<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1998
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM 10-K/A
AMENDMENT TO FORM 10-K ANNUAL REPORT
Filed pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
------------------
MERCK & CO., INC.
P.O. BOX 100
WHITEHOUSE STATION, NEW JERSEY 08889-0100
================================================================================
<PAGE> 2
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its annual report on Form 10-K for the
fiscal year ended December 31, 1997 as set forth below:
1. Add Exhibit Numbers 99(a), 99(b), 99(c) and 99(d) as follows:
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
<C> <S> <C>
99(a) -- Financial statements and exhibits Filed with this Form 10-K/A Amendment
required by Form 11-K Annual Report
pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for
the Merck & Co., Inc. Employee
Savings and Security Plan for the
fiscal year ended December 31, 1997
99(b) -- Financial statements and exhibits Filed with this Form 10-K/A Amendment
required by Form 11-K Annual Report
pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for
the Merck & Co., Inc. Employee Stock
Purchase and Savings Plan for the
fiscal year ended December 31, 1997
99(c) -- Financial statements and exhibits Filed with this Form 10-K/A Amendment
required by Form 11-K Annual Report
pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for
the Hubbard Farms, Inc. Employee
Savings Plan for the fiscal year
ended December 31, 1997
99(d) -- Financial statements and exhibits Filed with this Form 10-K/A Amendment
required by Form 11-K Annual Report
pursuant to Section 15(d) of the
Securities Exchange Act of 1934 for
the Merck Puerto Rico Employee
Savings and Security Plan for the
period July 1, 1997 through Decem-
ber 31, 1997
</TABLE>
2
<PAGE> 3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
MERCK & CO., INC.
Dated: June 22, 1998
By RAYMOND V. GILMARTIN
(CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER)
By /s/ CELIA A. COLBERT
CELIA A. COLBERT
(ATTORNEY-IN-FACT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
RAYMOND V. GILMARTIN Chairman of the Board,
President and Chief
Executive Officer ;
Principal Executive
Officer ; Director
JUDY C. LEWENT Senior Vice President
and Chief Financial
Officer; Principal
Financial Officer
PETER E. NUGENT Vice President, Controller ;
Principal Accounting
Officer
DEREK BIRKIN
LAWRENCE A. BOSSIDY
WILLIAM G. BOWEN
JOHNNETTA B. COLE
CAROLYNE K. DAVIS Directors June 22, 1998
LLOYD C. ELAM
WILLIAM N. KELLEY
EDWARD M. SCOLNICK
SAMUEL O. THIER
</TABLE>
CELIA A. COLBERT, BY SIGNING HER NAME HERETO, DOES HEREBY SIGN THIS
DOCUMENT PURSUANT TO POWERS OF ATTORNEY DULY EXECUTED BY THE PERSONS NAMED,
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS AN EXHIBIT TO FORM 10-K, ON
BEHALF OF SUCH PERSONS, ALL IN THE CAPACITIES AND ON THE DATE STATED, SUCH
PERSONS INCLUDING A MAJORITY OF THE DIRECTORS OF THE COMPANY.
By /s/CELIA A. COLBERT
CELIA A. COLBERT
(ATTORNEY-IN-FACT)
3
<PAGE> 1
EXHIBIT 99(a)
FINANCIAL STATEMENTS AND EXHIBITS
REQUIRED BY FORM 11-K ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-3305
---------------------
MERCK & CO., INC. EMPLOYEE SAVINGS AND SECURITY PLAN
(FULL TITLE OF THE PLAN)
MERCK & CO., INC.
P.O. BOX 100
WHITEHOUSE STATION, NEW JERSEY 08889-0100
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE
PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE)
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merck & Co., Inc.:
We have audited the accompanying statements of net assets available for
benefits of the Merck & Co., Inc. Employee Savings and Security Plan (the
"Plan") as of December 31, 1997 and 1996, and the related statement of changes
in net assets available for benefits for the year ended December 31, 1997. These
financial statements and the schedules referred to below are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 benefits of the Plan as
of December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 1997, 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 of
assets held for investment purposes and reportable transactions are presented
for purposes 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 fund information in the
statements of net assets available for benefits and the statement of changes in
net assets available for 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.
ARTHUR ANDERSEN LLP
New York, New York
April 30, 1998
1
<PAGE> 3
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
----------------------------------
(NON-PARTICIPANT (PARTICIPANT T. ROWE PRICE FIDELITY
DIRECTED; SEE DIRECTED; SEE BLUE CHIP MAGELLAN
TOTAL NOTE 1) NOTE 1) GROWTH FUND FUND
----- ---------------- ------------- ------------- --------
DECEMBER 31, 1997
- --------------------------- |--------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market
value.................. $2,134,239,587 $272,483,529 $1,104,221,533 $198,764,539 $ --
-------------- ------------ -------------- ------------ ------------
Receivables
Employer's
contribution......... 3,137,907 1,493,644 624,444 229,381 --
Participants'
contributions....... 7,083,498 -- 4,281,527 770,693 --
Accrued interest and
dividends............ 6,147,371 1,168,119 4,787,193 -- --
-------------- ------------ -------------- ------------ ------------
Total receivables.... 16,368,776 2,661,763 9,693,164 1,000,074 --
-------------- ------------ -------------- ------------ ------------
Net assets available for
benefits................. $2,150,608,363 $275,145,292 $1,113,914,697 $199,764,613 $ --
============== ============ ============== ============ ============
<CAPTION>
FIDELITY VANGUARD
EQUITY- U.S. GROWTH
INCOME FUND PORTFOLIO
----------- -----------
DECEMBER 31, 1997
- --------------------------- --------------------------
<S> <C> <C>
Assets:
Investments at market
value.................. $44,321,055 $58,316,674
----------- -----------
Receivables
Employer's
contribution......... 61,817 105,747
Participants'
contributions........ 171,851 226,118
Accrued interest and
dividends............ -- --
----------- -----------
Total receivables.... 233,668 331,865
----------- -----------
Net assets available for
benefits................. $44,554,723 $58,648,539
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
2
<PAGE> 4
<TABLE>
<CAPTION>
T. ROWE
FIDELITY FIDELITY FIDELITY PRICE
GROWTH GROWTH & T. ROWE PRICE FIDELITY RETIREMENT MID-CAP FIDELITY
COMPANY INCOME NEW INCOME INTERMEDIATE GROWTH GROWTH OTC
FUND PORTFOLIO FUND BOND FUND FUND FUND PORTFOLIO
-------- --------- ------------- ------------ --------- ------- ---------
DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market
value.................. $ -- $98,415,031 $24,839,606 $ -- $ -- $38,576,112 $ --
----------- ----------- ----------- ----------- ---------- ----------- ----------
Receivables
Employer's
contribution......... -- 156,268 33,889 -- -- 74,682 --
Participants'
contributions........ -- 381,596 96,313 -- -- 149,576 --
Accrued interest and
dividends............ -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------- ----------
Total receivables.... -- 537,864 130,202 -- -- 224,258 --
----------- ----------- ----------- ----------- ---------- ----------- ----------
Net assets available for
benefits................ $ -- $98,952,895 $24,969,808 $ -- $ -- $38,800,370 $ --
=========== =========== =========== =========== ========== =========== ==========
<CAPTION>
THE GEORGE
EUROPACIFIC FIDELITY PUTNAM
GROWTH OVERSEAS FUND OF
FUND FUND BOSTON A
---------- -------- ----------
DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments at market
value.................. $31,038,262 $ -- $58,439,910
----------- ----------- -----------
Receivables
Employer's
contribution......... 65,582 -- 58,051
Participants'
contributions........ 120,348 -- 226,596
Accrued interest and
dividends............ -- -- --
----------- ----------- -----------
Total receivables.... 185,930 -- 284,647
----------- ----------- -----------
Net assets available for
benefits................ $31,224,192 $ -- $58,724,557
=========== =========== ===========
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
FIDELITY FIDELITY SPARTAN FIDELITY
FIDELITY RETIREMENT RETIREMENT U.S. EQUITY LOW-PRICED FRANKLIN PUTNAM
BALANCED MONEY GOVERNMENT INDEX STOCK SMALL CAP VOYAGER
FUND MARKET MONEY MARKET FUND FUND GROWTH FUND I FUND A
-------- --------- ------------- ---------- ---------- ------------- ---------
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market
value.................. $ -- $86,580,252 $ -- $ 44,776,486 $11,112,462 $12,159,638 $ 5,696,444
----------- ----------- ------------ ------------ ----------- ----------- -----------
Receivables
Employer's
contribution......... -- 75,937 -- 75,937 20,083 23,848 15,690
Participants'
contributions........ -- 335,708 -- 173,617 43,088 47,148 22,087
Accrued interest and
dividends............ -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ---------- -----------
Total receivables.... -- 411,645 -- 249,554 63,171 70,996 37,777
----------- ----------- ----------- ----------- ----------- ---------- -----------
Net assets available for
benefits................ $ -- $86,991,897 $ -- $45,026,040 $11,175,633 $12,230,634 $ 5,734,221
=========== =========== =========== =========== =========== =========== ===========
<CAPTION>
TEMPLETON
DEVELOPING T. ROWE PRICE PARTICIPANTS'
MARKETS DIVIDEND LOAN
TRUST I GROWTH FUND ACCOUNT
---------- ------------- -------------
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------|
<S> <C> <C> <C>
Assets:
Investments at market
value.................. $ 4,713,493 $ 4,888,735 $34,895,826
----------- ----------- -----------
Receivables
Employer's
contribution......... 15,062 7,845 --
Participants'
contributions........ 18,276 18,956 --
Accrued interest and
dividends............ -- -- 192,059
----------- ----------- -----------
Total receivables.... 33,338 26,801 192,059
----------- ----------- -----------
Net assets available for
benefits................ $ 4,746,831 $ 4,915,536 $35,087,885
=========== =========== ===========
</TABLE>
4
<PAGE> 6
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
-----------------------------
(NON- FIDELITY
PARTICIPANT (PARTICIPANT FIDELITY EQUITY-
DIRECTED; SEE DIRECTED; SEE MAGELLAN INCOME
TOTAL NOTE 1) NOTE 1) FUND FUND
----- ------------- ------------- -------- --------
DECEMBER 31, 1996
- ----------------------------- |-------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market
value.................... $1,601,407,630 $203,684,246 $871,865,880 $145,105,856 $24,777,615
-------------- ------------ ------------ ------------ -----------
Receivables
Employer's
contribution........... 2,625,228 1,286,362 520,058 200,830 46,992
Participants'
contributions.......... 5,866,877 -- 3,755,053 621,829 106,181
Accrued interest and
dividends............. 5,624,399 1,025,249 4,460,558 -- --
-------------- ------------ ------------ ------------ -----------
Total receivables...... 14,116,504 2,311,611 8,735,669 822,659 153,173
-------------- ------------ ------------ ------------ -----------
Net assets available for
benefits................... $1,615,524,134 $205,995,857 $880,601,549 $145,928,515 $24,930,788
============== ============ ============ ============ ===========
<CAPTION>
FIDELITY FIDELITY
GROWTH GROWTH &
COMPANY INCOME
FUND PORTFOLIO
-------- ---------
DECEMBER 31, 1996
- ---------------------------------------------------------
<S> <C> <C>
Assets:
Investments at market
value.................... $43,649,523 $62,317,069
----------- -----------
Receivables
Employer's
contribution........... 101,859 129,949
Participants'
contributions.......... 187,053 267,050
Accrued interest and
dividends.............. -- --
----------- -----------
Total receivables...... 288,912 396,999
----------- -----------
Net assets available for
benefits................... $43,938,435 $62,714,068
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
5
<PAGE> 7
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FIDELITY RETIREMENT FIDELITY FIDELITY FIDELITY RETIREMENT
INTERMEDIATE GROWTH OTC OVERSEAS BALANCED MONEY
BOND FUND FUND PORTFOLIO FUND FUND MARKET
------------ ---------- --------- -------- -------- ----------
DECEMBER 31, 1996 (PARTICIPANT DIRECTED; SEE NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market
value.................... $13,088,728 $13,878,448 $25,261,544 $22,079,860 $46,168,307 $37,299,452
----------- ----------- ----------- ----------- ----------- -----------
Receivables
Employer's
contribution........... 26,252 34,390 63,005 50,667 52,242 27,827
Participants'
contributions.......... 56,090 59,474 108,254 94,620 197,847 159,841
Accrued interest and
dividends............. -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total receivables...... 82,342 93,864 171,259 145,287 250,089 187,668
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for
benefits................... $13,171,070 $13,972,312 $25,432,803 $22,225,147 $46,418,396 $37,487,120
=========== =========== =========== =========== =========== ===========
<CAPTION>
FIDELITY
RETIREMENT FIDELITY
GOVERNMENT U.S. EQUITY PARTICIPANTS'
MONEY INDEX LOAN
MARKET PORTFOLIO ACCOUNT
---------- ----------- -------------
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------|
<S> <C> <C> <C>
Assets:
Investments at market
value.................... $40,403,016 $18,771,886 $33,056,200
----------- ----------- -----------
Receivables
Employer's
contribution........... 37,541 47,254 --
Participants'
contributions.......... 173,141 80,444 --
Accrued interest and
dividends............. -- -- 138,592
----------- ----------- -----------
Total receivables...... 210,682 127,698 138,592
----------- ----------- -----------
Net assets available for
benefits................... $40,613,698 $18,899,584 $33,194,792
=========== =========== ===========
</TABLE>
6
<PAGE> 8
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
-----------------------
(NON-
PARTICIPANT (PARTICIPANT T. ROWE PRICE FIDELITY
DIRECTED; SEE DIRECTED; SEE BLUE CHIP MAGELLAN
TOTAL NOTE 1) NOTE 1) GROWTH FUND FUND
-------------- ------------- ------------- ------------- --------
YEAR ENDED DECEMBER 31, 1997
- -------------------------------------- |--------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in
market value of investments..... $ 450,286,858 $ 70,441,046 $ 295,300,074 $ 16,134,723 $ 19,980,866
Interest.......................... 2,905,447 110,292 1,501,698 187,586 174,347
Dividends......................... 58,062,327 5,502,302 23,044,546 1,144,065 3,868,673
-------------- ------------ -------------- ------------ ------------
Total investment income
(loss)........................ 511,254,632 76,053,640 319,846,318 17,466,374 24,023,886
-------------- ------------ -------------- ------------ ------------
Contributions to the Plan
By participants................... 102,152,916 -- 39,808,014 8,061,348 5,595,894
By the employer................... 38,776,067 18,591,104 7,746,846 1,724,596 1,129,275
-------------- ------------ -------------- ------------ ------------
Total contributions............. 140,928,983 18,591,104 47,554,860 9,785,944 6,725,169
-------------- ------------ -------------- ------------ ------------
Total additions (deductions).... 652,183,615 94,644,744 367,401,178 27,252,318 30,749,055
-------------- ------------ -------------- ------------ ------------
Deductions from net assets attributed
to:
Benefits paid to participants....... (95,203,380) (10,716,468) (48,821,872) (2,513,018) (2,931,842)
-------------- ------------ -------------- ------------ ------------
Transfers among funds and Plans:
Transfers to Merck Puerto Rico
Employee Savings and Security
Plan.............................. (23,594,404) (6,714,884) (13,441,758) (492,343) --
Net reallocations................... 1,698,398 (7,889,834) (68,730,768) 175,737,505 (173,694,432)
Loans to participants............... -- (637,042) (9,189,884) (977,329) (787,200)
Loan repayments by participants..... -- 462,919 6,096,252 757,480 735,904
-------------- ------------ -------------- ------------ ------------
Net transfers among funds and
Plans......................... (21,896,006) (14,778,841) (85,266,158) 175,025,313 (173,745,728)
-------------- ------------ -------------- ------------ ------------
Total deductions and net
transfers
among funds and Plans......... (117,099,386) (25,495,309) (134,088,030) 172,512,295 (176,677,570)
-------------- ------------ -------------- ------------ ------------
Net increase (decrease)....... 535,084,229 69,149,435 233,313,148 199,764,613 (145,928,515)
Net assets available for benefits
Beginning of year............. 1,615,524,134 205,995,857 880,601,549 -- 145,928,515
-------------- ------------ -------------- ------------ ------------
End of year................... $2,150,608,363 $275,145,292 $1,113,914,697 $199,764,613 $ --
============== ============ ============== ============ ============
<CAPTION>
FIDELITY
EQUITY- VANGUARD
INCOME U.S. GROWTH
FUND PORTFOLIO
-------- -----------
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------
<S> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in
market value of investments..... $ 6,793,507 $ 1,307,902
Interest.......................... 72,942 66,691
Dividends......................... 2,298,777 2,254,386
----------- -----------
Total investment income
(loss)........................ 9,165,226 3,628,979
----------- -----------
Contributions to the Plan
By participants................... 3,840,120 3,909,809
By the employer................... 779,225 799,627
----------- -----------
Total contributions............. 4,619,345 4,709,436
----------- -----------
Total additions (deductions).... 13,784,571 8,338,415
----------- -----------
Deductions from net assets attributed
to:
Benefits paid to participants....... (931,004) (1,333,622)
----------- -----------
Transfers among funds and Plans:
Transfers to Merck Puerto Rico
Employee Savings and Security
Plan.............................. (225,944) (101,326)
Net reallocations................... 7,040,405 51,771,200
Loans to participants............... (335,481) (307,489)
Loan repayments by participants..... 291,388 281,361
----------- -----------
Net transfers among funds and
Plans......................... 6,770,368 51,643,746
----------- -----------
Total deductions and net
transfers
among funds and Plans......... 5,839,364 50,310,124
----------- -----------
Net increase (decrease)....... 19,623,935 58,648,539
Net assets available for benefits
Beginning of year............. 24,930,788 --
----------- -----------
End of year................... $44,554,723 $58,648,539
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
7
<PAGE> 9
<TABLE>
<CAPTION>
FIDELITY FIDELITY
GROWTH GROWTH & T. ROWE PRICE FIDELITY FIDELITY T. ROWE PRICE
COMPANY INCOME NEW INCOME INTERMEDIATE RETIREMENT MID-CAP
FUND PORTFOLIO FUND BOND FUND GROWTH FUND GROWTH FUND
-------- --------- ------------- ------------ ----------- -------------
YEAR ENDED DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- ------------------------------------ ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in
market value of investments..... $ 5,767,886 $16,739,474 $ 425,222 $ (47,266) $ 1,843,361 $ 3,198,642
Interest.......................... 68,133 181,751 14,934 12,737 20,454 40,702
Dividends......................... 75,503 4,283,405 729,230 450,796 -- 398,290
----------- ----------- ----------- ----------- ----------- -----------
Total investment income
(loss)........................ 5,911,522 21,204,630 1,169,386 416,267 1,863,815 3,637,634
----------- ----------- ----------- ----------- ----------- -----------
Contributions to the Plan
By participants................... 3,314,869 10,074,385 1,057,761 901,290 1,029,713 2,595,496
By the employer................... 608,556 2,024,431 238,192 154,807 193,189 545,943
----------- ----------- ----------- ----------- ----------- -----------
Total contributions............. 3,923,425 12,098,816 1,295,953 1,056,097 1,222,902 3,141,439
----------- ----------- ----------- ----------- ----------- -----------
Total additions (deductions).... 9,834,947 33,303,446 2,465,339 1,472,364 3,086,717 6,779,073
----------- ----------- ----------- ----------- ----------- -----------
Deductions from net assets attributed
to:
Benefits paid to participants....... (1,389,094) (2,310,890) (505,251) (248,158) (246,497) (293,385)
----------- ----------- ----------- ----------- ----------- -----------
Transfers among funds and Plans:
Transfers to Merck Puerto Rico
Employee Savings and Security
Plan.............................. -- (209,311) (9,761) -- -- (107,238)
Net reallocations................... (52,435,493) 5,477,675 23,044,832 (14,386,911) (16,818,627) 32,438,757
Loans to participants............... (223,029) (831,802) (98,537) (59,781) (80,417) (205,440)
Loan repayments by participants..... 274,234 809,709 73,186 51,416 86,512 188,603
----------- ----------- ---------- ----------- ----------- -----------
Net transfers among funds and
Plans......................... (52,384,288) 5,246,271 23,009,720 (14,395,276) (16,812,532) 32,314,682
----------- ----------- ----------- ----------- ----------- -----------
Total deductions and net
transfers
among funds and Plans......... (53,773,382) 2,935,381 22,504,469 (14,643,434) (17,059,029) 32,021,297
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)....... (43,938,435) 36,238,827 24,969,808 (13,171,070) (13,972,312) 38,800,370
Net assets available for benefits
Beginning of year............. 43,938,435 62,714,068 -- 13,171,070 13,972,312 --
----------- ----------- ----------- ----------- ----------- -----------
End of year................... $ -- $98,952,895 $24,969,808 $ -- $ -- $38,800,370
=========== =========== =========== =========== =========== ===========
<CAPTION>
THE GEORGE
FIDELITY PUTNAM
FIDELITY OTC EUROPACIFIC OVERSEAS FUND OF
PORTFOLIO GROWTH FUND FUND BOSTON A
------------ ----------- -------- ----------
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in
market value of investments..... $ 1,751,822 $(3,450,830) $ 4,079,755 $ (555,731)
Interest.......................... 43,494 39,657 32,789 53,640
Dividends......................... 153 1,608,164 -- 4,478,936
----------- ----------- ----------- -----------
Total investment income
(loss)........................ 1,795,469 (1,803,009) 4,112,544 3,976,845
----------- ----------- ----------- -----------
Contributions to the Plan
By participants................... 2,278,556 2,247,100 1,734,085 2,075,492
By the employer................... 409,306 493,224 319,143 435,294
----------- ----------- ----------- -----------
Total contributions............. 2,687,862 2,740,324 2,053,228 2,510,786
----------- ----------- ----------- -----------
Total additions (deductions).... 4,483,331 937,315 6,165,772 6,487,631
----------- ----------- ----------- -----------
Deductions from net assets attributed
to:
Benefits paid to participants....... (463,645) (281,125) (646,594) (903,078)
----------- ----------- ----------- -----------
Transfers among funds and Plans:
Transfers to Merck Puerto Rico
Employee Savings and Security
Plan.............................. -- (86,596) -- (121,190)
Net reallocations................... (29,478,338) 30,630,152 (27,658,831) 53,246,173
Loans to participants............... (148,441) (167,095) (204,986) (200,454)
Loan repayments by participants..... 174,290 191,541 119,492 215,475
----------- ----------- ----------- -----------
Net transfers among funds and
Plans......................... (29,452,489) 30,568,002 (27,744,325) 53,140,004
----------- ----------- ----------- -----------
Total deductions and net
transfers
among funds and Plans......... (29,916,134) 30,286,877 (28,390,919) 52,236,926
----------- ----------- ----------- -----------
Net increase (decrease)....... (25,432,803) 31,224,192 (22,225,147) 58,724,557
Net assets available for benefits
Beginning of year............. 25,432,803 -- 22,225,147 --
----------- ----------- ----------- -----------
End of year................... $ -- $31,224,192 $ -- $58,724,557
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
FIDELITY
FIDELITY RETIREMENT FRANKLIN
FIDELITY RETIREMENT GOVERNMENT SPARTAN U.S. FIDELITY SMALL CAP
BALANCED MONEY MONEY EQUITY INDEX LOW-PRICED GROWTH
FUND MARKET MARKET FUND STOCK FUND FUND I
-------- ---------- ---------- ------------ ---------- ---------
YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in
market value of investments..... $ 5,254,443 $ -- $ -- $ 7,565,228 $ (286) $ (519,762)
Interest.......................... 53,091 93,796 41,239 73,838 4,734 5,973
Dividends......................... 985,798 3,241,387 1,021,867 842,710 514,136 485,958
----------- ----------- ----------- ----------- ----------- -----------
Total investment income
(loss)........................ 6,293,332 3,335,183 1,063,106 8,481,776 518,584 (27,831)
----------- ----------- ----------- ----------- ----------- -----------
Contributions to the Plan
By participants................... 1,474,405 3,882,344 1,004,768 4,772,637 616,711 734,306
By the employer................... 318,036 733,033 233,771 887,818 98,544 113,288
----------- ----------- ----------- ----------- ----------- -----------
Total contributions............. 1,792,441 4,615,377 1,238,539 5,660,455 715,255 847,594
----------- ----------- ----------- ----------- ----------- -----------
Total additions (deductions).... 8,085,773 7,950,560 2,301,645 14,142,231 1,233,839 819,763
----------- ----------- ----------- ----------- ----------- -----------
Deductions from net assets attributed
to:
Benefits paid to participants....... (1,609,507) (11,797,608) (5,603,004) (996,110) (31,946) (39,777)
----------- ----------- ----------- ----------- ----------- -----------
Transfers among funds and Plans:
Transfers to Merck Puerto Rico
Employee Savings and Security
Plan.............................. -- (305,070) -- (40,069) -- --
Net reallocations................... (52,891,711) 54,043,284 (37,337,706) 13,138,939 9,952,586 11,473,099
Loans to participants............... (203,971) (756,375) (210,351) (434,576) (16,363) (54,995)
Loan repayments by participants..... 201,020 369,986 235,718 316,041 37,517 32,544
----------- ----------- ----------- ----------- ----------- -----------
Net transfers among funds and
Plans......................... (52,894,662) 53,351,825 (37,312,339) 12,980,335 9,973,740 11,450,648
----------- ----------- ----------- ----------- ----------- -----------
Total deductions and net
transfers
among funds and Plans......... (54,504,169) 41,554,217 (42,915,343) 11,984,225 9,941,794 11,410,871
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)....... (46,418,396) 49,504,777 (40,613,698) 26,126,456 11,175,633 12,230,634
Net assets available for benefits
Beginning of year............. 46,418,396 37,487,120 40,613,698 18,899,584 -- --
----------- ----------- ----------- ----------- ----------- -----------
End of year................... $ -- $86,991,897 $ -- $45,026,040 $11,175,633 $12,230,634
=========== =========== =========== =========== =========== ===========
<CAPTION>
TEMPLETON
PUTNAM DEVELOPING T. ROWE PRICE PARTICIPANTS'
VOYAGER MARKETS DIVIDEND LOAN
FUND A TRUST I GROWTH FUND ACCOUNT
------- ---------- ------------- -------------
YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in
market value of investments..... $ (84,039) $(1,787,482) $ 148,303 $ --
Interest.......................... 4,061 4,911 1,957 --
Dividends......................... 341,199 308,391 183,655 --
----------- ----------- ---------- -----------
Total investment income
(loss)........................ 261,221 (1,474,180) 333,915 --
----------- ----------- ---------- -----------
Contributions to the Plan
By participants................... 474,892 441,658 227,263 --
By the employer................... 76,474 80,686 41,659 --
----------- ----------- ---------- -----------
Total contributions............. 551,366 522,344 268,922 --
----------- ----------- ---------- -----------
Total additions (deductions).... 812,587 (951,836) 602,837 --
----------- ----------- ---------- -----------
Deductions from net assets attributed
to:
Benefits paid to participants....... (14,013) (7,051) (75) (568,746)
----------- ----------- ---------- -----------
Transfers among funds and Plans:
Transfers to Merck Puerto Rico
Employee Savings and Security
Plan.............................. -- -- -- (1,738,914)
Net reallocations................... 4,928,252 5,711,090 4,308,017 79,083
Loans to participants............... (10,386) (23,456) (1,969) 16,166,849
Loan repayments by participants..... 17,781 18,084 6,726 (12,045,179)
----------- ----------- ---------- -----------
Net transfers among funds and
Plans......................... 4,935,647 5,705,718 4,312,774 2,461,839
----------- ----------- ---------- -----------
Total deductions and net
transfers
among funds and Plans......... 4,921,634 5,698,667 4,312,699 1,893,093
----------- ----------- ---------- -----------
Net increase (decrease)....... 5,734,221 4,746,831 4,915,536 1,893,093
Net assets available for benefits
Beginning of year............. -- -- -- 33,194,792
----------- ----------- ---------- -----------
End of year................... $ 5,734,221 $ 4,746,831 $4,915,536 $35,087,885
=========== =========== ========== ===========
</TABLE>
9
<PAGE> 11
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The Merck & Co., Inc. Employee Savings and Security Plan (the "Plan") was
designed to provide an easy, economical way for employees to become stockholders
of Merck & Co., Inc. (the "Company" or "Merck") as well as a systematic means of
saving and investing for the future. Regular full-time, part-time, and temporary
employees of the Company and of certain wholly-owned subsidiaries as defined by
the Plan document who were not covered by a collective bargaining agreement are
eligible to enroll in the Plan as of the first day of the third month following
their date of hire.
The Plan is administered by a management committee appointed by the Chief
Executive Officer of the Company. All costs of administering the Plan are borne
by the Company.
Participants should refer to the Summary Plan Description for a complete
description of benefits provided.
CONTRIBUTIONS
Participants may contribute from 2% up to 15% of their base pay. In
addition, the Company matches 75% of employee contributions up to 6% of base pay
per pay period. Company matching contributions are invested according to the
following age parameters:
Under age 50 -- 50% of Company matching contributions is invested in the
Merck Common Stock Fund (Non-participant directed) and 50% is invested in the
funds to which the participant is currently contributing (Participant directed).
Age 50 and above -- Participants have the option to invest all Company
matching contributions in any of the available fund options (Participant
directed).
INVESTMENT OPTIONS
Participants direct the investment of their contributions into any
investment option including the Merck Common Stock Fund (Participant directed).
The following is a brief description of each option:
Merck Common Stock Fund
The Merck Common Stock Fund invests primarily in Merck common stock and a
small portion of money market instruments for liquidity. This liquidity allows
for daily trading in the fund. Ownership is measured in units rather than
shares. An investment in this option allows the participant to become a
stockholder and part owner of the Company. The value of the investment can go up
or down depending on general factors affecting the stock market and specific
factors affecting the Company's business. This is neither a mutual fund nor a
diversified or managed investment option. Investing in a non-diversified single
stock involves more investment risk than investing in a diversified fund.
T. Rowe Price Blue Chip Growth Fund
The T. Rowe Price Blue Chip Growth Fund seeks to provide long-term growth
of capital. The fund invests primarily (at least 65% of its assets) in common
stocks of large and medium-sized blue chip companies that have the potential for
above-average earnings growth and are well established in their respective
industries. The fund may also invest in convertible stocks and bonds, preferred
stocks, bonds and warrants. Up to 20% of assets (excluding reserves) may be
invested in foreign securities, which may be subject to currency risks and
political and sovereign risks of the home country.
This investment option was added to the Plan effective July 1, 1997.
10
<PAGE> 12
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fidelity Magellan Fund
Funds are invested primarily in domestic and foreign common stock and
securities convertible into common stock. Up to 20% of assets may also be
invested in debt securities of all types and qualities issued by foreign and
domestic issuers if the fund manager believes they have potential for capital
appreciation.
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Equity-Income Fund
Funds are invested in income-producing equity securities. Normally, at
least 65% of the fund's assets will be invested in income producing equity
securities. The fund has the flexibility to invest the balance in all types of
domestic and foreign securities, including bonds.
Vanguard U.S. Growth Portfolio
Vanguard U.S. Growth Portfolio seeks to provide long-term capital growth by
investing in equity securities of large, established U.S. companies that have
good growth records, strong market positions and have exhibited long-term
financial strength to provide potential long-term growth.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Growth Company Fund
Funds are invested primarily in common stock, and securities convertible
into common stock, of companies considered to have above-average growth
characteristics. These characteristics are most often associated with companies
in new and emerging areas of the economy, although the fund may also hold shares
in larger, mature or declining industry firms which have been revitalized.
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Growth & Income Portfolio
Funds are invested primarily in U.S. and foreign stocks, focusing on those
that pay current dividends and offer potential growth of earnings such as common
stocks, convertible securities, preferred stocks and warrants.
T. Rowe Price New Income Fund
The T. Rowe Price New Income Fund is a bond fund that seeks to provide the
highest level of income consistent with preservation of capital by purchasing
securities that have been rated as investment-grade by Standard & Poor's,
Moody's or Fitch Investor Services. The fund invests at least 80% of its assets
in income-producing investment-grade debt securities including U.S. government
and agency securities, corporate bonds, bank obligations and utilities. The
fund's dollar-weighted average maturity is generally expected to be between four
and fifteen years.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Intermediate Bond Fund
This fund seeks high current income by investing in U.S. and foreign
investment grade debt securities rated Baa or better by Moody's or BBB or better
by Standard & Poor's. Investment securities include
11
<PAGE> 13
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
corporate bonds, mortgage securities, bank obligations and U.S. government and
agency securities, as well as short-term investments. The fund's dollar-weighted
average maturity will range between three and ten years under normal
circumstances.
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Retirement Growth Fund
Funds are invested primarily in common stocks of domestic or foreign
issuers, although they can be invested in all types of securities. Foreign
securities may involve a higher degree of risk. The fund's emphasis is on the
realization of capital gains rather than on dividend income.
This investment option was eliminated from the Plan effective June 30,
1997.
T. Rowe Price Mid-Cap Growth Fund
T. Rowe Price Mid-Cap Growth Fund seeks to provide long-term capital
appreciation by investing primarily in the stock of medium-sized (mid-cap)
growth companies that offer the potential for above-average earnings growth. The
fund focuses on companies that are no longer considered new or emerging, but are
well-established. It may also invest in convertible securities, warrants and
foreign securities, which are subject to greater risks.
This investment option was added to the Plan effective July 1, 1997.
Fidelity OTC Portfolio
Funds are invested primarily in securities traded on the over-the-counter
securities market. These are frequently the securities of smaller or newer
companies whose instruments may have limited marketability and may be subject to
more erratic market movement.
This investment option was eliminated from the Plan effective June 30,
1997.
EuroPacific Growth Fund
This fund seeks long-term capital growth by investing primarily in
securities of companies outside the United States. Normally, at least 65% of the
fund's total assets will be invested in Europe or the Pacific Basin. The Pacific
Basin is generally defined as those countries bordering the Pacific Ocean and
includes, but is not limited to Australia, Canada, Japan, Malaysia and
Singapore. The fund may also invest in convertible securities, debt and
government securities and preferred stock. Foreign investments, especially in
developing countries, involve greater risks and may offer greater potential.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Overseas Fund
This fund seeks long-term capital growth by investing primarily in foreign
securities. The investments may include common stock and securities convertible
into common stock, as well as debt instruments.
This investment option was eliminated from the Plan effective June 30,
1997.
12
<PAGE> 14
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The George Putnam Fund of Boston A
This fund seeks to provide a balanced investment comprised of a
well-diversified portfolio of stocks and bonds that will produce both capital
growth and current income. Normally, no more than 75% of the fund's assets will
be invested in common stocks and convertible securities.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Balanced Fund
Funds are invested in a broadly diversified portfolio of high-yielding
securities, including common stocks, preferred stocks and bonds. The objective
is to provide a balanced investment in both stocks and bonds, thereby affording
the opportunity for capital growth and current income; however, at least 25% of
total assets will always be invested in fixed-income senior securities.
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Retirement Money Market
Funds are invested in high-quality U.S. dollar-denominated money market
instruments of U.S. and foreign issuers. Normally, the fund intends to invest
more than 25% of its total assets in obligations of institutions in the
financial services industry.
Fidelity Retirement Government Money Market
Funds are invested in obligations issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and in
repurchase agreements secured by these obligations. An investment in the
portfolio is not insured or guaranteed by the U.S. government.
This investment option was eliminated from the Plan effective June 30,
1997.
Spartan U.S. Equity Index Fund
Funds are primarily invested in securities of the companies which comprise
the S&P 500 Index. Effective April 18, 1997, the fund name was changed from
Fidelity U.S. Equity Index Portfolio to the Spartan U.S. Equity Index Fund.
Fidelity Low-Priced Stock Fund
This fund seeks capital appreciation by investing mainly in low-priced
domestic and foreign common stocks ($35 or less at time of purchase). Foreign
securities may involve a higher degree of risk. This fund charges a redemption
fee to discourage short-term buying and selling of fund shares. If fund shares
are sold after being held for less than 90 days, the fund will deduct a
redemption fee from participants' accounts equal to 1.5% of the value of the
shares sold.
This investment option was added to the Plan effective July 1, 1997.
Franklin Small Cap Growth Fund I
This fund seeks long-term capital growth by investing primarily in stocks
of companies with market capitalization of less than $1 billion at the time of
the investment. The fund tries to invest at least one-third of its assets in
stocks of companies with market capitalization of $550 million or less. Although
the fund's assets
13
<PAGE> 15
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
are invested primarily in small companies, it may invest up to 35% of its total
assets in larger capitalized companies with strong growth potential, in
relatively well-known larger companies in mature industries with potential for
capital appreciation, or in corporate debt securities, including bonds, notes
and debentures if deemed appropriate. The fund may also invest up to 25% of its
total assets in foreign securities, which may involve greater risks.
This investment option was added to the Plan effective July 1, 1997.
Putnam Voyager Fund A
This fund seeks capital appreciation by investing primarily in common
stocks of companies that have potential for capital appreciation which is
significantly greater than that of the market averages. The fund may also invest
in convertible bonds, convertible preferred stocks, warrants, preferred stocks,
money market instruments and debt securities. The fund may invest up to 20% of
its total assets in securities principally traded in foreign markets. Foreign
securities are subject to currency, political, financial or sovereign risks of
the issuer's home country.
This investment option was added to the Plan effective July 1, 1997.
Templeton Developing Markets Trust I
This fund seeks long-term capitalization by investing in equity securities
of emerging market countries. The fund may invest up to 35% of its total assets
in debt securities, including bonds, notes, debentures, commercial paper,
certificates of deposit, time deposits and bankers' acceptances. Foreign
investments may involve greater risks.
This investment option was added to the Plan effective July 1, 1997.
T. Rowe Price Dividend Growth Fund
This fund seeks to provide increasing dividend income over time, long-term
capital appreciation and reasonable current income through investments primarily
in dividend-paying stocks. The fund may also invest in bonds and foreign
securities.
This investment option was added to the Plan effective July 1, 1997.
VESTING
Participants are immediately vested in their contributions, all Company
matching contributions, plus actual earnings thereon.
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 the Employee Retirement Income
Security Act of 1974.
PARTICIPANTS' LOAN ACCOUNT
Participants may borrow from their account balances with interest charged
at the prime rate plus 1%. Loan terms range from one to five years or up to
thirty years for the purchase of a primary residence. The minimum loan is $500
and the maximum loan is the lesser of $50,000 less the highest outstanding loan
14
<PAGE> 16
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
balance during the one year period prior to the new loan application date, or
50% of the participant's account balance less any current outstanding loan.
Activity related to these borrowings is reflected in the Participants' Loan
Account column of the financial statements.
BENEFITS PAID TO PARTICIPANTS
In-service (which include hardship withdrawals) and termination
distributions are made throughout the year in accordance with applicable Plan
provisions. At December 31, 1997 and 1996, net assets available for benefits
included distributions in process of payment of $3,134,986 and $2,827,505,
respectively.
2. SUMMARY OF ACCOUNTING POLICIES:
The financial statements of the Plan have been prepared on the accrual
basis of accounting. The investments of the Plan are stated at quoted market
value. Dividend income is recorded on the ex-dividend date. The net appreciation
(depreciation) in market value of investments is based on the beginning of the
year market value or value at the time of purchase during the year and is
included in the statement of changes in net assets available for benefits.
USE OF ESTIMATES
The financial statements are prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts that are based on
management's best estimates and judgments. Actual results could differ from
these estimates.
RECLASSIFICATIONS
Certain prior year amounts shown in the accompanying financial statements
have been reclassified to conform to the current year's presentation.
3. INCOME TAXES:
The Plan obtained a tax determination letter from the Internal Revenue
Service on September 18, 1995 indicating that it had been designed in accordance
with applicable sections of the Internal Revenue Code ("IRC"). The Plan was most
recently amended in July 1997. The Plan sponsor believes that the Plan is
designed and currently operated in compliance with the IRC.
4. OTHER MATTERS:
A transfer of ($23,594,404) was made on July 1, 1997 for employees residing
in Puerto Rico who were transferred to a new plan, the Merck Puerto Rico
Employee Savings and Security Plan.
Net reallocations and transfers in 1997 of $1,698,398 consist of $1,467,531
transferred between the Plan and the Merck & Co., Inc. Stock Purchase and
Savings Plan for employees who changed their status during the year and $424,912
transferred in from Merck-Medco Managed Care, L.L.C. during the year. The
remaining amount relates to miscellaneous net transfers.
5. PARTY-IN-INTEREST:
All transactions of party-in-interest are set forth on the attached
schedule.
6. SUBSEQUENT EVENTS:
Effective January 6, 1998, Merck employees in the Merck AgVet division and
associated operations and their balances in the Plan were transferred to the
savings plan of Merial Limited, a stand-alone joint venture that is 50% owned by
Merck & Co., Inc. and 50% owned by Rhone-Poulenc SA.
15
<PAGE> 17
SCHEDULE I
EIN: 22-1109110
PLAN NO.: 001
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
UNITS/SHARES AT
NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE
--------------------------------- --------------- -------------- -------------
<S> <C> <C> <C>
Merck Common Stock Fund*.................................... 75,769,964 $ 481,662,364 $1,376,705,062
T. Rowe Price Blue Chip Growth Fund......................... 8,223,605 183,262,013 198,764,539
Fidelity Equity-Income Fund................................. 845,675 35,585,777 44,321,055
Vanguard U.S. Growth Portfolio.............................. 2,031,940 57,240,807 58,316,674
Fidelity Growth & Income Portfolio.......................... 2,583,111 74,922,676 98,415,031
T. Rowe Price New Income Fund............................... 2,738,655 24,446,790 24,839,606
T. Rowe Price Mid-Cap Growth Fund........................... 1,348,815 35,570,891 38,576,112
EuroPacific Growth Fund..................................... 1,192,862 34,340,119 31,038,262
The George Putnam Fund of Boston A.......................... 3,250,273 59,079,694 58,439,910
Fidelity Retirement Money Market............................ 86,552,102 86,552,102 86,580,252
Spartan U.S. Equity Index Fund.............................. 1,280,064 35,002,228 44,776,486
Fidelity Low-Priced Stock Fund.............................. 442,199 11,113,049 11,112,462
Franklin Small Cap Growth Fund I............................ 530,294 12,684,386 12,159,638
Putnam Voyager Fund A....................................... 299,026 5,772,063 5,696,444
Templeton Developing Markets Trust I........................ 364,257 6,412,885 4,713,493
T. Rowe Price Dividend Growth Fund.......................... 242,858 4,745,064 4,888,735
Participants' Loan Account (with interest ranging from 6.5%
to 12.5%)................................................. -- 34,895,826 34,895,826
-------------- --------------
Total Investments................................... $1,183,288,734 $2,134,239,587
============== ==============
</TABLE>
- ---------------
* Denotes a party-in-interest to the Plan.
16
<PAGE> 18
SCHEDULE II
EIN: 22-1109110
PLAN NO.: 001
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS(a)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CURRENT
VALUE
OF ASSETS ON
IDENTITY OF PARTY INVOLVED AND DESCRIPTION OF PURCHASE COST OF TRANSACTION
ASSETS PRICE SELLING PRICE ASSET DATE NET GAIN
- --------------------------------------------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Merck Common Stock Fund
251 Purchase Transactions.............. $190,659,284 $ -- $190,659,284 $190,659,284 $ --
251 Sales Transactions................. -- 260,659,275 133,791,678 260,659,275 126,867,597
T. Rowe Price Blue Chip Growth Fund
128 Purchase Transactions.............. 198,222,455 -- 198,222,455 198,222,455 --
125 Sales Transactions................. -- 15,592,642 14,960,443 15,592,642 632,199
Fidelity Magellan Fund
130 Purchase Transactions.............. 13,963,042 -- 13,963,042 13,963,042 --
126 Sales Transactions................. -- 179,059,139 140,905,074 179,059,139 38,154,065
Fidelity Retirement Money Market Portfolio
254 Purchase Transactions.............. 154,014,032 -- 154,014,032 154,014,032 --
249 Sales Transactions................. -- 104,733,231 104,733,231 104,733,231 --
</TABLE>
- ---------------
(a) Reportable transactions are transactions that, individually or in the
aggregate, exceed 5% of the Plan's net assets as of the beginning of the
Plan year.
17
<PAGE> 19
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated April 30, 1998 included in the financial
statements and exhibits required by Form 11-K Annual Report for the Merck & Co.,
Inc. Employee Savings and Security Plan into the Company's previously filed
Registration Statements on Form S-8 (Nos. 33-21087, 33-21088, 33-36101,
33-40177, 33-51235, 33-53463, 33-64273, 33-64665, 333-23293 and 333-23295), on
Form S-4 (No. 33-50667) and on Form S-3 (Nos. 33-60322, 33-39349, 33-51785,
33-57421, 333-17045 and 333-36383). It should be noted that we have not audited
any financial statements of the Plan subsequent to December 31, 1997 or
performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
June 22, 1998
<PAGE> 1
EXHIBIT 99(b)
FINANCIAL STATEMENTS AND EXHIBITS
REQUIRED BY FORM 11-K ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-3305
---------------------
MERCK & CO., INC. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
(Full title of the plan)
MERCK & CO., INC.
P.O. BOX 100
WHITEHOUSE STATION, NEW JERSEY 08889-0100
(Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office)
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merck & Co., Inc.:
We have audited the accompanying statements of net assets available for
benefits of the Merck & Co., Inc. Employee Stock Purchase and Savings Plan (the
"Plan") as of December 31, 1997 and 1996, and the related statement of changes
in net assets available for benefits for the year ended December 31, 1997. These
financial statements and the schedules referred to below are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 benefits of the Plan as
of December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 1997, 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 of
assets held for investment purposes and reportable transactions are presented
for purposes 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 fund information in the
statements of net assets available for benefits and the statement of changes in
net assets available for 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.
ARTHUR ANDERSEN LLP
New York, New York
April 30, 1998
1
<PAGE> 3
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
-----------------------------
(NON- T. ROWE FIDELITY
PARTICIPANT (PARTICIPANT PRICE FIDELITY EQUITY-
DIRECTED; SEE DIRECTED; SEE BLUE CHIP MAGELLAN INCOME
TOTAL NOTE 1) NOTE 1) GROWTH FUND FUND FUND
----- ------------- ------------- ----------- -------- --------
DECEMBER 31, 1997
- ------------------------------------------ |-------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market value............. $269,920,909 $49,466,644 $173,227,643 $11,198,335 $ -- $1,895,866
------------ ----------- ------------ ----------- ----------- ----------
Receivables
Employer's contribution............... 77,521 77,521 -- -- -- --
Participants' contributions........... 360,190 -- 292,723 18,923 -- 3,204
Accrued interest and dividends........ 962,735 211,323 735,968 -- -- --
------------ ----------- ------------ ----------- ----------- ----------
Total receivables................... 1,400,446 288,844 1,028,691 18,923 -- 3,204
------------ ----------- ------------ ----------- ----------- ----------
Net assets available for benefits......... $271,321,355 $49,755,488 $174,256,334 $11,217,258 $ -- $1,899,070
============ =========== ============ =========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
2
<PAGE> 4
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
VANGUARD GROWTH GROWTH & T. ROWE PRICE FIDELITY RETIREMENT
U.S. GROWTH COMPANY INCOME NEW INCOME INTERMEDIATE GROWTH
PORTFOLIO FUND PORTFOLIO FUND BOND FUND FUND
----------- -------- --------- ------------- ------------ ----------
DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market value............. $2,006,198 $ -- $3,664,353 $966,177 $ -- $ --
---------- -------- ---------- -------- -------- --------
Receivables
Employer's contribution............... -- -- -- -- -- --
Participants' contributions........... 3,390 -- 6,192 1,633 -- --
Accrued interest and dividends........ -- -- -- -- -- --
---------- -------- ---------- -------- -------- --------
Total receivables................... 3,390 -- 6,192 1,633 -- --
---------- -------- ---------- -------- -------- --------
Net assets available for benefits......... $2,009,588 $ -- $3,670,545 $967,810 $ -- $ --
========== ======== ========== ======== ======== ========
<CAPTION>
T. ROWE PRICE FIDELITY FIDELITY
MID-CAP OTC EUROPACIFIC OVERSEAS
GROWTH FUND PORTFOLIO GROWTH FUND FUND
------------- --------- ----------- --------
DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets: $1,591,041 $ -- $1,349,190 $ --
Investments at market value............. ---------- -------- ---------- --------
Receivables -- -- -- --
Employer's contribution............... 2,689 -- 2,280 --
Participants' contributions........... -- -- -- --
Accrued interest and dividends........ ---------- -------- ---------- --------
2,689 -- 2,280 --
Total receivables................... ---------- -------- ---------- --------
$1,593,730 $ -- $1,351,470 $ --
Net assets available for benefits......... ========== ======== ========== ========
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
THE GEORGE FIDELITY FIDELITY
PUTNAM FIDELITY RETIREMENT RETIREMENT SPARTAN FIDELITY
FUND OF BALANCED MONEY GOVERNMENT U.S. EQUITY LOW-PRICED
BOSTON A FUND MARKET MONEY MARKET INDEX FUND STOCK FUND
---------- -------- ---------- ------------ ----------- ----------
DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market value............. $4,889,792 $ -- $9,317,599 $ -- $1,076,594 $460,669
---------- -------- ---------- -------- ---------- --------
Receivables
Employer's contribution............... -- -- -- -- -- --
Participants' contributions........... 8,263 -- 15,745 -- 1,819 778
Accrued interest and dividends........ -- -- -- -- -- --
---------- -------- ---------- -------- ---------- --------
Total receivables................... 8,263 -- 15,745 -- 1,819 778
---------- -------- ---------- -------- ---------- --------
Net assets available for benefits......... $4,898,055 $ -- $9,333,344 $ -- $1,078,413 $461,447
========== ======== ========== ======== ========== ========
<CAPTION>
TEMPLETON
FRANKLIN PUTNAM DEVELOPING T. ROWE PRICE
SMALL CAP VOYAGER MARKETS DIVIDEND PARTICIPANTS'
GROWTH FUND I FUND A TRUST I GROWTH FUND LOAN ACCOUNT
------------- ------- ---------- ------------- -------------
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------|
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value............. $492,967 $463,264 $250,691 $302,591 $7,301,295
-------- -------- -------- -------- ----------
Receivables
Employer's contribution............... -- -- -- -- --
Participants' contributions........... 833 783 424 511 --
Accrued interest and dividends........ -- -- -- -- 15,444
-------- -------- -------- -------- ----------
Total receivables................... 833 783 424 511 15,444
-------- -------- -------- -------- ----------
Net assets available for benefits......... $493,800 $464,047 $251,115 $303,102 $7,316,739
======== ======== ======== ======== ==========
</TABLE>
4
<PAGE> 6
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
-----------------------------
(NON- FIDELITY FIDELITY FIDELITY
PARTICIPANT (PARTICIPANT FIDELITY EQUITY- GROWTH GROWTH &
DIRECTED; SEE DIRECTED; SEE MAGELLAN INCOME COMPANY INCOME
TOTAL NOTE 1) NOTE 1) FUND FUND FUND PORTFOLIO
----- ------------- ------------- -------- -------- -------- ---------
DECEMBER 31, 1996
- --------------------------------- |----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market value.... $199,786,764 $46,804,486 $121,471,143 $7,849,145 $915,537 $1,008,987 $1,986,353
------------ ----------- ------------ ---------- -------- ---------- ----------
Receivables
Employer's contribution...... 61,525 61,525 -- -- -- -- --
Participants'
contributions.............. 312,196 -- 260,255 16,059 1,873 2,064 4,064
Accrued interest and
dividends.................. 866,527 235,591 625,250 -- -- -- --
------------ ----------- ------------ ---------- -------- ---------- ----------
Total receivables.......... 1,240,248 297,116 885,505 16,059 1,873 2,064 4,064
------------ ----------- ------------ ---------- -------- ---------- ----------
Net assets available for
benefits....................... $201,027,012 $47,101,602 $122,356,648 $7,865,204 $917,410 $1,011,051 $1,990,417
============ =========== ============ ========== ======== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
5
<PAGE> 7
<TABLE>
<CAPTION>
FIDELITY
FIDELITY RETIREMENT FIDELITY FIDELITY FIDELITY
INTERMEDIATE GROWTH OTC OVERSEAS BALANCED
BOND FUND FUND PORTFOLIO FUND FUND
------------ ---------- --------- -------- --------
DECEMBER 31, 1996 (PARTICIPANT DIRECTED; SEE NOTE 1)
- -------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value... $369,411 $616,783 $719,063 $800,300 $3,807,066
-------- -------- -------- -------- ----------
Receivables
Employer's contribution..... -- -- -- -- --
Participants'
contributions............. 756 1,262 1,471 1,637 7,789
Accrued interest and
dividends................. -- -- -- -- --
-------- -------- -------- -------- ----------
Total receivables......... 756 1,262 1,471 1,637 7,789
-------- -------- -------- -------- ----------
Net assets available for
benefits...................... $370,167 $618,045 $720,534 $801,937 $3,814,855
======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
FIDELITY RETIREMENT FIDELITY
RETIREMENT GOVERNMENT U.S. EQUITY PARTICIPANTS'
MONEY MONEY INDEX LOAN
MARKET MARKET PORTFOLIO ACCOUNT
---------- ---------- ----------- -------------
DECEMBER 31, 1996
- -------------------------------- ------------------------------------------------------|
<S> <C> <C> <C> <C>
Assets:
Investments at market value... $2,210,381 $4,596,289 $508,094 $6,123,726
---------- ---------- -------- ----------
Receivables
Employer's contribution..... -- -- -- --
Participants'
contributions............. 4,522 9,404 1,040 --
Accrued interest and
dividends................. -- -- -- 5,686
---------- ---------- -------- ----------
Total receivables......... 4,522 9,404 1,040 5,686
---------- ---------- -------- ----------
Net assets available for
benefits...................... $2,214,903 $4,605,693 $509,134 $6,129,412
========== ========== ======== ==========
</TABLE>
6
<PAGE> 8
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
-----------------------------
(NON- FIDELITY
PARTICIPANT (PARTICIPANT T. ROWE PRICE FIDELITY EQUITY- VANGUARD
DIRECTED; SEE DIRECTED; SEE BLUE CHIP MAGELLAN INCOME U.S. GROWTH
TOTAL NOTE 1) NOTE 1) GROWTH FUND FUND FUND PORTFOLIO
----- ------------- ------------- ------------- -------- -------- -----------
YEAR ENDED DECEMBER 31,
1997
- --------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income
Net appreciation
(depreciation) in
market value of
investments.......... $ 60,311,739 $ 7,000,059 $ 49,591,267 $ 888,938 $1,094,692 $ 258,998 $ 28,410
Interest............... 561,933 88,898 364,353 18,921 14,672 3,111 3,925
Dividends.............. 6,189,451 1,143,617 3,368,327 64,978 213,308 95,903 76,779
------------ ----------- ------------ ----------- ---------- ---------- ----------
Total investment
income (loss)...... 67,063,123 8,232,574 53,323,947 972,837 1,322,672 358,012 109,114
------------ ----------- ------------ ----------- ---------- ---------- ----------
Contributions to the Plan
By participants........ 14,731,915 -- 10,195,564 679,729 499,515 269,830 219,271
By the employer........ 2,164,962 2,164,962 -- -- -- -- --
------------ ----------- ------------ ----------- ---------- ---------- ----------
Total
contributions...... 16,896,877 2,164,962 10,195,564 679,729 499,515 269,830 219,271
------------ ----------- ------------ ----------- ---------- ---------- ----------
Total additions...... 83,960,000 10,397,536 63,519,511 1,652,566 1,822,187 627,842 328,385
------------ ----------- ------------ ----------- ---------- ---------- ----------
Deductions from net assets
attributed to:
Benefits paid to
participants........... (12,198,126) (2,634,769) (7,996,619) (57,577) (102,370) (71,445) (5,265)
------------ ----------- ------------ ----------- ---------- ---------- ----------
Transfers among funds and
Plans:
Net reallocations........ (1,467,531) (5,072,674) (2,459,862) 9,642,854 (9,547,138) 435,010 1,688,623
Loans to participants.... -- (387,924) (2,619,047) (91,132) (91,885) (23,132) (17,123)
Loan repayments by
participants........... -- 351,717 1,455,703 70,547 54,002 13,385 14,968
------------ ----------- ------------ ----------- ---------- ---------- ----------
Net transfers among
funds and Plans.... (1,467,531) (5,108,881) (3,623,206) 9,622,269 (9,585,021) 425,263 1,686,468
------------ ----------- ------------ ----------- ---------- ---------- ----------
Total deductions and
net
transfers among
funds and Plans.... (13,665,657) (7,743,650) (11,619,825) 9,564,692 (9,687,391) 353,818 1,681,203
------------ ----------- ------------ ----------- ---------- ---------- ----------
Net increase
(decrease)....... 70,294,343 2,653,886 51,899,686 11,217,258 (7,865,204) 981,660 2,009,588
Net assets available for
benefits
Beginning of
year............. 201,027,012 47,101,602 122,356,648 -- 7,865,204 917,410 --
------------ ----------- ------------ ----------- ---------- ---------- ----------
End of year........ $271,321,355 $49,755,488 $174,256,334 $11,217,258 $ -- $1,899,070 $2,009,588
============ =========== ============ =========== ========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
7
<PAGE> 9
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
GROWTH GROWTH & T. ROWE PRICE FIDELITY RETIREMENT
COMPANY INCOME NEW INCOME INTERMEDIATE GROWTH
FUND PORTFOLIO FUND BOND FUND FUND
----------- --------- ----------- ------------ --------
YEAR ENDED DECEMBER 31,
1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- --------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income
Net appreciation
(depreciation) in
market value of
investments.......... $ 132,733 $ 579,477 $ 16,001 $ (385) $ 76,082
Interest............... 2,714 10,443 818 593 1,320
Dividends.............. 1,750 152,679 27,833 13,476 --
----------- ---------- -------- -------- ---------
Total investment
income (loss)...... 137,197 742,599 44,652 13,684 77,402
----------- ---------- -------- -------- ---------
Contributions to the Plan
By participants........ 156,328 581,351 63,867 45,634 65,368
By the employer........ -- -- -- -- --
----------- ---------- -------- -------- ---------
Total
contributions...... 156,328 581,351 63,867 45,634 65,368
----------- ---------- -------- -------- ---------
Total additions...... 293,525 1,323,950 108,519 59,318 142,770
----------- ---------- -------- -------- ---------
Deductions from net assets
attributed to:
Benefits paid to
participants........... (3,319) (63,694) (429) (5,748) (12,731)
----------- ---------- -------- -------- ---------
Transfers among funds and
Plans:
Net reallocations........ (1,292,233) 447,177 860,202 (424,148) (749,519)
Loans to participants.... (17,553) (67,432) (3,818) (1,570) (4,171)
Loan repayments by
participants........... 8,529 40,127 3,336 1,981 5,606
----------- ---------- -------- -------- ---------
Net transfers among
funds and Plans.... (1,301,257) 419,872 859,720 (423,737) (748,084)
----------- ---------- -------- -------- ---------
Total deductions and
net
transfers among
funds and Plans.... (1,304,576) 356,178 859,291 (429,485) (760,815)
----------- ---------- -------- -------- ---------
Net increase
(decrease)....... (1,011,051) 1,680,128 967,810 (370,167) (618,045)
Net assets available for
benefits
Beginning of
year............. 1,011,051 1,990,417 -- 370,167 618,045
----------- ---------- -------- -------- ---------
End of year........ $ -- $3,670,545 $967,810 $ -- $ --
=========== ========== ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
T. ROWE THE GEORGE
PRICE FIDELITY EUROPACIFIC FIDELITY PUTNAM
MID-CAP OTC GROWTH OVERSEAS FUND OF
GROWTH FUND PORTFOLIO FUND FUND BOSTON A
----------- --------- ----------- -------- ----------
YEAR ENDED DECEMBER 31,
1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- --------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income
Net appreciation
(depreciation) in
market value of
investments.......... $ 106,345 $ 53,339 $ (135,820) $ 150,790 $ (46,430)
Interest............... 1,943 1,578 2,634 2,247 6,874
Dividends.............. 16,441 -- 67,423 -- 372,038
---------- ---------- ----------- ---------- -----------
Total investment
income (loss)...... 124,729 54,917 (65,763) 153,037 332,482
---------- ---------- ----------- ---------- -----------
Contributions to the Plan
By participants........ 155,874 126,254 162,382 113,945 246,119
By the employer........ -- -- -- -- --
---------- ---------- ----------- ---------- -----------
Total
contributions...... 155,874 126,254 162,382 113,945 246,119
---------- ---------- ----------- ---------- -----------
Total additions...... 280,603 181,171 96,619 266,982 578,601
---------- ---------- ----------- ---------- -----------
Deductions from net assets
attributed to:
Benefits paid to
participants........... (8,559) (2,884) (3,765) (1,923) (92,117)
---------- ---------- ----------- ---------- -----------
Transfers among funds and
Plans:
Net reallocations........ 1,344,381 (892,695) 1,275,686 (1,069,901) 4,416,826
Loans to participants.... (31,446) (12,283) (27,859) (4,473) (33,996)
Loan repayments by
participants........... 8,751 6,157 10,789 7,378 28,741
---------- ---------- ----------- ---------- -----------
Net transfers among
funds and Plans.... 1,321,686 (898,821) 1,258,616 (1,066,996) 4,411,571
---------- ---------- ----------- ---------- -----------
Total deductions and
net
transfers among
funds and Plans.... 1,313,127 (901,705) 1,254,851 (1,068,919) 4,319,454
---------- ---------- ----------- ---------- -----------
Net increase
(decrease)....... 1,593,730 (720,534) 1,351,470 (801,937) 4,898,055
Net assets available for
benefits
Beginning of
year............. -- 720,534 -- 801,937 --
---------- ---------- ----------- ---------- -----------
End of year........ $1,593,730 $ -- $ 1,351,470 $ -- $ 4,898,055
========== ========== =========== ========== ===========
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
FIDELITY FIDELITY SPARTAN FIDELITY
FIDELITY RETIREMENT RETIREMENT U.S. EQUITY LOW-PRICED
BALANCED MONEY GOVERNMENT INDEX STOCK
FUND MARKET MONEY MARKET FUND FUND
YEAR ENDED DECEMBER 31, -------- ---------- ------------ ----------- ----------
1997
- --------------------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income
Net appreciation
(depreciation) in
market value of
investments.......... $ 434,988 $ -- $ -- $ 177,590 $ (137)
Interest............... 7,354 16,271 7,995 4,368 85
Dividends.............. 78,677 256,899 125,932 19,917 17,909
---------- ---------- ----------- ---------- --------
Total investment
income (loss)...... 521,019 273,170 133,927 201,875 17,857
---------- ---------- ----------- ---------- --------
Contributions to the Plan
By participants........ 168,232 489,643 199,856 185,443 24,864
By the employer........ -- -- -- -- --
---------- ---------- ----------- ---------- --------
Total
contributions...... 168,232 489,643 199,856 185,443 24,864
---------- ---------- ----------- ---------- --------
Total additions...... 689,251 762,813 333,783 387,318 42,721
---------- ---------- ----------- ---------- --------
Deductions from net assets
attributed to:
Benefits paid to
participants........... (77,610) (647,540) (312,088) (23,025) --
---------- ---------- ----------- ---------- --------
Transfers among funds and
Plans:
Net reallocations........ (4,443,673) 7,043,977 (4,622,118) 214,044 421,994
Loans to participants.... (17,253) (88,325) (34,327) (21,098) (3,546)
Loan repayments by
participants........... 34,430 47,516 29,057 12,040 278
---------- ---------- ----------- ---------- --------
Net transfers among
funds and Plans.... (4,426,496) 7,003,168 (4,627,388) 204,986 418,726
---------- ---------- ----------- ---------- --------
Total deductions and
net
transfers among
funds and Plans.... (4,504,106) 6,355,628 (4,939,476) 181,961 418,726
---------- ---------- ----------- ---------- --------
Net increase
(decrease)....... (3,814,855) 7,118,441 (4,605,693) 569,279 461,447
Net assets available for
benefits
Beginning of
year............. 3,814,855 2,214,903 4,605,693 509,134 --
---------- ---------- ----------- ---------- --------
End of year........ $ -- $9,333,344 $ -- $1,078,413 $461,447
========== ========== =========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON
FRANKLIN PUTNAM DEVELOPING T. ROWE PRICE PARTICIPANTS'
SMALL CAP VOYAGER MARKETS DIVIDEND LOAN
GROWTH FUND I FUND A TRUST I GROWTH FUND ACCOUNT
------------- ------- ---------- ------------- -------------
YEAR ENDED DECEMBER 31,
1997
- --------------------------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income
Net appreciation
(depreciation) in
market value of
investments.......... $(28,786) $(12,781) $(61,636) $ 8,005 $ --
Interest............... 255 185 246 130 --
Dividends.............. 20,650 27,348 15,866 11,701 --
-------- -------- -------- -------- -----------
Total investment
income (loss)...... (7,881) 14,752 (45,524) 19,836 --
-------- -------- -------- -------- -----------
Contributions to the Plan
By participants........ 29,422 22,071 18,153 13,200 --
By the employer........ -- -- -- -- --
-------- -------- -------- -------- -----------
Total
contributions...... 29,422 22,071 18,153 13,200 --
-------- -------- -------- -------- -----------
Total additions...... 21,541 36,823 (27,371) 33,036 --
-------- -------- -------- -------- -----------
Deductions from net assets
attributed to:
Benefits paid to
participants........... -- (284) (2,792) (23,449 (48,124)
-------- -------- -------- -------- -----------
Transfers among funds and
Plans:
Net reallocations........ 477,493 428,293 281,063 293,062 (164,255)
Loans to participants.... (5,962) (1,790) (357) -- 3,607,502
Loan repayments by
participants........... 728 1,005 572 453 (2,207,796)
-------- -------- -------- -------- -----------
Net transfers among
funds and Plans.... 472,259 427,508 281,278 293,515 1,235,451
-------- -------- -------- -------- -----------
Total deductions and
net
transfers among
funds and Plans.... 472,259 427,224 278,486 270,066 1,187,327
-------- -------- -------- -------- -----------
Net increase
(decrease)....... 493,800 464,047 251,115 303,102 1,187,327
Net assets available for
benefits
Beginning of
year............. -- -- -- -- 6,129,412
-------- -------- -------- -------- -----------
End of year........ $493,800 $464,047 $251,115 $303,102 $ 7,316,739
======== ======== ======== ======== ===========
9
</TABLE>
<PAGE> 11
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The Merck & Co., Inc. Employee Stock Purchase and Savings Plan (the "Plan")
was designed to provide an easy, economical way for employees to become
stockholders of Merck & Co., Inc. (the "Company" or "Merck") as well as a
systematic means of saving and investing for the future. Generally, any regular
full-time, part-time, or temporary employee of the Company who is a U.S.
resident covered by a collective bargaining agreement providing for
participation in this Plan as defined by the Plan document, and has completed
one year of employment, is eligible to participate.
The Plan is administered by a management committee appointed by the Chief
Executive Officer of the Company. All costs of administering the Plan are borne
by the Company.
Participants should refer to the Summary Plan Description for a complete
description of benefits provided.
CONTRIBUTIONS
Depending on the terms of the applicable collective bargaining agreements,
participants may contribute from 2% up to either 10% or 15% of their base pay
per pay period. In addition, the Company will match 50% of employee
contributions up to 5% of base pay per pay period, or contributions of a
predetermined dollar amount negotiated with each bargaining group, whichever is
less. Pursuant to certain collective bargaining agreements, the Company match is
subject to a monthly cap of $60. Company matching contributions are invested
entirely in the Merck Common Stock Fund (Non-participant directed), and may not
be reallocated into any other investment option, except certain unions that have
negotiated to allow a percentage of Company matching contributions to follow the
direction of the participants' contributions.
INVESTMENT OPTIONS
Participants direct the investment of their contributions into any
investment option including the Merck Common Stock Fund (Participant directed).
The following is a brief description of each option:
Merck Common Stock Fund
The Merck Common Stock Fund invests primarily in Merck common stock and a
small portion of money market instruments for liquidity. This liquidity allows
for daily trading in the fund. Ownership is measured in units rather than
shares. An investment in this option allows the participant to become a
stockholder and part owner of the Company. The value of the investment can go up
or down depending on general factors affecting the stock market and specific
factors affecting the Company's business. This is neither a mutual fund nor a
diversified or managed investment option. Investing in a non-diversified single
stock involves more investment risk than investing in a diversified fund.
T. Rowe Price Blue Chip Growth Fund
The T. Rowe Price Blue Chip Growth Fund seeks to provide long-term growth
of capital. The fund invests primarily (at least 65% of its assets) in common
stocks of large and medium-sized blue chip companies that have the potential for
above-average earnings growth and are well established in their respective
industries. The fund may also invest in convertible stocks and bonds, preferred
stocks, bonds and warrants. Up to 20% of assets (excluding reserves) may be
invested in foreign securities, which may be subject to currency risks and
political and sovereign risks of the home country.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Magellan Fund
Funds are invested primarily in domestic and foreign common stock and
securities convertible into common stock. Up to 20% of assets may also be
invested in debt securities of all types and qualities issued by foreign and
domestic issuers if the fund manager believes they have potential for capital
appreciation.
10
<PAGE> 12
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Equity-Income Fund
Funds are invested in income-producing equity securities. Normally, at
least 65% of the fund's assets will be invested in income producing equity
securities. The fund has the flexibility to invest the balance in all types of
domestic and foreign securities, including bonds.
Vanguard U.S. Growth Portfolio
Vanguard U.S. Growth Portfolio seeks to provide long-term capital growth by
investing in equity securities of large, established U.S. companies that have
good growth records, strong market positions and have exhibited long-term
financial strength to provide potential long-term growth.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Growth Company Fund
Funds are invested primarily in common stock, and securities convertible
into common stock, of companies considered to have above-average growth
characteristics. These characteristics are most often associated with companies
in new and emerging areas of the economy, although the fund may also hold shares
in larger, mature or declining industry firms which have been revitalized.
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Growth & Income Portfolio
Funds are invested primarily in U.S. and foreign stocks, focusing on those
that pay current dividends and offer potential growth of earnings such as common
stocks, convertible securities, preferred stocks and warrants.
T. Rowe Price New Income Fund
The T. Rowe Price New Income Fund is a bond fund that seeks to provide the
highest level of income consistent with preservation of capital by purchasing
securities that have been rated as investment-grade by Standard & Poor's,
Moody's or Fitch Investor Services. The fund invests at least 80% of its assets
in income-producing investment-grade debt securities including U.S. government
and agency securities, corporate bonds, bank obligations and utilities. The
fund's dollar-weighted average maturity is generally expected to be between four
and fifteen years.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Intermediate Bond Fund
This fund seeks high current income by investing in U.S. and foreign
investment grade debt securities rated Baa or better by Moody's or BBB or better
by Standard & Poor's. Investment securities include corporate bonds, mortgage
securities, bank obligations and U.S. government and agency securities, as well
as short-term investments. The fund's dollar-weighted average maturity will
range between three and ten years under normal circumstances.
This investment option was eliminated from the Plan effective June 30,
1997.
Fidelity Retirement Growth Fund
Funds are invested primarily in common stocks of domestic or foreign
issuers, although they can be invested in all types of securities. Foreign
securities may involve a higher degree of risk. The fund's emphasis is on the
realization of capital gains rather than on dividend income.
11
<PAGE> 13
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
This investment option was eliminated from the Plan effective June 30,
1997.
T. Rowe Price Mid-Cap Growth Fund
T. Rowe Price Mid-Cap Growth Fund seeks to provide long-term capital
appreciation by investing primarily in the stock of medium-sized (mid-cap)
growth companies that offer the potential for above-average earnings growth. The
fund focuses on companies that are no longer considered new or emerging, but are
well-established. It may also invest in convertible securities, warrants and
foreign securities, which are subject to greater risks.
This investment option was added to the Plan effective July 1, 1997.
Fidelity OTC Portfolio
Funds are invested primarily in securities traded on the over-the-counter
securities market. These are frequently the securities of smaller or newer
companies whose instruments may have limited marketability and may be subject to
more erratic market movement.
This investment option was eliminated from the Plan effective June 30,
1997.
EuroPacific Growth Fund
This fund seeks long-term capital growth by investing primarily in
securities of companies outside the United States. Normally, at least 65% of the
fund's total assets will be invested in Europe or the Pacific Basin. The Pacific
Basin is generally defined as those countries bordering the Pacific Ocean and
includes, but is not limited to Australia, Canada, Japan, Malaysia and
Singapore. The fund may also invest in convertible securities, debt and
government securities and preferred stock. Foreign investment, especially in
developing countries, involve greater risks and may offer greater potential.
This investment option was added to the Plan effective July 1, 1997.
Fidelity Overseas Fund
This fund seeks long-term capital growth by investing primarily in foreign
securities. The investments may include common stock and securities convertible
into common stock, as well as debt instruments.
This investment option was eliminated from the Plan effective June 30,
1997.
The George Putnam Fund of Boston A
This fund seeks to provide a balanced investment comprised of a
well-diversified portfolio of stocks and bonds that will produce both capital
growth and current income. Normally, no more than 75% of the fund's assets will
be invested in common stocks and convertible securities.
This investment option was added to the Plan effective July 1, 1997
Fidelity Balanced Fund
Funds are invested in a broadly diversified portfolio of high-yielding
securities, including common stocks, preferred stocks and bonds. The objective
is to provide a balanced investment in both stocks and bonds, thereby affording
the opportunity for capital growth and current income; however, at least 25% of
total assets will always be invested in fixed-income senior securities.
This investment option was eliminated from the Plan effective June 30,
1997.
12
<PAGE> 14
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fidelity Retirement Money Market
Funds are invested in high-quality U.S. dollar-denominated money market
instruments of U.S. and foreign issuers. Normally, the fund intends to invest
more than 25% of its total assets in obligations of institutions in the
financial services industry.
Fidelity Retirement Government Money Market
Funds are invested in obligations issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and in
repurchase agreements secured by these obligations. An investment in the
portfolio is not insured or guaranteed by the U.S. government.
This option was eliminated from the Plan effective June 30, 1997.
Spartan U.S. Equity Index Fund
Funds are primarily invested in securities of the companies which comprise
the S&P 500 Index. Effective April 18, 1997, the fund name was changed from
Fidelity U.S. Equity Index Portfolio to the Spartan U.S. Equity Index Fund.
Fidelity Low-Priced Stock Fund
This fund seeks capital appreciation by investing mainly in low-priced
domestic and foreign common stocks ($35 or less at time of purchase). Foreign
securities may involve a higher degree of risk. This fund charges a redemption
fee to discourage short-term buying and selling of fund shares. If fund shares
are sold after being held for less than 90 days, the fund will deduct a
redemption fee from participants' accounts equal to 1.5% of the value of the
shares sold.
This investment option was added to the Plan effective July 1, 1997.
Franklin Small Cap Growth Fund I
This fund seeks long-term capital growth by investing primarily in stocks
of companies with market capitalization of less than $1 billion at the time of
the investment. The fund tries to invest at least one-third of its assets in
stocks of companies with market capitalization of $550 million or less. Although
the fund's assets are invested primarily in small companies, it may invest up to
35% of its total assets in larger capitalized companies with strong growth
potential, in relatively well-known larger companies in mature industries with
potential for capital appreciation, or in corporate debt securities, including
bonds, notes and debentures if deemed appropriate. The fund may also invest up
to 25% of its total assets in foreign securities, which may involve greater
risks.
This investment option was added to the Plan effective July 1, 1997.
Putnam Voyager Fund A
This fund seeks capital appreciation by investing primarily in common
stocks of companies that have potential for capital appreciation which is
significantly greater than that of the market averages. The fund may also invest
in convertible bonds, convertible preferred stocks, warrants, preferred stocks,
money market instruments and debt securities. The fund may invest up to 20% of
its total assets in securities principally traded in foreign markets. Foreign
securities are subject to currency, political, financial or sovereign risks of
the issuer's home country.
This investment option was added to the Plan effective July 1, 1997.
Templeton Developing Markets Trust I
This fund seeks long-term capitalization by investing in equity securities
of emerging market countries. The fund may invest up to 35% of its total assets
in debt securities, including bonds, notes, debentures,
13
<PAGE> 15
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
commercial paper, certificates of deposit, time deposits and bankers'
acceptances. Foreign investments may involve greater risks.
This investment option was added to the Plan effective July 1, 1997.
T. Rowe Price Dividend Growth Fund
This fund seeks to provide increasing dividend income over time, long-term
capital appreciation and reasonable current income through investments primarily
in dividend-paying stocks. The fund may also invest in bonds and foreign
securities.
This investment option was added to the Plan effective July 1, 1997.
VESTING
Participants are immediately vested in their contributions, all Company
matching contributions, plus actual earnings thereon.
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 the Employee Retirement Income
Security Act of 1974.
PARTICIPANTS' LOAN ACCOUNT
Participants may borrow from their account balances with interest charged
at the prime rate plus 1%. Loan terms range from one to five years or up to
thirty years for the purchase of a primary residence. The minimum loan is $500
and the maximum loan is the lesser of $50,000 less the highest outstanding loan
balance during the one year period prior to the new loan application date, or
50% of the participant's account balance less any current outstanding loan.
Activity related to these borrowings is reflected in the Participants' Loan
Account column of the financial statements.
BENEFITS PAID TO PARTICIPANTS
In-service (which include hardship withdrawals) and termination
distributions are made throughout the year in accordance with applicable Plan
provisions. At December 31, 1997 and 1996, net assets available for benefits
included distributions in process of payment of $698,384 and $610,665,
respectively.
2. SUMMARY OF ACCOUNTING POLICIES:
The financial statements of the Plan have been prepared on the accrual
basis of accounting. The investments of the Plan are stated at quoted market
value. Dividend income is recorded on the ex-dividend date. The net appreciation
(depreciation) in market value of investments is based on the beginning of the
year market value or value at the time of purchase during the year and is
included in the statement of changes in net assets available for benefits.
USE OF ESTIMATES
The financial statements are prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts that are based on
management's best estimates and judgments. Actual results could differ from
these estimates.
RECLASSIFICATIONS
Certain prior year amounts shown in the accompanying financial statements
have been reclassified to conform to the current year's presentation.
14
<PAGE> 16
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES:
The Plan obtained a tax determination letter from the Internal Revenue
Service on September 18, 1995 indicating that it had been designed in accordance
with applicable sections of the Internal Revenue Code ("IRC"). The Plan was most
recently amended in April 1997. The Plan sponsor believes that the Plan is
designed and currently operated in compliance with the IRC.
4. OTHER MATTERS:
Net reallocations in 1997 of ($1,467,531) consist of transfers between the
Plan and the Merck & Co., Inc. Employee Savings and Security Plan for employees
who changed their status during the year.
5. PARTY-IN-INTEREST:
All transactions of party-in-interest are set forth on the attached
schedule.
6. SUBSEQUENT EVENTS:
Effective January 1, 1998, the Company matching contributions for
Inter-Union Council employees increased from 50% of employee contribution up to
5% of base pay subject to a $60 monthly cap, to 50% of employee contribution up
to 6% of base pay and eliminated the monthly cap of $60.
15
<PAGE> 17
SCHEDULE I
EIN: 22-1109110
PLAN NO.: 004
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
UNITS/SHARES AT
NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE
--------------------------------- --------------- ------------ -------------
<S> <C> <C> <C>
Merck Common Stock Fund*.................................... 12,256,932 $ 81,677,890 $222,694,287
T. Rowe Price Blue Chip Growth Fund......................... 463,316 10,349,380 11,198,335
Fidelity Equity-Income Fund................................. 36,174 1,565,546 1,895,866
Vanguard U.S. Growth Portfolio.............................. 69,902 1,982,374 2,006,198
Fidelity Growth & Income Portfolio.......................... 96,180 2,872,704 3,664,353
T. Rowe Price New Income Fund............................... 106,524 951,338 966,177
T. Rowe Price Mid-Cap Growth Fund........................... 55,631 1,492,272 1,591,041
EuroPacific Growth Fund..................................... 51,852 1,482,709 1,349,190
The George Putnam Fund of Boston A.......................... 271,957 4,940,926 4,889,792
Fidelity Retirement Money Market............................ 9,317,599 9,317,599 9,317,599
Spartan U.S. Equity Index Fund.............................. 30,778 862,315 1,076,594
Fidelity Low-Priced Stock Fund.............................. 18,331 460,684 460,669
Franklin Small Cap Growth Fund I............................ 21,499 516,216 492,967
Putnam Voyager Fund A....................................... 24,318 476,367 463,264
Templeton Developing Markets Trust I........................ 19,373 310,202 250,691
T. Rowe Price Dividend Growth Fund.......................... 15,032 295,662 302,591
Participants' Loan Account (with interest
ranging from 6.5% to 12.5%)............................... -- 7,301,295 7,301,295
------------ ------------
Total Investments................................... $126,855,479 $269,920,909
============ ============
</TABLE>
- ---------------
* Denotes a party-in-interest to the Plan.
16
<PAGE> 18
SCHEDULE II
EIN: 22-1109110
PLAN NO.: 004
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS(a)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CURRENT
VALUE
PURCHASE COST OF OF ASSETS ON
IDENTITY OF PARTY INVOLVED AND DESCRIPTION OF ASSETS PRICE SELLING PRICE ASSET TRANSACTION DATE NET GAIN
- ---------------------------------------------------- ---------- ------------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Merck Common Stock Fund
249 purchase transactions..................... $26,010,654 $ -- $26,010,654 $26,010,654 $ --
247 sales transactions........................ -- 29,032,224 13,253,715 29,032,224 15,778,509
T. Rowe Price Blue Chip Growth Fund
103 purchase transactions..................... 11,297,445 -- 11,297,445 11,297,445 --
91 sales transactions......................... -- 988,048 948,065 988,048 39,983
Fidelity Magellan Fund
104 purchase transactions..................... 936,420 -- 936,420 936,420 --
101 sales transactions........................ -- 9,881,710 7,908,116 9,881,710 1,973,594
Fidelity Retirement Money Market Portfolio
178 purchase transactions..................... 15,114,089 -- 15,114,089 15,114,089 --
157 sales transactions........................ -- 8,006,870 8,006,870 8,006,870 --
</TABLE>
- ---------------
(a) Reportable transactions are transactions that, individually or in the
aggregate, exceed 5% of the Plan's net assets as of the beginning of the
Plan year.
17
<PAGE> 19
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated April 30, 1998 included in the financial
statements and exhibits required by Form 11-K Annual Report for the Merck & Co.,
Inc. Employee Stock Purchase and Savings Plan into the Company's previously
filed Registration Statements on Form S-8 (Nos. 33-21087, 33-21088, 33-36101,
33-40177, 33-51235, 33-53463, 33-64273, 33-64665, 333-23293 and 333-23295), on
Form S-4 (No. 33-50667) and on Form S-3 (Nos. 33-60322, 33-39349, 33-51785,
33-57421, 333-17045 and 333-36383). It should be noted that we have not audited
any financial statements of the Plan subsequent to December 31, 1997 or
performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
June 22, 1998
<PAGE> 1
EXHIBIT 99(c)
FINANCIAL STATEMENTS AND EXHIBITS
REQUIRED BY FORM 11-K ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-3305
---------------------
HUBBARD FARMS, INC. EMPLOYEE SAVINGS PLAN
(FULL TITLE OF THE PLAN)
MERCK & CO., INC.
P.O. BOX 100
WHITEHOUSE STATION, NEW JERSEY 08889-0100
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE
PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE)
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merck & Co., Inc.:
We have audited the accompanying statements of net assets available for
benefits of the Hubbard Farms, Inc. Employee Savings Plan (the "Plan") as of
December 31, 1997 and 1996, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1997. These financial
statements and the schedules referred to below are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 benefits of the Plan as
of December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 1997, 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 of
assets held for investment purposes and reportable transactions are presented
for purposes 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 fund information in the
statements of net assets available for benefits and the statement of changes in
net assets available for 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.
ARTHUR ANDERSEN LLP
New York, New York
April 30, 1998
1
<PAGE> 3
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
FIDELITY FIDELITY
MERCK FIDELITY FIDELITY FIDELITY GROWTH GROWTH &
COMMON MAGELLAN BALANCED INTERMEDIATE COMPANY INCOME
TOTAL STOCK FUND FUND BOND FUND FUND PORTFOLIO
---------- ---------- ---------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
Assets:
Investments at market value............. $5,548,215 $3,140,776 $1,063,324 $405,620 $242,648 $ 77,894 $157,504
---------- ---------- ---------- -------- -------- -------- --------
Receivables
Employer's contribution............... 3,832 1,792 744 332 190 177 205
Participants' contributions........... 12,256 5,847 2,397 1,101 574 550 659
Accrued dividends..................... 13,179 13,179 -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- --------
Total receivables................. 29,267 20,818 3,141 1,433 764 727 864
---------- ---------- ---------- -------- -------- -------- --------
Net assets available for benefits......... $5,577,482 $3,161,594 $1,066,465 $407,053 $243,412 $ 78,621 $158,368
========== ========== ========== ======== ======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
2
<PAGE> 4
<TABLE>
<CAPTION>
FIDELITY
FIDELITY FIDELITY RETIREMENT PARTICIPANTS'
OTC OVERSEAS GOVERNMENT LOAN
PORTFOLIO FUND MONEY MARKET ACCOUNT
--------- -------- ------------ -------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Assets:
Investments at market value............. $24,826 $21,174 $278,489 $135,960
------- ------- -------- --------
Receivables
Employer's contribution............... 76 39 277 --
Participants' contributions........... 253 133 742 --
Accrued dividends..................... -- -- -- --
------- ------- -------- --------
Total receivables................. 329 172 1,019 --
------- ------- -------- --------
Net assets available for benefits......... $25,155 $21,346 $279,508 $135,960
======= ======= ======== ========
</TABLE>
3
<PAGE> 5
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
FIDELITY
MERCK FIDELITY FIDELITY FIDELITY GROWTH
COMMON MAGELLAN BALANCED INTERMEDIATE FIDELITY DAILY COMPANY
TOTAL STOCK FUND FUND BOND FUND INCOME TRUST FUND
---------- ---------- -------- -------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Assets:
Investments at market value.......... $3,669,124 $2,004,018 $763,082 $287,499 $195,624 $ -- $29,154
---------- ---------- -------- -------- -------- -------- -------
Receivables
Employer's contribution............ 2,636 1,187 548 240 156 -- 94
Participants' contributions........ 8,390 3,702 1,819 835 458 -- 315
Accrued dividends.................. 9,934 9,934 -- -- -- -- --
---------- ---------- -------- -------- -------- -------- -------
Total receivables.............. 20,960 14,823 2,367 1,075 614 -- 409
---------- ---------- -------- -------- -------- -------- -------
Net assets available for benefits...... $3,690,084 $2,018,841 $765,449 $288,574 $196,238 $ -- $29,563
========== ========== ======== ======== ======== ======== =======
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
4
<PAGE> 6
<TABLE>
<CAPTION>
FIDELITY FIDELITY
GROWTH & FIDELITY FIDELITY RETIREMENT PARTICIPANTS'
INCOME OTC OVERSEAS GOVERNMENT LOAN
PORTFOLIO PORTFOLIO FUND MONEY MARKET ACCOUNT
--------- --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Assets:
Investments at market value.......... $44,415 $8,845 $4,059 $233,731 $98,697
------- ------ ------ -------- -------
Receivables
Employer's contribution............ 79 30 23 279 --
Participants' contributions........ 354 115 73 719 --
Accrued dividends.................. -- -- -- -- --
------- ------ ------ -------- -------
Total receivables.............. 433 145 96 998 --
------- ------ ------ -------- -------
Net assets available for benefits...... $44,848 $8,990 $4,155 $234,729 $98,697
======= ====== ====== ======== =======
</TABLE>
5
<PAGE> 7
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
FIDELITY FIDELITY
MERCK FIDELITY FIDELITY FIDELITY GROWTH GROWTH
COMMON MAGELLAN BALANCED INTERMEDIATE COMPANY & INCOME
TOTAL STOCK FUND FUND BOND FUND FUND PORTFOLIO
---------- ---------- ---------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Additions to net assets attributed to:
Investment income
Net appreciation (depreciation) in
market value of investments......... $ 911,530 $ 714,493 $ 148,204 $ 25,404 $ 2,250 $ 905 $ 20,408
Interest.............................. 9,519 4,190 2,550 865 628 39 14
Dividends............................. 208,434 49,860 67,655 47,493 13,941 7,302 6,325
---------- ---------- ---------- -------- -------- ------- --------
Total investment income............. 1,129,483 768,543 218,409 73,762 16,819 8,246 26,747
---------- ---------- ---------- -------- -------- ------- --------
Contributions to the Plan
By participants....................... 711,403 324,232 144,249 64,344 38,578 29,811 36,223
By the employer....................... 215,355 102,012 43,202 19,188 12,212 8,865 10,223
---------- ---------- ---------- -------- -------- ------- --------
Total contributions................. 926,758 426,244 187,451 83,532 50,790 38,676 46,446
---------- ---------- ---------- -------- -------- ------- --------
Total additions..................... 2,056,241 1,194,787 405,860 157,294 67,609 46,922 73,193
---------- ---------- ---------- -------- -------- ------- --------
Deductions from net assets attributed to:
Benefits paid to participants........... (168,843) (63,680) (54,017) (11,356) (6,436) (61) (180)
---------- ---------- ---------- -------- -------- ------- --------
Transfers among funds:
Net reallocations..................... -- 7,603 (21,908) (21,049) (11,426) 2,861 42,233
Loans to participants................. -- (13,425) (40,490) (10,773) (5,188) (786) (1,801)
Loan repayments by participants....... -- 17,468 11,571 4,363 2,615 122 75
---------- ---------- ---------- -------- -------- ------- --------
Net transfers among funds........... -- 11,646 (50,827) (27,459) (13,999) 2,197 40,507
---------- ---------- ---------- -------- -------- ------- --------
Total deductions and transfers among
funds............................. (168,843) (52,034) (104,844) (38,815) (20,435) 2,136 40,327
---------- ---------- ---------- -------- -------- ------- --------
Net increase...................... 1,887,398 1,142,753 301,016 118,479 47,174 49,058 113,520
Net assets available for benefits
Beginning of year................. 3,690,084 2,018,841 765,449 288,574 196,238 29,563 44,848
---------- ---------- ---------- -------- -------- ------- --------
End of year....................... $5,577,482 $3,161,594 $1,066,465 $407,053 $243,412 $78,621 $158,368
========== ========== ========== ======== ======== ======= ========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
6
<PAGE> 8
<TABLE>
<CAPTION>
FIDELITY
FIDELITY FIDELITY RETIREMENT PARTICIPANTS'
OTC OVERSEAS GOVERNMENT LOAN
PORTFOLIO FUND MONEY MARKET ACCOUNT
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Additions to net assets attributed to:
Investment income
Net appreciation (depreciation) in
market value of investments......... $ 354 $ (488) $ -- $ --
Interest.............................. -- -- 1,233 --
Dividends............................. 1,708 998 13,152 --
------- ------- -------- --------
Total investment income............. 2,062 510 14,385 --
------- ------- -------- --------
Contributions to the Plan
By participants....................... 14,614 11,125 48,227 --
By the employer....................... 3,214 2,020 14,419 --
------- ------- -------- --------
Total contributions................. 17,828 13,145 62,646 --
------- ------- -------- --------
Total additions..................... 19,890 13,655 77,031 --
------- ------- -------- --------
Deductions from net assets attributed to:
Benefits paid to participants........... (918) (256) (31,939) --
Transfers among funds:
Net reallocations..................... -- 3,792 (2,106) --
Loans to participants................. (2,807) -- (2,830) 78,100
Loan repayments by participants....... -- -- 4,623 (40,837
------- ------- -------- --------
Net transfers among funds........... (2,807) 3,792 (313) 37,263
------- ------- -------- --------
Total deductions and transfers among
funds............................. (3,725) 3,536 (32,252) 37,263
------- ------- -------- --------
Net increase...................... 16,165 17,191 44,779 37,263
Net assets available for benefits
Beginning of year................. 8,990 4,155 234,729 98,697
------- ------- -------- --------
End of year....................... $25,155 $21,346 $279,508 $135,960
======= ======= ======== ========
</TABLE>
7
<PAGE> 9
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The Hubbard Farms, Inc. (the "Company") Employee Savings Plan (the "Plan")
was designed to provide an easy, economical way for employees to become
stockholders of Merck & Co., Inc. ("Merck"), the Joint Partner of the Company,
as well as a systematic means of saving and investing for the future. Regular
full-time and part-time employees of the Company and its domestic wholly-owned
subsidiaries as defined by the Plan document are eligible to participate in the
Plan the 1st of January or the 1st of July following their date of hire.
The Plan is administered by a management committee appointed by the Board
of Directors of the Company. All costs of administering the Plan are borne by
the Company.
Participants should refer to the Summary Plan description for a complete
description of benefits provided.
LEGAL CHANGES
Effective August 1, 1997, Hubbard Farms, Inc. became a part of Merial
Limited, a stand alone joint venture that is 50% owned by Merck & Co., Inc. and
50% owned by Rhone-Poulenc SA. The name Hubbard Farms, Inc. was changed to
Hubbard ISA effective August 1, 1997. However, the Plan retained the name
Hubbard Farms, Inc. Employee Savings Plan.
CONTRIBUTIONS
Participants may contribute from 2% up to 15% of their base pay. The
Company matches 50% of employee contributions up to 5% of base pay per pay
period.
INVESTMENT OPTIONS
Participants direct the investment of their contributions in 10% increments
into any investment option, including Merck Common Stock (Participant directed).
The following is a brief description of the options available in 1997 and 1996.
Merck Common Stock
This portfolio consists of shares of Merck common stock. The value of the
investment can go up or down depending on general factors affecting the stock
market and specific factors affecting Merck's business. This is neither a mutual
fund nor a diversified or managed investment option. Investing in a
non-diversified single stock involves more investment risk than investing in a
diversified fund.
Fidelity Magellan Fund
Funds are invested primarily in domestic and foreign common stock and
securities convertible into common stock. Up to 20% of assets may also be
invested in debt securities of all types and qualities issued by foreign and
domestic issuers if the fund manager believes they have potential for capital
appreciation.
Fidelity Balanced Fund
Funds are invested in a broadly diversified portfolio of high-yielding
securities, including common stocks, preferred stocks and bonds. The objective
is to provide a balanced investment in both stocks and bonds, thereby affording
the opportunity for capital growth and current income; however, at least 25% of
total assets will always be invested in fixed-income senior securities.
Fidelity Intermediate Bond Fund
This fund seeks high current income by investing in U.S. and foreign
investment grade debt securities rated Baa or better by Moody's or BBB or better
by Standard & Poor's. Investment securities include corporate bonds, mortgage
securities, bank obligations and U.S. government and agency securities, as well
as
8
<PAGE> 10
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
short-term investments. The fund's dollar-weighted average maturity will range
between three and ten years under normal circumstances.
Fidelity Growth Company Fund
Funds are invested primarily in common stock, and securities convertible
into common stock, of companies considered to have above-average growth
characteristics. These characteristics are most often associated with companies
in new and emerging areas of the economy, although the fund may also hold shares
in larger, mature or declining industry firms which have been revitalized.
Fidelity Growth & Income Portfolio
Funds are invested primarily in U.S. and foreign stocks, focusing on those
that pay current dividends and offer potential growth of earnings such as common
stocks, convertible securities, preferred stocks and warrants.
Fidelity OTC Portfolio
Funds are invested primarily in securities traded on the over-the-counter
securities market. These are frequently the securities of smaller or newer
companies whose instruments may have limited marketability and may be subject to
more erratic market movement.
Fidelity Overseas Fund
This fund seeks long-term capital growth by investing primarily in foreign
securities. The investments may include common stock and securities convertible
into common stock, as well as debt instruments.
Fidelity Retirement Government Money Market
Funds are invested in obligations issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and in
repurchase agreements secured by these obligations. An investment in the
portfolio is not insured or guaranteed by the U.S. government.
VESTING
Participants are immediately vested in their contributions plus actual
earnings thereon. Participants become vested in Company matching contributions
after two years of service with the Company.
FORFEITURES
Any forfeitures by participants are used by the Company to reduce its
future matching contributions.
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 the Employee Retirement Income
Security Act of 1974.
9
<PAGE> 11
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PARTICIPANTS' LOAN ACCOUNT
Participants may borrow against their account balances with interest
charged at the prime rate plus 1%. Loan terms range from one to five years or up
to thirty years for the purchase of a primary residence. The minimum loan is
$1,000 and the maximum loan is the lesser of $50,000 less the highest
outstanding loan balance during the one year period prior to the new loan
application date, or 50% of the participant's account balance less any current
outstanding loan. Activity related to these borrowings is reflected in the
Participants' Loan Account column of the financial statements.
BENEFITS PAID TO PARTICIPANTS
In-service (which include hardship withdrawals) and termination
distributions are made throughout the year in accordance with applicable Plan
provisions. At December 31, 1997 and 1996, net assets available for benefits
included distributions in process of payment of $51,118 and $874, respectively.
2. SUMMARY OF ACCOUNTING POLICIES:
The financial statements of the Plan have been prepared on the accrual
basis of accounting. The investments of the Plan are stated at quoted market
value. Dividend income is recorded on the ex-dividend date. The appreciation in
market value of investments is based on the beginning of the year market value
or value at the time of purchase during the year and is included in the
statement of changes in net assets available for benefits.
USE OF ESTIMATES
The financial statements are prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts that are based on
management's best estimates and judgments. Actual results could differ from
these estimates.
3. INCOME TAXES:
The Plan obtained a tax determination letter from the Internal Revenue
Service on January 31, 1996 indicating that it had been designed in accordance
with applicable sections of the Internal Revenue Code ("IRC"). The Plan was most
recently amended in January 1996. The Company believes that the Plan is designed
and currently operated in compliance with the IRC.
4. PARTY-IN-INTEREST:
All transactions of party-in-interest are set forth on the attached
schedule.
10
<PAGE> 12
SCHEDULE I
EIN: 02-0314630
PLAN NO.: 008
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES AT
NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE
--------------------------------- --------------- ---------- -------------
<S> <C> <C> <C>
Merck Common Stock*......................................... 29,630 $1,590,605 $3,140,776
Fidelity Magellan Fund...................................... 11,161 865,674 1,063,324
Fidelity Balanced Fund...................................... 26,563 361,848 405,620
Fidelity Intermediate Bond Fund............................. 23,859 243,075 242,648
Fidelity Growth Company Fund................................ 1,798 76,762 77,894
Fidelity Growth & Income Portfolio.......................... 4,134 134,963 157,504
Fidelity OTC Portfolio...................................... 742 24,764 24,826
Fidelity Overseas Fund...................................... 651 21,674 21,174
Fidelity Retirement Government Money Market................. 278,489 278,489 278,489
Participants' Loan Account (with interest rates ranging from
6.5% to 10.0%)............................................ -- 135,960 135,960
---------- ----------
Total Investments................................... $3,733,814 $5,548,215
========== ==========
</TABLE>
- ---------------
* Denotes a party-in-interest to the Plan.
11
<PAGE> 13
SCHEDULE II
EIN: 02-0314630
PLAN NO.: 008
HUBBARD FARMS, INC.
EMPLOYEE SAVINGS PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS(a)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CURRENT
VALUE
PURCHASE SELLING COST OF OF ASSETS ON NET
IDENTITY OF PARTY INVOLVED AND DESCRIPTION OF ASSETS PRICE PRICE ASSET TRANSACTION DATE GAIN
---------------------------------------------------- -------- -------- -------- ---------------- -------
<S> <C> <C> <C> <C> <C>
Merck Common Stock
85 purchase transactions........................... $505,057 $ -- $505,057 $505,057 $ --
23 sales transactions.............................. -- 82,792 52,623 82,792 30,169
Fidelity Magellan Fund
92 purchase transactions........................... 276,735 -- 276,735 276,735 --
31 sales transactions.............................. -- 124,697 102,758 124,697 21,939
Fidelity Balanced Fund
76 purchase transactions........................... 136,289 -- 136,289 136,289 --
18 sales transactions.............................. -- 43,573 37,660 43,573 5,913
</TABLE>
- ---------------
(a) Reportable transactions are transactions that, individually or in the
aggregate, exceed 5% of the Plan's net assets as of the beginning of the
Plan year.
12
<PAGE> 14
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated April 30, 1998 included in the financial
statements and exhibits required by Form 11-K Annual Report for the Hubbard
Farms, Inc. Employee Savings Plan into Merck & Co., Inc.'s previously filed
Registration Statements on Form S-8 (Nos. 33-21087, 33-21088, 33-36101,
33-40177, 33-51235, 33-53463, 33-64273, 33-64665, 333-23293 and 333-23295), and
Form S-4 (No. 33-50667) and on Form S-3 (Nos. 33-60322, 33-39349, 33-51785,
33-57421, 333-17045 and 333-36383). It should be noted that we have not audited
any financial statements of the Plan subsequent to December 31, 1997 or
performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
June 22, 1998
<PAGE> 1
EXHIBIT 99(d)
FINANCIAL STATEMENTS AND EXHIBITS
REQUIRED BY FORM 11-K ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-3305
---------------------
MERCK PUERTO RICO EMPLOYEE SAVINGS AND SECURITY PLAN
(FULL TITLE OF THE PLAN)
MERCK & CO., INC.
P.O. BOX 100
WHITEHOUSE STATION, NEW JERSEY 08889-0100
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE
PLAN AND THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE)
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Merck Sharp & Dohme Quimica de Puerto Rico, Inc. and
Merck Sharp & Dohme (I.A.) Corp.:
We have audited the accompanying statement of net assets available for
benefits of the Merck Puerto Rico Employee Savings and Security Plan (the
"Plan") as of December 31, 1997 and the related statement of changes in net
assets available for benefits for the period from inception (July 1, 1997)
through December 31, 1997. These financial statements and the schedules referred
to below are the responsibility of the Plan's management. Our responsibility is
to express an opinion on these financial statements and schedules 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 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 audit provides 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 as
of December 31, 1997, and the changes in its net assets available for benefits
for the period from inception (July 1, 1997) through December 31, 1997, in
conformity with generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for purposes
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 fund information in the statement of
net assets available for benefits and the statement of changes in net assets
available for 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
audit 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.
ARTHUR ANDERSEN LLP
San Juan, Puerto Rico
May 1, 1998
1
<PAGE> 3
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
--------------------------------
(NON-PARTICIPANT (PARTICIPANT T. ROWE PRICE FIDELITY
DIRECTED: SEE DIRECTED: SEE BLUE CHIP EQUITY-
TOTAL NOTE 1) NOTE 1) GROWTH FUND INCOME FUND
----- ---------------- ------------- ------------- -----------
DECEMBER 31, 1997
- --------------------------------------------------- |--------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value...................... $24,835,401 $6,993,525 $13,976,782 $571,614 $ 273,159
----------- ---------- ----------- -------- -----------
Receivables
Employer's contribution........................ 8,576 1,921 5,299 300 43
Participants' contributions.................... 30,065 -- 26,206 1,072 512
Accrued interest and dividends................. 88,376 29,067 58,086 -- --
----------- ---------- ----------- -------- -----------
Total receivables............................ 127,017 30,988 89,591 1,372 555
----------- ---------- ----------- -------- -----------
Net assets available for benefits.................. $24,962,418 $7,024,513 $14,066,373 $572,986 $ 273,714
=========== ========== =========== ======== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
2
<PAGE> 4
<TABLE>
<CAPTION>
FIDELITY THE GEORGE
VANGUARD GROWTH & T. ROWE PRICE T. ROWE PRICE EUROPACIFIC PUTNAM
U.S. GROWTH INCOME NEW INCOME MID-CAP GROWTH FUND OF
PORTFOLIO PORTFOLIO FUND GROWTH FUND FUND BOSTON A
----------- --------- ------------- ------------- ----------- ----------
DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments at market value............ $112,653 $318,090 $11,848 $125,293 $90,947 $133,881
-------- -------- ------- -------- ------- --------
Receivables
Employer's contribution.............. 77 163 9 111 86 77
Participants' contributions.......... 211 596 22 235 171 251
Accrued interest and dividends....... -- -- -- -- -- --
-------- -------- ------- -------- ------- --------
Total receivables.................. 288 759 31 346 257 328
-------- -------- ------- -------- ------- --------
Net assets available for benefits........ $112,941 $318,849 $11,879 $125,639 $91,204 $134,209
======== ======== ======= ======== ======= ========
<CAPTION>
FIDELITY FIDELITY SPARTAN FIDELITY
RETIREMENT RETIREMENT U.S. EQUITY LOW-PRICED
MONEY GOVERNMENT INDEX STOCK
MARKET MONEY MARKET FUND FUND
---------- ------------ ----------- ----------
DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments at market value............ $353,066 $ -- $58,343 $5,626
-------- ----- ------- ------
Receivables
Employer's contribution.............. 412 -- 51 9
Participants' contributions.......... 662 -- 109 11
Accrued interest and dividends....... -- -- -- --
-------- ----- ------- ------
Total receivables.................. 1,074 -- 160 20
-------- ----- ------- ------
Net assets available for benefits........ $354,140 $ -- $58,503 $5,646
======== ===== ======= ======
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
TEMPLETON
FRANKLIN PUTNAM DEVELOPING T. ROWE PRICE
SMALL CAP VOYAGER MARKETS DIVIDEND PARTICIPANTS'
GROWTH FUND I FUND A TRUST I GROWTH FUND LOAN ACCOUNT
----------- --------- ------------- ------------- -----------
DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------|
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value............ $1,245 $800 $1,641 $-- $1,806,888
------ ---- ------ --- ----------
Receivables
Employer's contribution.............. 9 9 -- -- --
Participants' contributions.......... 2 2 3 -- --
Accrued interest and dividends....... -- -- -- -- 1,223
------ ---- ------ --- ----------
Total receivables.................. 11 11 3 -- 1,223
------ ---- ------ --- ----------
Net assets available for benefits........ $1,256 $811 $1,644 $-- $1,808,111
====== ==== ====== === ==========
</TABLE>
4
<PAGE> 6
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
MERCK COMMON STOCK FUND
--------------------------------
(NON- FIDELITY
PARTICIPANT (PARTICIPANT T. ROWE PRICE EQUITY-
DIRECTED; SEE DIRECTED; SEE BLUE CHIP INCOME
TOTAL NOTE 1) NOTE 1) GROWTH FUND FUND
--------------- -------------- --------------- ------------- -----------
FOR THE PERIOD FROM INCEPTION (JULY 1, 1997)
THROUGH DECEMBER 31, 1997
- ----------------------------------------------- |--------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in market
value of investments..................... $ 497,471 $ 144,908 $ 276,201 $ 45,566 $ 13,436
Interest................................... 90,344 37,620 43,011 3,698 307
Dividends.................................. 230,633 57,845 116,314 3,260 9,992
--------------- -------------- --------------- -------- --------
Total investment income (loss)........... 818,448 240,373 435,526 52,524 23,735
--------------- -------------- --------------- -------- --------
Contributions to the Plan
By participants............................ 1,702,782 -- 1,331,647 65,268 8,323
By the employer............................ 446,686 438,430 5,299 672 340
--------------- -------------- --------------- -------- --------
Total contributions...................... 2,149,468 438,430 1,336,946 65,940 8,663
--------------- -------------- --------------- -------- --------
Total additions.......................... 2,967,916 678,803 1,772,472 118,464 32,398
--------------- -------------- --------------- -------- --------
Deductions from net assets attributed to:
Benefits paid to participants................ (1,599,902) (334,772) (1,102,686) (47,686) (2,810)
--------------- -------------- --------------- -------- --------
Transfers among funds and Plans:
Transfers in from Merck & Co., Inc.
Employee Savings and Security Plan (see
Note 1).................................... 23,594,404 6,714,884 13,441,758 492,343 225,944
Net reallocations............................ -- -- (2,560) (2,455) 16,010
Loans to participants........................ -- (238,916) (236,763) (4,595) (341)
Loan repayments by participants.............. -- 204,514 194,152 16,915 2,513
--------------- -------------- --------------- -------- --------
Net transfers among funds and Plans...... 23,594,404 6,680,482 13,396,587 502,208 244,126
--------------- -------------- --------------- -------- --------
Total deductions and net transfers
among funds and Plans.................. 21,994,502 6,345,710 12,293,901 454,522 241,316
--------------- -------------- --------------- -------- --------
Net increase........................... 24,962,418 7,024,513 14,066,373 572,986 273,714
Net assets available for benefits
Beginning of period.................... -- -- -- -- --
--------------- -------------- --------------- -------- --------
End of period.......................... $ 24,962,418 $ 7,024,513 $ 14,066,373 $572,986 $273,714
=============== ============== =============== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
5
<PAGE> 7
<TABLE>
<CAPTION>
FIDELITY
VANGUARD GROWTH & T. ROWE PRICE T. ROWE PRICE EUROPACIFIC
U.S. GROWTH INCOME NEW INCOME MID-CAP GROWTH
PORTFOLIO PORTFOLIO FUND GROWTH FUND FUND
----------- --------- ------------- ------------- -----------
FOR THE PERIOD FROM INCEPTION (JULY 1, 1997)
THROUGH DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in market
value of investments..................... $ 2,876 $ 10,748 $ 250 $ 11,489 $(10,042)
Interest................................... 376 1,352 39 763 794
Dividends.................................. 4,360 12,526 399 1,281 4,620
-------- -------- ------- -------- --------
Total investment income (loss)........... 7,612 24,626 688 13,533 (4,628)
-------- -------- ------- -------- --------
Contributions to the Plan
By participants............................ 16,201 111,973 1,953 24,284 18,511
By the employer............................ 105 387 9 139 413
-------- -------- ------- -------- --------
Total contributions...................... 16,306 112,360 1,962 24,423 18,924
-------- -------- ------- -------- --------
Total additions.......................... 23,918 136,986 2,650 37,956 14,296
-------- -------- ------- -------- --------
Deductions from net assets attributed to:
Benefits paid to participants................ (5,457) (19,643) (58) (14,385) (8,630)
-------- -------- ------- -------- --------
Transfers among funds and Plans:
Transfers in from Merck & Co., Inc.
Employee Savings and Security Plan (see
Note 1).................................... 101,326 209,311 9,761 107,238 86,596
Net reallocations............................ (7,179) 9,843 -- (4,139) (3,348)
Loans to participants........................ (956) (21,945) (580) (3,032) (685)
Loan repayments by participants.............. 1,289 4,297 106 2,001 2,975
-------- -------- ------- -------- --------
Net transfers among funds and Plans...... 94,480 201,506 9,287 102,068 85,538
-------- -------- ------- -------- --------
Total deductions and net transfers
among funds and Plans.................. 89,023 181,863 9,229 87,683 76,908
-------- -------- ------- -------- --------
Net increase........................... 112,941 318,849 11,879 125,639 91,204
Net assets available for benefits
Beginning of period.................... -- -- -- -- --
-------- -------- ------- -------- --------
End of period.......................... $112,941 $318,849 $11,879 $125,639 $ 91,204
======== ======== ======= ======== ========
<CAPTION>
THE GEORGE FIDELITY FIDELITY SPARTAN FIDELITY
PUTNAM RETIREMENT RETIREMENT U.S. EQUITY LOW-PRICED
FUND OF MONEY GOVERNMENT INDEX STOCK
BOSTON A MARKET MONEY MARKET FUND FUND
---------- ---------- ------------ ----------- ----------
FOR THE PERIOD FROM INCEPTION (JULY 1, 1997)
THROUGH DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in market
value of investments..................... $ (1,305) $ -- $ -- $ 4,068 $ (12)
Interest................................... 645 963 619 122 7
Dividends.................................. 10,353 8,440 300 620 126
-------- -------- ------- ------- ------
Total investment income (loss)........... 9,693 9,403 919 4,810 121
-------- -------- ------- ------- ------
Contributions to the Plan
By participants............................ 13,966 46,940 50,787 10,497 462
By the employer............................ 105 412 -- 348 9
-------- -------- ------- ------- ------
Total contributions...................... 14,071 47,352 50,787 10,845 471
-------- -------- ------- ------- ------
Total additions.......................... 23,764 56,755 51,706 15,655 592
-------- -------- ------- ------- ------
Deductions from net assets attributed to:
Benefits paid to participants................ (11,342) (32,318) (2,468) (11,371) --
-------- -------- ------- ------- ------
Transfers among funds and Plans:
Transfers in from Merck & Co., Inc.
Employee Savings and Security Plan (see
Note 1).................................... 121,190 305,070 -- 40,069 --
Net reallocations............................ (1,947) 25,087 (50,134) 13,940 5,000
Loans to participants........................ (455) (5,241) (268) (422) --
Loan repayments by participants.............. 2,999 4,787 1,164 632 54
-------- -------- ------- ------- ------
Net transfers among funds and Plans...... 121,787 329,703 (49,238) 54,219 5,054
-------- -------- ------- ------- ------
Total deductions and net transfers
among funds and Plans.................. 110,445 297,385 (51,706) 42,848 5,054
-------- -------- ------- ------- ------
Net increase........................... 134,209 354,140 -- 58,503 5,646
Net assets available for benefits
Beginning of period.................... -- -- -- -- --
-------- -------- ------- ------- ------
End of period.......................... $134,209 $354,140 $ -- $58,503 $5,646
======== ======== ======= ======= ======
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
TEMPLETON
FRANKLIN PUTNAM DEVELOPING T. ROWE PRICE
SMALL CAP VOYAGAR MARKETS DIVIDEND PARTICIPANTS'
GROWTH FUND I FUND A TRUST I GROWTH FUND LOAN ACCOUNT
------------- -------- ---------- ------------ ------------
FOR THE PERIOD FROM INCEPTION (JULY 1, 1997)
THROUGH DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------------|
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income (loss)
Net appreciation (depreciation) in market
value of investments..................... $ (72) $(26) $ (614) $ -- $ --
Interest................................... -- 7 21 -- --
Dividends.................................. 50 39 108 -- --
------ ---- ------ -------- ----------
Total investment income (loss)........... (22) 20 (485) -- --
------ ---- ------ -------- ----------
Contributions to the Plan
By participants............................ 709 728 533 -- --
By the employer............................ 9 9 -- -- --
------ ---- ------ -------- ----------
Total contributions...................... 718 737 533 -- --
------ ---- ------ -------- ----------
Total additions.......................... 696 757 48 -- --
------ ---- ------ -------- ----------
Deductions from net assets attributed to:
Benefits paid to participants................ -- -- -- -- (6,276)
------ ---- ------ -------- ----------
Transfers among funds and Plans:
Transfers in from Merck & Co., Inc.
Employee Savings and Security Plan (see
Note 1).................................... -- -- -- -- 1,738,914
Net reallocations............................ 560 -- 1,322 -- --
Loans to participants........................ -- -- -- -- 514,199
Loan repayments by participants.............. -- 54 274 -- (438,726)
------ ---- ------ -------- ----------
Net transfers among funds and Plans...... 560 54 1,596 -- 1,814,387
------ ---- ------ -------- ----------
Total deductions and net transfers
among funds and Plans.................. 560 54 1,596 -- 1,808,111
------ ---- ------ -------- ----------
Net increase........................... 1,256 811 1,644 -- 1,808,111
Net assets available for benefits
Beginning of period.................... -- -- -- -- --
------ ---- ------ -------- ----------
End of period.......................... $1,256 $811 $1,644 $ -- $1,808,111
====== ==== ====== ======== ==========
</TABLE>
7
<PAGE> 9
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The Merck Puerto Rico Employee Savings and Security Plan (the "Plan") is a
profit sharing plan designed to provide an opportunity for employees of Merck
Sharp & Dohme Quimica de Puerto Rico, Inc. and Merck Sharp & Dohme (I.A.) Corp.
(the "Companies") to become stockholders of Merck & Co., Inc. ("Merck") and to
encourage them to save on a regular basis by setting aside part of their
earnings. The Plan was adopted effective July 1, 1997, as a result of a spin-off
from the Merck & Co., Inc. Employee Savings and Security Plan. A transfer of
$23,594,404 of assets was made into the Plan as a result of the spin-off.
Regular full-time and part-time employees of the Companies, as defined in the
Plan document, who have completed at least one year of employment and are not
covered by a collective bargaining agreement, are eligible to enroll in the
Plan.
The Plan is administered by the Employee Benefits Committee appointed by
the President of the Companies. All costs of administering the Plan are borne by
the Companies.
Participants should refer to the Summary Plan Description for a complete
description of benefits provided.
CONTRIBUTIONS
Participants may contribute from 2% up to 15% of their base pay, provided
that pre-tax contributions shall not exceed 10% of base compensation. In
addition, the Companies match 50% of employee contributions up to 5% of base pay
per pay period. The Companies' matching contributions are invested entirely in
the Merck Common Stock Fund (Non-participant directed) and may not be
reallocated into any other investment option.
INVESTMENT OPTIONS
Participants direct the investment of their contributions into any
investment option including the Merck Common Stock Fund (Participant directed).
The following is a brief description of each option:
Merck Common Stock Fund
The Merck Common Stock Fund invests primarily in Merck common stock and a
small portion of money market instruments for liquidity. This liquidity allows
for daily trading in the fund. Ownership is measured in units rather than
shares. An investment in this option allows the participant to become a
stockholder and part owner of Merck. The value of the investment can go up or
down depending on general factors affecting the stock market and specific
factors affecting Merck's business. This is neither a mutual fund nor a
diversified or managed investment option. Investing in a non-diversified single
stock involves more investment risk than investing in a diversified fund.
T. Rowe Price Blue Chip Growth Fund
The T. Rowe Price Blue Chip Growth Fund seeks to provide long-term growth
of capital. The fund invests primarily (at least 65% of its assets) in common
stocks of large and medium-sized blue chip companies that have the potential for
above-average earnings growth and are well established in their respective
industries. The fund may also invest in convertible stocks and bonds, preferred
stocks, bonds and warrants. Up to 20% of assets (excluding reserves) may be
invested in foreign securities, which may be subject to currency risks and
political and sovereign risks of the home country.
8
<PAGE> 10
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fidelity Equity-Income Fund
Funds are invested in income-producing equity securities. Normally, at
least 65% of the fund's assets will be invested in income producing equity
securities. The fund has the flexibility to invest the balance in all types of
domestic and foreign securities, including bonds.
Vanguard U.S. Growth Portfolio
Vanguard U.S. Growth Portfolio seeks to provide long-term capital growth by
investing in equity securities of large, established U.S. companies that have
good growth records, strong market positions and have exhibited long-term
financial strength to provide potential long-term growth.
Fidelity Growth & Income Portfolio
Funds are invested primarily in U.S. and foreign stocks, focusing on those
that pay current dividends and offer potential growth of earnings such as common
stocks, convertible securities, preferred stocks and warrants.
T. Rowe Price New Income Fund
The T. Rowe Price New Income Fund is a bond fund that seeks to provide the
highest level of income consistent with preservation of capital by purchasing
securities that have been rated as investment-grade by Standard & Poor's,
Moody's or Fitch Investor Services. The fund invests at least 80% of its assets
in income-producing investment-grade debt securities including U.S. government
and agency securities, corporate bonds, bank obligations and utilities. The
fund's dollar-weighted average maturity is generally expected to be between four
and fifteen years.
T. Rowe Price Mid-Cap Growth Fund
The T. Rowe Price Mid-Cap Growth Fund seeks to provide long-term capital
appreciation by investing primarily in the stock of medium-sized (mid-cap)
growth companies that offer the potential for above-average earnings growth. The
fund focuses on companies that are no longer considered new or emerging, but are
well-established. It may also invest in convertible securities, warrants and
foreign securities, which are subject to greater risks.
EuroPacific Growth Fund
This fund seeks long-term capital growth by investing primarily in
securities of companies outside the United States. Normally, at least 65% of the
fund's total assets will be invested in Europe or the Pacific Basin. The Pacific
Basin is generally defined as those countries bordering the Pacific Ocean and
includes, but is not limited to Australia, Canada, Japan, Malaysia and
Singapore. The fund may also invest in convertible securities, debt and
government securities and preferred stock. Foreign investments, especially in
developing countries, involve greater risks and may offer greater potential.
The George Putnam Fund of Boston A
This fund seeks to provide a balanced investment comprised of a
well-diversified portfolio of stocks and bonds that will produce both capital
growth and current income. Normally, no more than 75% of the fund's assets will
be invested in common stocks and convertible securities.
9
<PAGE> 11
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fidelity Retirement Money Market
Funds are invested in high-quality U.S. dollar-denominated money market
instruments of U.S. and foreign issuers. Normally, the fund intends to invest
more than 25% of its total assets in obligations of institutions in the
financial services industry.
Fidelity Retirement Government Money Market
Funds are invested in obligations issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities and in
repurchase agreements secured by these obligations. An investment in the
portfolio is not insured or guaranteed by the U.S. government.
This investment option was eliminated from the plan effective July 1, 1997.
Spartan U.S. Equity Index Fund
Funds are primarily invested in securities of the companies which comprise
the S&P 500 Index. Effective April 18, 1997, the fund name was changed from
Fidelity U.S. Equity Index Portfolio to the Spartan U.S. Equity Index Fund.
Fidelity Low-Priced Stock Fund
This fund seeks capital appreciation by investing mainly in low-priced
domestic and foreign common stocks ($35 or less at time of purchase). Foreign
securities may involve a higher degree of risk. This fund charges a redemption
fee to discourage short-term buying and selling of fund shares. If fund shares
are sold after being held for less than 90 days, the fund will deduct a
redemption fee from participants' accounts equal to 1.5% of the value of the
shares sold.
Franklin Small Cap Growth Fund I
This fund seeks long-term capital growth by investing primarily in stocks
of companies with market capitalization of less than $1 billion at the time of
the investment. The fund tries to invest at least one-third of its assets in
stocks of companies with market capitalization of $550 million or less. Although
the fund's assets are invested primarily in small companies, it may invest up to
35% of its total assets in larger capitalized companies with strong growth
potential, in relatively well-known larger companies in mature industries with
potential for capital appreciation, or in corporate debt securities, including
bonds, notes and debentures if deemed appropriate. The fund may also invest up
to 25% of its total assets in foreign securities, which may involve greater
risks.
Putnam Voyager Fund A
This fund seeks capital appreciation by investing primarily in common
stocks of companies that have potential for capital appreciation which is
significantly greater than that of the market averages. The fund may also invest
in convertible bonds, convertible preferred stocks, warrants, preferred stocks,
money market instruments and debt securities. The fund may invest up to 20% of
its total assets in securities principally traded in foreign markets. Foreign
securities are subject to currency, political, financial or sovereign risks of
the issuer's home country.
10
<PAGE> 12
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Templeton Developing Markets Trust I
This fund seeks long-term capitalization by investing in equity securities
of emerging market countries. The fund may invest up to 35% of its total assets
in debt securities, including bonds, notes, debentures, commercial paper,
certificates of deposit, time deposits and bankers' acceptances. Foreign
investments may involve greater risks.
T. Rowe Price Dividend Growth Fund
This fund seeks to provide increasing dividend income over time, long-term
capital appreciation and reasonable current income through investments primarily
in dividend-paying stocks. The fund may also invest in bonds and foreign
securities.
VESTING
Participants are immediately vested in their contributions, all Companies'
matching contributions, plus actual earnings thereon.
PLAN TERMINATION
Although they have not expressed any intent to do so, the Companies have
the right under the Plan to discontinue contributions at any time and to
terminate the Plan subject to the provisions of the Employee Retirement Income
Security Act of 1974.
PARTICIPANTS' LOAN ACCOUNT
Participants may borrow from their account balances with interest charged
at the prime rate plus 1%. Loan terms range from one to five years or up to
thirty years for the purchase of a primary residence. The minimum loan is $500
and the maximum loan is the lesser of $50,000 less the highest outstanding loan
balance during the one year period prior to the new loan application date, or
50% of the participant's account balance less any current outstanding loan.
Activity related to these borrowings is reflected in the Participants' Loan
Account column of the financial statements.
BENEFITS
Participants are entitled to receive automatic, voluntary, in-service
(which include hardship withdrawals), or mandatory distributions as provided in
the applicable Plan provisions.
2. SUMMARY OF ACCOUNTING POLICIES:
The financial statements of the Plan have been prepared on the accrual
basis of accounting. The investments of the Plan are stated at quoted market
value. Dividend income is recorded on the ex-dividend date. The net appreciation
(depreciation) in market value of investments is based on the beginning of the
year market value or value at the time of purchase during the year and is
included in the statement of changes in net assets available for benefits.
USE OF ESTIMATES
The financial statements are prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts that are based on
management's best estimates and judgments. Actual results could differ from
these estimates.
11
<PAGE> 13
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES:
The Plan obtained a tax determined letter from the Puerto Rico Department
of Treasury on February 18, 1998 indicating that it had been designed in
accordance with applicable sections of the Puerto Rico Internal Revenue Code of
1994 ("PRIRC"). The Plan sponsors believe that the Plan is designed and operated
in compliance with the PRIRC. The Plan sponsors also believe that the Plan is
designed and currently operated as a qualified plan under the Internal Revenue
Code. The Plan has not been amended since its inception on July 1, 1997. A
request for a favorable determination letter will be filed with the Internal
Revenue Service by mid-August 1998.
4. PARTY-IN-INTEREST:
All transactions of party-in-interest are set forth on the attached
schedule.
12
<PAGE> 14
SCHEDULE I
EIN: 66-0288298
PLAN NO.: 061
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES AT
NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE
--------------------------------- --------------- ----------- -------------
<S> <C> <C> <C>
Merck Common Stock Fund*.................................... 1,152,781 $10,067,125 $20,970,307
T. Rowe Price Blue Chip Growth Fund......................... 23,650 528,579 571,614
Fidelity Equity Income Fund................................. 5,212 259,854 273,159
Vanguard U.S. Growth Portfolio.............................. 3,925 110,360 112,653
Fidelity Growth & Income Portfolio.......................... 8,349 307,540 318,090
T. Rowe Price New Income Fund............................... 1,306 11,609 11,848
T. Rowe Price Mid-Cap Growth Fund........................... 4,381 115,152 125,293
EuroPacific Growth Fund..................................... 3,495 100,350 90,947
The George Putnam Fund of Boston A.......................... 7,446 135,408 133,881
Fidelity Retirement Money Market............................ 353,065 353,065 353,066
Fidelity Retirement Government Money Market................. -- -- --
Spartan U.S. Equity Index Fund.............................. 1,668 54,748 58,343
Fidelity Low-Priced Stock Fund.............................. 224 5,638 5,626
Franklin Small Cap Growth Fund 1............................ 54 1,317 1,245
Putnam Voyager Fund A....................................... 42 827 800
Templeton Developing Markets Trust 1........................ 127 2,255 1,641
T. Rowe Price Dividend Growth Fund.......................... -- -- --
Participants' Loan Account (with interest ranging from 6.5%
to 10.7%)................................................. -- 1,806,888 1,806,888
----------- -----------
Total Investments................................... $13,860,715 $24,835,401
=========== ===========
</TABLE>
- ---------------
* Denotes a party-in-interest to the Plan.
13
<PAGE> 15
SCHEDULE II
EIN: 66-0288298
PLAN NO.: 061
MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS(a)
FOR THE PERIOD FROM INCEPTION
(JULY 1, 1997) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
CURRENT
VALUE
PURCHASE SELLING COST OF OF ASSETS ON NET
IDENTITY OF PARTY INVOLVED AND DESCRIPTION OF ASSETS PRICE PRICE ASSET TRANSACTION DATE GAIN
- ---------------------------------------------------- ----------- ---------- ----------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Merck Common Stock
73 purchase transactions...................... $22,502,264 $ -- $22,502,264 $22,502,264 $ --
36 sales transactions......................... -- 1,954,289 1,287,872 1,954,289 666,417
</TABLE>
- ---------------
(a) Reportable transactions are transactions that, individually or in the
aggregate, exceed 5% of the Plan's net assets as of the beginning of the
Plan year.
14
<PAGE> 16
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated May 1, 1998 included in the financial
statements and exhibits required by Form 11-K Annual Report for the Merck Puerto
Rico Employee Savings and Security Plan into the previously filed Registration
Statements of Merck & Co., Inc. on Form S-8 (Nos. 33-21087, 33-21088, 33-36101,
33-40177, 33-51235, 33-53463, 33-64273, 33-64665, 333-23293 and 333-23295), on
Form S-4 (No. 33-50667) and on Form S-3 (Nos. 33-60322, 33-39349, 33-51785,
33-57421, 333-17045 and 333-36383). It should be noted that we have not audited
any financial statements of the Plan subsequent to December 31, 1997 or
performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
San Juan, Puerto Rico
June 22, 1998
