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)
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
3
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
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
- --------------------------- |--------------------------
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 $ --
============== ============ ============== ============ ============
FIDELITY VANGUARD
EQUITY- U.S. GROWTH
INCOME FUND PORTFOLIO
----------- -----------
DECEMBER 31, 1997
- --------------------------- --------------------------
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
=========== ===========
The accompanying notes to financial statements are an integral part of this
financial statement.
2
4
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)
- ------------------------------------------------------------------------------------------------------------------------------------
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 $ --
=========== =========== =========== =========== ========== =========== ==========
THE GEORGE
EUROPACIFIC FIDELITY PUTNAM
GROWTH OVERSEAS FUND OF
FUND FUND BOSTON A
---------- -------- ----------
DECEMBER 31, 1997 (PARTICIPANT DIRECTED; SEE NOTE 1)
- --------------------------------------------------------------------------------
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
=========== =========== ===========
3
5
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
- ------------------------------------------------------------------------------------------------------------------------------------
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
=========== =========== =========== =========== =========== =========== ===========
TEMPLETON
DEVELOPING T. ROWE PRICE PARTICIPANTS'
MARKETS DIVIDEND LOAN
TRUST I GROWTH FUND ACCOUNT
---------- ------------- -------------
DECEMBER 31, 1997
- ------------------------------------------------------------------------------------|
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
=========== =========== ===========
4
6
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
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
- ----------------------------- |-------------------------
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
============== ============ ============ ============ ===========
FIDELITY FIDELITY
GROWTH GROWTH &
COMPANY INCOME
FUND PORTFOLIO
-------- ---------
DECEMBER 31, 1996
- ---------------------------------------------------------
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
=========== ===========
The accompanying notes to financial statements are an integral part of this
financial statement.
5
7
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)
- -------------------------------------------------------------------------------------------------------------------------
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
=========== =========== =========== =========== =========== ===========
FIDELITY
RETIREMENT FIDELITY
GOVERNMENT U.S. EQUITY PARTICIPANTS'
MONEY INDEX LOAN
MARKET PORTFOLIO ACCOUNT
---------- ----------- -------------
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------|
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
=========== =========== ===========
6
8
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
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
- -------------------------------------- |--------------------------
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 $ --
============== ============ ============== ============ ============
FIDELITY
EQUITY- VANGUARD
INCOME U.S. GROWTH
FUND PORTFOLIO
-------- -----------
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------
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
=========== ===========
The accompanying notes to financial statements are an integral part of this
financial statement.
7
9
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)
- ------------------------------------ ------------------------------------------------------------------------------------------
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
=========== =========== =========== =========== =========== ===========
THE GEORGE
FIDELITY PUTNAM
FIDELITY OTC EUROPACIFIC OVERSEAS FUND OF
PORTFOLIO GROWTH FUND FUND BOSTON A
------------ ----------- -------- ----------
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
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
=========== =========== =========== ===========
8
10
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
- -----------------------------------------------------------------------------------------------------------------------------------
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
=========== =========== =========== =========== =========== ===========
TEMPLETON
PUTNAM DEVELOPING T. ROWE PRICE PARTICIPANTS'
VOYAGER MARKETS DIVIDEND LOAN
FUND A TRUST I GROWTH FUND ACCOUNT
------- ---------- ------------- -------------
YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------
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
=========== =========== ========== ===========
9
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
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
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
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
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
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
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
NUMBER OF
UNITS/SHARES AT
NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE
--------------------------------- --------------- -------------- -------------
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
============== ==============
- ---------------
* Denotes a party-in-interest to the Plan.
16
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
CURRENT
VALUE
OF ASSETS ON
IDENTITY OF PARTY INVOLVED AND DESCRIPTION OF PURCHASE COST OF TRANSACTION
ASSETS PRICE SELLING PRICE ASSET DATE NET GAIN
- --------------------------------------------- ------------ ------------- ------------ ------------ ------------
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 --
- ---------------
(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
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