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
---------------------
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)
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 statements of net assets available for
benefits of the Merck Puerto Rico Employee Savings and Security Plan (the
"Plan") as of December 31, 1998 and 1997 and the related statement of changes in
net assets available for benefits for the year ended December 31, 1998. 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, 1998 and 1997, and the changes in its net assets available for
benefits for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules 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 9, 1999
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MERCK PUERTO RICO
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 EQUITY-
TOTAL NOTE 1) NOTE 1) GROWTH FUND INCOME FUND
----- ---------------- ------------- ------------- -----------
DECEMBER 31, 1998
- --------------------------------------------------- -------------------------
Assets:
Investments at market value...................... $33,769,371 $9,666,965 $19,533,155 $827,723 $ 42,001
----------- ---------- ----------- -------- -----------
Receivables
Employer's contribution........................ 24,537 5,420 15,492 741 130
Participants' contributions.................... 85,652 -- 74,861 3,173 161
Accrued interest and dividends................. 107,220 34,234 69,159 -- --
----------- ---------- ----------- -------- -----------
Total receivables............................ 217,409 39,654 159,512 3,914 291
----------- ---------- ----------- -------- -----------
Net assets available for benefits.................. $33,986,780 $9,706,619 $19,692,667 $831,637 $ 42,292
=========== ========== =========== ======== ===========
The accompanying notes to financial statements are an integral part of this
financial statement.
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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
----------- --------- ------------- ------------- -----------
DECEMBER 31, 1998 (PARTICIPANT DIRECTED; SEE NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------
Assets:
Investments at market value...................... $295,492 $539,595 $17,557 $171,008 $133,469
-------- -------- ------- -------- --------
Receivables
Employer's contribution........................ 280 424 29 292 233
Participants' contributions.................... 1,133 2,068 67 656 512
Accrued interest and dividends................. -- -- -- -- --
-------- -------- ------- -------- --------
Total receivables............................ 1,413 2,492 96 948 745
-------- -------- ------- -------- --------
Net assets available for benefits.................. $296,905 $542,087 $17,653 $171,956 $134,214
======== ======== ======= ======== ========
THE GEORGE FIDELITY SPARTAN FIDELITY
PUTNAM RETIREMENT U.S. EQUITY LOW-PRICED
FUND OF MONEY INDEX STOCK
BOSTON A MARKET FUND FUND
---------- ---------- ----------- ----------
DECEMBER 31, 1998 (PARTICIPANT DIRECTED; SEE NOTE 1)
- -------------------------------------------------------------------------------------------------------
Assets:
Investments at market value...................... $159,288 $380,176 $201,400 $11,966
-------- -------- -------- -------
Receivables
Employer's contribution........................ 184 927 132 56
Participants' contributions.................... 611 1,457 772 46
Accrued interest and dividends................. -- -- -- --
-------- -------- -------- -------
Total receivables............................ 795 2,384 904 102
-------- -------- -------- -------
Net assets available for benefits.................. $160,083 $382,560 $202,304 $12,068
======== ======== ======== =======
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5
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, 1998
- -------------------------------------------------------------------------------------------------------------------------
Assets:
Investments at market value...................... $13,149 $12,196 $7,270 $2,729 $1,754,232
------- ------- ------ ------ ----------
Receivables
Employer's contribution........................ 74 71 27 25 --
Participants' contributions.................... 50 47 28 10 --
Accrued interest and dividends................. -- -- -- -- 3,827
------- ------- ------ ------ ----------
Total receivables............................ 124 118 55 35 3,827
------- ------- ------ ------ ----------
Net assets available for benefits.................. $13,273 $12,314 $7,325 $2,764 $1,758,059
======= ======= ====== ====== ==========
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MERCK PUERTO RICO
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 EQUITY-
TOTAL NOTE 1) NOTE 1) GROWTH FUND INCOME FUND
----- ---------------- ------------- ------------- -----------
DECEMBER 31, 1997
- --------------------------------------------------- -------------------------
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
=========== ========== =========== ======== ===========
The accompanying notes to financial statements are an integral part of this
financial statement.
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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
------------ --------- ------------- ------------- -----------
(PARTICIPANT DIRECTED; SEE NOTE 1)
-----------------------------------------------------------------------------
Assets:
Investments at market value ...... $112,653 $318,090 $11,848 $125,293 $90,947
-------- -------- ------- -------- -------
Receivables
Employer's contribution ........ 77 163 9 111 86
Participants' contributions .... 211 596 22 235 171
Accrued interest and dividends.. -- -- -- -- --
-------- -------- ------- -------- -------
Total receivables ............ 288 759 31 346 257
-------- -------- ------- -------- -------
Net assets available for benefits .. $112,941 $318,849 $11,879 $125,639 $91,204
======== ======== ======= ======== =======
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
----------- ---------- ------------ ----------- ----------
----------- -------------------------- -------------------------
Assets:
Investments at market value ...... $133,881 $353,066 $ -- $58,343 $5,626
-------- -------- ----- ------- ------
Receivables
Employer's contribution ........ 77 412 -- 51 9
Participants' contributions .... 251 662 -- 109 11
Accrued interest and dividends.. -- -- -- -- --
-------- -------- ----- ------- ------
Total receivables ........... 328 1,074 -- 160 20
-------- -------- ----- ------- ------
Net assets available for benefits... $134,209 $354,140 $ -- $58,503 $5,646
======== ======== ===== ======= ======
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TEMPLETON
FRANKLIN PUTNAM DEVELOPING T. ROWE PRICE
SMALL CAP VOYAGER MARKETS DIVIDEND PARTICIPANTS'
GROWTH FUND I FUND A TRUST I GROWTH FUND LOAN ACCOUNT
------------- ------- ---------- ------------- -------------
------------------------------------------------------------------------
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
====== ==== ====== === ==========
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MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
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
----------- ------------- ------------- ------------- -----------
YEAR ENDED DECEMBER 31, 1998
- ------------------------------------------------------ -------------------------
Additions to net assets attributed to:
Investment income (loss)
Net appreciation(depreciation)
in market value of investments.................. $ 8,347,916 $ 2,659,334 $ 5,333,097 $163,492 $ 14,471
Interest.......................................... 161,776 63,397 80,414 6,831 618
Dividends......................................... 489,996 127,134 250,333 13,124 8,021
----------- ----------- ----------- -------- --------
Total investment income(loss)................... 8,999,688 2,849,865 5,663,844 183,447 23,110
----------- ----------- ----------- -------- --------
Contributions to the Plan
By participants................................... 3,289,370 -- 2,654,100 130,452 20,633
By the employer................................... 934,413 918,911 10,193 1,153 710
----------- ----------- ----------- -------- --------
Total contributions............................. 4,223,783 918,911 2,664,293 131,605 21,343
----------- ----------- ----------- -------- --------
Total additions................................. 13,223,471 3,768,776 8,328,137 315,052 44,453
----------- ----------- ----------- -------- --------
Deductions from net assets attributed to:
Benefits paid to participants....................... (4,357,447) (1,155,046) (2,792,099) (47,016) (29,788)
----------- ----------- ----------- -------- --------
Transfers among funds and Plans:
Net reallocations................................... 158,338 27,963 179,373 (15,040) (246,175)
Loans to participants............................... -- (371,499) (520,607) (32,356) (3,682)
Loan repayments by participants..................... -- 411,912 431,490 38,011 3,770
----------- ----------- ----------- -------- --------
Net transfers among funds and Plans............. 158,338 68,376 90,256 (9,385) (246,087)
----------- ----------- ----------- -------- --------
Total deductions and net transfers
among funds and Plans......................... (4,199,109) (1,086,670) (2,701,843) (56,401) (275,875)
----------- ----------- ----------- -------- --------
Net increase(decrease)........................ 9,024,362 2,682,106 5,626,294 258,651 (231,422)
Net assets available for benefits
Beginning of year............................. 24,962,418 7,024,513 14,066,373 572,986 273,714
----------- ----------- ----------- -------- --------
End of year................................... $33,986,780 $ 9,706,619 $19,692,667 $831,637 $ 42,292
=========== =========== =========== ======== ========
The accompanying notes to financial statements are an integral part of this
financial statement.
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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
----------- --------- ------------- ------------- -----------
YEAR ENDED DECEMBER 31, 1998 (PARTICIPANT DIRECTED; SEE NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------
Additions to net assets attributed to:
Investment income (loss)
Net appreciation(depreciation)
in market value of investments....... $ 40,564 $ 77,601 $ (476) $ 26,525 $ 8,931
Interest............................... 764 2,987 141 1,497 1,181
Dividends.............................. 18,090 24,768 1,174 3,620 6,724
-------- -------- ------- -------- --------
Total investment income(loss)........ 59,418 105,356 839 31,642 16,836
-------- -------- ------- -------- --------
Contributions to the Plan
By participants........................ 42,170 81,910 5,590 50,969 37,307
By the employer........................ 203 723 20 181 767
-------- -------- ------- -------- --------
Total contributions.................. 42,373 82,633 5,610 51,150 38,074
-------- -------- ------- -------- --------
Total additions...................... 101,791 187,989 6,449 82,792 54,910
-------- -------- ------- -------- --------
Deductions from net assets attributed to:
Benefits paid to participants............ (8,316) (59,106) (1,696) (25,663) (11,738)
-------- -------- ------- -------- --------
Transfers among funds and Plans:
Net reallocations........................ 89,657 80,154 452 (10,822) (4,743)
Loans to participants.................... (2,475) (10,507) -- (4,988) (992)
Loan repayments by participants.......... 3,307 24,708 569 4,998 5,573
-------- -------- ------- -------- --------
Net transfers among funds and Plans.. 90,489 94,355 1,021 (10,812) (162)
-------- -------- ------- -------- --------
Total deductions and net transfers
among funds and Plans.............. 82,173 35,249 (675) (36,475) (11,900)
-------- -------- ------- -------- --------
Net increase(decrease)............. 183,964 223,238 5,774 46,317 43,010
Net assets available for benefits
Beginning of year.................. 112,941 318,849 11,879 125,639 91,204
-------- -------- ------- -------- --------
End of year........................ $296,905 $542,087 $17,653 $171,956 $134,214
======== ======== ======= ======== ========
THE GEORGE FIDELITY SPARTAN FIDELITY
PUTNAM RETIREMENT U.S. EQUITY LOW-PRICED
FUND OF MONEY INDEX STOCK
BOSTON A MARKET FUND FUND
----------- ---------- ----------- ----------
YEAR ENDED DECEMBER 31, 1998 (PARTICIPANT DIRECTED; SEE NOTE 1)
- ----------------------------------------------------------------------------------------------------
Additions to net assets attributed to:
Investment income (loss)
Net appreciation(depreciation)
in market value of investments....... $ 111 $ -- $ 23,845 $ (555)
Interest............................... 1,308 2,213 198 17
Dividends.............................. 14,561 18,546 1,961 758
-------- -------- -------- -------
Total investment income(loss)........ 15,980 20,759 26,004 220
-------- -------- -------- -------
Contributions to the Plan
By participants........................ 29,698 174,666 25,701 7,141
By the employer........................ 107 515 704 47
-------- -------- -------- -------
Total contributions.................. 29,805 175,181 26,405 7,188
-------- -------- -------- -------
Total additions...................... 45,785 195,940 52,409 7,408
-------- -------- -------- -------
Deductions from net assets attributed to:
Benefits paid to participants............ (13,450) (137,470) (16,602) (1,175)
-------- -------- -------- -------
Transfers among funds and Plans:
Net reallocations........................ (6,696) (22,655) 106,895 $ --
Loans to participants.................... (4,011) (17,586) (433) (82)
Loan repayments by participants.......... 4,246 10,191 1,532 271
-------- -------- -------- -------
Net transfers among funds and Plans.. (6,461) (30,050) 107,994 189
-------- -------- -------- -------
Total deductions and net transfers
among funds and Plans.............. (19,911) (167,520) 91,392 (986)
-------- -------- -------- -------
Net increase(decrease)............. 25,874 28,420 143,801 6,422
Net assets available for benefits
Beginning of year.................. 134,209 354,140 58,503 5,646
-------- -------- -------- -------
End of year........................ $160,083 $382,560 $202,304 $12,068
======== ======== ======== =======
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TEMPLETON
FRANKLIN PUTNAM DEVELOPING T. ROWE PRICE
SMALL CAP VOYAGER MARKETS DIVIDEND PARTICIPANTS'
GROWTH FUND I FUND A TRUST I GROWTH FUND LOAN ACCOUNT
YEAR ENDED DECEMBER 31, 1998 ------------- ------- ---------- ------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
Additions to net assets attributed to:
Investment income (loss)
Net appreciation(depreciation)
in market value of investments....... $ 725 $ 928 $ (795) $ 118 $ --
Interest............................... 43 55 112 -- --
Dividends.............................. 186 808 109 79 --
------- ------- ------ ------ ----------
Total investment income(loss)........ 954 1,791 (574) 197 --
------- ------- ------ ------ ----------
Contributions to the Plan
By participants........................ 11,433 10,379 4,679 2,542 --
By the employer........................ 65 62 27 25 --
------- ------- ------ ------ ----------
Total contributions.................. 11,498 10,441 4,706 2,567 --
------- ------- ------ ------ ----------
Total additions...................... 12,452 12,232 4,132 2,764 --
------- ------- ------ ------ ----------
Deductions from net assets attributed to:
Benefits paid to participants............ (802) (931) (192) -- (56,357)
------- ------- ------ ------ ----------
Transfers among funds and Plans:
Net reallocations........................ 206 -- 1,080 -- (21,311)
Loans to participants.................... -- (170) (112) -- 969,500
Loan repayments by participants.......... 161 372 773 -- (941,884)
------- ------- ------ ------ ----------
Net transfers among funds and Plans.. 367 202 1,741 -- 6,305
------- ------- ------ ------ ----------
Total deductions and net transfers
among funds and Plans.............. (435) (729) 1,549 -- (50,052)
------- ------- ------ ------ ----------
Net increase(decrease)............. 12,017 11,503 5,681 2,764 (50,052)
Net assets available for benefits
Beginning of year.................. 1,256 811 1,644 -- 1,808,111
------- ------- ------ ------ ----------
End of year........................ $13,273 $12,314 $7,325 $2,764 $1,758,059
======= ======= ====== ====== ==========
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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. 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.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
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).
Participants should refer to each investment fund's prospectus for a more
complete description of the risks and strategies associated with each fund.
Participants may change their investment options daily. 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
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MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
The 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.
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MERCK PUERTO RICO
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.
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.
Spartan U.S. Equity Index Fund
This fund seeks to provide results that correspond to the total return
performance of common stocks traded in the United States. Funds are primarily
invested in securities of the companies which comprise the S&P 500 Index.
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 $1.5 billion at the time of
the investment. 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, and 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.
Effective January 1, 1999, the Franklin Small Cap Growth Fund I shares were
changed to Class A.
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.
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,
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MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
commercial paper, certificates of deposit, time deposits and bankers'
acceptances. Foreign investments may involve greater risks.
Effective January 1, 1999 the Templeton Developing Markets Trust I shares
were changed to Class A.
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
balance. 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.
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MERCK PUERTO RICO
EMPLOYEE SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES:
The Plan obtained a tax determination 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 United
States Internal Revenue Code. The Plan has not been amended since its inception
on July 1, 1997. A favorable determination letter was received from the Internal
Revenue Service in November, 1998. Therefore, no provision for income taxes has
been made.
4. OTHER MATTERS:
Net reallocations in 1998 of $158,338 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 party-in-interest transactions are set forth on the attached schedules.
6. PROHIBITED TRANSACTIONS:
There were no prohibited transactions during 1998.
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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, 1998
NUMBER OF
UNITS/SHARES AT
NAME OF ISSUER AND TITLE OF ISSUE CLOSE OF PERIOD COST CURRENT VALUE
--------------------------------- --------------- ----------- -------------
Merck Common Stock Fund*.................................... 1,160,425 $12,289,885 $29,200,120
T. Rowe Price Blue Chip Growth Fund......................... 27,050 633,492 827,723
Fidelity Equity Income Fund................................. 756 39,435 42,001
Vanguard U.S. Growth Portfolio.............................. 7,882 254,117 295,492
Fidelity Growth & Income Portfolio.......................... 11,771 458,751 539,595
T. Rowe Price New Income Fund............................... 1,993 17,803 17,557
T. Rowe Price Mid-Cap Growth Fund........................... 5,018 138,771 171,008
EuroPacific Growth Fund..................................... 4,700 133,508 133,469
The George Putnam Fund of Boston A.......................... 8,830 160,765 159,288
Fidelity Retirement Money Market............................ 380,175 380,175 380,176
Spartan U.S. Equity Index Fund.............................. 4,581 175,925 201,400
Fidelity Low-Priced Stock Fund.............................. 524 12,519 11,966
Franklin Small Cap Growth Fund 1............................ 583 12,602 13,149
Putnam Voyager Fund A....................................... 557 11,292 12,196
Templeton Developing Markets Trust 1........................ 706 8,415 7,270
T. Rowe Price Dividend Growth Fund.......................... 124 2,611 2,729
Participants' Loan Account (with interest rates ranging from
9.5% to 9.5%)............................................. -- 1,754,232 1,754,232
----------- -----------
Total Investments................................... $16,484,298 $33,769,371
=========== ===========
- ---------------
* Denotes a party-in-interest to the Plan.
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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 YEAR ENDED DECEMBER 31, 1998
CURRENT
VALUE
PURCHASE SELLING COST OF OF ASSETS ON
IDENTITY OF PARTY INVOLVED AND DESCRIPTION OF ASSETS PRICE PRICE ASSET TRANSACTION DATE NET GAIN
- ---------------------------------------------------- ---------- ---------- ---------- ---------------- ----------
Merck Common Stock Fund*
135 purchase transactions..................... $5,103,922 $ -- $5,103,922 $5,103,922 $ --
64 sales transactions........................ -- 4,869,142 2,881,161 4,869,142 1,987,981
- ---------------
(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.
*Denotes a party-in-interest to the Plan.
>
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated May 9, 1999 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, 333-36383 and 333-77569). It should be noted that we have
not audited any financial statements of the Plan subsequent to December 31, 1998
or performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
San Juan, Puerto Rico
June 10, 1999