Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 11-K

 

 

 

x	ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2012

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-4448

 

 

 

A.	Full title of the plan and the address of the plan, if different from that of the issuer named below:

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

 

B.	Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Baxter International Inc.

One Baxter Parkway

Deerfield, IL 60015

(224) 948-2000

 

 

 

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Table of Contents

Baxter International Inc.

and Subsidiaries

Incentive Investment Plan

Financial Statements and Supplemental Schedule

December 31, 2012 and 2011

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Index

December 31, 2012 and 2011

 

 

		Page(s)
Report of Independent Registered Public Accounting Firm			1
Financial Statements
Statements of Net Assets Available for Benefits as of December 31, 2012 and 2011			2
Statements of Changes in Net Assets Available for Benefits for the years ended December  31, 2012 and 2011			3
Notes to Financial Statements			4-14
Supplemental Information
Schedule H, Line 4i: Schedule of Assets (Held at End of Year) as of December 31, 2012			16-67

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Table of Contents

Report of Independent Registered Public Accounting Firm

To the Participants and Administrative Committee of

  the Baxter International Inc. and Subsidiaries Incentive Investment Plan

Deerfield, Illinois

We have audited the accompanying statements of net assets available for benefits of the Baxter International Inc. and Subsidiaries Incentive Investment Plan (“the Plan”) as of December 31, 2012 and 2011, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, Line 4i - Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic 2012 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2012 financial statements taken as a whole.

 

/s/ Crowe Horwath LLP

Oak Brook, Illinois

June 26, 2013

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Statements of Net Assets Available for Benefits

December 31, 2012 and 2011 (in thousands)

 

 

		2012				2011
Assets
Investments
Cash and cash equivalents		$	47,603			$	55,858
Common stock (including securities on loan of $2,821 in 2012 and $1,108 in 2011)			444,196				394,301
U.S. government and government agency issues (including securities on loan of $8,091 in 2012 and $5,336 in 2011)			28,292				21,865
Corporate and other obligations (including securities on loan of $7,559 in 2012 and $7,072 in 2011)			40,509				40,242
Commingled funds			381,516				335,027
Registered investment companies			307,109				214,074
Synthetic guaranteed investment contracts			777,297				743,892
Collateral held on loaned securities			18,842				13,782
Total investments at fair value			2,045,364				1,819,041
Receivables
Notes receivables from participants			43,079				40,514
Sponsor contributions			18,963				15,102
Accrued interest and dividends			1,975				1,869
Due from brokers for securities sold			1,415				16
Total receivables			65,432				57,501
Total assets			2,110,796				1,876,542
Liabilities
Accounts payable			6,126				4,295
Due to brokers for securities purchased			—				81
Collateral to be paid on loaned securities			18,842				13,782
Total liabilities			24,968				18,158
Net assets available for benefits, reflecting investments at fair value			2,085,828				1,858,384
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			(68,692	)			(60,432	)
Net assets available for benefits		$	2,017,136			$	1,797,952

The accompanying notes are an integral part of these financial statements.

 

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Statements of Changes in Net Assets Available for Benefits

For the Years Ended December 31, 2012 and 2011 (in thousands)

 

 

		2012				2011
Additions (reductions) to net assets attributed to
Investment income
Net appreciation (depreciation) in fair value of investments		$	168,628			$	(39,315	)
Interest			28,982				30,742
Dividends			14,771				12,405
Net investment income			212,381				3,832
Participant loan interest			3,525				1,811
Contributions
Sponsor			59,471				53,357
Participant			92,936				84,207
			152,407				137,564
Net additions			368,313				143,207
Deductions from net assets attributed to
Benefits paid			161,649				148,773
Plan expenses			7,138				6,569
Total deductions			168,787				155,342
Increase (decrease) before transfer			199,526				(12,135	)
Transfer from other plan (Refer to Note 11)			19,658				—
Net increase (decrease)			219,184				(12,135	)
Net assets available for benefits
Beginning of year			1,797,952				1,810,087
End of year		$	2,017,136			$	1,797,952

The accompanying notes are an integral part of these financial statements.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

1.	General Description of the Plan

The following description of the Baxter International Inc. and Subsidiaries Incentive Investment Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document and summary plan description for more complete information. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

The Plan allows tax deferred contributions in compliance with Section 401(k) of the Internal Revenue Code. Eligible participants may make pre-tax contributions of up to 50% of their eligible annual compensation within certain limitations. Newly hired employees are deemed to have elected to contribute 3% of compensation (increased by 1% per year to a total of 6%) unless they make a contrary election. The Plan sponsor, Baxter International Inc. (Baxter or the Company), matches participant contributions up to a maximum of 3.5% of the employee’s compensation. Participant contributions and Plan sponsor matching contributions are fully vested and nonforfeitable at all times. The Company also contributes an additional non-matching 3% of compensation for employees that are not eligible to participate in the Company’s U.S. qualified defined benefit pension plan, which includes all new employees hired on or after January 1, 2007, and employees who had less than five years of service on January 1, 2007 and who elected to cease earning additional service in the pension plan and participate in the higher level of Company contributions in the Plan. The additional non-matching contribution becomes fully vested after three years of service. Forfeitures of nonvested accounts are used to reduce future employer contributions.

Participants may borrow up to the lesser of $50,000 or 50% of their vested account balance. The loans are secured by the balance in the participant’s account and bear interest at variable rates as outlined in the Plan agreement. The loans are reported at their unpaid principal balance plus any accrued but unpaid interest, with no allowance for credit losses, as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participant’s account balances.

Participants or their beneficiaries may elect lump-sum benefit payments, or benefits may be paid in installments. Shares of Baxter common stock may also be distributed in kind at the participant’s election. Subject to certain provisions specified in the Plan agreement, employed participants may withdraw their pre-tax contributions, matching contributions made prior to 2008, vested non-matching contributions and related earnings in cases of financial hardship and in certain other circumstances. In the case of a participant termination of death or disability, the entire vested amount is paid to the person or persons legally entitled thereto.

Each participant’s account is credited with the participant’s contributions and an allocation of the Company’s contributions and Plan earnings, and is charged with his or her withdrawals and an allocation of Plan-related expenses. Allocations are based on participant earnings or account balances, as defined in the Plan document. The net income of the Plan is posted to the participant’s accounts on a daily basis. Each participant directs the investment of his or her account to any of the investment options available under the Plan.

Upon enrollment in the Plan, a participant may direct contributions to any of 18 investment options: Stable Income Fund, Baxter Common Stock Fund, Composite Fund, General Equity Fund, S&P 500 Flagship Fund, International EAFE Equity Index Fund, Small Cap Fund, ten different Target Retirement Funds and the Self-Managed Fund. However, non-matching contributions may not be invested in the Baxter Common Stock Fund. In addition, certain participants may maintain shares received in connection with Baxter’s 1996 spin-off of Allegiance Corporation (Allegiance), which were subsequently converted into common shares of Cardinal Health Inc. (Cardinal) upon Cardinal’s acquisition of Allegiance in 1999. These shares are maintained in the Cardinal Health Common Stock Fund. Additionally, certain participants maintain shares in Edwards Lifesciences Corporation. These shares were placed into the Edwards Lifesciences Common Stock Fund in connection with Baxter’s 2000 spin-off of its cardiovascular business. Participants are not able to make contributions or transfer existing account balances to the Cardinal Health Common Stock Fund or the Edwards Lifesciences Common Stock Fund, but may make transfers out of these funds at any time.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

2.	Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting. Accordingly, investment income is recognized when earned and expenses are recognized when incurred.

Valuation of Investments and Collateral

The fair value of Plan investments and collateral is determined as follows:

 

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

Income Recognition

Plan investment return includes dividend and interest income, gains and losses on sales of investments and unrealized depreciation or appreciation of investments. Purchases and sales of investments are recorded on a trade date basis. Dividends are recorded on the ex-dividend date. Interest is earned on an accrual basis.

The financial statements reflect the net depreciation or appreciation in the fair value of the Plan’s investments. This net depreciation or appreciation consists of realized gains and losses calculated as the difference between proceeds from a sales transaction and cost determined on a moving average basis, and unrealized gains and losses calculated as the change in the fair value between beginning of the year (or purchase date if later) and the end of the year.

Synthetic Guaranteed Investment Contracts

The Plan holds synthetic guaranteed investment contracts (GICs) as part of the Stable Income Fund. The synthetic GICs provide for a fixed return on principal over a specified time through fully benefit-responsive contracts issued by Transamerica (formerly Aegon Institutional Markets) and Bank of America N.A. The portfolio of assets, overall of investment grade, underlying the synthetic GICs primarily includes cash and cash equivalents, U.S. government and government agency issues, and corporate and other obligations.

The fair value of the synthetic GICs equals the total of the fair value of the underlying assets plus the fair value of the wrapper contracts. The fair value of the wrapper contracts is computed using a replacement cost approach that incorporates a comparison of the current fee rate on similar wrapper contracts to the fee being paid by the Plan. Using this approach, the fair values of the wrapper contracts were a loss of $991 thousand and a loss of $343 thousand at December 31, 2012 and 2011, respectively.

While Plan investments are presented at fair value in the Statements of Net Assets Available for Benefits, any material difference between the fair value of the Plan’s direct and indirect interests in fully benefit-responsive investment contracts and their contract value is presented as an adjustment line in the Statements of Net Assets Available for Benefits, because contract value is the relevant measurement attribute for that portion of the Plan’s net assets available for benefits. Contract value represents contributions, plus earnings, less participant withdrawals and administrative expenses. The wrapper contracts used by the Plan are fully benefit-responsive because the wrapper contract issuers are contractually obligated to make up any shortfall in the event that the underlying asset portfolio has been liquidated and is inadequate to cover participant withdrawals and transfers

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

at contract value. There are currently no reserves against contract values for credit risk of the contract issuers or any other risk. The contract value for the synthetic GICs was $708.6 million and $683.5 million at December 31, 2012 and 2011, respectively.

The crediting interest rate, which is reset quarterly, can never fall below zero. The crediting rate formula smoothes the impact of interest rate changes on participant returns by amortizing any difference between market value and book value over a period of years equal to the duration of the portfolio benchmark. The average yield on the synthetic GICs was approximately 2.2% and 2.9% at December 31, 2012 and 2011, respectively. The average interest rate credited to participants on the synthetic GICs was approximately 3.4% and 3.7% for the years ended December 31, 2012 and 2011. The credit ratings for Transamerica were AA- at both December 31, 2012 and 2011, and the credit ratings for Bank of America N.A. were A at both December 31, 2012 and 2011, respectively.

Events that lead to market value withdrawals that exceed 20 percent of the contract value would limit the ability of the Plan to transact at contract value with participants. These events include restructurings, early retirement plans, divestitures, bankruptcies, or legal, tax or regulatory changes. The Plan sponsor believes that the occurrence of any such event is remote.

The wrapper providers can only terminate at a value different than contract value under an event of default (that was not remedied) such as failure to follow the terms of the contract. If a wrapper provider would like to exit the contract for another reason, the Plan can maintain the contract through an extended termination process designed to ensure continued benefit-responsive treatment for withdrawals.

Payment of Benefits and Fees

Benefits are recorded when paid. Loan origination fees associated with notes receivable from participants and the Plan’s record keeping and trustee fees are paid by the Plan and are reflected in the financial statements as Plan expenses. Investment management fees are charged to the Plan as a reduction of investment return and included in the investment income (loss) reported by the Plan. All other expenses of the Plan are paid by the Company.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to the financial statements. Changes in such estimates may affect amounts reported in future periods.

Other

Due from or due to brokers for securities sold or purchased, respectively, represent the net cash value of security trades initiated but not yet settled at each respective year-end.

Risks and Uncertainties

The Plan provides for various investment options which invest in any combination of registered investment companies, U.S. government and government agency issues, corporate and other obligations, common stock, commingled funds, synthetic guaranteed investment contracts and short-term investments. Investment securities are exposed to various risks, such as interest rate, market, liquidity and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits. Individual participants’ accounts bear the risk of loss resulting from fluctuations in investment values.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

Investments underlying the Plan’s synthetic GICs include securities with contractual cash flows, such as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities, including securities backed by subprime mortgage loans. The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate values, delinquencies and/or defaults and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.

 

3.	Eligibility Requirements

Employees become eligible to participate in the Plan as of the first day of the month following the completion of thirty days of employment. Eligible employees are those who meet the following requirements:

 

A.

U.S. employees of Baxter or its subsidiaries which have adopted the Plan;

 

B.

U.S. employees not covered by a collective bargaining agreement unless the agreement provides for coverage under the Plan; and

 

C.

U.S. employees who are not leased employees.

 

4.	Administration of the Plan

State Street Bank and Trust Company (the Trustee) serves as trustee and ING Institutional Plan Services, LLC serves as recordkeeper for the Plan.

The Administrative Committee administers the Plan. The Investment Committee has authority, responsibility and control over the management of the assets of the Plan. Members of both committees are appointed by the Board of Directors of Baxter and are employees of Baxter.

Substantially all investment manager, trustee and administrative fees incurred in the administration of the Plan were paid from the assets of the Plan.

 

5.	Fair Value Measurements

The fair value hierarchy under the accounting standard for fair value measurements consists of the following three levels:

 

•

Level 1 - Quoted prices in active markets that the Plan has the ability to access for identical assets or liabilities;

 

•

Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market; and

 

•

Level 3 - Valuations using significant inputs that are unobservable in the market and include the use of judgment by the Plan’s management about the assumptions market participants would use in pricing the asset or liability.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

The following tables summarize the bases used to measure the Plan’s financial instruments and liabilities that are carried at fair value on a recurring basis.

 

						Basis of Fair Value Measurement
		Balance at December 31, 2012				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
(in thousands)
Assets
Cash and cash equivalents		$	47,603			$	—			$	47,603			$	—
Common stock:
Healthcare			233,821				233,821				—				—
Consumer products			51,020				51,020				—				—
Information technology			57,333				57,333				—				—
Financial services			30,371				30,371				—				—
Industrial services and materials			29,686				29,686				—				—
Energy			14,125				14,125				—				—
Other			27,840				27,840				—				—
Total common stock			444,196				444,196				—				—
U.S. government and government agency issues			28,292				—				28,292				—
Corporate and other obligations			40,509				—				40,509				—
Commingled funds			381,516				—				381,516				—
Registered investment companies:
Target retirement funds			291,573				291,573				—				—
Self-managed funds			12,772				12,772				—				—
Other			2,764				2,764				—				—
Total registered investment companies			307,109				307,109				—				—
Synthetic guaranteed investment contracts:
Corporate and other obligations			293,972				—				293,972				—
U.S. government and government agency issues			442,114				—				442,114				—
Cash and cash equivalents			42,202				—				42,202				—
Wrapper contracts			(991	)			—				—				(991	)
Total synthetic guaranteed investment contracts			777,297				—				778,288				(991	)
Collateral held on loaned securities			18,842				—				18,842				—
Total assets		$	2,045,364			$	751,305			$	1,295,050			$	(991	)
Liability
Collateral to be paid on loaned securities		$	18,842			$	2,859			$	15,983			$	—

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

						Basis of Fair Value Measurement
		Balance at December 31, 2011				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
(in thousands)
Assets
Cash and cash equivalents		$	55,858			$	—			$	55,858			$	—
Common stock:
Healthcare			201,587				201,587				—				—
Consumer products			55,827				55,827				—				—
Information technology			47,938				47,938				—				—
Financial services			21,838				21,838				—				—
Industrial services and materials			20,624				20,624				—				—
Energy			16,602				16,602				—				—
Other			29,885				29,885				—				—
Total common stock			394,301				394,301				—				—
U.S. government and government agency issues			21,865				—				21,865				—
Corporate and other obligations			40,242				—				40,242				—
Commingled funds			335,027				—				335,027				—
Registered investment companies:
Target retirement funds			199,777				199,777				—				—
Self-managed funds			11,830				11,830				—				—
Other			2,467				2,467				—				—
Total registered investment companies			214,074				214,074				—				—
Synthetic guaranteed investment contracts:
Corporate and other obligations			257,547				—				257,547				—
U.S. government and government agency issues			463,348				—				463,348				—
Cash and cash equivalents			23,347				17				23,330				—
Wrapper contracts			(343	)			—				—				(343	)
Other			(7	)			—				(7	)			—
Total synthetic guaranteed investment contracts			743,892				17				744,218				(343	)
Collateral held on loaned securities			13,782				—				13,782				—
Total assets		$	1,819,041			$	608,392			$	1,210,992			$	(343	)
Liability
Collateral to be paid on loaned securities		$	13,782			$	1,135			$	12,647			$	—

There were no transfers from Level 1 to Level 2 investments in 2012 or 2011.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

The following table sets forth a summary of changes in the fair values of the Plan’s level 3 financial instruments.

 

(in thousands)		Wrapper Contracts
Balance at December 31, 2010		$	1,634
Unrealized losses (relating to assets held at end of year)			(1,977	)
Balance at December 31, 2011			(343	)
Unrealized losses (relating to assets held at end of year)			(648	)
Balance at December 31, 2012		$	(991	)

The unrealized losses from the wrapper contracts are excluded from the net appreciation (depreciation) reported for the Plan, but instead are reflected in the change in the adjustment from fair value to contract value for fully benefit responsive contracts reported on the statements of net assets available for benefits.

See Valuation of Investments and Collateral in Note 2 above for a discussion of the methodologies used to determine the fair values of the Plan’s investments and collateral. These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

6.	Investments

Investments representing five percent or more of the Plan’s net assets available for benefits at December 31, 2012 and 2011 are summarized as follows:

 

(in thousands, except per share data)		2012				2011
Baxter common stock, 2,516,782 shares and 2,921,806 shares at December 31, 2012 and 2011, respectively		$	167,769			$	144,571
State Street Global Advisors (SSgA) S&P 500 Flagship Fund			197,250				173,817

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

Investments as of December 31, 2012 and 2011 are segregated into various investment fund options as follows:

 

		2012				2011
(in thousands)
Cash (available for investment)		$	6,597			$	6,861
Stable Income Fund			803,238				775,335
Baxter Common Stock Fund			168,607				144,639
Composite Fund			154,624				140,853
General Equity Fund			151,465				137,841
Cardinal Health Common Stock Fund			4,847				5,243
SSgA S&P 500 Flagship Fund			197,250				173,954
SSgA International EAFE Equity Index Fund			90,079				80,053
Edwards Lifesciences Common Stock Fund			19,658				17,747
SSgA Small Cap Fund			94,187				81,274
Self-Managed Fund			44,397				41,682
Target Retirement Funds			291,573				199,777
Collateral held on loaned securities			18,842				13,782
Total investments at fair value			2,045,364				1,819,041
Adjustment from fair value to contract value for Stable Income Fund			(68,692	)			(60,432	)
Total investments		$	1,976,672			$	1,758,609

Net appreciation (depreciation) in fair value for each significant class of investment, which includes realized and unrealized gains and losses, is as follows:

 

		2012				2011
(in thousands)
Baxter common stock		$	48,002			$	(1,295	)
Other common stock			38,620				(22,315	)
U.S. government and government agency issues			38				1,154
Corporate and other obligations			3,365				1,031
Commingled funds			54,283				(11,490	)
Registered investment companies			24,320				(7,314	)
Collateral held on loaned securities			—				914
		$	168,628			$	(39,315	)

 

7.	Securities Lending Transactions

The Plan participates in a securities lending program with the Trustee. The program allows the Trustee to loan securities, which are assets of the Plan, to approved brokers (the Borrowers).

The Trustee requires the Borrowers, pursuant to a security loan agreement, to deliver collateral to secure each loan in an amount that is at least equal to the fair value of the securities loaned. The Plan bears the risk of loss with respect to any unfavorable change in fair value of the invested cash collateral. However, the Borrower bears the risk of loss related to the decrease in the fair value of the non-cash collateral and, therefore, would have to deliver additional securities to maintain the required collateral. In the event of default by the Borrower, the Trustee shall indemnify the Plan by purchasing replacement securities equal to the number of unreturned loaned securities or, if replacement securities are not able to be purchased, the Trustee shall credit the Plan for the market value of the unreturned securities. In each case, the Trustee would apply the proceeds from the collateral for such a loan to make the Plan whole.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

The fair value of the investment of cash collateral received pursuant to securities lending transactions is reflected on the Statements of Net Assets Available for Benefits as an asset and the obligation to return the amount received is reflected as a liability.

As of December 31, 2010, the Plan had securities on loan with a fair value of $228.8 million, with cash collateral received of $232.9 million, which was reflected at its fair value of $230.4 million. During 2010, $218.4 million was redeemed from the State Street Quality D Short-Term Investment Fund and held in a separate fund (Baxter International Savings Trust Separate Account) for liquidation due to an agreement between the Plan and the Trustee to terminate the securities lending program for the securities within the Stable Income Fund. As a result of the liquidation of this fund in 2011, a realized gain of $914 thousand is reflected in the 2011 Statement of Changes in Net Assets Available for Benefits. As of December 31, 2012 and 2011, the Plan had securities on loan with a fair value of $18.5 million and $13.5 million, respectively, with cash collateral received of $18.8 million and $13.8 million, respectively, which was invested in the State Street Quality D Short-Term Investment Fund. Investments underlying this fund primarily consisted of cash and cash equivalents and asset-backed securities as of both December 31, 2012 and 2011, and the net asset value of this fund was approximately $1.00 per unit. As of December 31, 2012 and 2011 the cash collateral received is reflected at its fair value of $18.8 million and $13.8 million in the 2012 and 2011 Statements of Net Assets Available for Benefits, respectively.

The Plan did not receive any non-cash collateral for securities on loan at December 31, 2012. Non-cash collateral of $2.0 million received for securities on loan at December 31, 2011, consisted of U.S. government and government agency issues held by the Trustee on behalf of the Plan. Non-cash collateral is not included with the collateral balance on the 2011 Statement of Net Assets Available for Benefits because it may not be sold or repledged. A portion of the income generated upon investment of cash collateral is remitted to the Borrowers, and the remainder is allocated between the Plan and the Trustee in its capacity as a security agent. Securities lending income allocated to the Plan amounted to $45 thousand and $57 thousand for 2012 and 2011, respectively. Securities lending income is classified as interest income in the Statements of Changes in Net Assets Available for Benefits.

 

8.	Plan Termination

Although it has not expressed any intent to do so, the Plan sponsor has the right under the Plan to reduce, suspend or discontinue its contributions at any time and to terminate the Plan subject to the provisions of the ERISA. In the event the Plan terminates, the interest of each participating employee in the Plan shall become fully vested and such termination of the Plan would not reduce the interest of any participating employee or their beneficiaries accrued under the Plan up to the date of such termination.

 

9.	Tax Status of the Plan

The Internal Revenue Service (IRS) has determined and informed the Plan sponsor by a letter dated July 19, 2006 that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (the IRC). The Plan has been amended since the date of the determination letter. The Plan sponsor believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan’s financial statements. The Plan has requested from the IRS an updated determination letter, but has not yet received it as of the date of this report.

 

13

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2012 and 2011

 

 

10.	Related Parties

Parties-in-interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others.

At December 31, 2012 and 2011, the Plan held units of participation in certain shares of common stock of State Street Corporation, commingled funds and short-term investment funds of State Street Bank and Trust Company, and units of registered investment companies of SSgA, the Plan trustee; shares of common stock and bonds of Baxter, the Plan sponsor; loans with participants; units of registered investment companies managed by Pacific Investment Management Company, an investment manager for the Plan; shares of common stock and units of registered investment companies managed by AllianceBernstein, an investment manager for the Plan; units of registered investment companies managed by Loomis Sayles, an investment manager for the Plan; shares of common stock, bonds, and interest rate wrapper contracts of Bank of America, issuer of the Plan’s fully benefit-responsive contracts; interest rate wrapper contracts of Transamerica, issuer of the Plan’s fully benefit-responsive contracts; and units of registered investment companies in various affiliates of ING Institutional Plan Services, LLC, the recordkeeper. These transactions are allowable party-in-interest transactions under ERISA and the regulations promulgated thereunder.

Fees paid by the Plan for investment management, recordkeeping and consulting services, also qualify as party-in-interest transactions and are included in Plan expenses in the accompanying financial statements. The Company pays certain expenses for the administration of the Plan. These transactions are exempt from the party-in interest transaction prohibitions of ERISA.

 

11.	Plan Merger

During 2011, Baxter acquired Baxa Corporation (Baxa). The Baxa 401(k) Plan was merged into the Plan effective October 2012. As a result of this merger, total assets of approximately $19.7 million were transferred into the Plan.

 

14

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SUPPLEMENTAL SCHEDULE

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Cash & Cash Equivalents:
*		SSgA Money Market Fund		Short-Term Investment Fund			—			$	9,153,455
*		State Street Bank & Trust Co		Short-Term Investment Fund			—				38,436,778
		United States Dollar		Cash			—				12,545
										$	47,602,778
**		Common Stock:
		3D Systems Corp		Common Stock			—				213
		3Dicon Corp		Common Stock			—				1,437
		3M Company		Common Stock			—				11,960
		8X8 Inc		Common Stock			—				8,856
		A123 Systems		Common Stock			—				11
		ABB Ltd		Common Stock			—				49,571
		Abbott Laboratories		Common Stock			—				162,542
		Abbott Laboratories		Common Stock			—				1,296,052
		Access Pharmaceuticals Inc		Common Stock			—				2,867
		Acclaim Entertainment Inc		Common Stock			—				—
		ACE Ltd		Common Stock			—				1,178,069
		Achillion Pharmaceuticals Inc		Common Stock			—				801
		Acme Packet Inc		Common Stock			—				17,696
		Acorda Therapeutics Inc		Common Stock			—				12,430
		Activision Blizzard Inc		Common Stock			—				23,491
		Adaptive Broadband Corp		Common Stock			—				—
		Adarna Energy Corp		Common Stock			—				—
		Adept Technology Inc		Common Stock			—				2,600
		Adobe Systems		Common Stock			—				941,365
		Adolor Corporation		Common Stock			—				—
		ADT Corp		Common Stock			—				511
		Advanced Micro Devices Inc		Common Stock			—				5,472
		Advanced Optics Electronics Inc		Common Stock			—				—
		Advansource Biomaterials Corp		Common Stock			—				85
		Advanta Corp		Common Stock			—				—
		Advantage Oil & Gas Ltd		Common Stock			—				810
		Adventrx Pharmaceuticals Inc		Common Stock			—				570
		AES Corp		Common Stock			—				1,035,468
		Affymax Inc		Common Stock			—				3,798
		Aflac Inc		Common Stock			—				37,848
		Agenus Inc		Common Stock			—				4,252
		Agilent Technologies		Common Stock			—				743,175
		Agnico Eagle Mines Ltd		Common Stock			—				26,831
		Agrium Inc		Common Stock			—				7,490
		AK Steel Hldg Corp		Common Stock			—				2,308
		Akorn Inc		Common Stock			—				30,060
		Aksys Ltd		Common Stock			—				1
		Alcatel Lucent		Common Stock			—				7,075
		Alcoa Inc		Common Stock			—				17,325
		Alexco Resource Corp		Common Stock			—				24,990
		Alexion Pharmaceuticals		Common Stock			—				2,061,503

 

16

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		ALJ Regal Holdings Inc		Common Stock			—				700
		All American Gold Corp		Common Stock			—				8
		Allergan Inc		Common Stock			—				2,086,810
		Alliance Pharmaceutical Corp		Common Stock			—				2
		Alliancebernstein Hldg LP		Common Stock			—				8,470
		Allied Irish Banks		Common Stock			—				1,070
		Allos Therapeutics Inc		Common Stock			—				—
		Allscripts Healthcare Solutions Inc		Common Stock			—				4,540
		Allstate Corp		Common Stock			—				21,678
		Almaden Minerals Ltd		Common Stock			—				15,850
		Alnylam Pharmaceuticals Inc		Common Stock			—				1,825
		Alon USA Energy Inc		Common Stock			—				9,950
		Altair Nanotechnologies Inc		Common Stock			—				88
		Alternative Living Services		Common Stock			—				—
		Altria Group Inc		Common Stock			—				149,330
		Aluminum Corp China Ltd		Common Stock			—				202
		Alvarion Ltd		Common Stock			—				186
		Amarin Corp		Common Stock			—				30,216
		Amazon.com Inc		Common Stock			—				72,752
		Amazon.com Inc		Common Stock			—				3,936,918
		Amcore Finl Inc		Common Stock			—				—
		Amdocs Ltd		Common Stock			—				6,798
		Ameren Corp		Common Stock			—				3,266
		American Cap Agy Corp		Common Stock			—				25,866
		American Cap Ltd		Common Stock			—				32,229
		American Cap Mtg Invt Corp		Common Stock			—				5,512
		American Elec Pwr Co		Common Stock			—				40,508
		American Express Co		Common Stock			—				6,897
		American International Group		Common Stock			—				1,209,570
		American Intl Group Inc		Common Stock			—				3,491
		American Intl Group Inc		Common Stock			—				23,404
		American Lithium Minerals Inc		Common Stock			—				120
		American Realty Capital Trust Inc		Common Stock			—				8,266
		American Tower Corporation		Common Stock			—				3,014,857
		American Tower Corporation		Common Stock			—				17,887
		Amerigas Partners LP		Common Stock			—				8,135
		Amgen Inc		Common Stock			—				93,017
		Ampliphi Biosciences Corp		Common Stock			—				1,754
		Amstem Corp		Common Stock			—				—
		Anadarko Pete Corp		Common Stock			—				3,716
		Analog Devices		Common Stock			—				203,513
		Andrea Electronics Corp		Common Stock			—				25
		Annaly Mortgage Management Inc		Common Stock			—				149,171
		Antares Pharma Inc		Common Stock			—				24,765
		Anthera Pharmaceuticals Inc		Common Stock			—				3,100
		AOL Inc		Common Stock			—				415
		AON PLC		Common Stock			—				1,103,564
		Apache Corp		Common Stock			—				17,663
		Apollo Group Inc		Common Stock			—				1,255

 

17

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Apple Computer Inc		Common Stock			—				3,856,120
		Apple Inc		Common Stock			—				7,737,939
		Applied Materials Inc		Common Stock			—				2,974
		Applied Materials Inc		Common Stock			—				720,731
		Apptech Corp		Common Stock			—				—
		Apricus Biosciences Inc		Common Stock			—				1,791
		Aqua America Inc		Common Stock			—				3,034
		Aradigm Corp		Common Stock			—				448
		Arch Coal Inc		Common Stock			—				8,658
		Archer Daniels Midland		Common Stock			—				6,598
		Arcos Dorados Holdings Inc		Common Stock			—				35,593
		Arena Pharmaceuticals Inc		Common Stock			—				675,580
		Ariad Pharmaceutical Inc		Common Stock			—				95,612
		ARM Holdings Plc		Common Stock			—				1,353,267
		ARM Holdings Plc		Common Stock			—				9,458
		Array Biopharma Inc		Common Stock			—				5,022
		Artificial Life Inc		Common Stock			—				60
		Asia Pulp & Paper Co		Common Stock			—				—
		Astrazeneca Plc		Common Stock			—				2,127
		Astropower Inc		Common Stock			—				—
		AT&T Inc		Common Stock			—				145,514
		Atlantic Power Corp		Common Stock			—				8,261
		ATP Oil & Gas Corp		Common Stock			—				570
		Atwood Oceanics Inc		Common Stock			—				4,579
		ATX Communications Inc		Common Stock			—				—
		Augme Technologies Inc		Common Stock			—				41,844
		Aurizon Mines Ltd		Common Stock			—				6,960
		Automatic Data Processing Inc		Common Stock			—				40,259
		Avago Technologies		Common Stock			—				1,151,122
		Avanir Pharmaceuticals		Common Stock			—				3,114
		Babson Cap Partn Invs		Common Stock			—				27,820
		Backweb Technologies Ltd		Common Stock			—				327
		Baidu Inc		Common Stock			—				96,278
		Baidu Inc		Common Stock			—				1,288,928
		Banco Bilbao Vizcaya Argentaria Sa		Common Stock			—				7,716
		Banco Latino- Americano De Comercio		Common Stock			—				18,973
		Banco Santander Sa		Common Stock			—				15,354
		Bank New York Mellon Corp		Common Stock			—				28,627
*		Bank of America Corp		Common Stock			—				532,525
*		Bank of America Corp		Common Stock			—				1,175,255
		Bank of Ireland		Common Stock			—				3,413
		Barrick Gold		Common Stock			—				1,078,632
*		Baxter International Inc		Common Stock			—				322,555
*		Baxter International Inc		Common Stock			—				167,446,120
		Bayer AG		Common Stock			—				24,379
		BB&T Corp		Common Stock			—				5,094
		BB&T Corp		Common Stock			—				980,219
		BCE Inc		Common Stock			—				1,115,179
		Beacon Pwr Corp		Common Stock			—				20

 

18

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Beacon Roofing Supply Inc		Common Stock			—				33,280
		Berkshire Hathaway Inc		Common Stock			—				149,351
		Best Buy Inc		Common Stock			—				10,818
		Beyond Corp Com New		Common Stock			—				—
		Big Bear Mining Corp		Common Stock			—				10
		Bioclinica Inc		Common Stock			—				5,720
		Biodel Inc		Common Stock			—				705
		Bioelectronics Corp		Common Stock			—				154
		Biogen		Common Stock			—				2,024,478
		Biogen Idec Inc		Common Stock			—				5,269
		Biomedical Technology Solutions		Common Stock			—				28
		Biomerica Inc		Common Stock			—				11,270
		Biomoda Inc		Common Stock			—				135
		Bionovo Inc Com New		Common Stock			—				450
		Biopharm Asia Inc		Common Stock			—				975
		Biosante Pharmaceuticals Inc		Common Stock			—				2,478
		Bizauctions Inc		Common Stock			—				—
		Black Hills Corp		Common Stock			—				3,997
		Blackbaud Inc		Common Stock			—				22,830
		Blackrock Inc		Common Stock			—				959,370
		Blackstone Group LP		Common Stock			—				35,857
		Blavod Extreme Spirits		Common Stock			—				37
		Blyth Inc		Common Stock			—				4,665
		Boeing Co		Common Stock			—				19,025
		Boeing Co		Common Stock			—				2,002,689
		Boingo Wireless Inc		Common Stock			—				7,248
		Borgwarner Inc		Common Stock			—				723,214
		Boston Scientific		Common Stock			—				1,146
		BP Amoco Plc		Common Stock			—				5,190
		BP Liquidating Inc		Common Stock			—				2
		BP PLC		Common Stock			—				842,930
		Braskem S.A.		Common Stock			—				1,335
		Bridgepoint Ed Inc		Common Stock			—				14,863
		Bristol Myers Squibb		Common Stock			—				43,718
		Bristol Myers Squibb		Common Stock			—				1,706,797
		Broadcom Corp		Common Stock			—				42,509
		Broadridge Financial Solutions		Common Stock			—				1,716
		Broadwind Energy Inc		Common Stock			—				22
		Brookfield Asset Mgmt Inc		Common Stock			—				9,163
		Brookfield Infrastructure Partners		Common Stock			—				12,454
		Brookfield Residential Pptys Inc		Common Stock			—				18
		Buckeye Partners LP		Common Stock			—				18,164
		Bunge Ltd		Common Stock			—				1,055,161
		Burberry Group		Common Stock			—				508,843
		Cadence Pharmaceuticals Inc		Common Stock			—				10,634
		Calamp Corp		Common Stock			—				156,324
		Calgon Carbon Corp		Common Stock			—				1,702
		Cambridge Heart Inc		Common Stock			—				15
		Camden Ppty Tr Sh Ben Int		Common Stock			—				13,262

 

19

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Cameron Intl Corp		Common Stock			—				4,404
		Canadian Natural Resources Ltd		Common Stock			—				5,774
		Canadian Pacific Railway		Common Stock			—				251,872
		Canadian Solar Inc		Common Stock			—				51
		Capital One		Common Stock			—				1,235,617
		Capital One Financial Corp		Common Stock			—				1,647,490
		Capitalsource Inc		Common Stock			—				14,766
		Capitol Bancorp Ltd		Common Stock			—				37
		Capstead Mtg Corp		Common Stock			—				11,470
		Capstone Turbine Corp		Common Stock			—				89
		Carbonite Inc		Common Stock			—				925
		Cardinal Communications Inc		Common Stock			—				—
		Cardinal Health Inc		Common Stock			—				1,016,607
		Cardinal Health Inc		Common Stock			—				4,808,959
		Cardinal Health Inc		Common Stock			—				95,711
		Cardium Therapeutics Inc		Common Stock			—				1,026
		Carefusion Corp Com		Common Stock			—				28,580
		Carmax Inc		Common Stock			—				9,423
		Catamaran Corp		Common Stock			—				23,691
		Caterpillar Inc		Common Stock			—				210,272
		Cbl & Assoc Pptys Inc		Common Stock			—				2,446
		Celgene Corp		Common Stock			—				14,046
		Cell Therapeutics Inc		Common Stock			—				2,558
		Cel-Sci Corp		Common Stock			—				702
		Cemex SA		Common Stock			—				945
		Cenovus Energy Inc		Common Stock			—				1,811
		Central Fund CDA		Common Stock			—				21,030
		Centurytel Inc		Common Stock			—				3,364
		Ceragon Networks Ltd		Common Stock			—				662
		Cereplast Inc		Common Stock			—				129
		Cerus Corp		Common Stock			—				4,108
		Charles Schwab Corp		Common Stock			—				1,131,577
		Charter Comm Inc		Common Stock			—				—
		Chesapeake Energy Corporation		Common Stock			—				134,728
		Chevron Corp		Common Stock			—				157,174
		Chimera Invt Corp		Common Stock			—				13,676
		China Automotive Sys Inc		Common Stock			—				3,439
		China Biologic Prods Inc		Common Stock			—				4,648
		China Energy Svgs Technology Inc		Common Stock			—				—
		China New Borun Corp		Common Stock			—				1,078
		China Shen Zhou Mng & Res Inc		Common Stock			—				3,220
		Chipotle Mexican Grill Inc		Common Stock			—				49,081
		Chipotle Mexican Grill Inc		Common Stock			—				1,676,344
		Church & Dwight Inc		Common Stock			—				6,918
		Churchill Downs Inc		Common Stock			—				7,063
		Ciena Corp		Common Stock			—				31
		Cisco Systems		Common Stock			—				203,401
		Cisco Systems		Common Stock			—				1,851,133
		Citadel Broadcasting Corp		Common Stock			—				—

 

20

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Citigroup Inc		Common Stock			—				2,109,487
		Citigroup Inc		Common Stock			—				1,168,031
		Citigroup Inc		Common Stock			—				166,082
		City Bank Lynnwood Wash		Common Stock			—				20
		Clarent Corp		Common Stock			—				—
		Clean Energy Fuels Corp		Common Stock			—				52,913
		Clean Habors Inc		Common Stock			—				5,501
		Cleco Corp		Common Stock			—				120,030
		Cliffs Nat Res Inc		Common Stock			—				13,590
		Clp Hldgs		Common Stock			—				1,673
		Coach Inc		Common Stock			—				1,789,813
		Coca Cola Co		Common Stock			—				132,839
		Coca Cola Co		Common Stock			—				417,024
		Coeur D Alene Mines Corp		Common Stock			—				20,295
		Coinstar Inc		Common Stock			—				8,842
		Coldwater Creek Inc		Common Stock			—				3,608
		Colgate-Palmolive Co		Common Stock			—				5,784
		Colonial Bancgroup		Common Stock			—				—
		Columbia Laboratories Inc		Common Stock			—				382
		Comcast Corp		Common Stock			—				1,044,606
		Comcast Corp		Common Stock			—				3,736
		Commtouch Software Limited		Common Stock			—				1,290
		Companhia Siderurgica Nacional CSN		Common Stock			—				7,520
		Compass Minerals Intl Inc		Common Stock			—				8,467
		Conagra Foods Inc		Common Stock			—				5,950
		Concho Resources		Common Stock			—				1,699,530
		Conocophillips		Common Stock			—				148,307
		Consolidated Communications Hldgs Inc		Common Stock			—				1,320
		Consolidated Edison Hldg Co Inc		Common Stock			—				69,515
		Constellation Energy Partners Llc		Common Stock			—				7,080
		Corning Inc		Common Stock			—				8,051
		Cortex Pharmaceuticals Inc		Common Stock			—				199
		Costco Wholesale Corp		Common Stock			—				10,083
		Costco Wholesale Corp		Common Stock			—				2,969,296
		Covidien Plc		Common Stock			—				1,168,846
		Covidien Plc		Common Stock			—				1,270
		Cpfl Energia Sa		Common Stock			—				4,192
		Credit Suisse		Common Stock			—				7,254
		Cree Inc		Common Stock			—				88,348
		Crocs Inc		Common Stock			—				20,448
		Cross Timbers Royalty Trust		Common Stock			—				404
		Crown Castle Intl		Common Stock			—				1,563,221
		Cubist Pharmaceuticals Inc		Common Stock			—				2,103
		Cui Global Inc		Common Stock			—				88
		Cummins Inc		Common Stock			—				1,021,784
		Cummins Inc		Common Stock			—				22,910
		CVR Partners LP		Common Stock			—				12,620
		CVS Caremark Corp		Common Stock			—				1,079,025
		CVS Corp Del		Common Stock			—				31,036

 

21

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Cyber-Care Inc		Common Stock			—				—
		Cyberonics Inc		Common Stock			—				2,311
		Cyclacel Pharmaceuticals Inc		Common Stock			—				861
		Cytori Therapeutics Inc		Common Stock			—				2,100
		Cytosorbents Corp		Common Stock			—				975
		Cytrx Corp		Common Stock			—				10,292
		Dan River Inc		Common Stock			—				—
		Darling Intl Inc		Common Stock			—				3,208
		Daulton Cap Corp		Common Stock			—				35
		Daystar Technologies Inc		Common Stock			—				3
		Decisionpoint Sys		Common Stock			—				8
		Deckers Outdoor		Common Stock			—				18,122
		Deere & Co		Common Stock			—				75,723
		Delcath Systems Inc		Common Stock			—				1,689
		Dell Inc		Common Stock			—				18,030
		Denbury Res Inc		Common Stock			—				29,792
		Dendreon Corp		Common Stock			—				78,742
		Derma Sciences Inc		Common Stock			—				2,222
		Devon Energy Corp		Common Stock			—				1,043,182
		Devon Energy Corp		Common Stock			—				17,433
		Devry Inc		Common Stock			—				11,865
		Diamond Offshore Drilling Inc		Common Stock			—				1,019
		Diana Containerships Inc		Common Stock			—				42
		Diana Shipping Inc		Common Stock			—				1,676
		Digerati Technologies Inc		Common Stock			—				28
		Digital Angel Corp		Common Stock			—				639
		Discover Finl Svcs		Common Stock			—				22,745
		Discovery Laboratories Inc		Common Stock			—				80
		Disney Walt Co		Common Stock			—				103,912
		Divine Inc		Common Stock			—				—
		Dolby Laboratories Inc		Common Stock			—				4,400
		Dollar General Corp		Common Stock			—				6,790
		Dominion Resources Inc		Common Stock			—				37,051
		Doral Finl Corp		Common Stock			—				36
		Dow Chemical Co		Common Stock			—				43,700
		Downey Finl Corp		Common Stock			—				—
		Dryships Inc		Common Stock			—				8,962
		Du Pont		Common Stock			—				1,065,764
		Du Pont		Common Stock			—				12,009
		Duke Energy Corp		Common Stock			—				136,474
		Duke Realty Corp		Common Stock			—				61,722
		Duma Energy Corp		Common Stock			—				816
		Dunkin Brands Group		Common Stock			—				1,477,940
		Dunkin Brands Group		Common Stock			—				5,043
		Dynamic Materials Corp		Common Stock			—				22,893
		Dynegy Inc		Common Stock			—				4
		EMC Corp		Common Stock			—				25,047
		E Trade Finl Corp		Common Stock			—				6,641
		Eagle Bulk Shipping Inc		Common Stock			—				38

 

22

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Eastman Kodak Co		Common Stock			—				10,127
		Eaton Corp Plc		Common Stock			—				16,254
		Eb2B Commerce Inc		Common Stock			—				—
		Ebay Inc		Common Stock			—				13,463
		Ebay Inc		Common Stock			—				1,529,720
		Ecolocap Solutions Inc		Common Stock			—				3
		E-Commerce China Dangdang Inc		Common Stock			—				4,565
		Edap Tms S.A.		Common Stock			—				67,320
		Edwards Lifesciences Corp		Common Stock			—				19,529,718
		Edwards Lifesciences Corp		Common Stock			—				659,954
		Elan Corp Plc Adr		Common Stock			—				7,351
		Eldorado Gold Corp		Common Stock			—				38,640
		Eline Entertainment Group Inc		Common Stock			—				—
		EMC Corp		Common Stock			—				2,844,707
		Emcore Corp Com		Common Stock			—				4
		Emergent Biosolutions Inc		Common Stock			—				4,812
		Emerson Electric Co		Common Stock			—				7,229
		Emulex Corp Com		Common Stock			—				840
		Enbridge Energy Partners		Common Stock			—				2,790
		Enbridge Inc		Common Stock			—				4,332
		Encana Corp		Common Stock			—				736,598
		Encana Corp		Common Stock			—				15,913
		Endologix Inc		Common Stock			—				5,696
		Energy Conversion Devices Inc		Common Stock			—				—
		Energy Transfer Partners		Common Stock			—				55,144
		Energysolutions Inc		Common Stock			—				312
		Engility Hldgs Inc		Common Stock			—				116
		Enron Corp		Common Stock			—				—
		Ensco Plc		Common Stock			—				8,892
		Enterprise Products		Common Stock			—				77,956
		Entravision Communications Corp		Common Stock			—				249
		Entremed Inc Com		Common Stock			—				51
		EOG Resources Inc		Common Stock			—				1,232,015
		Epix Pharmaceuticals Inc		Common Stock			—				—
		Escrow CDC Liquidating Trust		Common Stock			—				—
		Estee Lauder Companies		Common Stock			—				2,230,765
		Evergreen Solar Inc		Common Stock			—				—
		Evolving Sys Inc		Common Stock			—				11,920
		Exelixis Inc		Common Stock			—				15,387
		Exelon Corp		Common Stock			—				36,601
		Exeter Resource Corp		Common Stock			—				4,840
		Expedia Inc		Common Stock			—				1,905
		Expeditors Intl		Common Stock			—				12,038
		Express Scripts Hldg Co		Common Stock			—				5,400
		Express Scripts Inc		Common Stock			—				2,196,938
		Exxon Mobil Corp		Common Stock			—				75,330
		Exxon Mobil Corp		Common Stock			—				1,995,633
		Facebook Inc		Common Stock			—				1,543,788
		Facebook Inc		Common Stock			—				161,956

 

23

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Fairpoint Communications Inc		Common Stock			—				—
		Family Dollar Stores Inc		Common Stock			—				743,251
		Family Dollar Stores Inc		Common Stock			—				3,350
		Fastenal Co		Common Stock			—				6,998
		Federal Natl Mtg Assn		Common Stock			—				5,701
		Finisar Corp Com New		Common Stock			—				4,073
		First American Financial Corp		Common Stock			—				1,205
		First China Pharmaceutical Group Inc		Common Stock			—				2,640
		First Majestic Silver Corp		Common Stock			—				34,929
		First Physicians Cap Group Inc		Common Stock			—				—
		First Solar Inc		Common Stock			—				26,690
		Flagstar Bancorp Inc		Common Stock			—				7,760
		Flexsteel Inds Inc		Common Stock			—				4,290
		Flextronics International		Common Stock			—				6,210
		Flextronics Ltd		Common Stock			—				1,082,952
		Fluor Corp		Common Stock			—				14,913
		Focus Gold Corp		Common Stock			—				10
		Food Technology Svc Inc		Common Stock			—				2,505
		Ford Motor Co		Common Stock			—				212,049
		Ford Motor Co		Common Stock			—				630,440
		Fortress Invt Group Llc		Common Stock			—				2,195
		Forward Inds		Common Stock			—				148
		Fossil Inc		Common Stock			—				1,862
		Foster Wheeler Ag		Common Stock			—				17,024
		France Telecom		Common Stock			—				11,050
		Franklin Res Inc		Common Stock			—				33,914
		Freddie Mac		Common Stock			—				5,237
		Freeport Mcmoran Copper & Gold Inc.		Common Stock			—				116,349
		Fresenius Kabi Pharmaceuticals Hldg		Common Stock			—				—
		Frontier Communications Corp		Common Stock			—				6,101
		Fuel Sys Solutions Inc		Common Stock			—				1,839
		Fuel Tech Inc		Common Stock			—				328
		Fusion-Io		Common Stock			—				229
		Futuremedia Plc		Common Stock			—				—
		Fx Energy Inc		Common Stock			—				575
		Gas Nat Inc		Common Stock			—				2,799
		Geeknet Inc		Common Stock			—				3,590
		Generac Hldgs Inc		Common Stock			—				3,431
		General Dynamics Corp		Common Stock			—				10,436
		General Electric Co		Common Stock			—				1,084,029
		General Electric Co		Common Stock			—				336,418
		General Electric Co		Common Stock			—				1,760,770
		General Mills Inc		Common Stock			—				65,504
		General Steel Hldgs Inc		Common Stock			—				891
		Generex Biotechnology Corp		Common Stock			—				163
		Genetic Technologies Ltd		Common Stock			—				22
		Geopharma Inc		Common Stock			—				3
		Geron Corp		Common Stock			—				1,410
		Gevo Inc		Common Stock			—				10,683

 

24

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Giant Interactive Group Inc		Common Stock			—				1,976
		Gilead Sciences		Common Stock			—				507,711
		Gilead Sciences		Common Stock			—				1,597,186
		Gilead Sciences		Common Stock			—				37,827
		GMX Res Inc		Common Stock			—				100
		Gold Amern Mng Corp		Common Stock			—				50
		Gold Fields Ltd		Common Stock			—				4,996
		Goldcorp Inc		Common Stock			—				3,686
		Goldman Sachs Group Inc		Common Stock			—				2,178,647
		Goldman Sachs Group Inc		Common Stock			—				74,552
		Goodyear Tire & Rubber Co		Common Stock			—				4,764
		Google Inc		Common Stock			—				1,155,802
		Google Inc		Common Stock			—				5,032,993
		Google Inc		Common Stock			—				118,840
		GPO Aeroportuario Del Sureste Sab		Common Stock			—				2,394
		Grace W R & Co		Common Stock			—				20,169
		Grand Pacaraima Gold Corp		Common Stock			—				2
		Graphic Packaging Hldg Co		Common Stock			—				1,292
		Great Basin Gold		Common Stock			—				420
		Great Panther Silver Limited		Common Stock			—				7,650
		Green Earth Technologies Inc		Common Stock			—				3,900
		Green Mtn Coffee Roasters Inc		Common Stock			—				24,391
		Greenhunter Energy		Common Stock			—				—
		Groupon Inc		Common Stock			—				292
		Gsi Technology Inc		Common Stock			—				3,135
		Guess? Inc		Common Stock			—				883
		Guggenheim		Common Stock			—				14,116
		Halliburton Co		Common Stock			—				1,162,976
		Halliburton Co		Common Stock			—				18,573
		Halozyme Therapeutics Inc		Common Stock			—				134,529
		Hansen Med Inc		Common Stock			—				11,960
		Hanwha Solarone Company Ltd		Common Stock			—				10
		Harley Davidson Inc		Common Stock			—				4,883
		Hartford Finl Svcs Group		Common Stock			—				2,963
		Hasbro Inc		Common Stock			—				4,859
		Hatteras Finl Corp		Common Stock			—				5,113
		HCA Hldgs Inc		Common Stock			—				15,085
		HCP Inc		Common Stock			—				20,056
		Headwaters Inc		Common Stock			—				10,700
		Health Care Reit Inc		Common Stock			—				6,129
		Healthwarehouse.Com		Common Stock			—				106
		Heckmann Corp		Common Stock			—				27,001
		Hecla Mining Co		Common Stock			—				5,830
		Helix Energy Solutions Group Inc		Common Stock			—				4,128
		Hellenic Telecomm Org		Common Stock			—				296
		Hemisperix Bioprarma Inc		Common Stock			—				226
		Henry Jack & Associates Inc		Common Stock			—				7,302
		Herbalife Ltd		Common Stock			—				7,313
		Hercules Offshore Inc		Common Stock			—				25,297

 

25

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Hermes International		Common Stock			—				3,580
		Hewlett-Packard Co		Common Stock			—				20,020
		Hillenbrand Inc		Common Stock			—				12,820
		Hollyfrontier Corporation		Common Stock			—				13,965
		Hologic Inc		Common Stock			—				2,001
		Home Depot Inc		Common Stock			—				149,059
		Home Solutions Amer Inc		Common Stock			—				—
		Honeywell International Inc		Common Stock			—				2,083,948
		Honeywell International Inc		Common Stock			—				19,041
		Horizon Lines Inc		Common Stock			—				60
		Hospira Inc		Common Stock			—				312
		Houston Amern Energy Corp		Common Stock			—				10,340
		Hovnanian Enterprise Inc		Common Stock			—				27,132
		Howard Hughes Corp		Common Stock			—				1,899
		HSBC Holdings Plc		Common Stock			—				33,024
		HSN Inc		Common Stock			—				661
		Hugoton Rty Tr Tex		Common Stock			—				8,906
		Huntington Bancshares Inc		Common Stock			—				4,359
		Hydrogenics Corporation		Common Stock			—				487
		Hyperdynamics Corp		Common Stock			—				5,681
		Iac / Interactivecrp		Common Stock			—				1,465
		IBM		Common Stock			—				2,486,013
		ICG Group Inc		Common Stock			—				857
		Idearc Inc		Common Stock			—				—
		Igo Inc Com		Common Stock			—				14
		Illinois Tool Works		Common Stock			—				3,864
		Illumina Inc		Common Stock			—				5,559
		Illumina Inc		Common Stock			—				275,512
		Imaging3 Inc		Common Stock			—				1,352
		Imation Corp		Common Stock			—				467
		Imax Corp		Common Stock			—				4,496
		Immunogen Inc		Common Stock			—				6,375
		Immunomedics Inc		Common Stock			—				2,920
		Incyte Genomics Inc		Common Stock			—				48,086
		Indevus Pharmaceuticals Inc		Common Stock			—				—
		Inditex Unspon		Common Stock			—				3,037,975
		Indymac Bancorp Inc		Common Stock			—				—
		Infinera Corp		Common Stock			—				25,512
		Infosys Technologies Limited		Common Stock			—				2,115
		Ingles Mkts Inc		Common Stock			—				21,782
		Ingles Mkts Inc		Common Stock			—				8,195
		Inplay Technologies Inc		Common Stock			—				—
		Insmed Incorporated		Common Stock			—				1,659
		Insys Therapeutics Inc		Common Stock			—				248
		Intel Corp		Common Stock			—				124,730
		Intermune Inc		Common Stock			—				22,578
		Interoil Corp		Common Stock			—				21,101
		Interval Leisure Group Inc		Common Stock			—				233
		Intl Business Machine		Common Stock			—				61,577

 

26

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Intl Fuel Tech Inc		Common Stock			—				473
		Intl Speedway		Common Stock			—				15,013
		Intuit		Common Stock			—				1,369,282
		Intuitive Surgical Inc		Common Stock			—				2,452
		Invensense Inc		Common Stock			—				6,699
		Invesco Ltd		Common Stock			—				1,120,702
		Invesco Van Kampen		Common Stock			—				20,953
		Invivo Therapeutics Hldgs Corp		Common Stock			—				1,740
		Invo Bioscience Inc		Common Stock			—				12
		IPG Photonics Corp		Common Stock			—				23,794
		Ironwood Gold Corp		Common Stock			—				642
		Isc8 Inc		Common Stock			—				60
		Isoray Inc		Common Stock			—				780
		Ivanhoe Energy		Common Stock			—				4,089
		Ja Solar Holdings Co		Common Stock			—				1,601
		Jabil Circuit Inc		Common Stock			—				9,697
		James Riv Coal Co		Common Stock			—				6,420
		JDS Uniphase Corp		Common Stock			—				2,525
		Jensen Portfolio, Inc.		Common Stock			—				71,410
		Jetblue Awys Corp		Common Stock			—				12,298
		John Bean Technologies Corp		Common Stock			—				404
		Johnson & Johnson		Common Stock			—				140,096
		Johnson & Johnson		Common Stock			—				2,017,824
		Johnson Controls Inc		Common Stock			—				1,385,420
		Johnson Controls Inc		Common Stock			—				11,533
		Joy Global Inc		Common Stock			—				4,784
		JP Morgan Chase & Co		Common Stock			—				7,692
		JP Morgan Chase & Co		Common Stock			—				45,354
		JP Morgan Chase & Co		Common Stock			—				1,843,151
		Juniper Networks Inc		Common Stock			—				33,439
		K V Pharmaceutical Co		Common Stock			—				37
		Kansas City Southern		Common Stock			—				701,765
		KB Home		Common Stock			—				28,523
		Keegan Res Inc		Common Stock			—				19,800
		Keryx Biopharmaceuticals Inc		Common Stock			—				13,703
		Keycorp New		Common Stock			—				8,420
		Kilroy Realty Corp		Common Stock			—				3,112
		Kimberly Clark Corp		Common Stock			—				33,772
		Kinder Morgan Energy Partners		Common Stock			—				231,453
		Kinder Morgan Mgmt Llc		Common Stock			—				14,232
		Kinross Gold Corp		Common Stock			—				19,440
		KMA Global Solutions Intl Inc		Common Stock			—				42
		Knightsbridge Tank		Common Stock			—				5,093
		Kobex Minerals Inc		Common Stock			—				485
		Kodiak Oil & Gas Corp		Common Stock			—				8,850
		Kohl’s Corp		Common Stock			—				49,740
		Kraft Foods Group Inc		Common Stock			—				38,149
		Krispy Kreme Doughnuts Inc		Common Stock			—				9,380
		Kronos Worldwide Inc		Common Stock			—				81

 

27

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		L-3 Communications Hldgs Inc		Common Stock			—				2,828
		Laboratory Corp of America Hldgs		Common Stock			—				17,324
		Las Vegas Sands Corp		Common Stock			—				9,952
		LDK Solar Co Ltd		Common Stock			—				1,106
		Leap Wireless Intl Inc		Common Stock			—
		Legacy Resvs LP		Common Stock			—				2,380
		Lehman Brothers Holdings Inc		Common Stock			—				—
		Lender Processing Svcs Inc		Common Stock			—				4,924
		Lennox Intl Inc		Common Stock			—				13,130
		Level 3 Communications Inc		Common Stock			—				7,696
		Life Technologies Corp		Common Stock			—				1,080,777
		Life Technologies Corp		Common Stock			—				4,903
		Lifeline Biotechnologies Inc		Common Stock			—				—
		Lilly Eli & Co		Common Stock			—				2,959
		Limelight Networks Inc		Common Stock			—				1,110
		Linkedin Corp		Common Stock			—				2,107,772
		Linn Co		Common Stock			—				4,715
		Linn Energy Llc		Common Stock			—				107,515
		Linux Gold Corp		Common Stock			—				95
		Lithium Expl Group Inc		Common Stock			—				2,144
		Live Nation Entertainment Inc		Common Stock			—				158
		Lloyds Banking Group		Common Stock			—				6,400
		Lone Pine Resources Inc		Common Stock			—				1,230
		Loral Space & Communications Ltd		Common Stock			—				—
		Lowes		Common Stock			—				375,304
		Lowes		Common Stock			—				38,840
		Lowes		Common Stock			—				817,251
		LPBP Inc		Common Stock			—				—
		LSI Logic Corp		Common Stock			—				643
		Lululemon Athletica		Common Stock			—				1,768,368
		Lumber Liquidators Hldgs Inc		Common Stock			—				17,751
		Lynas Corporation NPV		Common Stock			—				298
		Lyondellbasell Industries NV Com		Common Stock			—				28,545
		M 2003 Plc		Common Stock			—				—
		M D U Res Group Inc		Common Stock			—				2,174
		Macquarie Infrastructure Co		Common Stock			—				22,780
		Macys Inc		Common Stock			—				19,510
		Mahanagar Tel Nigam Ltd		Common Stock			—				179
		Main Str Cap Corp		Common Stock			—				40,375
		Mako Surgical Corp		Common Stock			—				2,570
		Mandalay Digital Group Inc		Common Stock			—				20
		Manhattan Scientific Inc		Common Stock			—				4,272
		Manitowoc Inc		Common Stock			—				2,979
		Mannkind Corp		Common Stock			—				24,255
		Marathon Oil Corp		Common Stock			—				53,287
		Marathon Oil Corp		Common Stock			—				1,033,926
		Marathon Petroleum Corp		Common Stock			—				45,328
		Markel Corp Hldg Co		Common Stock			—				36,407
		Marsh & Mclennan Cos		Common Stock			—				1,014,342

 

28

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 36-0781620 and Plan Number 023

December 31, 2012

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Marvell Tech Group		Common Stock			—				3,680
		Mastercard Inc		Common Stock			—				39,302
		Mastercard Inc		Common Stock			—				4,699,915
		McDonalds Corp		Common Stock			—				905,895
		McDonalds Corp		Common Stock			—				48,299
		McKesson Corp		Common Stock			—				1,359,589
		Medclean Technologies Inc		Common Stock			—				—
		Medicines Co		Common Stock			—				11,985
		Medivation Inc		Common Stock			—				1,739
		Medtronic Inc		Common Stock			—				9,310
		Meetme Inc		Common Stock			—				17,450
		Mellanox Technologies Ltd		Common Stock			—				11,876
		Mercadolibre Inc		Common Stock			—				2,362
		Merck & Co Inc		Common Stock			—				90,962
		Meru Networks		Common Stock			—				1,590
		Metabolix Inc		Common Stock			—				740
		Metlife Inc		Common Stock			—				460,264
		Metlife Inc		Common Stock			—				3,697
		Mgic Invst Corp		Common Stock			—				670
		MGM Mirage		Common Stock			—				12,455
		Michael Kors Holdings Ltd		Common Stock			—				5,103
		Micro Imaging Technology Inc		Common Stock			—				60
		Microsoft Corp		Common Stock			—				80,924
		Microsoft Corp		Common Stock			—				682,317
		Microsoft Corp		Common Stock			—				1,137,635
		Microvision Inc		Common Stock			—				4,775
		Miller Herman Inc		Common Stock			—				2,146
		Mindspeed Technologies Inc		Common Stock			—				28
		Mirant Corp		Common Stock			—				—
		Miravant Medical Technology		Common Stock			—				—
		Mitek Sys Inc		Common Stock			—				3,210
		Modern Energy Corp		Common Stock