employees' Savings Plan
(the "Plan") included in the Annual Report on Form 11-K relating to the Plan
filed by MHM Services, Inc. for the years ended September 30, 1997 and 1996, and
to the incorporation by reference of such report in the Registration Statement
on Form S-8 pertaining to the Plan (File No. 333-09147).
/s/ KPMG PEAT MARWICK LLP
McLean, Virginia
September 25, 1998
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-09147 of MHM Services, Inc. on Form S-8 of our report dated April 13, 1996,
appearing on Form 1l-K of Mental Health Management, Inc. Employees' Savings Plan
for the year ended September 30, 1997.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
October 27, 1998
