Accelerating the Pace of Innovation

American Home Products Corporation

                                                              Annual Report 1999

                               [GRAPHIC OMITTED]
<PAGE>

Targeting Disease with First-in-Class Products

AHP recently introduced - in a remarkably short timeframe - Sonata, Rapamune,
Meningitec, ReFacto and Prevnar. These innovative products target some of the
world's most debilitating diseases and challenging health problems. Their
introduction underscores the depth and productivity of AHP's pharmaceutical
product pipeline. A listing of other worldwide products in post-Phase I trials
follows.

                                                                      Pipeline >

IFC Pharmaceutical Pipeline
  2 Chairman's Report
  7 AHP's Focus Franchises
 22 AHP at a Glance
 26 Research
 27 Financial Section
 56 Directors and Officers
 57 Principal Products
 58 Corporate Data

                               [GRAPHIC OMITTED]

<PAGE>

AHP's Pipeline:
Accelerating the Pace of New Products to Market

                                             Phase II   Phase III   Registration

Women's Health
--------------------------------------------------------------------------------
Minesse(R) Low-dose oral contraceptive (international)
--------------------------------------------------------------------------------
Trimegestone
   -----------------------------------------------------------------------------
   With Premarin(R): hormone replacement therapy
    with endometrial protection (United States)
   -----------------------------------------------------------------------------
   With 17 (beta)-estradiol: hormone replacement therapy
    with endometrial protection (international)
   -----------------------------------------------------------------------------
   With ethinyl estradiol: oral contraception
--------------------------------------------------------------------------------
Prempro(TM) Lower dosage for osteoporosis and
      menopausal symptoms
--------------------------------------------------------------------------------
TSE-424 Tissue-selective estrogen for osteoporosis

Neuroscience
--------------------------------------------------------------------------------
Effexor(R) XR/Effexor(R)
   -----------------------------------------------------------------------------
   Long-term treatment of generalized anxiety disorder
   -----------------------------------------------------------------------------
   Social anxiety disorder
   -----------------------------------------------------------------------------
   Relapse/recurrence of depression
   -----------------------------------------------------------------------------
   Pediatric usage
--------------------------------------------------------------------------------
Sonata(R)
   -----------------------------------------------------------------------------
   Thirty-five night usage
   -----------------------------------------------------------------------------
   Middle-of-night dosing
--------------------------------------------------------------------------------
Retigabine Anti-epileptic

Vaccines
--------------------------------------------------------------------------------
Meningitec(TM)
   -----------------------------------------------------------------------------
   Meningococcal C conjugate vaccine (Pan-European)
--------------------------------------------------------------------------------
Prevnar(TM)/Prevenar(TM)
   -----------------------------------------------------------------------------
   Seven-valent pneumococcal conjugate vaccine
   -----------------------------------------------------------------------------
   Nine-valent pneumococcal conjugate vaccine
--------------------------------------------------------------------------------
FluMist(TM) Cold adapted intranasal influenza vaccine
--------------------------------------------------------------------------------
Meningococcal C conjugate/nine-valent

pneumococcal conjugate Combination vaccine
--------------------------------------------------------------------------------
RSV subunit vaccine Respiratory syncytial virus vaccine

Anti-Infectives
--------------------------------------------------------------------------------
Zosyn(R)/Tazocin(R)
   -----------------------------------------------------------------------------
   Intra-abdominal infections Q8H
   -----------------------------------------------------------------------------
   Febrile neutropenia
   -----------------------------------------------------------------------------
   Nosocomial pneumonia Q6H
   -----------------------------------------------------------------------------
   Pediatric indications
--------------------------------------------------------------------------------
GAR-936 Antibiotic

<PAGE>
                                             Phase II   Phase III   Registration

Musculoskeletal
--------------------------------------------------------------------------------
Enbrel(R) Disease modification in early RA
--------------------------------------------------------------------------------
Synvisc(R)
   -----------------------------------------------------------------------------
   Six-month duration of action
   -----------------------------------------------------------------------------
   Twelve-month duration of action
   -----------------------------------------------------------------------------
   Additional joints
--------------------------------------------------------------------------------
rhBMP-2
   -----------------------------------------------------------------------------
   Orthopaedic trauma
   -----------------------------------------------------------------------------
   Dental/craniofacial surgery
   -----------------------------------------------------------------------------
   Spinal fusion
   -----------------------------------------------------------------------------
   Periodontal
   -----------------------------------------------------------------------------
   Osteonecrosis

Oncology
--------------------------------------------------------------------------------
Mylotarg (TM) Relapsed acute myeloid leukemia
--------------------------------------------------------------------------------
rhIL-11 Mucositis

Transplantation and Immunology
--------------------------------------------------------------------------------
Rapamune(R)
   -----------------------------------------------------------------------------
   Renal transplantation - liquid (international)
   -----------------------------------------------------------------------------
   Renal transplantation - tablets (United States)
   -----------------------------------------------------------------------------
   Renal transplantation - tablets (Europe)
   -----------------------------------------------------------------------------
   Cyclosporin induction
   -----------------------------------------------------------------------------
   Liver transplantation
   -----------------------------------------------------------------------------
   Heart transplantation
--------------------------------------------------------------------------------
rhIL-11 Crohn's disease

Hemophilia and Special Opportunities
--------------------------------------------------------------------------------
BeneFIX(R) Hemophilia B (Japan)
--------------------------------------------------------------------------------
ReFacto(R) Hemophilia A (United States)
--------------------------------------------------------------------------------
Protonix(R) (United States)
   -----------------------------------------------------------------------------
   I.V. for erosive esophagitis
   -----------------------------------------------------------------------------
   Oral maintenance
   -----------------------------------------------------------------------------
   I.V. for Zollinger-Ellison Syndrome
   -----------------------------------------------------------------------------
   Oral H. pylori eradication
--------------------------------------------------------------------------------
Enbrel(R) Congestive heart failure

<PAGE>

1999 Highlights

Years Ended December 31,                                 1999               1998
(In thousands except per share amounts)
--------------------------------------------------------------------------------
Net Sales                                         $13,550,176        $13,462,687
--------------------------------------------------------------------------------
Net Income (Loss)*                                 (1,227,121)         2,474,338
--------------------------------------------------------------------------------
Diluted Earnings (Loss) per Share                       (0.94)              1.85
--------------------------------------------------------------------------------
Dividends per Common Share                              0.905               0.87
--------------------------------------------------------------------------------
Total Assets                                       23,906,277         21,079,068
--------------------------------------------------------------------------------
Stockholders' Equity                                6,214,747          9,614,796
--------------------------------------------------------------------------------

*     See Management's Discussion and Analysis of Financial Condition and
      Results of Operations for amounts related to the litigation charge, gain
      on the sale of business and special charges for the years ended December
      31, 1999 and 1998.

1999 in Brief

      During 1999, AHP encountered difficulties that caused shareholder value to
decline. We are determined to recover this value and have taken significant
steps toward achieving this goal.

      The biggest challenge faced by the Company in 1999 was litigation in
connection with the voluntary market withdrawal of our antiobesity products. We
made significant progress toward resolving this issue through the establishment,
in October 1999, of a comprehensive, national settlement agreement. This
settlement agreement was developed by attorneys for the Company and by
plaintiffs' attorneys involved in various federal and state cases. The Company
recorded a charge to provide for expected costs of the settlement and related
matters, resulting in a net loss for the year. The details of this action are
discussed in the financial section of this report.

      We are optimistic that the settlement will help to put this difficulty
behind us and will allow us to move forward.

      With regard to the proposed merger between AHP and Warner-Lambert, we are
disappointed that this opportunity did not come to fruition. As we have noted in
the past, consolidation is attractive in our industry due to the high cost of
bringing a new drug to market. However, we strongly feel that our own resources,
including AHP's broad product franchise and our new product efforts, will allow
our Company to expand its position as a leader in the industry.

      During 1999, we began to pursue the divestiture of our agricultural
products business. This business had a difficult year due, in large part, to
poor conditions in the agricultural industry. However, historically it has been
a significant contributor to AHP, demonstrating growth in preceding years. After
divestiture of our agricultural products business, virtually our entire
portfolio will consist of pharmaceutical, consumer health care and animal health
products.

----------

Cover: AHP enters 2000 with great momentum as several innovative products reach
the children and adults who can benefit most from the unique properties of these
therapies.



                                                                               1
<PAGE>


Chairman's
Report

[PHOTO]
John R. Stafford  Chairman, President and Chief Executive Officer

1999 was both a year of accomplishment and, as discussed in "1999 in Brief," a
year of difficulty for American Home Products Corporation. On the positive side,
our core pharmaceutical business performed well and launched four innovative and
important new products during the year - Sonata, Rapamune, ReFacto and
Meningitec. Additionally, in February 2000, we received U.S. market clearance
for Prevnar and European market clearance for Enbrel. Protonix also was approved
in the United States in February 2000.

Sales and Results of Operations in 1999

In 1999, total worldwide net sales for the Company exceeded $13.5 billion,
increasing 2 percent for the full year. This increase, which is adjusted for the
sale of the Sherwood-Davis & Geck medical devices business in February 1998, was
due primarily to a 9 percent increase in human pharmaceutical sales worldwide
and a 9 percent rise in global sales of consumer health care products. These
increases were offset, in part, by lower sales of U.S. agricultural and animal
health products. Excluding the negative impact of foreign exchange, pro forma
net sales increased 4 percent in 1999.

      Net income (loss) and diluted earnings (loss) per share for 1999 were
($1.2 billion) and ($0.94), respectively, compared with $2.5 billion and $1.85
in 1998, respectively. These results include after-tax charges associated with
the antiobesity products litigation, the restructuring of the agricultural
products business, and the suspension of shipments and voluntary market
withdrawal of RotaShield, as well as other special items discussed in the
financial section of this report.

      AHP increased its dividend to shareholders for the 48th consecutive year,
and in 2000, we anticipate double-digit earnings growth driven by our new
product launches and the continued strong growth of our global product
franchises.

Investing in Health Care

AHP continues to place increased emphasis on its pharmaceutical business, which,
in 1999, represented more than two-thirds of the Company's net sales. With a
significant commitment to developing innovative, breakthrough products, AHP is


2
<PAGE>


focusing its efforts in several large and growing areas, including: Women's
Health Care, with its lead product, Premarin; Neuroscience Therapies, anchored
by Sonata and Effexor XR; Musculoskeletal Therapies, with Enbrel as its
cornerstone product; Vaccines, led by Prevnar and Meningitec; Hemophilia
Products, expanded by the launch of ReFacto in Europe; Transplantation Products,
with Rapamune at the forefront; Oncology; and Anti-Infectives.

      The Company's pharmaceutical research and development continued its
productivity, bolstering a product pipeline that is among the finest in the
industry. Driven by $1.5 billion in research and development spending during
1999 and supported by an expanding annual research and development budget that
emphasizes biotechnology, AHP's unique expertise in small molecules, proteins
and vaccines is expected to produce the scientific innovation necessary for
sustained market success.

      To supplement our own expertise, AHP has formed several important
strategic alliances to provide us with advanced technologies and co-development
opportunities. Included in these is the December 1999 collaboration agreement
with ViroPharma Incorporated for development and commercialization of novel,
small-molecule, antiviral drug candidates for the treatment of hepatitis C.

      In addition, we have made a major commitment to strengthening our
technological and manufacturing infrastructure as well as to expanding our sales
organization. In anticipation of new product launches, AHP added pharmaceutical
sales representatives worldwide in 1999. This larger, global presence will help
us to effectively launch new products while expanding our established
franchises.

Human Ethical Pharmaceuticals

Wyeth-Ayerst Global Pharmaceuticals had a strong year in 1999 as evidenced by
several new product approvals and launches, accompanied by solid sales growth.

      Worldwide human pharmaceutical sales increased 9 percent in 1999 largely
due to higher sales of Enbrel, Effexor XR, Premarin products, Zosyn and
Meningitec. This increase was offset, in part, by lower sales of oral
contraceptives, Naprelan and Verelan (divested in 1998), and Cordarone, which
was impacted by generic competition.

      In 1999 and early 2000, we received market clearance for several
innovative new products, including:

Sonata

This first in a new class of non-benzodiazepine compounds for the treatment of
insomnia in adults was launched in Europe in May 1999 and in the United States
in September 1999.

ReFacto

Launched in Europe in May 1999, ReFacto, the first albumin-free formulated
recombinant factor VIII product for the treatment of hemophilia A, achieved 1999
sales of more than $30 million. ReFacto now is pending U.S. Food and Drug
Administration (FDA) approval with its U.S. launch expected in 2000.

Rapamune

Following an FDA "priority review," Rapamune Oral Solution, the first in a new
class of immunosuppressive agents developed for the prevention of organ
rejection in kidney transplant patients, received market clearance in the United
States in September 1999. Rapamune already is being used by more than 80 of the
top 100 transplant centers in the United States. A New Drug Application filing
for the tablet formulation of Rapamune recently was accepted by the FDA. In
January 1999, AHP filed a Marketing Authorization Application, which was
accepted for review by the European Medicines Evaluation Agency.

Rapamune and ReFacto are novel therapies launched by Wyeth-Ayerst in 1999.

                                    [PHOTO]


                                                                               3

<PAGE>


Meningitec

In October 1999, AHP received marketing approval from the United Kingdom
Medicines Control Agency for Meningitec, the world's first conjugate vaccine
against meningococcal Group C disease. The United Kingdom promptly implemented a
national immunization program in November 1999. Within just two months,
Meningitec sales in the United Kingdom were nearly $50 million - considerably
ahead of expectations. Registration now is being pursued in other European
countries.

Prevnar

In March 1999, Prevnar, a novel, seven-valent pneumococcal conjugate vaccine,
was granted a "priority review" by the FDA. This was the first time the FDA
granted this status to a vaccine product. Prevnar subsequently received market
clearance and was launched in February 2000. A Centers for Disease Control and
Prevention advisory committee voted to recommend Prevnar for routine use in all
healthy children up to age two and for children in identified groups ages two to
five.

Protonix

In February 2000, the FDA approved Protonix tablet formulation for marketing.
Protonix is indicated for the short-term treatment of erosive esophagitis. When
its intravenous formulation, now pending approval, is cleared and an additional
research study is satisfactorily completed, it will be the first and only
intravenous formulation of a proton pump inhibitor to be marketed in the United
States.

Additional Therapies

In January 2000, the FDA accepted and designated "priority review" status to
Mylotarg (CMA-676), a new treatment for relapsed acute myeloid leukemia. This
action represented the third time in 12 months that New Drug Applications
submitted by AHP received accelerated review status from the FDA.

      Several other AHP products warrant attention. Jointly marketed in the
United States by Wyeth-Ayerst and Immunex Corporation, in which AHP holds a
majority ownership, Enbrel, a breakthrough product for the treatment of moderate
to severe rheumatoid arthritis (RA), far exceeded Company and analyst forecasts,
with sales of more than $360 million in 1999. European approval for use in
moderate to severe RA and juvenile chronic arthritis was received in February
2000. In May 1999, Enbrel received U.S. approval for the treatment of moderately
to severely active juvenile rheumatoid arthritis in patients who have had
inadequate response to one or more disease- modifying medicines. In July 1999, a
Supplemental Biologic License Application was filed for Enbrel as a
disease-modifying agent in early active rheumatoid arthritis, further expanding
the drug's therapeutic and market potential. Regulatory action on this important
claim is expected in 2000.

      Effexor XR, approved for treatment of depression in 1997, received U.S.
approval in March 1999 for a new indication, the treatment of generalized
anxiety disorder (GAD). It is the first and only antidepressant proved effective
in relieving GAD. As a result of its expanded utility, the drug experienced
rapidly rising sales, with the Effexor family of products showing a 48 percent
increase over the previous year. In the United States alone, Effexor sales
reached $525 million.

      Sales of the Premarin family of products, our hormone replacement
therapies that are the most prescribed drugs in the United States today,
continued to grow strongly in 1999 with worldwide sales just under $1.8 billion,
up 8 percent from a year ago.

Wyeth Lederle's new, advanced vaccines prevent some of the world's most serious
diseases.

                                    [PHOTO]


4

<PAGE>


                                    [PHOTO]

Our OTC products recorded strong sales growth in 1999.

Consumer Health Care

Whitehall-Robins Healthcare continues to be a major force in the consumer health
care segment, recording net sales of $2.4 billion in 1999. This represented an
increase of 9 percent over 1998 due primarily to strong performance by
nutritional supplements - which include Centrum products and Caltrate - as well
as by cough/cold/allergy products, including Robitussin and Dimetapp, and by
Chap Stick.

      In 1999, Whitehall-Robins introduced several new products in the
nutritional supplements category, including Centrum Performance, Centrum Focused
Formulas and Caltrate+Soy. The division's flagship brand, Advil, introduced
Children's Advil Chewables and Jr. Strength Advil Chewables, extending the
product's reach into the pediatric market. The Robitussin Honey Cough and Chap
Stick lines also were expanded.

      Whitehall-Robins Healthcare will continue to build on its success in 2000,
with plans to grow the business through new product launches, international
expansion and licensing opportunities.

      The acquisition of Solgar Vitamin and Herb Company Inc. in 1998 also
contributed to the growth of our consumer health care franchise in 1999. Solgar
nutritional supplements continued to expand their position within the health
food store channel. Future growth potential for Solgar remains significant due
to favorable demographic trends, licensing of new, proprietary formulas and
international expansion.

Animal Health Care

Fort Dodge Animal Health recorded more than $650 million in sales in 1999
despite a significant decline in worldwide livestock prices. The division's
ability to research, develop and deliver new and innovative products to the
marketplace is highly respected in the field. As one of the industry's more
successful companies in achieving U.S. Department of Agriculture registration
for new and innovative biological products, Fort Dodge Animal Health has
numerous registrations for canine, feline, equine and bovine biologicals, along
with several unique products in its development pipeline.

Agricultural Products

The Cyanamid Agricultural Products business, for which we are pursuing
divestiture, struggled with decreased demand for its products in 1999. Faced
with lower commodity prices and grain surpluses, farmers in the United States
applied fewer crop protection products and chose the lowest cost products.

      In 1999, Cyanamid globally launched the Clearfield Production System,
which combines herbicide-tolerant crops with custom-designed herbicide
solutions. Also in 1999, Cyanamid received U.S. registration for two new
products that are combinations of glyphosate and Cyanamid's imidazolinones for
use on soybeans. These new products, Backdraft and Extreme herbicides, are being
launched in the 2000 season.

Inside AHP

As we enter the year 2000, we take note of important organizational changes.
Senior Executive Vice President Robert G. Blount, who served American Home
Products and its shareholders for more than 25 years, retired effective February
1, 2000. It was with personal regret that I accepted his retirement for we had
worked together virtually every day since he joined the Company. We wish him and
his family happiness and the best of health for the future. Kenneth J. Martin,
previously Senior Vice President and Chief Financial Officer of Wyeth-Ayerst
Global Pharmaceuticals, assumed the


                                                                               5

<PAGE>

position of Senior Vice President and Chief Financial Officer of AHP effective
February 1, 2000. Also in February 2000, John R. Considine, previously Vice
President - Finance, was elected Senior Vice President - Finance, and Jack M.
O'Connor, previously Treasurer, was elected Vice President and Treasurer. In
March 1999, we were deeply saddened by the untimely death of William Wrigley, an
esteemed and valued member of the AHP Board of Directors. Mr. Wrigley was
President and Chief Executive Officer of the Wm. Wrigley Jr. Company - the
world's largest chewing gum company - and served on AHP's Board since 1981.

      I am proud to report that for the second consecutive year, Working Mother
magazine recognized AHP as one of the "100 Best Companies for Working Mothers."
AHP offers employees dependent care financial assistance as well as adoption
assistance benefits. Many employees also have an annual opportunity to choose
their daily work schedules for greater flexibility. We continue to explore ways
to address challenges of balancing work and personal responsibilities as well as
to encourage the training and career development of employees throughout the
Company.

Positioned for the Future

This is an exciting time for AHP. We enter the year 2000 with a portfolio of
remarkable products, a research and development platform that has produced a
rich pipeline, and solid health care businesses that will support our growth.
The achievements of the past year, particularly the introduction of several new
premier products and the solid performance of our core businesses, are
attributable to the extraordinary dedication and effort of our employees. The
Board of Directors and I offer deep appreciation to all in the Company who gave
such excellent support during 1999. As we move forward in this new century, AHP
will continue to strengthen its commitment to discovering new and valuable
therapies for complex diseases and devising innovative solutions to global
health care issues.


/s/ John R. Stafford

John R. Stafford
Chairman, President and
Chief Executive Officer

March 1, 2000

Sonata was launched in the United States in September 1999. Protonix was
approved in February 2000.

                                    [PHOTO]


                                       6

<PAGE>

                                    [PHOTO]

Deborah Smith, Research Scientist II, Wyeth-Ayerst Laboratories

AHP's Focus Franchises:

A Platform for Continued Innovation

In 1999, the approval and launch of several important products helped to expand
AHP's leadership in the global marketplace. These innovative pharmaceuticals and
vaccines are cornerstones of therapeutic areas targeted by AHP to address some
of the world's most debilitating diseases and health concerns. On the following
pages, we review our "focus franchises." The employees pictured are among the
many dedicated scientists and researchers worldwide who contribute to AHP's
research and development efforts.


                                       7

<PAGE>

Women's Health Care:

                                  Helping Women

                      Lead Healthier Lives

Premarin and its family of products are the most prescribed medications in the
United States today. Considering that Premarin has been on the market for nearly
60 years, this leadership position is particularly extraordinary. And now there
are tremendous opportunities to use Premarin as a springboard to expand our
women's health care franchise.

      Research provides increasing evidence of the potential consequences of
estrogen deficiency on bone mineral density, cardiovascular health and cognitive
functioning. Wyeth-Ayerst, through its Women's Health Research Institute, is at
the forefront of research in hormone replacement and estrogens. Currently, the
company is pursuing Phase III studies of lower doses of Prempro to determine its
benefits on bone and on menopausal symptoms. Trimegestone, a new progestin for
hormone replacement and contraception, is undergoing evaluations in
combination with Premarin, as well as with 17 (beta)-estradiol for hormone
replacement and with ethinyl estradiol for contraception.

      Another major focus of the Women's Health Research Institute is on
tissue-selective estrogens. These estrogens target certain tissue systems, such
as bone, creating the opportunity for highly selective drug candidates. TSE-424,
a new generation selective estrogen receptor modulator, was chosen from a large
number of candidate molecules because of its impressive tissue-selective
profile. The main clinical goal for this selective estrogen product is to
prevent osteoporosis.

      Our contraceptive research explores new technologies, new formulations of
existing products, innovative delivery systems and novel approaches. All of
these efforts are aimed at giving women a greater choice in contraception and
providing them with products that are easier to use and are highly reliable.

                                    [PHOTO]

Jim Pickar, MD, Assistant Vice President of Clinical Research and Development
"Trimegestone, in combination with estradiol for sequential hormone replacement
therapy, may be an effective new hormone replacement therapy regimen."

                                    [PHOTO]

Ginger Constantine, MD, Vice President, Women's Health Clinical Research "Our
research, starting with discovery and continuing through clinical development,
is designed to give women fully integrated options throughout their lives."


8
<PAGE>

Margo Gill, age 56, on Premarin since 1990. Daughter Katherine Gill-St. Claire,
age 31. Granddaughter Amanda St. Claire, 10 months.

                                    [PHOTO]

Margaret Weber, MD, Assistant Vice President of Global Medical Affairs and
Associate U.S. Medical Director "Wyeth-Ayerst is at the forefront of estrogen
research, exploring the `new science of Premarin' and its wide-ranging role in
women's health."

                                    [PHOTO]


                                                                               9
<PAGE>

                                    [PHOTO]

                                Shelia Singleton, age 46, on Effexor since 1996.

                                    [PHOTO]

Richard L. Rudolph, MD, Senior Director of Clinical Research and Development
"New medical knowledge and new discovery technologies provide an unprecedented
opportunity for the discovery of breakthrough CNS therapies."

                                    [PHOTO]

Eliseo Salinas, MD, Vice President of Clinical Research "Neuroscience presents
both a huge challenge and a major opportunity for pharmacological research."



10
<PAGE>

                            Neuroscience Therapies:

Offering New Options
            for CNS Disorders

Sonata and Effexor XR, cornerstone products in our neuroscience therapy area,
are improving the lives of individuals who suffer from central nervous system
(CNS) disorders that greatly affect their quality of life: sleep deprivation,
depression and generalized anxiety disorder (GAD).

      Sonata, approved in the United States and in Europe during 1999, is the
first in a new class of non-benzodiazepine, sleep-inducing compounds. Sonata
offers help to the millions of individuals who simply cannot fall asleep. It
works within 30 minutes, brings on a more natural sleep and leaves no residual
effects, either physical or cognitive. This first-in-class product can be taken
as needed to fall asleep rather than in anticipation of sleep problems.

      In 1999, Effexor XR, already indicated for depression, became the first
drug approved in more than 10 years in the United States for GAD, and it is the
only treatment indicated both for depression and GAD. Internationally, Effexor
XR has been approved for the short-term treatment of GAD in many major markets.
In 2001, we anticipate submitting registrations for the treatment of social
anxiety disorder.

      Our research and development efforts in neuroscience continue to evaluate
additional clinical applications for Sonata and for Effexor XR, and we also are
studying other new products for central nervous system disorders.

      In 1999, the research agreement between AHP and Millennium Pharmaceuticals
in the area of CNS disorders was renewed for an additional two years. This
alliance, which began in 1996, uses genomics and human genetics to discover
novel genes involved in neurodegenerative, neurological and psychiatric
disorders.

                                    [PHOTO]

Richard Mangano, PhD, Senior Director of Clinical Science "Despite a continuous
improvement in our understanding of the underlying mechanisms for CNS disorders,
there still are major urgent medical needs in this therapeutic area."


                                                                              11

<PAGE>

Musculoskeletal Therapies:

                             Breakthrough Treatments
                        for Joints and Bones

Enbrel, the first FDA-approved biological treatment for rheumatoid arthritis
(RA), is rapidly extending its reach. Discovered by Immunex Corporation, a
majority-owned subsidiary of AHP, and co-marketed in the United States by
Wyeth-Ayerst and Immunex, Enbrel was approved by the FDA in 1998 for the
treatment of moderate to severe RA in people who had not responded adequately to
disease-modifying medicines. In May 1999, a Supplemental Biologic License
Application was approved to treat children and teenagers (ages four to 17) with
juvenile rheumatoid arthritis, and in July 1999, a submission was made for
disease modification in early RA (less than three years' duration). In February
2000, Enbrel received approval in the European Union for the treatment of
rheumatoid arthritis and juvenile rheumatoid arthritis. Enbrel will be marketed
by Wyeth-Ayerst outside the United States.

      Currently, there are numerous programs under way to study Enbrel in the
treatment of other diseases which may be driven by tumor necrosis factor,
including congestive heart failure and psoriasis as well as gastrointestinal
disorders.

      Enbrel is the cornerstone product of AHP's musculoskeletal franchise. Also
included in this family of products is Synvisc, which supplements the synovial
fluid around the knee joint to lubricate and to relieve pain in osteoarthritis.
Synvisc was launched in 1997 and is a collaborative effort with Biomatrix.
Further studies are planned to extend the duration of action labeling and to
consider additional joints beyond the knee.

      rhBMP-2, a bone morphogenetic protein that stimulates new bone growth when
administered locally, currently is in pivotal trials evaluating its safety and
efficacy in fracture repair (open tibial fractures), in spinal fusion (marketing
rights licensed to Sofamor Danek) and in dental/craniofacial surgery.

      In orthopaedics, open tibial fractures are among the most difficult to
heal. Phase II studies suggest that rhBMP-2 may accelerate and assure successful
fracture healing and greatly decrease the need for follow-up interventions.
Spinal fusion surgery also is a significant opportunity. Thousands of patients
undergo spinal fusion each year in the United States, and virtually all of them
require autogenous bone to be harvested. rhBMP-2 is being studied as a
substitute for bone graft harvesting through stimulation of new bone growth to
stabilize the spine and achieve fusion. The dental/craniofacial surgical
community also is indicating widespread interest in the use of rhBMP-2.

      Submissions of marketing authorization filings for rhBMP-2 are expected to
begin in 2000.

                                    [PHOTO]

Cristina Csimma, Associate Director of Clinical Research "Bone morphogenetic
proteins, as a family, offer us a very rich source of potential musculoskeletal
therapies because of their unique biological activity."


12

<PAGE>

Jeanne Buckingham, age 45, on Enbrel since 1997.

                                    [PHOTO]

Marie Sanda, MD, Vice President of Clinical Research "Enbrel therapy allows many
patients with rheumatoid arthritis to embrace life again. Its success derives
from remarkable efficacy hallmarked by rapid and sustained therapeutic
response."

                                    [PHOTO]


                                                                              13
<PAGE>

Dr. Richard Greene, Pediatrician, helping to prevent life-threatening diseases
in infants and young children. June Yee and son, Kevin.

                                    [PHOTO]

                                    [PHOTO]

Velupillai Puvanesarajah, PhD, Associate Director of Chemical Development "We
have additional generations of pneumococcal conjugate vaccine in the pipeline,
including a nine-valent formulation to provide increased coverage in Europe."


14

<PAGE>

Vaccines:

Ushering in a New Era
            of Disease Prevention

Prevnar, a novel, seven-valent pneumococcal conjugate vaccine developed by Wyeth
Lederle Vaccines, was approved for U.S. marketing in February 2000. Previously,
the FDA had selected Prevnar for "priority review," making it the first vaccine
ever to receive this designation. Prevnar targets invasive pneumococcal disease,
the leading cause of bacterial blood stream infections and meningitis in infants
and children. In the United States, a Centers for Disease Control and Prevention
advisory committee voted to recommend Prevnar for routine use in all healthy
children up to age two, as well as for identified groups ages two to five who
are at high risk. In Europe, this vaccine, tradenamed Prevenar, is expected to
be launched in 2001. The company continues to study the utility of
Prevnar/Prevenar against middle ear infections and pneumonia.

      In October 1999, Meningitec, a conjugate vaccine against meningococcal
Group C disease, was approved in the United Kingdom, making it the first
meningococcal conjugate vaccine to reach the market anywhere in the world.
Prevention of meningitis, an overwhelming infection that can kill healthy
people, often of school age, within 24 hours, is a top public health priority in
the United Kingdom. A major inoculation program was commenced following the
launch of Meningitec. We are pursuing additional approvals throughout Europe.

      In the viral family, FluMist, a unique live, attenuated influenza vaccine
(licensed from Aviron) that will be delivered as a nasal spray, is expected to
increase the number of people protected against flu, especially children. Wyeth
Lederle Vaccines also is working on vaccines for respiratory syncytial virus, a
serious respiratory disease, and for parainfluenza virus, which causes severe
croup in children.

      There are several sexually transmitted disease (STD) vaccine projects
undergoing active discovery and development efforts. These include Phase I
trials in herpes and HIV using proprietary DNA technology.

                                    [PHOTO]

Sally Quataert, PhD, Associate Director of Immunobiological Laboratory Services
"Our research on vaccines for STDs focuses on the application of cutting-edge
technology."

                                    [PHOTO]

Linda Biehl, Director of Materials Management "Our vaccine pipeline consists of
first-in-class products based on proprietary platform technologies in
glycoconjugate chemistry, genetic attenuation of viruses and DNA immunization."


                                                                              15

<PAGE>

                                  Hemophilia:

Using Recombinant Technology
                 for Risk-Free Treatment

ReFacto introduces a new era in the treatment of hemophilia. The product
recently was approved and launched in the European Union with U.S. approval
expected in 2000. ReFacto is the first and, currently, the only albumin-free
formulated recombinant factor VIII product indicated for the treatment of
hemophilia A. This makes it an inherently safer treatment option by reducing the
theoretical risk of contamination by blood-borne pathogens.

      Hemophilia is a genetically inherited bleeding disorder that results from
a deficiency of natural factor VIII (hemophilia A) or factor IX (hemophilia B)
coagulant activity. In the past, this disorder was treated by replacement of the
deficient clotting factor with products purifid from plasma pooled from
thousands of blood donors. Now, recombinant DNA technology offers a
fundamentally safer approach, starting with non-human production cells as the
source of factor VIII or IX. It employs additional safety measures, including
extensive testing of the production cells and avoidance of the use of animal and
human proteins in the final formulation.

      Clinical trials soon will begin for a next-generation ReFacto product.
This new therapy will be the first recombinant factor VIII product manufactured
with a process devoid of all human-derived materials, providing additional
assurance of safety.

      Genetics Institute is the global leader in developing recombinant products
for hemophilia A and B. Our hemophilia franchise currently includes Recombinate,
our first factor VIII product (co-developed with Baxter), ReFacto and BeneFIX,
our recombinant factor IX product for hemophilia B launched in 1997. Our
commitment to the hemophilia community continues, not only through developing
newer and safer products but also by supporting patients, on a day-to-day basis,
and the organizations which advocate on their behalf. In March 1999, Genetics
Institute pledged $2.5 million to the National Hemophilia Foundation, joining as
a partner in its five-year campaign, "It's Time for a Cure."

                                    [PHOTO]

Camille Bedrosian, MD, Director of Clinical Research and Development "We have
been at the forefront of every major development in hemophilia in the last
decade."

                                    [PHOTO]

Karen Tubridy, RPh, Director of Clinical Affairs "The ReFacto clinical trials
are the largest prospective clinical studies for any hemophilia product,
covering more than five years of worldwide clinical use and more than 45,000
infusions."


                                       16

<PAGE>

                                    [PHOTO]

The Collier brothers: Charlie, age 17, and Fred, age 12, both on ReFacto.

John Edwards, MBA, Assistant Vice President of Hematology "Hemophilia patients
often develop a life-long affiliation with their physicians and nurses. This
relationship often extends to the company providing the hemophilia product."

                                    [PHOTO]


                                                                              17

<PAGE>

                                    [PHOTO]

Humberto Aguirre, age 63, on Rapamune since 1997.

                                    [PHOTO]

Joe Scarola, MD, Assistant Vice President of Clinical Research and Development
"Therapies such as Rapamune, to reduce the potential for organ rejection and
nephrotoxicity, have become increasingly important due to a global shortage of
donor organs."

                                    [PHOTO]

Bernadette Maida, MS, Director, Transplantation/Immunology and Global Clinical
Team Leader "Rapamune is able to minimize the toxicities of multi-drug regimens
while enhancing the transplant clinicians' ability to customize
immunosuppressive therapy."


18

<PAGE>

                                Transplantation:

                                          Advancing the Science
                                    of Immunosuppression

Rapamune is the first in a new class of immunosuppressive agents indicated for
the prevention of organ rejection following renal transplantation. In September
1999, after "priority review," Rapamune Oral Solution received approval in the
United States and presently is being reviewed by regulatory agencies throughout
the world. The FDA currently is reviewing an application for approval of a more
convenient, once-a-day tablet formulation. Rapamune Oral Solution, immediately
launched in the United States following its approval, has demonstrated its
potential to have a significant impact in the field of kidney transplantation
and now is undergoing further study to substantiate its role for other organ
transplants.

      In addition to addressing kidney rejection, studies of kidney transplant
patients are under way to examine the potential of Rapamune as the
immunosuppressant of choice for long-term maintenance therapy. Rapamune can be
used with other currently available immunosuppressive agents, making it very
desirable to clinicians who must achieve the right combination of drugs to
prevent rejection and minimize side effects in each of their patients.

      Other studies are in progress to determine if established transplant
patients who are experiencing toxicity from their current drug regimens can
safely convert to Rapamune. This product also is the subject of studies in
pediatric kidney transplants as well as heart and liver transplants.

      Earlier in development, our proprietary anti-B7 monoclonal antibodies are
being evaluated as inhibitors of T-cell responses, potentially offering a more
specific approach to immunosuppression. Two anti-B7 clinical programs are under
way evaluating potential synergies with Rapamune in solid organ transplantation
and the prevention of acute and chronic Graft versus Host Disease in bone marrow
transplantation. If anti-B7 monoclonal antibodies can induce tolerance to poorly
matched donor bone marrow, they will expand the donor pool and find application
in cancer and hematological disorders.

James Zimmerman, PhD, Senior Director of Clinical Pharmacokinetics "Rapamune is
a clear example of an innovative discovery in a highly specialized area of
medicine that has significant ramifications for therapeutic challenges well
beyond its initial target."

                                    [PHOTO]


                                                                              19

                               [GRAPHIC OMITTED]
<PAGE>

      Oncology:

Innovative Technology
             for Life-Threatening Diseases

Mylotarg, a novel and important product for treating relapsed adult acute
myeloid leukemia (AML), was developed in collaboration with Celltech Group Plc.
In January 2000, the New Drug Application for Mylotarg was assigned "priority
review" status by the FDA, thereby establishing a goal to act on this
application within six months of filing.

      Designated CMA-676 in clinical trials, Mylotarg is the first in a new
class of anticancer therapies known as antibody-targeted chemotherapy. It is a
recombinant humanized antibody (produced by Celltech) linked with a proprietary
cytotoxic antitumor antibiotic - calicheamicin - which was isolated by
Wyeth-Ayerst researchers. Unlike conventional treatments which generally involve
aggressive combinations of chemotherapeutic agents that cannot distinguish
between healthy and leukemic cells, Mylotarg zeros in on a specific protein
(CD33) expressed on the vast majority of leukemic cells in AML.

      The most common form of adult leukemia, AML often is fatal. Most patients
initially are treated successfully but virtually all relapse within one to two
years. The safety and novel mechanism of action of Mylotarg offers these
patients options, especially when they are very ill or when response to
conventional therapy no longer is attainable. Remission rates for Mylotarg as a
sole therapy are comparable to existing agents, but Mylotarg has a superior
safety profile, including a reduction in mucositis, the elimination of hair
loss, a lower infection rate and a reduction in hospitalization days, with some
cases treated completely as outpatients.

      Future plans for Mylotarg include broadening its development to other
categories of AML, including pediatric relapsed AML, and initiating trials to
test the drug in combination with other chemotherapies to increase the response
rate in first-line therapy.

      In the next few years, we expect other innovative drugs to be introduced
through our oncology pipeline, with a focus on therapies for non-small cell lung
cancer as well as for breast, prostate, renal cell, colon and pancreatic cancers
and sarcoma.

                                    [PHOTO]

Mark Berger, MD, Director of Clinical Research "Mylotarg is one of the most
complicated drugs we have ever produced. It is at the cutting edge between
elegant chemistry and new biologic discoveries."


20

<PAGE>

Clifford Jonatzke, age 52, in Mylotarg (CMA-676) clinical trials since 1997.

                                    [PHOTO]

Matthew L. Sherman, MD, Assistant Vice President of Clinical Research and
Development "Mylotarg is expected to be the first of many antibody-targeted
brands using the proprietary calicheamicin and linker technology platform."

                                    [PHOTO]


                                                                              21

<PAGE>

AHP at a Glance

Product Innovation, Market Success

American Home Products is recognized worldwide for its strong capabilities in
discovery, development, manufacturing and marketing. Its key divisions -
Wyeth-Ayerst Global Pharmaceuticals, Whitehall-Robins Healthcare, Fort Dodge
Animal Health and Cyanamid Global Agricultural Products - are industry leaders
that offer cutting-edge products. Featured here are some of the significant
brands underpinning AHP's global strength.

Women's Health Care

Wyeth-Ayerst is the worldwide leader in women's health care. Its Women's Health
Research Institute remains at the forefront of new discoveries on the role of
estrogens in a woman's body throughout her life. The benefits of this experience
and leadership are clearly demonstrated in the growth of the Premarin family of
products, the most prescribed hormone replacement therapies in the world, and
Alesse, the top selling 20 microgram birth control pill in the United States.

                                    [PHOTO]

Neuroscience Therapies

The neuroscience franchise within Wyeth-Ayerst is fast becoming a leading growth
area through expansion of the Effexor family coupled with the recent approval of
Sonata. Effexor XR received an indication for generalized anxiety disorder which
helped make it one of the fastest growing antidepressants in the United States
in 1999. Sonata, for insomnia, is a unique agent that helps patients fall asleep
fast while allowing them to wake refreshed in the morning.

                                    [PHOTO]


22

<PAGE>

Musculoskeletal Therapies

Wyeth-Ayerst is emerging as a global leader in musculoskeletal medicine. Strong
biotechnology platforms are yielding innovative new therapies for diseases and
disorders of the bone and joint. Enbrel, for rheumatoid arthritis, is a
first-in-class biologic response modifier. Synvisc, for osteoarthritis of the
knee, is the leading viscosupplement in the United States.

                                    [PHOTO]

Vaccines

Wyeth Lederle Vaccines is a major supplier of a broad range of pediatric and
adult vaccines. These vaccines address serious, life-threatening diseases such
as diphtheria, influenza, meningitis, pneumonia and whooping cough.

                                    [PHOTO]

Specialty Products

Wyeth-Ayerst has expanded its presence in several important specialty markets
through the introduction of new products, including ReFacto for hemophilia A and
Rapamune for renal transplantation. This stream of new products will be expanded
further as new product candidates, including Mylotarg for acute myeloid
leukemia, are reviewed by regulatory agencies around the globe.

                                    [PHOTO]


                                                                              23

<PAGE>

Cardiovascular Therapies

Wyeth-Ayerst has long maintained a strong position in cardiovascular medicine,
addressing disorders ranging from arrhythmia and myocardial infarction to
hypertension. Our Cordarone I.V. franchise has experienced strong growth
recently with the recognition of its beneficial effect on improving survival to
hospital admission rates among heart attack victims. A landmark study in the New
England Journal of Medicine reported that, when treated with Cordarone I.V.,
nearly 30 percent more patients who experienced a heart attack survived to
hospital admission compared with patients treated according to standard therapy.

                                    [PHOTO]

Anti-Infectives

The Wyeth-Ayerst anti-infective portfolio of antibiotics includes Suprax and
Minocin as well as the intravenous (I.V.) life-saving antibiotics Zosyn and
Pipracil. Zosyn, also known as Tazocin outside the United States, is the lead
franchise product and is available in more than 80 countries globally. It is
used to treat a variety of infections in hospitalized patients, fever associated
with cancer chemotherapy and pneumonia. Zosyn was among the fastest growing I.V.
antibiotics in the United States in 1999 and is expected to have additional uses
in the future.

                                    [PHOTO]

Nutritionals

Wyeth-Ayerst Nutrition markets a complete line of nutritional products for
children, along with specialty formulas, on a global basis. The product line,
which enjoys a strong and growing presence in the international pediatric
nutritional marketplace, has a new global brand look that is attractive and
vibrant.

                                    [PHOTO]


24

<PAGE>

Consumer Health Care

Whitehall-Robins Healthcare offers some of the world's best-known and
most-trusted over-the-counter (OTC) medications. The company's status in the OTC
industry is impressive: it holds a leadership position worldwide in OTC sales
and has three of the top 10 OTC brands in the United States. An aggressive new
product effort, coupled with sales of Solgar products, propelled
Whitehall-Robins to a record performance in 1999.

                                    [PHOTO]

Animal Health

Fort Dodge Animal Health launched a new line of its popular Duramune canine
vaccine, which offers pet owners broader protection against two clinically
significant strains of leptospira. Cydectin, a product used to control internal
and external parasites in beef cattle, received approval for an additional label
claim to include dairy cattle.

                                    [PHOTO]

Agricultural Products

Cyanamid's global product portfolio is based on leading-edge synthetic chemistry
and biotechnology. In 1999, Cyanamid launched the Clearfield Production System,
a global brand that combines herbicide-tolerant crops with custom-designed
herbicide solutions for agricultural producers around the globe.

                                    [PHOTO]


                                                                              25

<PAGE>

Research:

A Global Leader in Scientific Discovery and Clinical Development

                                    [PHOTO]

Christopher Aston, Senior Research Scientist, Wyeth-Ayerst Laboratories

The unfolding of the human genome sequence, rapid advances in technology and
greater understanding of disease mechanisms is facilitating discovery and
development of safe and efficacious drugs that more specifically target serious
diseases.

      American Home Products is well-positioned for this new era of
pharmaceutical research and has taken major steps to secure a leadership role.
These include an increasing investment in pharmaceutical research and
development, which, in the year 2000, will approach $1.8 billion. Additionally,
AHP has strategic alliances to provide advanced technologies, particularly in
genomics and combinatorial chemistry, to complement our own expertise. We have
refocused our discovery and development efforts into specific therapeutic areas
that hold great potential for drug development and also target significant unmet
medical needs. Underpinning these efforts is our Company's combination of
discovery platforms in small molecules, proteins and vaccines as well as our
leading presence in major therapeutic categories.

      Many compelling drugs are entering the clinical pipeline or are in the
more advanced stages of clinical evaluation. Listed according to their primary
therapeutic area, these include:

Neuroscience Therapies

Retigabine This compound, licensed from Asta Medica, is expected to be a potent
anti-convulsive therapy and currently is in Phase II clinical trials.

DAB-452 This selective D2 agonist is being evaluated as an innovative,
first-line treatment for managing psychotic disorders.

Oncology

CYA-246 This bacterial cell wall mimetic, a potent inducer of cytokines, is
beginning Phase II trials in combination with chemotherapy for patients with
non-small cell lung cancer.

CCI-779 Soon to be under study in several Phase II clinical trials, this drug
can inhibit cell cycle progression through a complex intracellular pathway. It
will be evaluated in breast, prostate, renal cell, colon and pancreatic cancers
and sarcoma.

Immunology

IL-11 Previously approved for the prevention of platelet loss associated with
chemotherapy, IL-11 is a potent anti-inflammatory cytokine that now is, at lower
doses, in Phase III studies for the treatment of Crohn's disease.

P-Selectin Glycoprotein Ligand (PSGL-Ig) This recombinant hybrid protein is
designed to disrupt the interaction between platelets and leukocytes in order to
reduce inflammation and thrombosis locally. Currently, PSGL-Ig is entering a
Phase II evaluation, testing its ability to enhance thrombolysis, to prevent or
reduce the reformation of clots, and to reduce reperfusion injury in patients
with acute myocardial infarction.

Infectious Disease

GAR-936 This novel antibiotic, in the glycylcycline class, has a broad spectrum
of activity against microorganisms, including multi-drug-resistant strains. To
take advantage of its unique profile, ongoing and planned Phase II trials will
position GAR-936 for intravenous use against serious infections.

RFI-641 This very specific inhibitor of the viral fusion process required for
respiratory syncytial virus (RSV) infection is being developed for treatment and
early intervention of RSV infection in the upper and lower respiratory tract.
Clinical studies began early in 2000.


26

<PAGE>

Financial Section

      Contents

28    Ten-Year Selected Financial Data

30    Consolidated Balance Sheets

31    Consolidated Statements of Operations

32    Consolidated Statements of Changes
      in Stockholders' Equity

33    Consolidated Statements of Cash Flows

34    Notes to Consolidated Financial Statements

46    Report of Independent Public Accountants

46    Management Report on Financial Statements

47    Quarterly Financial Data

47    Market Prices of Common Stock
      and Dividends

48    Management's Discussion and Analysis
      of Financial Condition and Results
      of Operations


                                                                              27
<PAGE>

Ten-Year Selected Financial Data
(Dollar amounts in thousands except per share amounts)

<TABLE>
<CAPTION>
Years Ended December 31,                                                               1999                 1998                1997

Summary of Sales and Earnings
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                  <C>                 <C>
Net sales                                                                      $ 13,550,176         $ 13,462,687        $ 14,196,026
Net income (loss)(1)                                                             (1,227,121)           2,474,338           2,043,123
Diluted earnings (loss) per share(1)(2)                                               (0.94)                1.85                1.56
Dividends per common share                                                            0.905                 0.87                0.83


Year-End Financial Position
------------------------------------------------------------------------------------------------------------------------------------
Current assets                                                                 $  9,738,108         $  7,955,632        $  7,361,326
Current liabilities                                                               7,110,223            4,210,721           4,327,018
Ratio of current assets to current liabilities                                         1.37                 1.89                1.70
Total assets                                                                     23,906,277           21,079,068          20,825,111
Long-term debt                                                                    3,668,643            3,859,163           5,031,861
Average stockholders' equity                                                      7,914,772            8,895,024           7,568,672


Stockholders--Outstanding Shares
------------------------------------------------------------------------------------------------------------------------------------
Number of common stockholders                                                        62,482               65,124              64,313
Average number of common shares outstanding used for
  diluted earnings per share calculation (in thousands)(2)                        1,308,876            1,336,641           1,312,975


Employment Data
------------------------------------------------------------------------------------------------------------------------------------
Number of employees at year-end                                                      51,656               52,984              60,523
Wages and salaries                                                             $  2,326,807         $  2,468,823        $  2,726,877
Benefits (including social security taxes)                                          665,620              647,406             692,648
</TABLE>

(1)   See Management's Discussion and Analysis of Financial Condition and
      Results of Operations for amounts related to the litigation charge, gain
      on the sale of business and special charges for the years ended December
      31, 1999, 1998 and 1997.
(2)   The average number of common shares outstanding for diluted loss per share
      for 1999 did not include common share equivalents as the effect would have
      been antidilutive.
(3)   The 1994 information reflects the acquisition of American Cyanamid Company
      (ACY) for the one-month period ended December 31, 1994.


28   American Home Products Corporation and Subsidiaries
<PAGE>

<TABLE>
<CAPTION>
                    1996              1995              1994(3)           1993              1992              1991              1990

------------------------------------------------------------------------------------------------------------------------------------
<S>          <C>               <C>               <C>               <C>               <C>               <C>               <C>
             $14,088,326       $13,376,089       $ 8,966,214       $ 8,304,851       $ 7,873,687       $ 7,079,443       $ 6,775,182
               1,883,403         1,680,418         1,528,254         1,469,300         1,460,842         1,375,273         1,230,597
                    1.46              1.34              1.24              1.17              1.15              1.08              0.97
                  0.7825             0.755             0.735             0.715             0.665            0.5938            0.5375

------------------------------------------------------------------------------------------------------------------------------------
             $ 7,470,419       $ 7,986,137       $ 7,821,246       $ 4,807,684       $ 4,552,077       $ 4,119,057       $ 3,826,075
               4,337,635         4,556,248         4,618,086         1,584,411         1,492,717         1,270,135         1,693,852
                    1.72              1.75              1.69              3.03              3.05              3.24              2.26
              20,785,343        21,362,923        21,674,812         7,687,353         7,141,405         5,938,797         5,637,107
               6,020,575         7,808,757         9,973,240           859,278           601,934           104,710           111,430
               6,252,545         4,898,550         4,065,295         3,719,539         3,431,568         2,987,885         2,322,623

------------------------------------------------------------------------------------------------------------------------------------
                  67,545            68,763            71,223            72,664            73,064            71,209            69,907

               1,287,790         1,250,902         1,234,100         1,252,990         1,267,240         1,273,390         1,266,696

------------------------------------------------------------------------------------------------------------------------------------
                  59,747            64,712            74,759            51,399            50,653            47,938            48,700
             $ 2,729,662       $ 2,757,664       $ 1,820,450       $ 1,654,984       $ 1,575,615       $ 1,388,397       $ 1,398,721
                 688,766           703,756           441,768           396,045           367,899           300,810           312,750
</TABLE>


                         American Home Products Corporation and Subsidiaries  29
<PAGE>

Consolidated Balance Sheets
(In thousands except share and per share amounts)

<TABLE>
<CAPTION>
December 31,                                                                                              1999                 1998

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>                  <C>
Assets
Cash and cash equivalents                                                                         $  1,892,715         $  1,182,319
Marketable securities                                                                                  520,587              119,210
Accounts receivable less allowances (1999--$240,108 and 1998--$222,540)                              3,280,298            3,276,597
Inventories                                                                                          2,244,834            2,237,918
Other current assets including deferred taxes                                                        1,799,674            1,139,588
                                                                                                  ---------------------------------
Total Current Assets                                                                                 9,738,108            7,955,632
Property, plant and equipment:
  Land                                                                                                 151,795              147,611
  Buildings                                                                                          3,186,841            2,901,355
  Machinery and equipment                                                                            3,723,226            3,669,398
                                                                                                  ---------------------------------
                                                                                                     7,061,862            6,718,364
Less accumulated depreciation                                                                        2,496,836            2,428,699
                                                                                                  ---------------------------------
                                                                                                     4,565,026            4,289,665
Goodwill and other intangibles, net of accumulated amortization
  (1999--$2,169,291 and 1998--$1,964,546)                                                            7,724,997            7,995,082
Other assets including deferred taxes                                                                1,878,146              838,689
                                                                                                  ---------------------------------
Total Assets                                                                                      $ 23,906,277         $ 21,079,068
                                                                                                  =================================
------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Loans payable                                                                                     $  1,912,491         $     79,728
Trade accounts payable                                                                                 757,815              680,961
Accrued expenses                                                                                     4,212,554            3,037,239
Accrued federal and foreign taxes                                                                      227,363              412,793
                                                                                                  ---------------------------------
Total Current Liabilities                                                                            7,110,223            4,210,721
Long-term debt                                                                                       3,668,643            3,859,163
Other noncurrent liabilities                                                                         6,015,774            2,533,480
Accrued postretirement benefits other than pensions                                                    896,890              860,908
                                                                                                  ---------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
$2 convertible preferred stock, par value $2.50 per share; 5,000,000
  shares authorized                                                                                         61                   64
Common stock, par value $0.331/3 per share; 2,400,000,000 shares authorized
  (outstanding shares: 1999--1,303,916,000 and 1998--1,312,399,000)                                    434,639              437,466
Additional paid-in capital                                                                           3,392,705            3,072,874
Retained earnings                                                                                    3,000,827            6,432,729
Accumulated other comprehensive loss                                                                  (613,485)            (328,337)
                                                                                                  ---------------------------------
Total Stockholders' Equity                                                                           6,214,747            9,614,796
                                                                                                  ---------------------------------
Total Liabilities and Stockholders' Equity                                                        $ 23,906,277         $ 21,079,068
                                                                                                  =================================
</TABLE>

The accompanying notes are an integral part of these Consolidated Balance
Sheets.


30   American Home Products Corporation and Subsidiaries
<PAGE>

Consolidated Statements of Operations
(In thousands except per share amounts)

<TABLE>
<CAPTION>
Years Ended December 31,                                                           1999                  1998                  1997

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                   <C>                   <C>
Net Sales                                                                  $ 13,550,176          $ 13,462,687          $ 14,196,026
                                                                           --------------------------------------------------------
Cost of goods sold                                                            3,692,522             3,616,832             4,101,309
Selling, general and administrative expenses                                  5,039,862             4,924,919             5,292,585
Research and development expenses                                             1,739,960             1,654,745             1,558,035
Interest expense, net                                                           213,866               207,157               370,696
Other income, net                                                              (237,408)             (277,942)             (121,306)
Gain on sale of business                                                             --              (592,084)                   --
Litigation charge                                                             4,750,000                    --                    --
Special charges                                                                 277,000               343,600               180,000
                                                                           --------------------------------------------------------
                                                                             15,475,802             9,877,227            11,381,319
                                                                           --------------------------------------------------------
Income (loss) before federal and foreign taxes                               (1,925,626)            3,585,460             2,814,707
Provision (benefit) for taxes:
  Federal                                                                    (1,190,395)              627,071               309,981
  Foreign                                                                       491,890               484,051               461,603
                                                                           --------------------------------------------------------
                                                                               (698,505)            1,111,122               771,584
                                                                           --------------------------------------------------------
Net Income (Loss)                                                          $ (1,227,121)         $  2,474,338          $  2,043,123
                                                                           ========================================================
Basic Earnings (Loss) per Share                                            $      (0.94)         $       1.88          $       1.58
                                                                           ========================================================
Diluted Earnings (Loss) per Share                                          $      (0.94)         $       1.85          $       1.56
                                                                           ========================================================
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.


                         American Home Products Corporation and Subsidiaries  31
<PAGE>

Consolidated Statements of Changes
in Stockholders' Equity
(In thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                           $2 Convertible                    Additional                         Other         Total
                                                Preferred         Common        Paid-in       Retained  Comprehensive  Stockholders'
                                                    Stock          Stock        Capital       Earnings           Loss        Equity

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>          <C>            <C>              <C>         <C>
Balance at January 1, 1997                            $79       $431,834     $2,034,337     $4,532,115       $(36,273)   $6,962,092
                                                    ================================================================================
Net income                                                                                   2,043,123                    2,043,123
Currency translation adjustments                                                                             (241,278)     (241,278)
Unrealized loss on marketable securities                                                                       (2,555)       (2,555)
                                                                                                                         -----------
  Comprehensive income                                                                                                    1,799,290
                                                                                                                         -----------
Cash dividends declared:
  Preferred stock (per share: $2.00)                                                               (60)                         (60)
  Common stock (per share: $0.83)                                                           (1,073,140)                  (1,073,140)
Treasury stock acquired                                              (52)        (1,079)       (10,204)                     (11,335)
Common stock issued for stock options                              3,251        366,310                                     369,561

Conversion of preferred stock
  and other exchanges                                  (7)           265        131,128         (2,542)                     128,844
                                                    --------------------------------------------------------------------------------
Balance at December 31, 1997                           72        435,298      2,530,696      5,489,292       (280,106)    8,175,252
                                                    ================================================================================
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                   2,474,338                    2,474,338
Currency translation adjustments                                                                              (45,803)      (45,803)
Unrealized loss on marketable securities                                                                       (2,428)       (2,428)
                                                                                                                         -----------
  Comprehensive income                                                                                                    2,426,107
                                                                                                                         -----------
Cash dividends declared:
  Preferred stock (per share: $2.00)                                                               (54)                         (54)
  Common stock (per share: $0.87)                                                           (1,143,198)                  (1,143,198)
Treasury stock acquired                                           (2,521)       (34,984)      (377,098)                    (414,603)
Common stock issued for stock options                              4,342        399,488                                     403,830

Conversion of preferred stock
  and other exchanges                                  (8)           347        177,674        (10,551)                     167,462
                                                    --------------------------------------------------------------------------------
Balance at December 31, 1998                           64        437,466      3,072,874      6,432,729       (328,337)    9,614,796
                                                    ================================================================================
------------------------------------------------------------------------------------------------------------------------------------
Net loss                                                                                    (1,227,121)                  (1,227,121)
Currency translation adjustments                                                                             (285,963)     (285,963)
Unrealized gain on marketable securities                                                                          815           815
                                                                                                                         -----------
  Comprehensive loss                                                                                                     (1,512,269)
                                                                                                                         -----------
Cash dividends declared:
  Preferred stock (per share: $2.00)                                                               (50)                         (50)
  Common stock (per share: $0.905)                                                          (1,183,571)                  (1,183,571)
Treasury stock acquired                                           (6,409)       (39,505)    (1,012,385)                  (1,058,299)
Common stock issued for stock options                              3,376        230,894                                     234,270

Conversion of preferred stock
  and other exchanges                                  (3)           206        128,442         (8,775)                     119,870
                                                    --------------------------------------------------------------------------------
Balance at December 31, 1999                          $61       $434,639     $3,392,705     $3,000,827      $(613,485)   $6,214,747
                                                    ================================================================================
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.


32  American Home Products Corporation and Subsidiaries
<PAGE>

Consolidated Statements of Cash Flows
(In thousands)

<TABLE>
<CAPTION>
Years Ended December 31,                                                                   1999              1998              1997

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>               <C>
Operating Activities
Net income (loss)                                                                   $(1,227,121)       $2,474,338        $2,043,123
Adjustments to reconcile net income (loss) to net cash
  provided from operating activities:
  Litigation charge                                                                   4,750,000                --                --
  Special charges                                                                       277,000           343,600           180,000
  Gain on sale of business                                                                   --          (592,084)               --
  Gains on sales of other assets                                                       (194,798)         (445,485)         (375,925)
  Depreciation                                                                          386,037           371,057           394,287
  Amortization                                                                          296,302           293,598           307,738
  Deferred income taxes                                                              (1,528,316)           74,472          (220,214)
  Changes in working capital, net of businesses acquired or sold:
    Accounts receivable                                                                 (91,966)         (601,627)         (329,537)
    Inventories                                                                        (122,705)         (121,414)          (50,927)
    Other current assets                                                               (140,978)         (198,815)           28,143
    Trade accounts payable and accrued expenses                                        (372,113)         (164,648)         (171,666)
    Accrued federal and foreign taxes                                                  (157,430)           (4,008)          (80,873)
  Other items, net                                                                      307,690            85,675           (28,695)
                                                                                    -----------------------------------------------
Net cash provided from operating activities                                           2,181,602         1,514,659         1,695,454
                                                                                    ===============================================
------------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Purchases of property, plant and equipment                                           (1,000,314)         (809,774)         (830,351)
Purchases of businesses, net of cash acquired                                                --          (425,041)         (479,694)
Proceeds from sales of businesses                                                            --         1,770,000           380,000
Proceeds from sales of other assets                                                     323,488           592,034           494,850
Purchases of marketable securities                                                     (784,645)         (350,687)         (468,426)
Proceeds from sales and maturities of marketable securities                             383,941           278,290           640,662
                                                                                    -----------------------------------------------
Net cash provided from/(used for) investing activities                               (1,077,530)        1,054,822          (262,959)
                                                                                    ===============================================
------------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net proceeds from/(repayments of) debt                                                1,639,392        (1,179,657)         (976,926)
Dividends paid                                                                       (1,183,621)       (1,143,252)       (1,073,200)
Purchases of treasury stock                                                          (1,058,299)         (414,603)          (11,335)
Exercises of stock options                                                              234,270           403,830           369,561
Termination of interest rate swap agreements                                                 --           (96,655)               --
                                                                                    -----------------------------------------------
Net cash used for financing activities                                                 (368,258)       (2,430,337)       (1,691,900)
                                                                                    -----------------------------------------------
Effects of exchange rates on cash balances                                              (25,418)           (8,197)          (11,520)
                                                                                    -----------------------------------------------
Increase/(decrease) in cash and cash equivalents                                        710,396           130,947          (270,925)
Cash and cash equivalents, beginning of year                                          1,182,319         1,051,372         1,322,297
                                                                                    -----------------------------------------------
Cash and cash equivalents, end of year                                               $1,892,715        $1,182,319        $1,051,372
                                                                                    ===============================================
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                         American Home Products Corporation and Subsidiaries  33
<PAGE>

Notes to Consolidated
Financial Statements

1. Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of American Home Products Corporation and its
majority-owned subsidiaries (the Company). The financial statements have been
prepared in accordance with generally accepted accounting principles and
necessarily include amounts based on judgments and estimates made by management.

      Description of Business: The Company is a U.S.-based multi national
corporation engaged in the discovery, development, manufacture, distribution and
sale of a diversified line of products in three primary businesses:
Pharmaceuticals, Consumer Health Care and Agricultural Products. Pharmaceuticals
include branded and generic human ethical pharmaceuticals, biologicals,
nutritionals, and animal biologicals and pharmaceuticals. Principal products
include women's health care products, infant nutritionals, cardiovascular
products, neuroscience therapies, gastroenterology drugs, anti-infectives,
vaccines, biopharmaceuticals, oncology therapies, musculoskeletal therapies and
transplantation products. Principal animal health products include vaccines,
pharmaceuticals, endectocides and growth implants. Consumer Health Care products
include analgesics, cough/cold/allergy remedies, vitamin, mineral and
nutritional supplements, herbal products, and hemorrhoidal, antacid and asthma
relief items sold over-the-counter. Agricultural Products include crop
protection and pest control products such as herbicides, insecticides and
fungicides. The Company sells its diversified line of products to wholesalers,
pharmacies, hospitals, physicians, retailers and other health care institutions
located in various markets in more than 150 countries throughout the world. The
Company is not dependent on any single customer or major group of customers for
its sales.

      The Company is not dependent on any one patent-protected product or line
of products for a substantial portion of its sales or results of operations.
However, Premarin, one of the Company's conjugated estrogens products, which has
not had patent protection for many years, contributes significantly to sales and
results of operations. See "Competition" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 53 and 54
for further details.

      Cash Equivalents, for purposes of reporting cash flows, consist primarily
of certificates of deposit, time deposits and other short-term, highly liquid
securities with original maturities of three months or less and are stated at
cost, which approximates fair value. The carrying value of cash equivalents
approximates fair value due to the short-term, highly liquid nature of cash
equivalents.

      Marketable Securities consist of U.S. government or agency issues,
commercial paper and corporate bonds and are stated at fair value, which
approximates cost. The fair values are estimated based on market prices.

      Inventories are valued at the lower of cost or market. Inventories valued
under the last-in, first-out (LIFO) method amounted to $709,609,000 and
$751,691,000 at December 31, 1999 and 1998, respectively. The current value
exceeded the LIFO value by $66,879,000 and $76,104,000 at December 31, 1999 and
1998, respectively. The remaining inventories are valued under the first-in,
first-out (FIFO) method or the average cost method.

    Inventories at December 31 consisted of:

(In thousands)                                           1999               1998
--------------------------------------------------------------------------------
Finished goods                                     $1,078,234         $1,012,679
Work in progress                                      572,489            604,647
Materials and supplies                                594,111            620,592
                                                   -----------------------------
                                                   $2,244,834         $2,237,918
                                                   =============================

      Property, Plant and Equipment is carried at cost. Depreciation is provided
over the estimated useful lives of the related assets, principally on the
straight-line method.

      Goodwill, the excess of cost over the fair value of net assets acquired,
is amortized using the straight-line method over various periods ranging from 15
to 40 years. The Company continually reviews goodwill to evaluate whether
changes have occurred that would suggest goodwill may be impaired. If
circumstances suggest an impairment, undiscounted cash flows of the assets
acquired are estimated. If this estimate indicates that the remaining estimated
useful life of goodwill requires revision or that the goodwill is not
recoverable, the carrying amount of the goodwill is reduced by the estimated
shortfall of cash flows on a discounted basis. To date, no impairments of
goodwill have been identified from these reviews.

      Customer Rebates: Rebates are offered to customers based on volume
purchases, the attainment of market share levels, sales support, government
mandates and wholesaler credits. At December 31, 1999 and 1998, accrued expenses
included customer rebates of $542,031,000 and $603,343,000, respectively.

      Foreign Currency Agreements: The Company enters into short-term foreign
currency agreements to manage specifically identifiable risks. Short-term
(approximately 30 days) foreign exchange forward contracts are part of the
Company's management of foreign currency exposures. The Company does not
speculate on foreign currency exchange rates. The fair value of foreign currency
agreements is based on market prices. The fair value represents the estimated
amount the Company would receive/pay to terminate the agreements, taking into
consideration current foreign currency exchange rates. Foreign currency
agreements are accounted for under the fair value method. The fair value of the
foreign currency agreements is carried on the balance sheet with changes in the
fair value recognized in results of operations offsetting any gains and losses
recognized on the underlying hedged transactions.


34  American Home Products Corporation and Subsidiaries
<PAGE>

      Currency Translation: The majority of the Company's international
operations are translated into U.S. dollars using current foreign currency
exchange rates with currency translation adjustments reflected in accumulated
other comprehensive loss in stockholders' equity. Currency translation
adjustments comprise the majority of accumulated other comprehensive loss on the
Consolidated Balance Sheets and the Consolidated Statements of Changes in
Stockholders' Equity. Currency translation adjustments related to international
operations in highly inflationary economies are included in the results of
operations.

      Earnings (Loss) per Share: The following table sets forth the computations
of basic earnings (loss) per share and diluted earnings (loss) per share:

(In thousands except
per share amounts)
Years Ended December 31,                       1999           1998          1997
--------------------------------------------------------------------------------
Net income (loss) less
  preferred dividends                   $(1,227,171)   $ 2,474,284   $ 2,043,063
Denominator:
  Average number of
  common shares                           1,308,876      1,314,580     1,293,765
                                        ----------------------------------------
Basic earnings (loss) per share         $     (0.94)   $      1.88   $      1.58
                                        ========================================
Net income (loss)                       $(1,227,121)   $ 2,474,338   $ 2,043,123
Denominator:
  Average number of
  common shares                           1,308,876      1,314,580     1,293,765

  Common share equivalents
  of outstanding stock
  options and deferred
  contingent common
  stock awards*                                  --         22,061        19,210
                                        ----------------------------------------
Total shares*                             1,308,876      1,336,641     1,312,975
                                        ----------------------------------------
Diluted earnings (loss)
  per share*                            $     (0.94)   $      1.85   $      1.56
                                        ========================================

*     The total average number of common shares outstanding for diluted loss per
      share for 1999 did not include common share equivalents as the effect
      would have been antidilutive. Therefore, the total average number of
      common shares outstanding for diluted loss per share was the same as for
      basic loss per share.

      Recently Issued Accounting Standards: In June 1998, Statement of Financial
Accounting Standards (SFAS) No. 133 -- "Accounting for Derivative Instruments
and Hedging Activities" was issued. SFAS No. 133 requires all derivatives to be
measured at fair value and recognized as assets or liabilities on the balance
sheet. Changes in the fair value of derivatives should be recognized in either
net income or other comprehensive income, depending on the designated purpose of
the derivative. In June 1999, the Financial Accounting Standards Board delayed
the required adoption of SFAS No. 133 for companies with fiscal years beginning
after June 15, 2000. The Company currently is evaluating the impact that SFAS
No. 133 will have on the Company's consolidated financial position and results
of operations.

Reclassifications: Certain reclassifications have been made to the December 31,
1998 Consolidated Financial Statements to conform with the December 31, 1999
presentation.

2. Acquisitions, Divestitures and Proposed Merger

On November 3, 1999, the Company and Warner-Lambert Company entered into an
agreement to combine the two companies in a merger-of-equals transaction. On
February 6, 2000, subsequent to the date of the Report of Independent Public
Accountants, the merger agreement was terminated. In accordance with the merger
agreement, the Company received a payment of $1.8 billion as a termination fee.

      During 1998 and 1997, the Company acquired and divested various businesses
and other assets as follows:

      In July 1998, the Company purchased the vitamin and nutritional supplement
products business of Solgar Vitamin and Herb Company Inc. and its related
affiliates for $425,041,000 in cash. The purchase price exceeded the net assets
acquired by $397,568,000. The excess purchase price has been recorded to
goodwill and other intangibles, which are being amortized over periods of four
to 25 years.

      In February 1998, the Company sold the Sherwood-Davis & Geck medical
devices business for approximately $1.77 billion, resulting in a pre-tax gain of
$592,084,000. The proceeds from the sale were used primarily to reduce
outstanding commercial paper. Net income and diluted earnings per share for 1998
included an after-tax gain on the sale of $330,782,000 and $0.25, respectively.

      In December 1997, the Company sold the stock of Storz Instrument Company
and affiliated companies, a global manufacturer and marketer of ophthalmic
products, and certain assets related to the Storz business for approximately
$380,000,000, resulting in a pre-tax gain of $71,861,000 ($46,710,000
after-tax), which was recorded in other income, net.

      In February 1997, the Company purchased the worldwide animal health
business of Solvay S.A. for approximately $460,000,000 in cash. The purchase
price exceeded the net assets acquired by $368,303,000. The excess purchase
price has been recorded to goodwill and other intangibles, which are being
amortized over periods of 10 to 25 years.

      The Company had other acquisitions and divestitures during 1999, 1998 and
1997, the effects of which, individually and in the aggregate, were not material
to the Company's consolidated financial position or results of operations. The
operations of all businesses acquired and divested during 1999, 1998 and 1997,
individually and in the aggregate, were not material to the Company's
consolidated financial position or results of operations in any of these years.

3. Special Charges

1999 Cyanamid Restructuring Charge and Asset Impairments

During the 1999 third quarter, a special charge of $195,000,000 ($126,750,000
after-tax or $0.10 per share--diluted) was recorded to provide for the
restructuring of the Company's Cyanamid Agricultural Products business segment
(Cyanamid) aggregating $113,000,000 and the impairment of a Cyanamid
manufacturing facility aggregating $82,000,000.

      The restructuring of Cyanamid was initiated to improve the effectiveness
and efficiency of this business in light of current conditions in the global
farm economy and to better align resources and capacity with present and future
product needs. The restructuring is being accomplished through revisions in the
practices used by Cyanamid to sell, market, manufacture and distribute products
to the global farm market and to realign its research activities.

      The restructuring will result in the elimination of approximately 700
positions worldwide and the closing of three research facilities located in the
European and Asian-Pacific regions. The workforce


                         American Home Products Corporation and Subsidiaries  35
<PAGE>

reductions cover personnel in marketing, sales, administration and research. The
components of the $113,000,000 charge were as follows: (i) personnel costs of
$73,000,000, (ii) noncash costs for fixed asset write-offs of $30,000,000 that
represented the net book value of the research facilities that will be closed
and (iii) other closure/exit costs of $10,000,000. Most of these costs will be
paid within one year. Except for shutdown activities during the transition
period related to the relocation of recurring research functions to other
facilities, the research facilities no longer are operational, and no new
research projects have commenced. Closure of these facilities is anticipated in
the 2000 third quarter. Due to the highly specialized nature of these
facilities, no proceeds were anticipated from the disposal of these facilities.
Other closure/exit costs are a direct result of the restructuring plan and
include security, utilities, property taxes, lease termination costs and other
related costs that will be paid during the disposal period. Since the 1999 third
quarter, the Company has begun its personnel reductions and has initiated the
closure of the research facilities. At December 31, 1999, approximately 175
employees had been severed.

      Activity in the Cyanamid restructuring accruals was as follows:

<TABLE>
<CAPTION>
                                                    Personnel       Fixed Asset    Other Closure/
(In thousands)                                          Costs        Write-offs        Exit Costs            Total
------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>               <C>              <C>
Restructuring accruals at inception                 $  73,000         $  30,000         $  10,000        $ 113,000
Cash expenditures*                                     (3,112)               --                --           (3,112)
Write-offs of fixed assets                                 --           (30,000)               --          (30,000)
                                                    --------------------------------------------------------------
Restructuring accruals at December 31, 1999         $  69,888         $      --         $  10,000        $  79,888
                                                    ==============================================================
</TABLE>

*     Cash expenditures represent partial severance payments related to
      approximately 175 employees who were severed to date. Remaining severance
      related to these employees is anticipated to be paid in the 2000 first
      quarter.

      The noncash charge for the impairment of a Cyanamid manufacturing facility
was recognized since the facility was dedicated primarily to a product that did
not obtain regulatory approval from the U.S. Environmental Protection Agency
(EPA). Based on a review of existing resources, the Company determined that it
had no alternative future use for a significant portion of this facility.
Therefore, an impairment loss of $82,000,000 was recorded based upon the
expected future discounted cash flows from the projected utilization of the
facility.

RotaShield Voluntary Market Withdrawal

During the 1999 second quarter, the Company recorded a special charge
aggregating $82,000,000 ($53,000,000 after-tax or $0.04 per share--diluted) for
estimated costs associated with the suspension of shipments and the voluntary
market withdrawal of RotaShield, the Company's rotavirus vaccine.

1998 Restructuring Charge and Related Asset Impairments

In December 1998, the Company recorded a special charge for restructuring and
related asset impairments of $343,600,000 ($240,500,000 after-tax or $0.18 per
share--diluted) to recognize the costs of the reorganization of the
pharmaceutical and nutritional supply chains (primarily in the Asian-Pacific and
Latin American regions), the reorganization of the U.S. pharmaceutical and
consumer health care distribution systems, and a reduction in personnel from the
globalization of certain business units. The reorganization of the
pharmaceutical and nutritional supply chains will result in the closure of 14
plants (nine pharmaceuticals and five nutritionals). The reorganization of the
U.S. pharmaceutical and consumer health care distribution systems will result in
the closure of three distribution centers. The restructuring will result in the
elimination of 4,100 positions offset, in part, by 1,000 newly created positions
in the same functions at other locations. The components of this charge were as
follows: (i) personnel costs of $142,375,000, (ii) noncash costs for fixed asset
write-offs of $115,225,000 and (iii) other closure/exit costs of $86,000,000.
While some of these costs were paid within one year of the announcement date,
due to regulatory requirements for product transfers, some of the restructuring
costs will not be paid until after 2000. The noncash costs of $115,225,000
reduced the carrying value of the fixed assets to their estimated fair value,
taking into consideration depreciation expected during the transition period,
which was determined by experience with similar properties and external
appraisals. These fixed assets, with a fair value of $11,575,000, have remained
operational during the transition period of obtaining the necessary regulatory
approvals to relocate these operations to new facilities. Since these fixed
assets have remained in use, depreciation was not suspended and will be
recognized over the transition period. Other closure/exit costs are a direct
result of the restructuring plan. The majority of the other closure/exit costs
are anticipated to be realized after the facilities cease production and prior
to disposition. These costs include non-cancelable operating leases, security,
utilities, maintenance, property taxes and other related costs that will be paid
during the disposal period. Due to the specialized nature of these facilities,
the costs will be paid over a two- to three-year period as product transfers are
approved by regulatory authorities and manufacturing sites are closed.

      Since the end of 1998, the Company has begun its personnel reductions and
has initiated/completed the closure/sale of certain manufacturing
facilities/distribution centers. At December 31, 1999, approximately 2,500
positions had been eliminated, two distribution centers had been sold, and the
third is expected to be fully closed in the 2000 first quarter. The
manufacturing plants are continuing their phase-out period, and the Company will
begin the disposal process in late 2000.


36  American Home Products Corporation and Subsidiaries
<PAGE>

Activity in the restructuring accruals was as follows:

<TABLE>
<CAPTION>
                                                    Personnel       Fixed Asset    Other Closure/
(In thousands)                                          Costs        Write-offs        Exit Costs             Total
-------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>               <C>               <C>
Restructuring accruals at inception                 $ 142,375         $ 115,225         $  86,000         $ 343,600
Cash expenditures                                        (527)               --              (922)           (1,449)
Write-offs of fixed assets                                 --          (115,225)               --          (115,225)
                                                    ---------------------------------------------------------------
Restructuring accruals at December 31, 1998           141,848                --            85,078           226,926
Cash expenditures                                     (87,095)               --            (5,817)          (92,912)
                                                    ---------------------------------------------------------------
Restructuring accruals at December 31, 1999         $  54,753         $      --         $  79,261         $ 134,014
                                                    ===============================================================
</TABLE>

Redux and Pondimin Voluntary Market Withdrawal

The 1997 results of operations included a special charge aggregating
$180,000,000 ($117,000,000 after-tax or $0.09 per share -- diluted) to record
the one-time costs associated with the voluntary market withdrawal of Redux
(dexfenfluramine) and Pondimin (fenfluramine). The special charge included
provisions for product returns, notification and administrative handling fees,
the writedown of inventory and supplies, and other related costs. At December
31, 1998, these accruals were fully utilized. These costs did not include
provisions for any subsequent charges which resulted from legal actions related
to these products (see Note 10).

4. Debt and Financing Arrangements

The Company's debt at December 31 consisted of:

(In thousands)                                                1999          1998
--------------------------------------------------------------------------------
Commercial paper                                        $2,841,630    $1,213,470
Notes payable:
  7.70% notes due 2000                                   1,000,000     1,000,000
  6.50% notes due 2002                                     250,000       250,000
  7.90% notes due 2005                                   1,000,000     1,000,000
  7.25% debentures due 2023                                250,000       250,000
Pollution control and industrial revenue bonds:
  5.1%-5.8% due 2000-2020                                  100,300       110,865
Other debt:
  1.3%-21.6% due 2000-2009                                 139,204       114,556
                                                        ------------------------
                                                         5,581,134     3,938,891
Less current portion                                     1,912,491        79,728
                                                        ------------------------
                                                        $3,668,643    $3,859,163
                                                        ========================

      The fair value of the Company's outstanding debt was $5,584,415,000 and
$4,123,938,000 at December 31, 1999 and 1998, respectively. The fair value of
the Company's outstanding debt was estimated based on market prices.

      The weighted average interest rate on the commercial paper outstanding at
December 31, 1999 and 1998 was 5.72% and 5.10%, respectively. The commercial
paper had original maturities that did not exceed 270 days and a weighted
average remaining maturity of 42 days and 45 days at December 31, 1999 and 1998,
respectively.

      In 1998, the Company reduced its $5.0 billion revolving credit facility to
$2.0 billion by terminating a $2.5 billion, 364-day credit facility in its
entirety and by reducing a $2.5 billion, five-year credit facility to $2.0
billion. The remaining $2.0 billion, five-year credit facility supports a
significant portion of the Company's commercial paper program and has a maturity
date of July 31, 2002.

      The interest rate on borrowings under the $2.0 billion credit facility is
based on various rate options available to the Company. The proceeds of the
credit facility may be used to support commercial paper and the Company's
general corporate and working capital requirements. The credit facility contains
a financial covenant and various other customary covenants, representations,
warranties, conditions and default provisions. At December 31, 1999 and 1998,
there were no borrowings outstanding under the credit facility. The portion of
commercial paper outstanding at December 31, 1999 supported by the credit
facility ($2.0 billion) and the entire balance of commercial paper outstanding
at December 31, 1998 were classified as long-term debt since the Company
intends, and has the ability, to refinance these obligations through the
issuance of additional commercial paper, through the use of its credit facility
or through the issuance of long-term debt. Outstanding commercial paper of
$841,630,000 at December 31, 1999 was classified as current, representing the
amount of the outstanding commercial paper borrowings in excess of the Company's
$2.0 billion credit facility that supports the commercial paper program. The
significant increase in commercial paper was due primarily to financing treasury
stock acquisitions as part of the Company's common stock repurchase program and
funding the purchase of a $450,000,000 convertible subordinated note issued by
Immunex Corporation, a majority-owned subsidiary of the Company. The increase in
marketable securities represents the investment by Immunex Corporation of the
proceeds from this note.

      In early 1998, the Company had interest rate swap agreements outstanding
with a notional amount of $2.3 billion under which the Company paid a fixed rate
of interest and received a floating rate of interest over the term of the
interest rate swap agreements, without the exchange of the underlying notional
amounts. The interest rate swap agreements converted a portion of the commercial
paper from a floating rate obligation to a fixed rate obligation. Proceeds from
the sale of the Sherwood-Davis & Geck medical devices business, which was sold
effective February 27, 1998, were used primarily to reduce outstanding
commercial paper and terminate the $2.3 billion of interest rate swap
agreements. The cost to terminate these interest rate swap agreements was
charged against the gain on the sale.

      The Company has outstanding $1.0 billion of 7.70% notes due February 2000,
which have been classified as current at December 31, 1999, and $1.0 billion of
7.90% notes due February 2005, both under a $3.5 billion shelf registration
statement. These non-callable notes, which have semiannual interest payments due
on February 15 and August 15, are unsecured and unsubordinated. The Company also
has outstanding $250,000,000 of 6.50% notes due October 2002 and $250,000,000 of
7.25% debentures due March 2023. The 6.50% non-callable notes have semiannual
interest payments due on April 15 and October 15. The 7.25% non-callable
debentures have semiannual


                         American Home Products Corporation and Subsidiaries  37
<PAGE>

interest payments due on March 1 and September 1. The non-callable notes and
debentures are unsecured and unsubordinated.

      The aggregate maturities of debt during the next five years at December
31, 1999 are as follows:

(In thousands)
---------------------------------------------------------------------
2000                                                       $1,912,491
2001                                                           18,343
2002                                                          301,039
2003                                                            7,620
2004                                                            6,012
Thereafter                                                  1,335,629
                                                           ----------
                                                            3,581,134
Commercial paper (classified as long-term debt)             2,000,000
                                                           ----------
Total debt                                                 $5,581,134
                                                           ==========

      Interest payments in connection with the Company's debt obligations,
excluding the cost to terminate the interest rate swap agreements in 1998, for
the years ended December 31, 1999, 1998 and 1997 amounted to $294,790,000,
$316,018,000 and $471,120,000, respectively.

      Interest expense, net in the Consolidated Statements of Operations
included interest income of $129,406,000, $115,813,000 and $90,674,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.

      The Company enters into short-term foreign exchange forward contracts as
part of its management of foreign currency exposures. The Company does not
engage in speculation on foreign currency. At December 31, 1999 and 1998, the
Company had notional amounts of $837,883,000 and $799,255,000, respectively, of
foreign exchange forward contracts outstanding. At December 31, 1999 and 1998,
the fair value of the foreign exchange forward contracts was a net payable of
$14,059,000 and $453,000, respectively. As foreign currency exchange rates
change from period to period, the fluctuations in the fair value of the foreign
exchange forward contracts are offset by fluctuations in the fair value of the
underlying hedged transactions. The Company believes that the risk of loss
associated with the foreign currency agreements from non-performance by the
counterparties is not material to its consolidated financial position or results
of operations.

5. Other Noncurrent Liabilities

Other noncurrent liabilities include a reserve for Redux and Pondimin litigation
(see Note 10), reserves relating to income taxes, environmental matters, product
liability and other litigation, as well as restructuring, pension and other
employee benefit liabilities, and minority interests.

      The Company has responsibility for environmental, safety and cleanup
obligations under various local, state and federal laws, including the
Comprehensive Environmental Response, Compensation and Liability Act, commonly
known as Superfund. At December 31, 1999, the Company was a party to, or
otherwise involved in, legal proceedings directed at the cleanup of 57 Superfund
sites.

      It is the Company's policy to accrue for environmental cleanup costs if it
is probable that a liability has been incurred and an amount is reasonably
estimable. In many cases, future environmental-related expenditures cannot be
quantified with a reasonable degree of accuracy. Environmental expenditures that
relate to an existing condition caused by past operations that do not contribute
to current or future results of operations are expensed. As investigations and
cleanups proceed, environmental-related liabilities are reviewed and adjusted as
additional information becomes available. The aggregate environmental-related
accruals were $359,190,000 and $385,040,000 at December 31, 1999 and 1998,
respectively. Environmental-related accruals have been recorded without giving
effect to any possible future insurance proceeds or the timing of payments. See
Note 10 for a discussion of contingencies.

      The Company's Management Incentive Plan provides for cash and deferred
contingent common stock awards to key employees. The maximum number of shares of
common stock issuable under the plan is 48,000,000, of which 36,651,432 have
been awarded through December 31, 1999. Deferred contingent common stock awards
plus accrued dividends totaling 1,448,256 shares were outstanding at December
31, 1999. As a result of the net loss realized by the Company in 1999, no awards
under this plan were issued. However, cash bonuses totaling $39,808,000 were
approved by the Board of Directors for key employees in 1999. The value of
management incentive plan awards for 1998 and 1997 was $65,847,000 and
$67,045,000, respectively, which included deferred contingent common stock of
$15,516,000 (284,244 shares) and $14,834,000 (396,832 shares), respectively.

6. Pensions and Other Postretirement Benefits

Pensions: The Company sponsors various retirement plans for most full-time
employees. Total pension expense for 1999, 1998 and 1997 was $114,995,000,
$112,209,000 and $146,403,000, respectively. The Company sponsors defined
benefit and defined contribution plans for most domestic and certain foreign
locations. Pension plan benefits for defined benefit plans are based primarily
on participants' compensation and years of credited service. It has been the
Company's policy to fund the minimum amount required by local regulations of
current and prior year service costs under defined benefit retirement plans.
Contributions to defined contribution plans are based on a percentage of
employees' compensation. Pension expense recognized for defined contribution
plans for 1999, 1998 and 1997 totaled $66,811,000, $64,006,000 and $65,645,000,
respectively.

      Other Postretirement Benefits: The Company provides postretirement health
care and life insurance benefits for retired employees of most domestic
locations and Canada. Most full-time employees become eligible for these
benefits after attaining specified age and service requirements.

      The change in benefit obligation, change in plan assets and reconciliation
of funded status of the Company's defined benefit plans (principally U.S. plans)
for 1999 and 1998 were as follows:


38  American Home Products Corporation and Subsidiaries
<PAGE>

<TABLE>
<CAPTION>
                                                                           Pensions                   Other Postretirement Benefits
                                                               ------------------------------        ------------------------------
Change in Benefit Obligation (In thousands)                           1999               1998               1999               1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>                <C>                <C>
Benefit obligation at January 1                                $ 3,227,295        $ 3,069,613        $ 1,025,286        $   980,998
Service cost                                                        76,987             70,902             25,229             18,963
Interest cost                                                      218,410            219,852             76,629             66,722
Amendments                                                          28,518                 --                 --                 --
Net actuarial loss/(gain)                                         (120,082)           152,505             13,640             63,092
Curtailments/settlements                                            (4,922)           (23,281)                --            (46,427)
Benefits paid                                                     (355,451)          (262,296)           (64,486)           (58,062)
                                                               --------------------------------------------------------------------
Benefit obligation at December 31                              $ 3,070,755        $ 3,227,295        $ 1,076,298        $ 1,025,286
                                                               ====================================================================

<CAPTION>
                                                                           Pensions                   Other Postretirement Benefits
                                                               ------------------------------        ------------------------------
Change in Plan Assets (In thousands)                                  1999               1998               1999               1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>                <C>                <C>
Fair value of plan assets at January 1                         $ 2,891,610        $ 2,723,177                 --                 --
Actual return on plan assets                                       439,515            396,366                 --                 --
Amendments                                                           6,343                 --                 --                 --
Company contributions                                               19,137             34,363        $    64,486        $    58,062
Benefits paid                                                     (355,451)          (262,296)           (64,486)           (58,062)
                                                               --------------------------------------------------------------------
Fair value of plan assets at December 31                       $ 3,001,154        $ 2,891,610        $        --        $        --
                                                               ====================================================================

<CAPTION>
                                                                           Pensions                   Other Postretirement Benefits
                                                               ------------------------------        ------------------------------
Reconciliation of Funded Status (In thousands)                        1999               1998               1999               1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>                <C>                <C>
Benefit obligation in excess of plan assets                    $    69,601        $   335,685        $ 1,076,298        $ 1,025,286
Unrecognized net actuarial gain/(loss)                             283,620             (1,950)          (112,160)          (106,772)
Unrecognized prior service cost                                    (74,198)           (85,903)            (2,248)            (2,606)
Unrecognized net transition obligation                              (4,606)            (7,176)                --                 --
                                                               --------------------------------------------------------------------
Accrued benefit liability                                      $   274,417        $   240,656        $   961,890        $   915,908
                                                               ====================================================================
</TABLE>

      Unrecognized net actuarial gain for pensions increased in 1999 compared
with an unrecognized net loss in 1998 due primarily to the actual return
exceeding the expected return on plan assets in 1999 and the net effect of
changes in actuarial assumptions.

      At December 31, 1999 and 1998, the Company had seven unfunded pension
plans with aggregate projected benefit obligations and accumulated benefit
obligations of $289,778,000 and $262,205,000 at December 31, 1999, respectively,
and $291,535,000 and $256,611,000 at December 31, 1998, respectively.

      There were no plan assets for the Company's other postretirement benefit
plans at December 31, 1999 and 1998 as postretirement benefits are funded by the
Company when claims are paid. The current portion of the accrued benefit
liability for other postretirement benefits was $65,000,000 and $55,000,000 at
December 31, 1999 and 1998, respectively.

      Assumptions used in developing the benefit obligations at December 31 were
as follows:

<TABLE>
<CAPTION>
                                                                               Pensions                Other Postretirement Benefits
                                                                      ---------------------------      -----------------------------
Weighted Average Assumptions at December 31,                           1999      1998       1997         1999       1998       1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>        <C>       <C>      <C>        <C>        <C>
Discount rate                                                          7.75%      7.0%      7.25%        7.75%       7.0%      7.25%
Rate of compensation increase                                           4.5%      4.0%       4.0%          --         --         --
Expected return on plan assets                                          9.5%      9.5%       9.5%          --         --         --
Increase in per capita cost of health care benefits that gradually
  decreases and is held constant thereafter beginning in 2004            --        --         --     7.5%-5.0%  8.0%-5.0%  8.5%-5.0%
</TABLE>


                         American Home Products Corporation and Subsidiaries  39
<PAGE>

      The assumed health care cost trend rates have a significant effect on the
amounts reported. A one percentage point increase in the assumed health care
cost trend rates would increase the postretirement benefit obligation by
$127,852,000 and the total service and interest cost components by $15,113,000.
A one percentage point decrease in the assumed health care cost trend rates
would decrease the postretirement benefit obligation by $106,794,000 and the
total service and interest cost components by $12,191,000.

      Net periodic benefit cost for 1999, 1998 and 1997 of the Company's defined
benefit plans (principally U.S. plans) was as follows:

<TABLE>
<CAPTION>
                                                                       Pensions                     Other Postretirement Benefits
                                                      -------------------------------------     ------------------------------------
Components of Net Periodic Benefit Cost (In thousands)     1999          1998          1997          1999         1998          1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>          <C>           <C>
Service cost                                          $  76,987     $  70,902     $  66,236     $  25,229    $  18,963     $  19,494
Interest cost                                           218,410       219,852       213,055        76,629       66,722        70,791
Expected return on plan assets                         (260,323)     (253,034)     (214,812)           --           --            --
Amortization of prior service cost                       11,352        11,880        13,888           357          357           357
Amortization of transition obligation                     1,114         1,143           324            --           --            --
Recognized net actuarial loss/(gain)                      3,122         3,200         2,067         7,082         (103)        1,923
Curtailment gain                                         (2,478)       (5,740)           --            --           --            --
                                                      ------------------------------------------------------------------------------
Net periodic benefit cost                             $  48,184     $  48,203     $  80,758     $ 109,297    $  85,939     $  92,565
                                                      ==============================================================================
</TABLE>

      Net periodic other postretirement benefit cost was higher in 1999 compared
with 1998 due primarily to a change in early retirement assumptions. Net
periodic pension benefit cost was lower in 1998 compared with 1997 due primarily
to the unusually high actual return on plan assets in 1997 and a $200,000,000
contribution to the American Home Products Corporation Retirement Plan--U.S. in
late 1997.

7. Capital Stock

There were 2,400,000,000 shares of common stock and 5,000,000 shares of
preferred stock authorized at December 31, 1999 and 1998, respectively. Of the
authorized preferred shares, there is a series of shares (24,241 and 25,480
outstanding at December 31, 1999 and 1998, respectively) which is designated as
$2 convertible preferred stock. Each share of the $2 series is convertible at
the option of the holder into 36 shares of common stock. This series may be
called for redemption at $60 per share plus accrued dividends.

      On October 7, 1999, the Company's Board of Directors declared a dividend
of one preferred share purchase right for each share of common stock outstanding
on October 18, 1999. The rights also will apply to all future stock issuances.
Each right permits the holder, under certain circumstances and upon the
occurrence of certain events, to purchase from the Company one one-thousandth of
a share of Series A Junior Participating Preferred Stock of the Company (the
Series A Preferred Stock) at an exercise price of $225 per one one-thousandth of
a share of Series A Preferred Stock under a Rights Plan relating to such Series
A Preferred Stock. The 5,000,000 shares of preferred stock authorized will be
used for the exercise of any preferred share purchase rights. The Rights Plan
has provisions that are triggered if any person or group acquires beneficial
ownership of 15% or more of the outstanding common stock or acquires the Company
in a merger or other business combination (an Acquiring Person). In such event,
stockholders (other than the Acquiring Person) would receive stock of the
Company or the Acquiring Person, as the case may be, having a market value of
twice the exercise price along with substantially increased voting and dividend
rights, among other things. The rights expire on October 7, 2009, and prior to
there being an Acquiring Person, the Company may redeem the rights issued under
the Rights Plan for $0.01 per right. The Board can, except with respect to the
redemption price, amend the Rights Plan in any manner without the consent of the
holders of the rights, provided that such amendment does not adversely affect
the rights of the holder at any time after there is an Acquiring Person.

      Changes in outstanding common shares during 1999, 1998 and 1997 were as
follows:

(In thousands except
shares of preferred stock)                   1999           1998           1997
--------------------------------------------------------------------------------
Balance at January 1                    1,312,399      1,300,755      1,279,966
Issued for stock options                   10,589         19,811         20,723
Purchases of common shares
  for treasury                            (19,226)        (8,284)          (419)
Conversions of preferred stock
  (1,239, 3,365 and 2,588
  shares in 1999, 1998
  and 1997, respectively)
  and other exchanges                         154            117            485
                                        ---------------------------------------
Balance at December 31                  1,303,916      1,312,399      1,300,755
                                        =======================================

      The Company has a common stock repurchase program under which the Company
is authorized to repurchase shares. At December 31, 1999, 13,906,960 shares were
authorized for future repurchases.

8. Stock Options

The Company has two Stock Option Plans and four Stock Incentive Plans. Included
in the four Stock Incentive Plans is the 1999 Stock Incentive Plan, authorized
to grant 65,000,000 options to purchase shares, which was approved at the
Company's April 22, 1999 Annual Meeting of Stockholders. No further grants may
be made under the two Stock Option Plans. Under the four Stock Incentive Plans,
options to purchase a maximum of 229,000,000 shares may be granted at prices not
less than 100% of the fair market value at the date of option grant. At December
31, 1999, 58,952,633 shares were available for future grants under the Stock
Incentive Plans.

      The plans provide for the granting of incentive stock options as defined
under the Internal Revenue Code. Under the plans, grants may be made to selected
officers and employees of non-qualified


40  American Home Products Corporation and Subsidiaries
<PAGE>

stock options with a 10-year term or incentive stock options with a term not
exceeding 10 years. The plans provide for the granting of stock appreciation
rights (SARs), which entitle the holder to receive an amount equal to the excess
of the market price of the common stock over the exercise price when exercised.
At December 31, 1999, there were no outstanding SARs.

      Each Stock Incentive Plan, among other things, provides for the issuance
of up to 8,000,000 shares (32,000,000 shares in the aggregate for all Stock
Incentive Plans) as restricted stock awards. Restricted stock awards
representing 148,850, 68,400 and 88,400 units were granted in 1999, 1998 and
1997, respectively, under the plans to certain key executives. These units
generally are converted to shares of restricted stock based on the achievement
of certain performance criteria related to performance years 1997 through 2003.

      Under the 1994 Restricted Stock Plan for Non-Employee Directors, a maximum
of 100,000 restricted shares may be granted to non-employee directors. The
restricted shares granted to each non-employee director are not delivered prior
to the end of a five-year restricted period. At December 31, 1999, 68,800 shares
were available for future grants.

      At the Company's April 22, 1999 Annual Meeting of Stockholders, the
stockholders approved the 1999 Stock Option Plan for Non-Employee Directors.
Under the Plan, a maximum of 250,000 shares may be granted to non-employee
directors at 100% of the fair market value of the common stock on the date of
the grant. During 1999, 21,000 stock options were granted to non-employee
directors, and 229,000 shares were available for future grants at December 31,
1999.

      Stock option information related to the plans was as follows:

<TABLE>
<CAPTION>
                                                                 Weighted                     Weighted                     Weighted
                                                                  Average                      Average                      Average
                                                                 Exercise                     Exercise                     Exercise
Option Shares                                           1999        Price           1998         Price           1997         Price
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>            <C>           <C>            <C>
Outstanding at January 1                          75,790,629    $   30.53     83,306,276     $   24.86     80,278,690     $   19.03
Granted                                           21,945,755        62.00     15,167,210         50.13     27,868,770         36.20
Canceled                                          (1,903,601)       51.83     (2,872,314)        37.03     (4,118,604)        22.89
Exercised (1999--$11.80 to $50.06 per share)     (10,588,653)       22.76    (19,810,543)        20.79    (20,722,580)        17.93
                                                 -----------                 -----------                  -----------
Outstanding at December 31
  (1999--$11.80 to $65.19 per share)              85,244,130        39.13     75,790,629         30.53     83,306,276         24.86
                                                 ===========                 ===========                  ===========
Exercisable at December 31                        52,789,450        28.27     54,471,524         24.51     53,472,180         19.28
                                                 ===========                 ===========                  ===========
</TABLE>

      The following table summarizes information regarding stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                         Options Outstanding                                      Options Exercisable
--------------------------------------------------------------------        ------------------------------
                                 Weighted Average   Weighted Average                      Weighted Average
  Range of              Number          Remaining           Exercise             Number           Exercise
Exercise Prices    Outstanding   Contractual Life              Price        Exercisable              Price
----------------------------------------------------------------------------------------------------------
<S>                 <C>                 <C>                   <C>            <C>                    <C>
$11.80 to 19.99     22,901,025          4.2 years             $17.80         22,901,025             $17.80
 20.00 to 29.99      7,278,617          5.9 years              26.40          7,278,617              26.40
 30.00 to 39.99     19,889,770          6.9 years              36.18         17,396,734              36.18
 40.00 to 49.99        754,430          8.6 years              46.52            186,419              46.28
 50.00 to 59.99     13,815,673          8.4 years              50.43          4,865,435              50.22
 60.00 to 65.19     20,604,615          9.4 years              62.33            161,220              62.31
                    ----------                                               ----------
                    85,244,130          7.0 years              39.13         52,789,450              28.27
                    ==========                                               ==========
</TABLE>


                         American Home Products Corporation and Subsidiaries  41
<PAGE>

      The Company accounts for stock-based compensation using the intrinsic
value method. Accordingly, no compensation expense has been recognized for stock
options. If compensation expense for the Company's stock options issued in 1999,
1998 and 1997 had been determined based on the fair value method of accounting,
the Company's net income (loss) and earnings (loss) per share would have been
reduced (increased) to the pro forma amounts indicated below:

(In thousands except
per share amounts)                               1999          1998         1997
--------------------------------------------------------------------------------
Net income (loss) less preferred dividends:
  As-reported                             $(1,227,171)   $2,474,284   $2,043,063
  Pro forma                                (1,312,238)    2,412,431    1,981,826
Basic earnings (loss) per share:
  As-reported                             $     (0.94)   $     1.88   $     1.58
  Pro forma                                     (1.00)         1.84         1.53
Net income (loss):
  As-reported                             $(1,227,121)   $2,474,338   $2,043,123
  Pro forma                                (1,312,188)    2,412,485    1,981,886
Diluted earnings (loss) per share:
  As-reported                             $     (0.94)   $     1.85   $     1.56
  Pro forma                                     (1.00)         1.80         1.51

      The fair value of issued stock options is estimated on the date of grant
using a variant of the Black-Scholes option pricing model incorporating the
following assumptions for stock options granted in 1999, 1998 and 1997,
respectively: expected volatility (the amount by which the stock price is
expected to fluctuate) of 23.2%, 24.2% and 18.3%; expected dividend yield of
2.2%, 2.8% and 3.7%; risk-free interest rate of 5.6%, 5.6% and 6.5%; and
expected life of four years. The weighted average fair value of stock options
granted during 1999, 1998 and 1997 was $14.36, $10.03 and $5.86 per option
share, respectively.

9. Income Taxes

The provision (benefit) for income taxes consisted of:

(In thousands)
Years Ended December 31,             1999               1998               1997
-------------------------------------------------------------------------------
Current:
  Federal                     $   328,862        $   518,450        $   531,770
  Foreign                         500,949            518,200            460,028
                              -------------------------------------------------
                                  829,811          1,036,650            991,798
Deferred:
  Federal                      (1,519,257)           108,621           (221,789)
  Foreign                          (9,059)           (34,149)             1,575
                              -------------------------------------------------
                               (1,528,316)            74,472           (220,214)
                              -------------------------------------------------
                              $  (698,505)       $ 1,111,122        $   771,584
                              =================================================

      Net deferred tax assets, inclusive of valuation allowances for certain
deferred tax assets, were reflected on the Consolidated Balance Sheets at
December 31 as follows:

(In thousands)                                             1999             1998
--------------------------------------------------------------------------------
Net current deferred tax assets                      $1,216,983       $  674,518
Net noncurrent deferred tax assets                    1,466,764          480,913
                                                     ---------------------------
Net deferred tax assets                              $2,683,747       $1,155,431
                                                     ===========================

      Deferred income taxes are provided for temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. Deferred tax assets result principally from the recording of
certain accruals and reserves, which currently are not deductible for tax
purposes. Deferred tax liabilities result principally from the use of
accelerated depreciation for tax purposes. The significant increase in net
deferred tax assets for the year ended 1999 was due primarily to deferred tax
assets generated as a result of the litigation charge related to Redux and
Pondimin (see Note 10).

      The components of the Company's deferred tax assets and liabilities at
December 31 were as follows:


(In thousands)                                              1999           1998
--------------------------------------------------------------------------------
Deferred tax assets:
  Product, litigation and environmental
    liabilities, and other operating accruals        $ 2,211,410    $   751,140
  Postretirement, pension and other
    employee benefits                                    458,322        455,999
  Net operating loss and other tax
    credit carryforwards                                 107,095        157,034
  Restructuring and
    reorganization accruals                              205,923        283,614
  Inventory reserves                                     161,026        161,252
  Investments and advances                                39,700         45,608
  Other                                                   56,479         20,537
                                                     --------------------------
Total deferred tax assets                              3,239,955      1,875,184
                                                     --------------------------
Deferred tax liabilities:
  Investments                                             (9,203)        (9,514)
  Depreciation                                          (268,322)      (311,645)
  Pension benefits and other
    employee benefits                                    (58,168)       (68,911)
  Other                                                  (69,106)       (80,632)
                                                     --------------------------
Total deferred tax liabilities                          (404,799)      (470,702)
                                                     --------------------------
Deferred tax asset
  valuation allowances                                  (151,409)      (249,051)
                                                     --------------------------

Net deferred tax assets                              $ 2,683,747    $ 1,155,431
                                                     ==========================

      Valuation allowances have been established for certain deferred tax assets
related primarily to net operating loss carryforwards and portions of other
deferred tax assets as the Company determined that it was more likely than not
that these benefits will not be realized. During 1999 and 1998, the valuation
allowance decreased by $97,642,000 and $50,373,000, respectively, due primarily
to the utilization of net operating loss carryforwards.


42  American Home Products Corporation and Subsidiaries
<PAGE>

      Reconciliations between the Company's effective tax rate and the U.S.
statutory rate, excluding the effect of the litigation charge in 1999 (see Note
10), were as follows:

Tax Rate
Years Ended December 31,                       1999         1998         1997
-----------------------------------------------------------------------------
U.S. statutory rate                            35.0%        35.0%        35.0%
Effect of Puerto Rico and
  Ireland manufacturing
  operations                                   (9.4)        (5.5)        (6.1)
Research credits                               (1.6)        (1.2)        (1.8)
ACY goodwill amortization                       2.4          2.0          2.7
Gains on sales of business
  and other assets                               --          2.7           --
Other, net                                      0.7         (2.0)        (2.4)
                                               ------------------------------
Effective tax rate                             27.1%        31.0%        27.4%
                                               ==============================

      Including the effect of the 1999 litigation charge, which had a 30.8% tax
benefit, the overall effective tax rate in 1999 was a 36.3% tax benefit. The
difference in the tax benefit related to the litigation charge versus the
statutory rate of 35.0% was caused by a $200 million provision for additional
U.S. income tax, net of foreign tax credits, that will have to be paid to the
extent that foreign earnings, taxed at a lower rate than in the United States,
are remitted back to the United States for litigation settlement payments.

      Total income tax payments, net of tax refunds, for the years ended
December 31, 1999, 1998 and 1997 amounted to $717,174,000, $897,361,000 and
$1,021,505,000, respectively.

10. Contingencies and Litigation Settlement

The Company is involved in various legal proceedings, including product
liability and environmental matters of a nature considered normal to its
business (see Note 5 for a discussion of environmental matters). It is the
Company's policy to accrue for amounts related to these legal matters if it is
probable that a liability has been incurred and an amount is reasonably
estimable.

      The Company is a defendant in numerous legal actions, many of which are
purported class actions, relating to the antiobesity products Redux or Pondimin,
which the Company estimated were used in the United States, prior to their 1997
voluntary market withdrawal, by approximately 6 million people. These actions
allege, among other things, that the use of Redux and/or Pondimin, independently
or in combination with the prescription drug phentermine (which the Company did
not manufacture, distribute or market), caused certain serious conditions,
including valvular heart disease.

      On October 7, 1999, the Company announced a comprehensive, national
settlement to resolve litigation brought against the Company regarding the use
of Redux or Pondimin. This nationwide, class action settlement is open to all
Redux or Pondimin users in the United States, regardless of whether they have
lawsuits pending. The settlement agreement is subject to judicial approval.
Preliminary approval was granted on November 23, 1999, and a fairness hearing is
scheduled for May 2000. Payments by the Company will be made into settlement
Funds A and B. Payments to the settlement funds in 1999 were $75,000,000, with
approximately $1.78 billion expected to be paid over approximately the next two
years (approximately $1.0 billion of which is subject to final judicial
approval). Payments to provide settlement benefits, if needed, may continue for
approximately 16 years after final judicial approval. Fund A is intended to
cover refunds, medical screening costs, additional medical services and cash
payments, education and research costs, and administration costs. Fund B will
compensate claimants with significant heart valve disease. The settlement covers
all claims arising out of the use of Redux or Pondimin except for claims of
primary pulmonary hypertension (PPH). The settlement provides opportunities
during three different time periods for claimants to opt out of the settlement.
Under certain circumstances, the Company will receive credits for future
settlement payments to claimants who opt out of the settlement. The Company may
terminate the settlement at its discretion based on the number of initial opt
outs. The initial opt out period ends March 30, 2000. The nationwide, class
action settlement states that it shall not be construed to be an admission or
evidence of any liability or wrongdoing whatsoever by the Company or the truth
of any of the claims alleged.

      The Company recorded a litigation charge of $4,750,000,000 ($3,287,500,000
after-tax or $2.51 per share--diluted) in the 1999 third quarter to provide for
expected payments to the settlement funds contemplated by the nationwide, class
action settlement as discussed above, other judgments and settlements (including
estimated claims for PPH and any opt outs), and future legal costs, net of
available insurance. At December 31, 1999, $4,632,419,000 of the litigation
accrual remained; $1,400,000,000 and $3,232,419,000 were included in accrued
expenses and other noncurrent liabilities, respectively. The amount of the
reserve is based upon, among other things, the assumption that the Company will
not terminate the nationwide, class action settlement based upon the number of
initial opt outs and that the settlement will receive final judicial approval. A
receivable of $316,092,000 from the Company's insurance carriers related to
these litigation expenditures was included in other current assets at December
31, 1999. The Company believes that this receivable is fully recoverable.

      The scientific studies conducted to date and clinical experience indicate
that the health of the overwhelming majority of people who took Redux or
Pondimin has not been adversely affected. The studies also show no increased
risk of valvular heart disease among persons who took the drugs for three months
or less--more than 75% of those who took the drugs.

      The Company is a defendant in numerous cases that have been consolidated
in federal district court in Illinois as Brand Name Prescription Drugs Antitrust
Litigation (MDL 997) relating to claims made by certain retail pharmacies
against the Company and other pharmaceutical manufacturers. The Company and
other pharmaceutical manufacturers also are defendants in similar litigation
brought on behalf of consumers and in some cases on behalf of pharmacies in
various state courts. The Company has settled the class action case in MDL 997
and certain other cases but remains as a defendant in other cases. The Company
believes it has complied with the antitrust laws and other applicable laws and
has settled these cases in order to avoid the costs and risks of litigation. The
settlement agreements are not admissions of any violation of law.

      In September 1999, the Company announced that it had reached an agreement
with plaintiffs' counsel, representing virtually all of the plaintiffs with
lawsuits pending against the Company, involving the Norplant System, the
Company's implantable contraceptive containing levonorgestrel, to settle the
Norplant System lawsuits for


                         American Home Products Corporation and Subsidiaries  43
<PAGE>

$1,500 per claimant. That settlement proposal has been communicated by
plantiffs' attorneys to their clients with a recommendation that they accept the
offer. The agreement to recommend settlement will not cover plaintiffs who
allege that they experienced either idiopathic intracranial hypertension or
stroke. The cost of the settlement is anticipated to be approximately
$50,000,000 and is anticipated to be covered by insurance.

      The Company is self-insured against ordinary product liability risks and
has liability coverage in excess of certain limits from various insurance
carriers.

      In the opinion of the Company, although the outcome of any legal
proceedings cannot be predicted with certainty, the ultimate liability of the
Company in connection with its legal proceedings will not have a material
adverse effect on the Company's financial position but could be material to the
results of operations in any one accounting period.

      The Company leases certain property and equipment for varying periods
under operating leases. Future minimum rental payments under non-cancelable
operating leases with terms in excess of one year in effect at December 31, 1999
are as follows:

(In thousands)
----------------------------------------------------
2000                                        $123,253
2001                                         113,685
2002                                         108,580
2003                                         100,067
2004                                          93,420
Thereafter                                    65,852
                                            --------
Total rental commitments                    $604,857
                                            ========

      Rental expense for all operating leases was $145,814,000, $131,358,000 and
$133,179,000 in 1999, 1998 and 1997, respectively.

11. Company Data by Operating and Geographic Segment

The Company has four reportable segments: Pharmaceuticals, Consumer Health Care,
Agricultural Products, and Corporate and All Other. The Company is not dependent
on any single customer or major group of customers for its sales. The Company
currently manufactures, distributes and sells a diversified line of products in
the reportable segments as outlined below.

      The Pharmaceuticals segment manufactures, distributes and sells branded
and generic human ethical pharmaceuticals, biologicals, nutritionals, and animal
biologicals and pharmaceuticals. Principal products include women's health care
products, infant nutritionals, cardiovascular products, neuroscience therapies,
gastroenterology drugs, anti-infectives, vaccines, biopharmaceuticals, oncology
therapies, musculoskeletal therapies and transplantation products. Principal
animal health products include vaccines, pharmaceuticals, endectocides and
growth implants.

      The Consumer Health Care segment manufactures, distributes and sells
over-the-counter health care products whose principal products include
analgesics, cough/cold/allergy remedies, vitamin, mineral and nutritional
supplements, herbal products, and hemorrhoidal, antacid and asthma relief items.

      The Agricultural Products segment manufactures, distributes and sells crop
protection and pest control products whose principal products include
herbicides, insecticides and fungicides. The Company is pursuing the divestiture
of the agricultural products business.

      Corporate is responsible for the treasury, tax, legal and compliance
operations of the Company's businesses and incurs and maintains certain assets,
liabilities, expenses, gains and losses related to the overall management of the
Company which are not allocated to the other reportable segments. All Other
consists of the medical devices businesses, which the Company exited completely
in February 1998. These businesses manufactured, distributed and sold medical
devices products, which included needles and syringes, tubes, catheters, wound
closure products, ophthalmic surgical equipment, enteral feeding systems,
microsurgical equipment and other hospital products.

      The accounting policies of the segments described above are the same as
those described in the Summary of Significant Accounting Policies in Note 1. The
Company evaluates the performance of the Pharmaceuticals, Consumer Health Care
and Agricultural Products reportable segments based on income from operations
before taxes which includes goodwill amortization, gains on the sales of non-
corporate assets and certain other items. Corporate and All Other includes
special charges, interest expense, net, the gain on the sale of the
Sherwood-Davis & Geck medical devices business, gains on the sales of
investments and other corporate assets, certain litigation provisions, including
the Redux and Pondimin litigation charge, and other miscellaneous items.

      The Company's reportable segments are strategic business units that offer
different products and services. The reportable segments are managed separately
because they manufacture, distribute and sell distinct products and provide
services which require various technologies and marketing strategies.


44  American Home Products Corporation and Subsidiaries
<PAGE>

Company Data by Operating Segment

(In millions)
Years Ended December 31,                        1999         1998         1997
------------------------------------------------------------------------------
Net Sales to Customers
------------------------------------------------------------------------------
Pharmaceuticals                           $  9,505.9   $  8,901.8   $  8,669.1
Consumer Health Care                         2,375.3      2,174.7      2,091.3
Agricultural Products(1)                     1,669.0      2,194.1      2,119.4
Corporate and All Other                           --        192.1      1,316.2
                                          ------------------------------------
Consolidated Total                        $ 13,550.2   $ 13,462.7   $ 14,196.0
                                          ====================================

Income (Loss) before Taxes(2)
------------------------------------------------------------------------------
Pharmaceuticals                           $  2,554.6   $  2,488.3   $  2,349.6
Consumer Health Care                           578.6        509.7        505.1
Agricultural Products(1)                       152.7        494.9        429.9
Corporate and All Other(3)                  (5,211.5)        92.6       (469.9)
                                          ------------------------------------
Consolidated Total                        $ (1,925.6)  $  3,585.5   $  2,814.7
                                          ====================================

Depreciation and
Amortization Expense
------------------------------------------------------------------------------
Pharmaceuticals                           $    465.6   $    443.8   $    416.0
Consumer Health Care                            57.3         52.3         40.0
Agricultural Products                          154.1        153.2        154.8
Corporate and All Other                          5.3         15.4         91.2
                                          ------------------------------------
Consolidated Total                        $    682.3   $    664.7   $    702.0
                                          ====================================

Total Assets
------------------------------------------------------------------------------
Pharmaceuticals                           $ 11,101.4   $ 11,158.2   $ 10,758.8
Consumer Health Care                         1,864.4      1,809.6      1,319.2
Agricultural Products                        4,968.0      5,026.4      4,763.9
Corporate and All Other                      5,972.5      3,084.9      3,983.2
                                          ------------------------------------
Consolidated Total                        $ 23,906.3   $ 21,079.1   $ 20,825.1
                                          ====================================

Expenditures for Long-Lived Assets(4)
------------------------------------------------------------------------------
Pharmaceuticals                           $  1,038.9   $    571.3   $    568.4
Consumer Health Care                            66.8        100.3         95.8
Agricultural Products                           87.8        119.3        115.8
Corporate and All Other                         21.2         20.5        111.9
                                          ------------------------------------
Consolidated Total                        $  1,214.7   $    811.4   $    891.9
                                          ====================================


Company Data by Geographic Segment

(In millions)
Years Ended December 31,                        1999         1998         1997
------------------------------------------------------------------------------
Net Sales to Customers(5)
------------------------------------------------------------------------------

United States(1)                          $  7,671.5   $  7,724.7   $  8,063.0
United Kingdom                                 787.3        662.7        713.0
Other International                          5,091.4      5,075.3      5,420.0
                                          ------------------------------------
Consolidated Total                        $ 13,550.2   $ 13,462.7   $ 14,196.0
                                          ====================================

Long-Lived Assets at December 31(5),
------------------------------------------------------------------------------
United States                             $  8,735.7   $  8,582.4   $  8,705.4
International                                3,888.3      3,981.2      4,147.0
                                          ------------------------------------
Consolidated Total                        $ 12,624.0   $ 12,563.6   $ 12,852.4
                                          ====================================

(1)   In September 1999, Cyanamid decided to repurchase selected U.S. field
      inventories from the trade, primarily soybean herbicides. As a result of
      this Cyanamid U.S. inventory buyback program, the Company reduced net
      sales of Agricultural Products by $175.0, which had the effect of
      increasing the consolidated loss before taxes by $135.0 ($93.2 after-tax
      or $0.07 per share--diluted). The Cyanamid U.S. inventory buyback program
      was a result of changes in the way Cyanamid will market and distribute its
      products, primarily a reduction in distributors to achieve efficiencies,
      and also is in preparation for the launch of new U.S. soybean herbicide
      premixed products containing glyphosate and Cyanamid's imidazolinone
      chemistry. Cyanamid obtained EPA registration for its new proprietary
      imidazolinone and glyphosate herbicide premixed products and will market
      these products to be used on Roundup Ready(R) (a registered trademark of
      the Monsanto Company) soybeans in the 2000 selling season.

(2)   Income (loss) before taxes included goodwill amortization for 1999, 1998
      and 1997 as follows: Pharmaceuticals--$154.3, $158.2 and $145.1, Consumer
      Health Care--$32.7, $22.6 and $16.9, Agricultural Products--$97.0, $97.1
      and $96.2, respectively, and Corporate and All Other of $0.9 in 1998 and
      $14.4 in 1997.

(3)   1999 Corporate and All Other included a litigation charge of $4,750.0 in
      connection with litigation brought against the Company regarding the use
      of the antiobesity products Redux or Pondimin. The charge provided for
      expected payments to settlement funds contemplated by the nationwide,
      class action settlement, other judgments and settlements (including
      estimated claims for PPH and any opt outs), and future legal costs, net of
      available insurance (see Note 10). The charge related to the
      Pharmaceuticals operating segment.

      1999 Corporate and All Other included a special charge of $195.0 to
      provide for the restructuring of Cyanamid and the impairment of a Cyanamid
      manufacturing facility (see Note 3). The charge related to the
      Agricultural Products operating segment.

      1999 Corporate and All Other included a special charge of $82.0 related to
      the suspension of shipments and the voluntary market withdrawal of
      RotaShield, the Company's rotavirus vaccine (see Note 3). The charge
      related to the Pharmaceuticals operating segment.

      1998 Corporate and All Other included a special charge for restructuring
      and related asset impairments of $343.6. The charge related to the
      operating segments as follows: Pharmaceuticals--$294.9, Consumer Health
      Care--$26.3 and Agricultural Products--$22.4 (see Note 3).

      1998 Corporate and All Other included the gain on the sale of the
      Sherwood-Davis & Geck medical devices business of $592.1 (see Note 2).

      1997 Corporate and All Other included a special charge of $180.0
      associated with the voluntary market withdrawal of Redux and Pondimin (see
      Note 3). The charge related to the Pharmaceuticals operating segment.

(4)   Expenditures for long-lived assets excluded expenditures for goodwill and
      long-lived assets acquired in purchase business combinations as follows:
      1998--Consumer Health Care--$408.6 and 1997--Pharmaceuticals--$413.5.

(5)   Other than the United States and the United Kingdom, no other country in
      which the Company operates had net sales greater than 5% of the respective
      consolidated total. Other than the United States, no country in which the
      Company operates had long-lived assets greater than 5% of the respective
      consolidated total. The basis for attributing net sales to geographic
      areas is the location of the customer. Long-lived assets consist of
      property, plant and equipment, goodwill and other intangibles, and other
      assets, excluding deferred taxes, net investments in equity companies and
      other investments.


                         American Home Products Corporation and Subsidiaries  45
<PAGE>

Report of Independent
Public Accountants

To the Board of Directors and Stockholders of American Home Products
Corporation:

      We have audited the accompanying consolidated balance sheets of American
Home Products Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Home Products
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.

Arthur Andersen LLP
New York, New York
January 25, 2000


Management Report on
Financial Statements

Management has prepared and is responsible for the Company's consolidated
financial statements and related notes. They have been prepared in accordance
with generally accepted accounting principles and necessarily include amounts
based on judgments and estimates made by management. All financial information
in this Annual Report is consistent with the financial statements.

      The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with management's
authorization and are properly recorded, and that accounting records may be
relied upon for the preparation of financial statements and other financial
information. The design, monitoring and revision of internal accounting control
systems involve, among other things, management's judgment with respect to the
relative cost and expected benefits of specific control measures. The Company
also maintains an internal auditing function which evaluates and formally
reports on the adequacy and effectiveness of internal accounting controls,
policies and procedures.

      The Company's financial statements have been audited by independent public
accountants who have expressed their opinion with respect to the fairness of
these statements.

      The Audit Committee of the Board of Directors, composed of non-employee
directors, meets periodically with the independent public accountants and
internal auditors to evaluate the effectiveness of the work performed by them in
discharging their respective responsibilities and to assure their independent
and free access to the Committee.

John R. Stafford             Kenneth J. Martin
Chairman, President and      Senior Vice President and
Chief Executive Officer      Chief Financial Officer



46  American Home Products Corporation and Subsidiaries
<PAGE>

Quarterly Financial Data

<TABLE>
<CAPTION>
                                                     First Quarter    Second Quarter     Third Quarter     Fourth Quarter
(In thousands except per share amounts)                       1999              1999              1999               1999
-------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                           <C>               <C>               <C>                <C>
Net sales(2)                                           $ 3,442,352       $ 3,319,292       $ 3,321,254        $ 3,467,278
Gross profit(2)                                          2,529,440         2,368,635         2,434,083          2,525,496
Net income (loss)(1)(2)(3)                                 654,918           398,673        (2,873,944)           593,232
Diluted earnings (loss) per share(1)(2)(3)(4)                 0.49              0.30             (2.20)              0.45

<CAPTION>
                                                     First Quarter    Second Quarter     Third Quarter     Fourth Quarter
(In thousands except per share amounts)                       1998              1998              1998               1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>               <C>                <C>
Net sales                                              $ 3,666,395       $ 3,341,960       $ 3,224,119        $ 3,230,213
Gross profit                                             2,661,965         2,421,719         2,414,535          2,347,636
Net income(5)(6)                                           982,210           523,511           618,995            349,622
Diluted earnings per share(5)(6)                              0.74              0.39              0.46               0.26
</TABLE>

(1)   Second Quarter 1999 included a special charge of $53,000 after-tax and
      $0.04 per share--diluted related to the suspension of shipments and the
      voluntary market withdrawal of RotaShield, the Company's rotavirus
      vaccine.

(2)   Third Quarter 1999 included a reduction in net sales of $175,000, which
      had the effect of reducing gross profit by $135,000, increasing net loss
      by $93,150 and increasing diluted loss per share by $0.07 due to the
      Cyanamid U.S. inventory buyback program.

(3)   Third Quarter 1999 included a litigation charge of $3,287,500 after-tax
      and $2.51 per share--diluted in connection with litigation brought against
      the Company regarding the use of the antiobesity products Redux or
      Pondimin.

      Third Quarter 1999 included a special charge of $126,750 after-tax and
      $0.10 per share--diluted to provide for the restructuring of Cyanamid and
      the impairment of a Cyanamid manufacturing facility.

(4)   The average number of common shares outstanding for diluted loss per share
      for the Third Quarter 1999 did not include common share equivalents as the
      effect would have been antidilutive. In addition, the sum of the 1999
      diluted earnings (loss) per share for each quarter did not equal the full
      year 1999 diluted loss per share for the same reason.

(5)   First Quarter 1998 included the gain on the sale of the Sherwood-Davis &
      Geck medical devices business of $330,782 after-tax and $0.25 per
      share--diluted.

(6)   Fourth Quarter 1998 included a special charge for restructuring and
      related asset impairments of $240,500 after-tax and $0.18 per
      share--diluted.


Market Prices of Common
Stock and Dividends

                          1999 Range of Prices*          1998 Range of Prices*
                      ---------------------------    ---------------------------
                                        Dividends                      Dividends
                        High      Low   per Share      High      Low   per Share
--------------------------------------------------------------------------------
First quarter         $68.19   $51.19      $0.225    $48.88   $37.75      $0.215
Second quarter         70.25    51.00       0.225     54.25    43.75       0.215
Third quarter          58.44    38.50       0.225     58.75    46.19       0.215
Fourth quarter         58.00    36.50       0.230     56.50    43.94       0.225

* Prices are those of the New York Stock Exchange--Composite Transactions.


                         American Home Products Corporation and Subsidiaries  47
<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations

The following commentary should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements on pages 30
to 45.

Results of Operations

Worldwide net sales increased 2% to $13.6 billion for the year ended 1999 after
adjusting for the sale of the Sherwood-Davis & Geck medical devices business,
which was sold effective February 27, 1998. The increase in 1999 was due
primarily to higher worldwide sales of pharmaceuticals and consumer health care,
which were offset, in part, by significantly lower sales of U.S. agricultural
products and the Cyanamid U.S. inventory buyback program discussed below.
Including net sales of Sherwood-Davis & Geck prior to its sale, worldwide net
sales increased 1% for the year ended 1999.

      In September 1999, Cyanamid decided to repurchase selected U.S. field
inventories from the trade, primarily soybean herbicides (see Note 11 to the
Consolidated Financial Statements). As a result of the Cyanamid U.S. inventory
buyback program, the Company reduced net sales by $175.0 million, which had the
effect of increasing the consolidated loss before taxes by $135.0 million ($93.2
million after-tax or $0.07 per share--diluted).

      Worldwide net sales decreased 5% to $13.5 billion in 1998 on an
as-reported basis and 2% on a pro forma basis. The 1998 pro forma sales results
reflected businesses acquired and divested in 1998 and 1997, assuming all
transactions occurred as of January 1, 1997. This activity included the
divestitures of the Sherwood-Davis & Geck (effective February 27, 1998) and
Storz Instrument Company (effective December 31, 1997) medical devices
businesses and the acquisition of the worldwide animal health business of Solvay
S.A. (effective February 28, 1997). The pro forma sales results also included
the reclassification of certain retained ophthalmic pharmaceutical sales from
the medical devices business to pharmaceuticals (effective January 1, 1998)
assuming the reclassification had occurred as of January 1, 1997. The pro forma
sales results reflected higher U.S. sales of pharmaceuticals and consumer health
care, and international sales of agricultural products offset, in part, by lower
international sales of pharmaceuticals.

      The following table sets forth 1999, 1998 and 1997 worldwide net sales
results by operating segment together with the percentage changes in
"As-Reported" and "Pro Forma" (where applicable) worldwide net sales from prior
years:

<TABLE>
<CAPTION>
                                                                                          1999 vs. 1998         1998 vs. 1997
                                                                                        ----------------  --------------------------
                                                   Years Ended December 31,                 As-Reported   As-Reported     Pro Forma
(Dollar amounts in millions)           ---------------------------------------------         % Increase    % Increase    % Increase
Net Sales to Customers                        1999             1998             1997          (Decrease)    (Decrease)    (Decrease)
------------------------------------------------------------------------------------------------------------------------------------
Operating Segment:
<S>                                    <C>              <C>              <C>                       <C>            <C>            <C>
Pharmaceuticals                        $   9,505.9      $   8,901.8      $   8,669.1                  7%            3%            2%
Consumer Health Care                       2,375.3          2,174.7          2,091.3                  9%            4%            4%
Agricultural Products                      1,669.0          2,194.1          2,119.4                (24)%           4%            4%
                                       ---------------------------------------------    --------------------------------------------
                                          13,550.2         13,270.6         12,879.8                  2%            3%            2%
Corporate and All Other*                        --            192.1          1,316.2               (100)%         (85)%          --
                                       ---------------------------------------------    --------------------------------------------
Consolidated Net Sales                 $  13,550.2      $  13,462.7      $  14,196.0                  1%           (5)%           2%
                                       =============================================    ============================================
</TABLE>

* Corporate and All Other, as-reported, for 1998 and 1997 included the net sales
  of the Company's divested medical devices businesses discussed above.


48  American Home Products Corporation and Subsidiaries
<PAGE>

      Worldwide pharmaceutical sales increased 7% (9% for human pharmaceuticals)
for the year ended 1999. Excluding the negative impact of foreign exchange,
worldwide pharmaceutical sales increased 8% for the year ended 1999. U.S.
pharmaceutical sales increased 7% for the year ended 1999 due primarily to
higher sales of Enbrel (introduced in 1998), Effexor XR (due to increased
selling efforts and expanded indications), Premarin products and Zosyn, which
were offset, in part, by lower sales of animal health products, Naprelan and
Verelan (divested in 1998), oral contraceptives and Cordarone (due to generic
competition). Lower sales of animal health products were due primarily to
customers reducing consumption of livestock-related animal health products, in
part, as a result of continuing commodity price declines in the livestock
markets.

      International pharmaceutical sales increased 6% for the year ended 1999
due primarily to higher sales of Effexor XR (due to increased selling efforts
and expanded indications), Meningitec (introduced in the United Kingdom in
1999), ReFacto (introduced in 1999), Tazocin, HibTITER and Zoton.

      Worldwide pharmaceutical sales increased 3% (2% for human pharmaceuticals)
for the year ended 1998. After adjusting for the acquisition of the worldwide
animal health business of Solvay S.A. in 1997 and the reclassification of
certain retained ophthalmic pharmaceutical sales from the medical devices
business effective January 1, 1998, worldwide pro forma pharmaceutical sales
increased 2% for the year ended 1998. Excluding the negative impact of foreign
exchange, worldwide pro forma pharmaceutical sales increased 4% for the year
ended 1998. As-reported and pro forma U.S. pharmaceutical sales increased 5% for
the year ended 1998 due primarily to higher sales of Premarin products, oral
contraceptives, Effexor XR, Synvisc (introduced in 1997), generic
pharmaceuticals, BeneFIX (introduced in 1997), Neumega (introduced in 1997),
RotaShield (introduced in 1998) and Zosyn, which were offset, in part, by the
voluntary market withdrawal of the Company's antiobesity products Redux and
Pondimin in 1997, and Duract in 1998, and lower sales of Oruvail (due to generic
competition), Naprelan and Verelan (divested in 1998), Lodine products (due to
generic competition) and vaccines. Adjusting for the voluntary market
withdrawals and divested products, U.S. pharmaceutical sales would have
increased 13% in 1998.

      International pharmaceutical sales decreased 1% for the year ended 1998.
Pro forma international pharmaceutical sales decreased 3% for the year ended
1998. Higher sales of Effexor, Zoton, Premarin products, oral contraceptives and
Tazocin were more than offset by lower sales of Minocin, infant nutritionals and
other pharmaceutical products.

      Worldwide consumer health care sales increased 9% for the year ended 1999.
Excluding the negative impact of foreign exchange, worldwide consumer health
care sales increased 11% for the year ended 1999. U.S. consumer health care
sales increased 10% for the year ended 1999 due primarily to higher sales of
nutritional supplements, which consist of Centrum products, Solgar products
(acquired in 1998) and Caltrate, cough/cold/allergy products and Chap Stick.
Solgar products contributed 3% to the U.S. sales increase for the year ended
1999.

      International consumer health care sales increased 7% for the year ended
1999 due primarily to higher sales of nutritional supplements, which consist of
Centrum products, Caltrate and Solgar products (acquired in 1998), and Advil.
Solgar products contributed 3% to the international sales increase for the year
ended 1999.

      Worldwide consumer health care sales increased 4% for the year ended 1998.
Excluding the negative impact of foreign exchange, worldwide consumer health
care sales increased 6% for the year ended 1998. U.S. consumer health care sales
increased 6% for the year ended 1998 due primarily to higher sales of
nutritional supplements, which consist of Centrum products, Solgar products
(acquired in 1998) and Caltrate, and Advil, which were offset, in part, by lower
sales of Axid AR and cough/cold/allergy products. Solgar products contributed 3%
to the U.S. sales increase for the year ended 1998.

      International consumer health care sales increased 1% for the year ended
1998 due primarily to higher sales of nutritional supplements, which consist of
Centrum products, Caltrate and Solgar products (acquired in 1998), and Advil,
which were offset, in part, by the effect of the disposal of several non-core
products in 1997 and lower sales of cough/cold/allergy products. Solgar products
contributed 1% to the international sales increase for the year ended 1998.

      Worldwide agricultural products sales decreased 24% for the year ended
1999. Excluding the negative impact of foreign exchange, worldwide agricultural
products sales decreased 23% for the year ended 1999. U.S. agricultural products
sales decreased 53% for the year ended 1999 due primarily to the Cyanamid U.S.
inventory buyback program previously discussed and lower sales of herbicides,
predominately Pursuit, Raptor, Prowl, Squadron and Scepter, and insecticides.
The lower U.S. sales of herbicides for the year ended 1999 were due principally
to various competitive factors and reduced demand for grain coupled with high
inventories from record harvests over the last two years. As a result of these
high inventory levels, commodity prices have declined causing farmers to reduce
input costs by lowering application rates and choosing the lowest cost crop
protection product. Due to the seasonality of the U.S. agricultural products
business, a majority of the U.S. agricultural products sales and results of
operations are realized in the first half of the year.

      International agricultural products sales decreased 3% for the year ended
1999 due primarily to lower sales of Pursuit and other herbicides offset, in
part, by higher sales of fungicides and insecticides.

      Worldwide agricultural products sales increased 4% for the year ended
1998. Excluding the negative impact of foreign exchange, worldwide agricultural
products sales increased 6% for the year ended 1998. U.S. agricultural products
sales for the year ended 1998 were comparable with the prior year. Higher sales
of Raptor and Lightning herbicides (both introduced in 1997) and Counter
insecticide were offset by lower sales of Pursuit, Scepter and Squadron
herbicides (due primarily to unfavorable weather conditions, sales of Raptor and
other competitive factors). Due to the seasonality of the U.S. agricultural
products business, a majority of the U.S. agricultural products sales and
results of operations are realized in the first half of the year.

      International agricultural products sales increased 6% for the year ended
1998 due primarily to higher sales of Odyssey (introduced in 1997), Squadron,
Utopia (introduced in 1997) and other herbicides, and Acrobat fungicide, which
were offset, in part, by lower sales of Scepter herbicide and other fungicides.


                         American Home Products Corporation and Subsidiaries  49
<PAGE>

      Corporate and All Other sales, which consist of the Company's divested
medical devices businesses (Sherwood-Davis & Geck in 1998 and 1997, and Storz
Instrument Company in 1997), decreased 100% and 85% for the years ended 1999 and
1998, respectively.

      The following table sets forth the percentage changes in worldwide net
sales by operating and geographic segment compared with the prior year,
including the effect volume, price and foreign exchange had on these percentage
changes:

<TABLE>
<CAPTION>
                                                          % Increase (Decrease)                      % Increase (Decrease)
                                                    Year Ended December 31, 1999(1)             Year Ended December 31, 1998(2)
                                                ----------------------------------------    ---------------------------------------
                                                                     Foreign      Total                         Foreign       Total
                                                Volume      Price   Exchange  Net Sales     Volume      Price  Exchange   Net Sales
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>        <C>        <C>         <C>        <C>      <C>        <C>
Pharmaceuticals
U.S.                                                 4%         3%        --          7%         3%         2%       --          5%
International                                        7%         3%        (4)%        6%         2%        --        (5)%       (3)%
                                                -----------------------------------------------------------------------------------
Total                                                5%         3%        (1)%        7%         3%         1%       (2)%        2%
                                                -----------------------------------------------------------------------------------
Consumer Health Care(3)(4)
U.S.                                                 9%         1%        --         10%         5%         1%       --          6%
International                                        8%         5%        (6)%        7%         5%         1%       (5)%        1%
                                                -----------------------------------------------------------------------------------
Total                                                9%         2%        (2)%        9%         5%         1%       (2)%        4%
                                                -----------------------------------------------------------------------------------
Agricultural Products
U.S.(5)                                            (44)%       (9)%       --        (53)%       (4)%        4%       --         --
International                                       (2)%       --         (1)%       (3)%        9%         1%       (4)%        6%
                                                -----------------------------------------------------------------------------------
Total                                              (20)%       (3)%       (1)%      (24)%        4%         2%       (2)%        4%
                                                -----------------------------------------------------------------------------------
Total
U.S.                                                (1)%        1%        --         --          2%         2%       --          4%
International                                        5%         3%        (4)%        4%         4%         1%       (5)%       --
                                                -----------------------------------------------------------------------------------
Total                                                2%         2%        (2)%        2%         3%         1%       (2)%        2%
                                                -----------------------------------------------------------------------------------
</TABLE>

(1)   Net sales results are presented after adjusting for the sale of the
      Sherwood-Davis & Geck medical devices business (effective February 27,
      1998).

(2)   Net sales results are presented on a pro forma basis. Pharmaceuticals was
      adjusted for the acquisition of the worldwide animal health business of
      Solvay S.A. (effective February 28, 1997) and the reclassification of
      certain retained ophthalmic pharmaceutical sales from the medical devices
      business (effective January 1, 1998). In addition, net sales results were
      adjusted for the divestitures of the Sherwood-Davis & Geck (effective
      February 27, 1998) and Storz Instrument Company (effective December 31,
      1997) medical devices businesses.

(3)   Solgar products contributed 3% to the U.S., international and total sales
      volume increases, respectively, for the year ended 1999.

(4)   Solgar products contributed 3%, 1% and 2% to the U.S., international and
      total sales volume increases, respectively, for the year ended 1998.

(5)   The sales volume decrease for the year ended 1999 included the effect of
      the Cyanamid U.S. inventory buyback program, which reduced net sales by
      $175.0 million.

      Cost of goods sold, as a percentage of net sales, increased to 27.3% for
the year ended 1999 compared with 26.9% for the year ended 1998 due primarily to
an unfavorable product mix in all operating segments. Cost of goods sold, as a
percentage of net sales, decreased to 26.9% for the year ended 1998 compared
with 28.9% for the year ended 1997 due primarily to an overall product mix
improvement as increased sales of higher margin pharmaceuticals, consumer health
care and agricultural products partially replaced the loss of lower margin
medical devices sales resulting from the divestitures of the medical devices
businesses and, to a lesser extent, cost savings and synergies.

      Selling, general and administrative expenses, as a percentage of net
sales, increased to 37.2% for the year ended 1999 compared with 36.6% for the
year ended 1998. Higher selling, general and administrative expenses were due
primarily to higher selling expenses related to certain pharmaceutical and
consumer health care product launches in late 1998 and in 1999, pre-launch
marketing costs for certain pharmaceutical products expected to be launched in
2000 and increased headcount to support new product initiatives; and higher bad
debt provisions and other administrative expenses, which were offset, in part,
by lower selling and general expenses for agricultural products as a result of
cost-reduction efforts in response to current economic conditions, and the
divested Sherwood-Davis & Geck medical devices business. Selling, general and
administrative expenses, as a percentage of net sales, decreased to 36.6% for
the year ended 1998 compared with 37.3% for the year ended 1997. Lower selling,
general and administrative expenses resulted from the divestitures of the
medical devices businesses, lower marketing expenses due to pharmaceutical
product withdrawals and divestitures, and lower promotional expenses for certain
consumer health care products, which were offset, in part, by higher marketing
and selling expenses for product launches and additional expenses related to
information technology initiatives.

      Research and development expenses increased 5% for the year ended 1999 due
primarily to higher pharmaceutical research and development expenditures as a
result of new product introductions, discovery initiatives and license payments,
which were offset, in part, by lower research and development expenses for
agricultural products as a result of cost-containment efforts. Research and
development expenses increased 6% for the year ended 1998 due primarily to
higher pharmaceutical research and development expenditures, particularly in the
biopharmaceutical area, and operating costs


50  American Home Products Corporation and Subsidiaries
<PAGE>

related to pharmaceutical research and development facility expansions, which
were offset, in part, by lower research and development expenses resulting from
the divestitures of the medical devices businesses. Pharmaceutical research and
development expenditures accounted for 87%, 84% and 80% of total research and
development expenditures in 1999, 1998 and 1997, respectively. Pharmaceutical
research and development expenses, as a percentage of worldwide pharmaceutical
sales exclusive of infant nutritional sales, were 17%, 17% and 16% in 1999, 1998
and 1997, respectively.

      Interest expense, net increased 3% for the year ended 1999 due primarily
to increased borrowings of commercial paper to finance treasury stock
acquisitions as part of the Company's common stock repurchase program offset, in
part, by higher interest income and a reduction in long-term debt from the
proceeds of the divestiture of the Sherwood-Davis & Geck medical devices
business during the 1998 first quarter. Interest expense, net decreased 44% for
the year ended 1998 due primarily to the reduction in long-term debt during 1998
as the proceeds from the sale of the medical devices business were used
primarily to reduce outstanding commercial paper. Weighted average debt
outstanding during 1999 and 1998 was $4,930.8 million and $4,134.3 million,
respectively.

      Other income, net decreased for the year ended 1999 due primarily to lower
gains on the sales of non-strategic assets, including certain non-core product
rights offset, in part, by lower non-recurring charges and lower unfavorable
foreign exchange results. Other income, net increased for the year ended 1998
due primarily to higher gains on the sales of non-strategic assets, including
certain generic and non-core product rights, and lower litigation costs offset,
in part, by Year 2000 conversion costs and other one-time charges.

      On October 7, 1999, the Company announced a comprehensive, national
settlement to resolve litigation brought against the Company regarding the use
of Redux or Pondimin (see Note 10 to the Consolidated Financial Statements). The
Company recorded a litigation charge of $4,750.0 million ($3,287.5 million
after-tax or $2.51 per share--diluted) in the 1999 third quarter to provide for
expected payments to the settlement funds contemplated by the nationwide, class
action settlement, other judgments and settlements (including estimated claims
for PPH and any opt outs), and future legal costs, net of available insurance.
This nationwide, class action settlement is open to all Redux or Pondimin users
in the United States, regardless of whether they have lawsuits pending.
Preliminary approval of the settlement was granted on November 23, 1999, and a
fairness hearing is scheduled for May 2000.

      During the 1999 third quarter, a special charge of $195.0 million ($126.8
million after-tax or $0.10 per share--diluted) was recorded to provide for the
restructuring of Cyanamid aggregating $113.0 million and the impairment of a
Cyanamid manufacturing facility aggregating $82.0 million (see Note 3 to the
Consolidated Financial Statements).

      During the 1999 second quarter, the Company recorded a special charge
aggregating $82.0 million ($53.0 million after-tax or $0.04 per share--diluted)
for estimated costs associated with the suspension of shipments and the
voluntary market withdrawal of RotaShield, the Company's rotavirus vaccine (see
Note 3 to the Consolidated Financial Statements).

      In December 1998, the Company recorded a special charge for restructuring
and related asset impairments of $343.6 million ($240.5 million after-tax or
$0.18 per share--diluted) to recognize the costs of the reorganization of the
pharmaceutical and nutritional supply chains (primarily in the Asian-Pacific and
Latin American regions), the reorganization of the U.S. pharmaceutical and
consumer health care distribution systems, and a reduction in personnel from the
globalization of certain business units (see Note 3 to the Consolidated
Financial Statements).

      In February 1998, the Company sold the Sherwood-Davis & Geck medical
devices business (see Note 2 to the Consolidated Financial Statements) for
approximately $1.77 billion, resulting in a pre-tax gain of $592.1 million
($330.8 million after-tax or $0.25 per share--diluted).

      In September 1997, the Company announced the voluntary market withdrawal
of Redux and Pondimin. The 1997 results of operations included a special charge
aggregating $180.0 million ($117.0 million after-tax or $0.09 per
share--diluted) to record the one-time costs associated with this voluntary
market withdrawal (see Note 3 to the Consolidated Financial Statements). These
costs did not include provisions for any subsequent charges which resulted from
legal actions related to these products as previously discussed.


                         American Home Products Corporation and Subsidiaries  51
<PAGE>

      The following table sets forth worldwide income (loss) before taxes by
operating segment together with the percentage changes from the comparable
periods in the prior year on an as-reported basis:

<TABLE>
<CAPTION>
                                                            Years Ended December 31,              1999 vs. 1998     1998 vs. 1997
(Dollar amounts in millions)                 -----------------------------------------------         % Increase        % Increase
Income (Loss) before Taxes(1)                      1999               1998              1997          (Decrease)        (Decrease)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                <C>               <C>                       <C>               <C>
Operating Segment:
  Pharmaceuticals                            $  2,554.6         $  2,488.3        $  2,349.6                  3%                6%
  Consumer Health Care                            578.6              509.7             505.1                 14%                1%
  Agricultural Products(2)                        152.7              494.9             429.9                (69)%              15%
                                             -----------------------------------------------      --------------------------------
                                                3,285.9            3,492.9           3,284.6                 (6)%               6%
  Corporate and All Other(3)                   (5,211.5)              92.6            (469.9)                --                --
                                             -----------------------------------------------      --------------------------------
  Total(4)                                   $ (1,925.6)        $  3,585.5        $  2,814.7                 --                27%
                                             ===============================================      ================================
</TABLE>

(1)   Income (loss) before taxes included goodwill amortization for 1999, 1998
      and 1997 as follows: Pharmaceuticals--$154.3, $158.2 and $145.1, Consumer
      Health Care--$32.7, $22.6 and $16.9, Agricultural Products--$97.0, $97.1
      and $96.2, respectively, and Corporate and All Other of $0.9 in 1998 and
      $14.4 in 1997.

(2)   1999 Agricultural Products income before taxes was decreased by $135.0 as
      a result of the Cyanamid U.S. inventory buyback program. Excluding the
      Cyanamid U.S. inventory buyback program, income before taxes for
      Agricultural Products decreased 42% for the year ended 1999.

(3)   1999 Corporate and All Other included a litigation charge of $4,750.0 in
      connection with litigation brought against the Company regarding the use
      of the antiobesity products Redux or Pondimin. The charge provided for
      expected payments to settlement funds contemplated by the nationwide,
      class action settlement, other judgments and settlements (including
      estimated claims for PPH and any opt outs), and future legal costs, net of
      available insurance.

      1999 Corporate and All Other included a special charge of $195.0 to
      provide for the restructuring of Cyanamid and the impairment of a Cyanamid
      manufacturing facility.

      1999 Corporate and All Other included a special charge of $82.0 related to
      the suspension of shipments and the voluntary market withdrawal of
      RotaShield, the Company's rotavirus vaccine.

      1998 Corporate and All Other included a special charge for restructuring
      and related asset impairments of $343.6.

      1998 Corporate and All Other included the gain on the sale of the
      Sherwood-Davis & Geck medical devices business of $592.1.

      1997 Corporate and All Other included a special charge of $180.0
      associated with the voluntary market withdrawal of Redux and Pondimin.

      Excluding the Corporate and All Other charges and the gain on the sale of
      the Sherwood-Davis & Geck medical devices business from 1999, 1998 and
      1997 results, Corporate and All Other expenses, net increased 18% for the
      year ended 1999 and decreased 46% for the year ended 1998.

(4)   Excluding the 1999 litigation charge, the 1999 Cyanamid U.S. inventory
      buyback program, the 1999, 1998 and 1997 special charges, and the 1998
      gain on the sale, total income before taxes decreased 3% for the year
      ended 1999 and increased 11% for the year ended 1998.

      The following explanations of changes in income before taxes by operating
segment for the year ended 1999 compared with 1998, and 1998 compared with 1997,
exclude items (2) and (3) discussed above.

      Worldwide pharmaceutical income before taxes increased 3% (9% for human
pharmaceuticals) for the year ended 1999 due primarily to higher worldwide
sales, which were offset, in part, by higher selling, general and administrative
expenses, higher research and development expenses, lower gains on the sales of
non-strategic assets and an unfavorable product mix. Higher selling, general and
administrative expenses for worldwide pharmaceuticals for the year ended 1999
were the result of higher selling expenses related to certain product launches
in late 1998 and in 1999, pre-launch marketing costs for certain products
expected to be launched in 2000 and increased headcount to support new product
initiatives. Worldwide pharmaceutical income before taxes increased 6% (4% for
human pharmaceuticals) for the year ended 1998 due primarily to higher U.S.
sales, which were offset, in part, by lower international sales and higher
selling, general and administrative expenses.

      Worldwide consumer health care income before taxes increased 14% for the
year ended 1999 due primarily to higher worldwide sales, which were offset, in
part, by higher selling, general and administrative expenses. Worldwide consumer
health care income before taxes increased 1% for the year ended 1998 due
primarily to higher U.S. sales, which were offset, in part, by lower gains on
the sales of non-strategic assets.

      Worldwide agricultural products income before taxes decreased 42% for the
year ended 1999 due primarily to lower U.S. sales and additional bad debt
provisions, which were offset, in part, by lower selling expenses, primarily
marketing, general expenses, and research and development expenses as a result
of cost-containment efforts. Worldwide agricultural products income before taxes
increased 15% for the year ended 1998 due primarily to higher international
sales and a favorable product mix, which were offset, in part, by higher
selling, general and administrative expenses.

      Corporate and All Other expenses, net increased 18% for the year ended
1999 due primarily to higher general and administrative expenses, the loss of
the Sherwood-Davis & Geck medical devices business operating profit and lower
gains on the sales of non-strategic assets, which were offset, in part, by lower
one-time charges. Corporate and All Other expenses, net decreased 46% for the
year ended 1998 due primarily to lower interest expense, net, higher gains on
the sales of non-strategic assets, lower litigation provisions, and lower
general and administrative expenses, which were offset, in part, by the loss of
the medical devices businesses operating profit.

      The effective tax rate, excluding the effect of the 1999 litigation charge
(see Notes 9 and 10 to the Consolidated Financial Statements), for the year
ended 1999 was 27.1% compared with 31.0% for the year ended 1998. The effective
tax rate decreased in 1999 due primarily to an increased benefit from products
manufactured in lower taxed jurisdictions and basis differences for tax and
financial reporting purposes, primarily goodwill, on the sale of the
Sherwood-Davis & Geck medical devices business and sales of certain other
non-core


52  American Home Products Corporation and Subsidiaries
<PAGE>

assets in 1998. The effective tax rate increased to 31.0% in 1998 from 27.4% in
1997 due primarily to basis differences on the sale of the medical devices
business and the sales of certain non-core assets in 1998.

      Net loss and diluted loss per share for the year ended 1999 were $1,227.1
million and $0.94, respectively. Results for the year ended 1999 included an
after-tax charge of $3,287.5 million ($2.51 per share --diluted) in connection
with litigation brought against the Company regarding the use of the antiobesity
products Redux or Pondimin. The charge provided for expected payments to the
settlement funds contemplated by the nationwide, class action settlement, other
judgments and settlements (including estimated claims for PPH and any opt outs),
and future legal costs, net of available insurance. Also included in the results
for the year ended 1999 was an after-tax special charge of $126.8 million ($0.10
per share--diluted) to provide for the restructuring of Cyanamid and the
impairment of a Cyanamid manufacturing facility, as well as an after-tax charge
of $93.2 million ($0.07 per share--diluted) to repurchase selected U.S. field
inventories from the trade, primarily soybean herbicides, as part of the
Cyanamid U.S. inventory buyback program. In addition, results for the year ended
1999 included an after-tax special charge of $53.0 million ($0.04 per
share--diluted) for estimated costs associated with the suspension of shipments
and the voluntary market withdrawal of RotaShield, the Company's rotavirus
vaccine. Excluding these charges, net income and diluted earnings per share for
the year ended 1999 were $2,333.4 million and $1.78, respectively. The $1.78
diluted earnings per share calculation included the $0.02 per share benefit of
excluding the dilutive impact of common share equivalents. Results for the year
ended 1998 included the after-tax gain on the sale of the Sherwood-Davis & Geck
medical devices business of $330.8 million ($0.25 per share--diluted) and the
after-tax special charge for restructuring and related asset impairments of
$240.5 million ($0.18 per share--diluted) associated with the reorganization of
the pharmaceutical and nutritional supply chains (primarily in the Asian-Pacific
and Latin American regions), the reorganization of the U.S. pharmaceutical and
consumer health care distribution systems, and a reduction in personnel from the
globalization of certain business units. Excluding the gain on the sale and the
special charge, net income and diluted earnings per share for the year ended
1998 were $2,384.0 million and $1.78, respectively. Excluding these charges and
the gain on the sale from the 1999 and 1998 results, net income and diluted
earnings per share for the year ended 1999 decreased 2% and remained flat,
respectively, compared with 1998 results. Including the dilutive impact of
common share equivalents, diluted earnings per share would have decreased 1% for
the year ended 1999 compared with the year ended 1998. The decrease in net
income was due primarily to a significantly lower earnings contribution from the
agricultural products segment, higher pharmaceutical research and development
expenses, and the loss of the Sherwood-Davis & Geck medical devices business
operating profit, which were offset, in part, by higher net income from
increased sales of pharmaceuticals and consumer health care.

      Net income and diluted earnings per share for the year ended 1998 were
$2,474.3 million and $1.85, respectively. Results for the year ended 1998
included the after-tax gain on the sale of the Sherwood-Davis & Geck medical
devices business of $330.8 million ($0.25 per share--diluted) and an after-tax
charge for restructuring and related asset impairments of $240.5 million ($0.18
per share--diluted) discussed above. Excluding the gain on the sale and the
special charge, net income and diluted earnings per share for the year ended
1998 were $2,384.0 million and $1.78, respectively. Results for the year ended
1997 included the after-tax special charge aggregating $117.0 million ($0.09 per
share--diluted) associated with the voluntary market withdrawal of Redux and
Pondimin. Excluding the special charge, net income and diluted earnings per
share for the year ended 1997 were $2,160.1 million and $1.65, respectively.
Excluding these special charges and the gain on the sale from the 1998 and 1997
results, net income and diluted earnings per share for the year ended 1998
increased 10% and 8%, respectively, compared with 1997 amounts. These increases
in net income and diluted earnings per share were greater than the as-reported
net sales increase due primarily to increased sales of higher margin
pharmaceuticals, consumer health care and agricultural products, lower selling,
general and administrative expenses and interest expense, lower provisions for
litigation and other accruals, and additional one-time gains from the sale of
certain non-strategic assets, which were offset, in part, by the divestiture of
lower margin medical devices sales and higher pharmaceutical research and
development expenditures.

Euro Currency

On January 1, 1999, 11 of the 15 member countries of the European Union adopted
the Euro as a new common legal currency. However, the legacy currencies of the
member countries are scheduled to remain legal tender as sub-denominations of
the Euro between January 1, 1999 and January 1, 2002 (the transition period).
Critical areas impacted by the conversion to the Euro have been identified and
appropriate strategies developed, which currently are being implemented to
facilitate the adoption of the Euro and to facilitate business transactions
during the transition period. The costs related to the Euro conversion and
transition period will not have a material adverse effect on the Company's
financial position or results of operations. However, the conversion to the Euro
may have competitive implications on the Company's pricing and marketing
strategies, the total impact of which is not known at this time.

Competition

The Company operates in the highly competitive pharmaceutical, consumer health
care and agrochemical industries. The Company is not dependent on any one
patent-protected product or line of products for a substantial portion of its
sales or results of operations. However, Premarin, one of the Company's
conjugated estrogens products manufactured from pregnant mare's urine and which
has not had patent protection for many years, is the leader in its category and
contributes significantly to sales and results of operations. Premarin's
principal uses are to manage the symptoms of menopause and to prevent
osteoporosis, a condition involving a loss of bone mass in postmenopausal women.
Estrogen-containing products manufactured by other companies have been marketed
for many years for the treatment of menopausal symptoms, and some of these
products also have an approved indication for the prevention of osteoporosis.
During the past several years, other manufacturers have introduced products for
the treatment and/or prevention of osteoporosis. Some companies have attempted
to obtain approval for generic versions of Premarin. These products, if
approved, would be routinely substitutable for Premarin under many state laws
and third-party insurance payer plans. In May 1997, the U.S. Food and


                         American Home Products Corporation and Subsidiaries  53
<PAGE>

Drug Administration (FDA) announced that it would not approve certain synthetic
estrogen products as generic equivalents of Premarin given known compositional
differences between the active ingredient of these products and Premarin.
Although the FDA has not approved any generic equivalent to Premarin to date,
Premarin will continue to be subject to competition from existing and new
competing estrogen and other products for its approved indications and may be
subject to generic competition from either synthetic or natural conjugated
estrogens products in the future. At least one other company has announced that
it is in the process of developing a generic version of Premarin from the same
natural source, and the Company currently cannot predict the timing or outcome
of these or any other efforts.

      The rapid acceptance of genetically modified seed has generated
competition from agricultural products not traditionally used on crops grown
from conventional seed, which has had an adverse effect on the results of
operations of the agricultural products segment for the year ended 1999 and is
expected to continue to have an adverse effect in subsequent periods. In
addition, depressed agricultural commodity prices are expected to continue to
have an adverse effect on farmer demand for premium crop protection products.
The Company is pursuing the divestiture of the agricultural products business.

Liquidity, Financial Condition and Capital Resources

Cash and cash equivalents increased $710.4 million in 1999 to $1,892.7 million.
Cash flows from operating activities of $2,181.6 million, net proceeds from debt
issuances of $1,639.4 million, proceeds from the sales and maturities of
marketable securities of $383.9 million, proceeds from the sales of other assets
of $323.5 million and proceeds from exercises of stock options of $234.3 million
were used principally for dividend payments of $1,183.6 million, purchases of
treasury stock of $1,058.3 million, capital expenditures of $1,000.3 million and
purchases of marketable securities of $784.6 million. Capital expenditures
included strategic investments in manufacturing and distribution facilities
worldwide, and the expansion of the Company's research and development
facilities.

      At December 31, 1999, the carrying values of cash and cash equivalents
approximated fair value due to the short-term, highly liquid nature of cash
equivalents, which have original maturities of three months or less. Interest
rate fluctuations would not have a significant effect on the fair value of cash
equivalents held by the Company.

      As discussed in Note 10 to the Consolidated Financial Statements, on
October 7, 1999, the Company announced a comprehensive, national settlement to
resolve litigation brought against the Company regarding the use of Redux or
Pondimin and recorded a charge of $4,750.0 million in the 1999 third quarter to
provide for expected payments to the settlement funds contemplated by the
nationwide, class action settlement, other judgments and settlements (including
estimated claims for PPH and any opt outs), and future legal costs, net of
available insurance. Payments to the settlement funds in 1999 were $75.0
million, with approximately $1.78 billion expected to be paid over approximately
the next two years (approximately $1.0 billion of which is subject to final
judicial approval). Payments to provide settlement benefits, if needed, may
continue for approximately 16 years after final judicial approval. Future
payments related to the litigation settlement are anticipated to be financed
through additional commercial paper borrowings, existing cash resources and cash
flows from operating activities.

      The Company believes that the foreign currency risks to which it is
exposed are not reasonably likely to have a material adverse effect on the
Company's cash flows, results of operations or financial position due to the
high concentration of sales in the United States. No single foreign currency
accounted for more than 5% of 1999 worldwide sales, except for the British Pound
which accounted for 6% of 1999 worldwide sales. As previously discussed, 11
member countries of the European Union adopted the Euro as a new common legal
currency. However, the legacy currencies of the member countries are scheduled
to remain legal tender as sub-denominations of the Euro until January 1, 2002.
Collectively, these countries accounted for 14% of 1999 worldwide sales.

      The Company's $1.0 billion of 7.70% notes, which were due February 15,
2000, have been classified as current at December 31, 1999. In addition, $841.6
million of outstanding commercial paper at December 31, 1999 was classified as
current, representing the amount of the outstanding commercial paper borrowings
in excess of the Company's $2.0 billion credit facility that supports the
commercial paper program. The Company used a portion of the proceeds from the
$1.8 billion termination fee received as a result of the termination of the
merger agreement with Warner-Lambert Company to pay the $1.0 billion of 7.70%
notes on February 15, 2000. The significant increase in commercial paper was due
primarily to financing treasury stock acquisitions as part of the Company's
common stock repurchase program and funding the purchase of a $450.0 million
convertible subordinated note issued by Immunex Corporation, a majority-owned
subsidiary of the Company. The increase in marketable securities represents the
investment by Immunex Corporation of the proceeds from this note.

      The Company has outstanding $1.0 billion of 7.90% notes due February 2005,
under a $3.5 billion shelf registration statement. The Company also has
outstanding $250.0 million of 6.50% notes due October 2002 and $250.0 million of
7.25% debentures due March 2023. These non-callable notes and debentures are
unsecured and unsubordinated.

      At December 31, 1999, the fair value of the Company's outstanding debt was
$5,584.4 million. If interest rates were to increase or decrease by one
percentage point, the fair value of the outstanding debt would decrease or
increase by approximately $79.9 million.

      At December 31, 1999, the fair value of the $837.9 million notional amount
of foreign exchange forward contracts was a net payable of $14.1 million. As
foreign currency exchange rates change from period to period, the fluctuations
in the fair value of the foreign exchange forward contracts are offset by
fluctuations in the fair value of the underlying hedged transactions. If the
value of the U.S. dollar were to increase or decrease by 10% in relation to all
hedged foreign currencies, the net payable would decrease or increase by
approximately $78.9 million.

      The Company has a common stock repurchase program under which the Company
is authorized, at December 31, 1999, to repurchase 13,906,960 additional shares
in the future. Depending upon, among other things, market conditions, the
Company intends to continue to repurchase common stock during 2000.


54  American Home Products Corporation and Subsidiaries
<PAGE>

      Management is confident that cash flows from operating activities will be
adequate to repay both the principal and interest on its outstanding obligations
without requiring the disposition of any significant strategic core businesses
or assets and, further, to allow the Company to continue to fund its operations
and the litigation settlement, pay dividends and maintain its ongoing programs
of capital expenditures, including the amount already committed at December 31,
1999 of $606.7 million, without restricting its ability to make further
acquisitions as may be appropriate. The Company received a $1.8 billion
termination fee as a result of the termination of its merger agreement with
Warner- Lambert Company. These proceeds will further enhance the Company's cash
flow position.

Year 2000

The Company recognized the importance of addressing Year 2000 problems and
committed certain resources to identify and correct potential problems in order
to minimize the impact on its business. The Company successfully completed the
Year 2000 rollover with no business interruptions.

      The Company's Year 2000 program was organized into three functional areas:
Information Technology, which included computer systems and related application
software; Embedded Chips, which were hidden internal components of many
non-computer devices and machinery; and Business Partners, which included
suppliers, customers and governmental agencies.

      The costs of remediation and appropriate replacement projects for Year
2000 activities were, in the aggregate, approximately $123.0 million through the
end of 1999, and $7.0 million is expected to be incurred in 2000. The total
costs included capital and operating costs of approximately $37.0 million and
$93.0 million, respectively, for all phases within each functional area. These
costs did not include any internal costs.

      The remediation effort involved updating and improving existing systems
and processes that will support the Company in the future. Business continuity
plans also were prepared for more than 170 locations around the world to help
maintain critical business operations in the event of a Year 2000-related
disruption. The Company's investment in the Year 2000 program was prudent and
necessary to sustain normal operations.

Company Statements for Forward-Looking Information

This Annual Report, including management's discussion and analysis set forth
above, contains certain forward-looking statements, including, among other
things, statements regarding the Company's results of operations, Euro currency,
competition, liquidity, financial condition and capital resources. These
forward-looking statements are based on current expectations. Certain factors
which could cause the Company's actual results to differ materially from
expected and historical results have been identified by the Company in Exhibit
99 to the Company's 1998 Annual Report on Form 10-K and the Company's 1999
Annual Report on Form 10-K, which will be filed by March 30, 2000.


                         American Home Products Corporation and Subsidiaries  55
<PAGE>

Directors and Officers

Board of Directors

John R. Stafford 1,5
Chairman, President and
Chief Executive Officer

Clifford L.
Alexander, Jr. 2,4,5
President, Alexander
& Associates, Inc.

Frank A.
Bennack, Jr. 1,3,5
President and Chief Executive
Officer, The Hearst Corporation

Robert Essner
Executive Vice President

John D. Feerick 2,3,5
Dean, Fordham University School of Law

John P. Mascotte 3,5
President and
Chief Executive Officer,
Blue Cross and Blue Shield
of Kansas City, Inc.

Mary Lake Polan,
M.D., Ph.D. 4,5
Chairman and Professor,
Department of Gynecology and
Obstetrics, Stanford University
School of Medicine

Ivan G. Seidenberg 2,5
Chairman and Chief Executive Officer,
Bell Atlantic Corporation

John R. Torell III 4,5
Chairman, Torell Management Inc.


Directors Emeriti

John W. Culligan
Retired--Former Chairman
of the Board

William F. Laporte
Retired--Former Chairman
of the Board


Principal Corporate Officers

John R. Stafford 6,7,8
Chairman, President and
Chief Executive Officer

Robert Essner 6,7,8
Executive Vice President

Joseph J. Carr 6,7
Senior Vice President

John R. Considine 6,7,8
Senior Vice President--Finance

Louis L. Hoynes, Jr. 6,7,8
Senior Vice President and
General Counsel

Robert I. Levy, M.D. 6,7
Senior Vice President--
Science and Technology

Kenneth J. Martin 6,7,8
Senior Vice President and
Chief Financial Officer

William J. Murray 6,7
Senior Vice President

David M. Olivier 6,7
Senior Vice President

John B. Adams
Vice President--
Corporate Development

Egon E. Berg
Vice President and
Associate General Counsel

Thomas G. Cavanagh
Vice President--
Investor Relations

Bruce Fadem
Vice President--
Corporate Systems and
Chief Information Officer

Leo C. Jardot
Vice President--
Government Relations

Gerald A. Jibilian
Vice President and
Associate General Counsel

Paul J. Jones 6
Vice President and Comptroller

Rene R. Lewin 6,8
Vice President--
Human Resources

Thomas M. Nee 6,8
Vice President--Taxes

Jack M. O'Connor
Vice President and Treasurer

Marily H. Rhudy
Vice President--
Public Affairs

Steven A. Tasher
Vice President--Environmental
Affairs and Associate
General Counsel

Eileen M. Lach
Secretary


Principal Division and Subsidiary Officers

Global Agricultural
Products, American
Cyanamid Company
Howard L. Minigh, Ph.D. 7
President

Global Agricultural
Products Research
Division
Mark W. Atwood, Ph.D.
President

Fort Dodge Animal
Health Division
E. Thomas Corcoran 7
President

Immunex Corporation*
Edward V. Fritzky
Chairman and Chief
Executive Officer

Specialty
Pharmaceuticals
Division
David G. Strunce
President

Whitehall
International, Inc.
Bruce I. Macphail 7
President

Whitehall-Robins
Healthcare
David M. Olivier 6,7
Senior Vice President, AHP

Wyeth-Ayerst Global
Pharmaceuticals
Bernard Poussot 7
President

Wyeth-Ayerst Global
Pharmaceuticals--
Europe, Middle East
and Africa
Robert N. Power
President

Wyeth-Ayerst Global
Pharmaceuticals--
Intercontinental Region
Mark M. Larsen
President

Wyeth-Ayerst Global
Pharmaceuticals--
North America
Joseph M. Mahady 7
President

Wyeth-Ayerst Research
L. Patrick Gage, Ph.D. 7
President

Wyeth Vaccines and
Nutrition
Kevin L. Reilly
President

1 Executive Committee
2 Audit Committee
3 Compensation and
  Benefits Committee
4 Corporate Issues Committee
5 Nominating Committee
6 Finance Committee
7 Operations Committee
8 Retirement Committee

* AHP is majority owner


56  American Home Products Corporation and Subsidiaries
<PAGE>

Principal Products - United States

Ethical Pharmaceuticals and Vaccines

Anti-Infectives

Bicillin
Minocin
Pipracil
Suprax
Zosyn

Cardiovascular

Cordarone
Cordarone I.V.
Inderal LA
ISMO
Sectral
Zebeta
Ziac

Musculoskeletal

Enbrel
Lodine XL
Oruvail
Synvisc

Neuroscience

Ativan
Effexor
Effexor XR
Sonata

Specialty Products

BeneFIX
Neumega
Rapamune

Vaccines

Acel-Imune
FluShield
HibTITER
Pnu-Imune 23
Prevnar
Tetramune

Women's Health

Alesse
Lo/Ovral
Nordette
Premarin
Premarin Vaginal
  Cream
Premphase
Prempro
Triphasil


Consumer Health Care

Analgesics and
Cough/Cold/Allergy

Advil
Advil Cold & Sinus
Anacin
Children's Advil
Dimetapp
Dristan
Robitussin
Robitussin Honey
  Products

Nutritional
Supplements

Caltrate
Centrum
Centrum Focused
  Formulas
Centrum Herbals
Centrum Performance
Centrum Silver
Solgar

Other Products

Anbesol
Chap Stick
Denorex
FiberCon
Preparation H
Primatene


Agricultural Products

Herbicides

Arsenal
Assert
Backdraft
Cadre
Chopper
Extreme
Lightning
Prowl
Pursuit
Raptor
Scepter
Squadron
Steel

Fungicides and
Insecticides

Acrobat
Amdro
Counter
Thimet


Animal Health Care

Veterinary
Pharmaceuticals and
Biologicals

Cydectin
Duramune
EtoGesic
Fel-O-Vax
Fluvac
Ketaset
LymeVax
Nolvasan
Panalog
PolyFlex
PYRAMID
Quest
Rabvac
Suvaxyn
Synovex
Telazol
ToDAY
ToMORROW
Torbugesic
Triangle

The above principal products are identified as trademarks used by American Home
Products Corporation and its subsidiaries.


                         American Home Products Corporation and Subsidiaries  57
<PAGE>

Corporate Data

Executive Offices

American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
(973) 660-5000


Stock Trading Information

American Home Products stock is listed on the
New York Stock Exchange (ticker symbol: AHP).


Independent Public Accountants

Arthur Andersen LLP
1345 Avenue of the Americas
New York, NY 10105


Annual Meeting

The Annual Meeting of Stockholders will be held on Thursday, April 27, 2000,
at the Headquarters Plaza Hotel in Morristown, New Jersey.


Stockholder Account Information

ChaseMellon Shareholder Services, L.L.C. is the transfer agent, registrar,
dividend disbursing agent and dividend reinvestment agent for the Company.
Stockholders of record with questions about lost certificates, lost or missing
dividend checks, or notification of change of address should contact:
ChaseMellon Shareholder Services, L.L.C.
Overpeck Center
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 565-2067
For the hearing impaired: (800) 231-5469 (TDD)
Internet address: http://www.chasemellon.com


Form 10-K

A copy of the Company's Annual Report on Form 10-K may be obtained by any
stockholder without charge through ChaseMellon Shareholder Services, L.L.C.


Master Investment Plan

The plan provides stockholders of record with the opportunity to automatically
reinvest dividends or to make cash purchases of additional shares of the
Company's common stock. Inquiries should be directed to ChaseMellon
Shareholder Services, L.L.C.


Equal Employment Opportunity

Our established affirmative action and equal employment programs demonstrate
our long-standing commitment to provide job and promotional opportunities for
all qualified persons regardless of age, color, disability, national origin,
race, religion, sex, sexual orientation, status as a Vietnam-era veteran or a
special disabled veteran, or any military uniformed services obligation.


Policy on Health, Safety and Environmental Protection

A copy of the Company's "Policy on Health, Safety and Environmental Protection"
may be obtained upon written request to:
American Home Products Corporation
Department of Environment and Safety
Five Giralda Farms
Madison, NJ 07940


AHP on the Internet

American Home Products' Internet address is:
http://www.ahp.com


Trademarks

Product designations appearing in differentiated type are trademarks.


58  American Home Products Corporation and Subsidiaries

<PAGE>


Design: Arnold Saks Associates
Text: Linda Errante

Page 21 cell photo: University of Washington


                          American Home Products Corporation and Subsidiaries 59
<PAGE>

[LOGO](R)   American Home Products Corporation
            Five Giralda Farms
            Madison, New Jersey 07940