<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, 1998
Commission file number: 1-12238
MHM SERVICES, INC. 401(k) SAVINGS PLAN
MHM Services, Inc.
8065 Westwood Center Drive, Suite 400
Vienna, Virginia 22182
<PAGE> 2
MHM SERVICES, INC. 401(k) SAVINGS PLAN
SEPTEMBER 30, 1998 AND 1997
INDEX
================================================================================
Independent Auditors' Report
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits as of September 30,
1998 and 1997
Statements of Changes in Net Assets Available for Plan Benefits for the
years ended September 30, 1998, 1997 and 1996
Notes to Financial Statements
SCHEDULE I - ITEM 27a
Schedule of Assets Held for Investment Purposes as of September 30, 1998
SCHEDULE II - ITEM 27d
Schedule of Reportable Transactions for the year ended September 30, 1998
SIGNATURE
EXHIBIT__
Consent of Independent Auditors-KPMG LLP
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of the
MHM Services Inc. 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the MHM Services Inc. 401(k) Savings Plan (the "Plan") as of
September 30, 1998 and 1997, and the related statements of changes in net
assets available for plan benefits for each of the years in the three-year
period ended September 30, 1998. 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 audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of
September 30, 1998 and 1997 and the changes in net assets available for plan
benefits for each of the years in the three-year period ended September 30,
1998 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 1998 and 1997 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.
KPMG LLP
McLean, Virginia
November 20, 1998
<PAGE> 4
MHM SERVICES INC. 401(k) SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
September 30, 1998
<TABLE>
<CAPTION>
===============================================================================================================================
Supplemental information by fund
-----------------------------------------------------------------------------------
American
Century Papp Manager's Hotchkis
Income & American Special & Wiley Steinroe
Growth Abroad Equities International Income
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments -- at fair value $ 381,751 237,703 319,698 105,732 79,658
Participant loans - - - - -
Employee contributions receivable 5,724 2,870 4,224 1,062 769
Employer contributions receivable 2,390 1,516 2,274 625 378
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 389,865 242,089 326,196 107,419 80,805
Liabilities - accrued expenses - - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits $ 389,865 242,089 326,196 107,419 80,805
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================================================
Supplemental information by fund
-------------------------------------------------------------------
Schwab
Institutional
Advantage MHM
Money Westwood Common Loan
Fund Balanced Stock Fund Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments -- at fair value 151,879 10,948 76,921 - 1,364,290
Participant loans - - - 14,145 14,145
Employee contributions receivable 4,291 719 672 - 20,331
Employer contributions receivable 2,172 296 581 - 10,232
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 158,342 11,963 78,174 14,145 1,408,998
Liabilities - accrued expenses 985 - - - 985
- -------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits 157,357 11,963 78,174 14,145 1,408,013
===============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
MHM SERVICES INC. 401(k) 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
Equity Equity Equity Equity Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
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 - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 414,042 296,695 388,630 150,136 101,629
Liabilities - accrued expenses - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
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
Value Stock Stock Fund Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
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
- ----------------------------------------------------------------------------------------------------------------
Total assets 164,360 121,082 116,962 36,320 1,789,856
Liabilities - accrued expenses 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
MHM SERVICES INC. 401(k) SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended September 30, 1998
<TABLE>
<CAPTION>
==============================================================================================================================
Supplemental information by fund
--------------------------------------------------------------------------------
Schwab
American Institutional
Century Papp Manager's Hotchkis Advantage
Income & American Special & Wiley Steinroe Money
Growth Abroad Equities International Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets available for plan benefits,
October 1, 1997 $ - - - - - -
Additions:
Employee contributions 60,592 45,597 53,725 17,547 9,528 35,617
Employer contributions 10,067 8,048 10,020 3,195 1,825 6,735
Investment income 46,478 2,597 13,435 3,989 5,001 5,671
Net realized/unrealized gains (losses) (9,789) (8,820) (67,614) (11,974) (1,411) (906)
- ------------------------------------------------------------------------------------------------------------------------------
Total additions 107,348 47,422 9,566 12,757 14,943 47,117
- ------------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 189,765 125,155 55,749 32,958 31,155 52,243
Administrative expenses 6,490 4,151 5,463 1,979 1,132 1,761
- ------------------------------------------------------------------------------------------------------------------------------
Total deductions 196,255 129,306 61,212 34,937 32,287 54,004
- ------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions)
prior to interfund transfers (88,907) (81,884) (51,646) (22,180) (17,344) (6,887)
Interfund transfers 478,772 323,973 377,842 129,599 98,149 164,244
- ------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions) 389,865 242,089 326,196 107,419 80,805 157,357
- ------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits,
September 30, 1998 $ 389,865 242,089 326,196 107,419 80,805 157,357
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================
Supplemental information by fund
-------------------------------------------------------------------
Large Large
MHM Cap. Cap.
Westwood Common Loan Value Growth
Balanced Stock Fund Equity Equity
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for plan benefits,
October 1, 1997 - 121,082 36,320 414,042 296,695
Additions:
Employee contributions 6,233 8,233 - 8,037 7,395
Employer contributions 902 2,064 - - -
Investment income 1,271 6,133 1,276 78 104
Net realized/unrealized gains (losses) (912) (50,459) - (5,107) (4,198)
- -----------------------------------------------------------------------------------------------------------------
Total additions 7,494 (34,029) 1,276 3,008 3,301
- -----------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 24,560 15,210 - 1,582 1,460
Administrative expenses 338 632 - - -
- -----------------------------------------------------------------------------------------------------------------
Total deductions 24,898 15,842 - 1,582 1,460
- -----------------------------------------------------------------------------------------------------------------
Net additions (deductions)
prior to interfund transfers (17,404) (49,871) 1,276 1,426 1,841
Interfund transfers 29,367 6,963 (23,451) (415,468) (298,536)
- -----------------------------------------------------------------------------------------------------------------
Net additions (deductions) 11,963 (42,908) (22,175) (414,042) (296,695)
- -----------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits,
September 30, 1998 11,963 78,174 14,145 - -
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================================================================
Supplemental information by fund
----------------------------------------------------------------------------------
Small
Cap. Intermediate MEDIQ
Growth International Fixed Stable Common
Equity Equity Income Value Stock Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets available for plan benefits,
October 1, 1997 388,630 150,136 101,629 163,550 116,962 1,789,046
Additions:
Employee contributions 3,654 6,314 5,589 7,339 - 275,400
Employer contributions - - - - - 42,856
Investment income 52 26 525 (3,107) (1,512) 82,017
Net realized/unrealized gains (losses) (37,042) (14,404) 509 (8) 1,104 (211,031)
- --------------------------------------------------------------------------------------------------------------------------------
Total additions (33,336) (8,064) 6,623 4,224 (408) 189,242
- --------------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 1,416 1,325 341 5,116 10,294 548,329
Administrative expenses - - - - - 21,946
- --------------------------------------------------------------------------------------------------------------------------------
Total deductions 1,416 1,325 341 5,116 10,294 570,275
- --------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions)
prior to interfund transfers (34,752) (9,389) 6,282 (892) (10,702) (381,033)
Interfund transfers (353,878) (140,747) (107,911) (162,658) (106,260) -
- --------------------------------------------------------------------------------------------------------------------------------
Net additions (deductions) (388,630) (150,136) (101,629) (163,550) (116,962) (381,033)
- --------------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits,
September 30, 1998 - - - - - 1,408,013
================================================================================================================================
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
MHM SERVICES INC. 401(k) 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
- ----------------------------------------------------------------------------------------------------------------------
Total additions 166,739 112,659 95,412 44,207 29,314
- ----------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 145,051 91,817 136,727 37,513 55,524
- ----------------------------------------------------------------------------------------------------------------------
Net additions (deductions) prior to
interfund transfers 21,688 20,842 (41,315) 6,694 (26,210)
Interfund transfers 20,520 365 (12,485) 1,600 2,250
- ----------------------------------------------------------------------------------------------------------------------
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
======================================================================================================================
</TABLE>
<TABLE>
<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 - 552 102,026
Net realized/unrealized
gains (losses) (869) 41,474 37,552 - 256,575
- ---------------------------------------------------------------------------------------------------
Total additions 56,343 86,326 37,552 552 629,104
- ---------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 27,973 8,397 12,293 11,271 526,566
- ---------------------------------------------------------------------------------------------------
Net additions (deductions) prior to
interfund transfers 28,370 77,929 25,259 (10,719) 102,538
Interfund transfers 1,386 (2,100) - (11,536) -
- ---------------------------------------------------------------------------------------------------
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
MHM SERVICES INC. 401(k) 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)
- ---------------------------------------------------------------------------------------------------------------------------
Total additions (deductions) 123,563 121,576 190,660 41,096 58,449
- ---------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 168,071 199,264 192,263 88,558 94,865
- ---------------------------------------------------------------------------------------------------------------------------
Net additions (deductions) prior to
interfund transfers (44,508) (77,688) (1,603) (47,462) (36,416)
Interfund transfers (16,925) (7,386) 32,048 3,586 6,278
- ---------------------------------------------------------------------------------------------------------------------------
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
===========================================================================================================================
</TABLE>
<TABLE>
<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)
- ----------------------------------------------------------------------------------------------------------
Total additions (deductions) 59,928 (80,434) 3,445 - 518,283
- ----------------------------------------------------------------------------------------------------------
Deductions:
Benefit payments 136,624 50,447 80,615 - 1,010,707
- ----------------------------------------------------------------------------------------------------------
Net additions (deductions) prior to
interfund transfers (76,696) (130,881) (77,170) - (492,424)
Interfund transfers 17,849 (88) (29,695) (5,667) -
- ----------------------------------------------------------------------------------------------------------
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
MHM SERVICES INC. 401(k) SAVINGS PLAN
Notes to Financial Statements
September 30, 1998 and 1997
================================================================================
(1) DESCRIPTION OF THE PLAN
The following description of the MHM Services, Inc. 401(k) Savings
Plan (the Plan), formerly known as Mental Health Management, Inc.
Employees' Savings 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
(1 percent to 23 percent beginning in July 1998 of their salaries to
be invested, as they choose, in the various funds described in note 3.
The Plan provides that MHM Services, 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 distributed among the funds elected by the participant.
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.
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> 10
MHM SERVICES INC. 401(k) 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> 11
MHM SERVICES INC. 401(k) SAVINGS PLAN
Notes to Financial Statements
================================================================================
(2) CONTINUED
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's managed investment funds and Company common stock 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.
RECLASSIFICATIONS
Certain 1997 and 1996 amounts have been reclassed to conform to the
1998 presentation.
(3) INVESTMENT OPTIONS
Contributions are invested in accordance with the written directions
of the participants in one or more of the following funds. During
1998, the Plan changed investment managers and investment options and
transferred participants' balances to the comparable investment funds
offered by the new managers. Pursuant to the Plan, 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.
AMERICAN CENTURY INCOME & GROWTH FUND
This fund seeks dividend growth, current income, and capital
appreciation by investing in common stocks. It is income-oriented,
seeking a total return that exceeds the total return of the S&P 500
Composite Stock Price Index and a dividend yield that exceeds the S&P
500's dividend yield.
(Continued)
<PAGE> 12
MHM SERVICES INC. 401(k) SAVINGS PLAN
Notes to Financial Statements
================================================================================
(3) CONTINUED
PAPP AMERICAN-ABROAD FUND
This fund seeks to obtain long-term capital growth resulting to a
considerable extent from international activities of its companies.
The fund acquires common stocks of US companies that have substantial
activities abroad, and common stocks of foreign companies that are
traded publicly in the US securities markets.
MANAGERS SPECIAL EQUITIES FUND
This fund seeks long-term capital appreciation by investing in the
securities of small to medium capitalization companies expected to
have superior earnings growth potential.
HOTCHKIS & WILEY INTERNATIONAL FUND
This fund seeks to provide current income and long-term growth of
income, accompanied by growth of capital by investing in international
equity securities.
STEINROE INCOME FUND
This fund seeks high current income by investing principally in medium
quality debt securities with at least 60% of its assets invested in
medium or higher-quality debt securities.
CHARLES SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND
This fund seeks security and liquidity. It invests in short-term
interest bearing securities.
WESTWOOD BALANCED FUND
This fund seeks to realize both capital appreciation and current
income by investing in both equity and debt securities.
(Continued)
<PAGE> 13
MHM SERVICES INC. 401(k) SAVINGS PLAN
Notes to Financial Statements
================================================================================
(3) CONTINUED
MHM SERVICES, INC. COMMON STOCK
Purchase of MHM common stock allows employees to invest in their
Company stock over and above the matching contribution.
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> 14
MHM SERVICES INC. 401(k) 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.
(4) ADMINISTRATIVE EXPENSES
Beginning in 1998, administrative expenses are charged directly to the
Plan. Prior to 1998, these expenses were paid by the Company.
Administrative expenses amounted to $21,946 for the year ended
September 30, 1998.
(Continued)
<PAGE> 15
MHM SERVICES INC. 401(k) SAVINGS PLAN
Notes to Financial Statements
================================================================================
(5) INVESTMENTS
At September 30, 1998, investments representing 5 percent or more of
the Plan's net assets available for plan benefits included all funds
except the Westwood Balanced and Loan Funds. At September 30, 1997,
investments representing 5 percent or more of the Plan's net assets
available for plan benefits included all funds except the Loan Fund.
Investment income and net realized/unrealized gains (losses) are
comprised of the following for the years ended September 30, 1998,
1997 and 1996, respectively:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends $ 21,187 24,215 31,011
Interest on participant loans 1,276 552 -
Capital gains distributions 59,554 77,259 86,478
- --------------------------------------------------------------------------------------------------
$ 82,017 102,026 117,489
==================================================================================================
Realized/unrealized gains (losses):
Realized gains 317,087 63,488 68,174
Unrealized gains (losses) (516,571) 203,333 (113,253)
Investment expenses (11,547) (10,246) (13,865)
- --------------------------------------------------------------------------------------------------
$ (211,031) 256,575 (58,944)
==================================================================================================
</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) PLAN AMENDMENT
Effective October 1, 1997, the Plan was amended and restated through
the adoption of a new 401(k) prototype plan document. The amendments
had no effect on net assets and the significant plan provisions have
basically remained the same.
(Continued)
<PAGE> 16
MHM SERVICES INC. 401(k) SAVINGS PLAN
Notes to Financial Statements
================================================================================
(8) TAX STATUS
The Plan was amended and restated on October 10, 1997 through the
adoption of a prototype 401(k) plan provided by Milliman and
Robertson, the Plan Administrator. The original Plan 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 amended
and restated Plan is relying on a determination letter dated April 13,
1993 with respect to the prototype plan document. 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 25 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) DIFFERENCES BETWEEN IRS FORM 5500 AND AUDITED FINANCIAL STATEMENTS
The following is a reconciliation of net assets available for plan
benefits per the financial statements to Form 5500:
<TABLE>
<CAPTION>
September 30
------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets available for plan benefits $ 1,408,013 1,789,046
Amounts payable to participants at year end - (2,717)
- --------------------------------------------------------------------------------------------------
Net assets available for plan benefits per the Form 5500 $ 1,408,013 1,786,329
==================================================================================================
</TABLE>
The following is a reconciliation of benefit payments paid to
participants per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
September 30
------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Benefit payments per the financial statements $ 548,329 526,014
Amounts payable to participants at September 30, 1997 (2,717) 2,717
- --------------------------------------------------------------------------------------------------
Benefit payments per the Form 5500 $ 545,612 528,731
==================================================================================================
</TABLE>
Amounts currently payable to or for participants, dependents, and
beneficiaries are recorded on the Form 5500 for benefit claims that
have been processed and approved for payment prior to September 30,
1998 or 1997, respectively, but not yet paid as of those dates. There
were no such payables at September 30, 1998.
<PAGE> 17
MHM SERVICES INC. 401(k) SAVINGS PLAN
Item 27a -- Schedule of Assets Held for Investment Purposes
September 30, 1998
<TABLE>
<CAPTION>
=========================================================================================================
Shares or Current
Issuer units Description Cost value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* Charles Schwab 15,325 American Century: Income & Growth Fund $ 396,512 381,751
* Charles Schwab 9,444 Papp American Abroad Fund 248,972 237,703
* Charles Schwab 6,248 Manager's Special Equities Fund 383,496 319,698
* Charles Schwab 5,113 Hotchkis & Wiley International Fund 119,416 105,732
* Charles Schwab 8,063 Stein Roe Income Trust Income Fund 80,599 79,658
* Charles Schwab 150,708 Schwab Institutional Advantage Money Fund 151,879 151,879
* Charles Schwab Westwood Balanced Fund 11,402 10,948
* MHM Services, Inc. 70,312 MHM Services Inc. 101,621 76,921
- ---------------------------------------------------------------------------------------------------------
Total investments $ 1,493,897 1,364,290
=========================================================================================================
Plan 14,145 Loan Fund (interest rates ranging from 9.5% to 14,145 14,145
10%, maturing through 2008).
=========================================================================================================
</TABLE>
* Party-in-interest
<PAGE> 18
MHM SERVICES INC. 401(k) SAVINGS PLAN
Item 27d -- Schedule of Reportable Transactions
Year ended September 30, 1998
<TABLE>
<CAPTION>
============================================================================================
Number of
Number of shares or
Description transactions units Purchases
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SINGLE TRANSACTIONS
AMCENT: Income & Growth Fund 1 15,977 $ 414,759
Papp American Abroad Fund 1 11,505 300,965
Manager's Special Equities Fund 1 5,746 353,945
Hotchkis & Wiley International Fund 1 6,051 140,800
Stein Roe Income Trust Fund 1 10,816 108,162
Schwab Instl Advantage Money Fund 1 161,607 161,607
Large Capitalization Value Equity Fund 1 26,604 -
Large Capitalization Growth Equity Fund 1 16,795 -
Small Capitalization Growth Equity Fund 1 19,642 -
International Equity Fund 1 13,777 -
Intermediate Fixed Income Fund 1 13,255 -
Stable Value Fund 1 161,607 -
Mediq Shares 1 13,863 -
SERIES OF TRANSACTIONS
AMCENT: Income & Growth Fund 92 23,200 600,854
AMCENT: Income & Growth Fund 28 7,875 -
Papp American Abroad Fund 104 15,076 397,245
Papp American Abroad Fund 36 5,633 -
Managers Special Equities Fund 80 7,506 461,092
Hotchkis & Wiley International Fund 80 7,834 182,885
Stein Roe Income Trust Fund 79 13,972 139,715
Schwab Instl Advantage Money Fund 77 248,392 248,392
Schwab Instl Advantage Money Fund 31 97,684 -
Large Capitalization Value Equity Fund 7 26,772 -
Large Capitalization Growth Equity Fund 6 16,878 -
Small Capitalization Growth Equity Fund - - -
Small Capitalization Growth Equity Fund 6 19,717 -
International Equity Fund 6 13,903 -
Intermediate Fixed Income Fund 9 853,476 6,944
Intermediate Fixed Income Fund 5 13,298 -
Stable Value Fund 7 165,086 -
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================
Sales
--------------------------------------------------
Gain
Description Cost Proceeds (Loss)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SINGLE TRANSACTIONS
AMCENT: Income & Growth Fund $ - $ - $ -
Papp American Abroad Fund - - -
Manager's Special Equities Fund - - -
Hotchkis & Wiley International Fund - - -
Stein Roe Income Trust Fund - - -
Schwab Instl Advantage Money Fund - - -
Large Capitalization Value Equity Fund 283,071 414,759 131,688
Large Capitalization Growth Equity Fund 201,803 300,965 99,162
Small Capitalization Growth Equity Fund 302,486 353,945 51,459
International Equity Fund 142,258 140,800 (1,458)
Intermediate Fixed Income Fund 106,851 108,161 1,310
Stable Value Fund 161,607 161,607 -
Mediq Shares 56,316 118,067 61,751
SERIES OF TRANSACTIONS
AMCENT: Income & Growth Fund - - -
AMCENT: Income & Growth Fund 204,342 212,725 8,383
Papp American Abroad Fund - - -
Papp American Abroad Fund 148,273 152,902 4,629
Managers Special Equities Fund - - -
Hotchkis & Wiley International Fund - - -
Stein Roe Income Trust Fund - - -
Schwab Instl Advantage Money Fund - - -
Schwab Instl Advantage Money Fund 97,684 97,684 -
Large Capitalization Value Equity Fund 284,835 417,410 132,575
Large Capitalization Growth Equity Fund 202,760 302,440 99,680
Small Capitalization Growth Equity Fund - - -
Small Capitalization Growth Equity Fund 303,646 355,414 51,768
International Equity Fund 143,555 142,132 (1,423)
Intermediate Fixed Income Fund - - -
Intermediate Fixed Income Fund 107,190 108,511 1,321
Stable Value Fund 165,086 165,086 -
==============================================================================================
</TABLE>
<PAGE> 19
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: March 26, 1999 By: /s/ Cleveland E. Slade
-----------------------
Cleveland E. Slade
Vice President and
Chief Financial Officer
MHM Services, Inc.
<PAGE> 20
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
MHM Services, Inc.
We consent to the use of our report dated November 20, 1998, on the statements
of net assets available for plan benefits as of September 30, 1998 and 1997,
and the related statements of changes in net assets available for plan benefits
for each of the years in the three-year period ended September 30, 1998 for the
MHM Services, Inc. 401(k) 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, 1998 and 1997, 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).
KPMG LLP
McLean, Virginia
March 26, 1999
