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, 2013

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, 2013 and 2012

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Index

December 31, 2013 and 2012

 

 

		Page(s)
Report of Independent Registered Public Accounting Firm			1
Financial Statements
Statements of Net Assets Available for Benefits as of December 31, 2013 and 2012			2
Statements of Changes in Net Assets Available for Benefits for the years ended December  31, 2013 and 2012			3
Notes to Financial Statements			4-15
Supplemental Information
Schedule H, Line 4i: Schedule of Assets (Held at End of Year) as of December 31, 2013			16-65

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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, 2013 and 2012, 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, 2013 and 2012, 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 2013 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2013 financial statements taken as a whole.

/s/ Crowe Horwath LLP

Oak Brook, Illinois

June 25, 2014

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Table of Contents

Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Statements of Net Assets Available for Benefits

December 31, 2013 and 2012 (in thousands)

 

 

		2013				2012
Assets
Investments
Cash and cash equivalents		$	35,266			$	47,603
Common stock (including securities on loan of $1,927 in 2013 and $2,821 in 2012)			493,958				444,196
U.S. government and government agency issues (including securities on loan of $5,325 in 2013 and $8,091 in 2012)			31,124				28,292
Corporate and other obligations (including securities on loan of $6,520 in 2013 and $7,559 in 2012)			38,500				40,509
Commingled funds			977,799				381,516
Synthetic guaranteed investment contracts			733,857				777,297
Registered investment companies			14,879				307,109
Collateral held on loaned securities			14,078				18,842
Total investments at fair value			2,339,461				2,045,364
Receivables
Notes receivables from participants			47,054				43,079
Sponsor contributions			23,109				18,963
Accrued interest and dividends			2,251				1,975
Due from brokers for securities sold			800				1,415
Total receivables			73,214				65,432
Total assets			2,412,675				2,110,796
Liabilities
Accounts payable			5,985				6,126
Collateral to be paid on loaned securities			14,078				18,842
Total liabilities			20,063				24,968
Net assets available for benefits, reflecting investments at fair value			2,392,612				2,085,828
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			(36,932	)			(68,692	)
Net assets available for benefits		$	2,355,680			$	2,017,136

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

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Statements of Changes in Net Assets Available for Benefits

For the Years Ended December 31, 2013 and 2012 (in thousands)

 

 

		2013				2012
Additions to net assets attributed to
Investment income
Net appreciation in fair value of investments		$	273,896			$	168,628
Interest			25,520				28,982
Dividends			9,905				14,771
Net investment income			309,321				212,381
Participant loan interest			3,744				3,525
Contributions
Sponsor			68,003				59,471
Participant			110,936				92,936
			178,939				152,407
Total additions			492,004				368,313
Deductions from net assets attributed to
Benefits paid			151,562				161,649
Plan expenses			6,845				7,138
Total deductions			158,407				168,787
Increase before transfer			333,597				199,526
Transfer from other plan (Refer to Note 11)			4,947				19,658
Net increase			338,544				219,184
Net assets available for benefits
Beginning of year			2,017,136				1,797,952
End of year		$	2,355,680			$	2,017,136

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

Notes to Financial Statements

December 31, 2013 and 2012

 

 

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 is a defined contribution plan the predecessor of which originally became effective on January 1, 1960. The Plan was created for the purpose of providing retirement benefits to United States employees of Baxter International Inc. (the Sponsor or the Company) and its subsidiaries, and to encourage and assist employees in adopting a regular savings program by means of payroll deductions through a plan that qualifies under the United States Internal Revenue Code. Plan participants may authorize the Company to make payroll deductions under the Plan ranging from 1% to 50% of their pre-tax monthly compensation limited to a maximum of $17,500 and $17,000 a year in 2013 and 2012, respectively. Participants who have attained the age of 50 by the end of the year may contribute up to an additional $5,500 per year in “catch-up” contributions. 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 Company matches a participant’s savings contributions on a dollar for dollar basis up to 3.0% of the participant’s compensation, and matches any contributions between 3% and 4% of compensation at the rate of 50 cents for each dollar of a participant’s pre-tax contribution, so that the maximum matching contribution for participants who contribute at least 4% of their compensation is 3.5% of compensation. 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.

Participants are immediately vested in the elective contributions and matching contribution plus actual earnings thereon. The additional non-matching contributions become fully vested after three years of service. Participants are fully vested in the Company’s non-matching contributions account, regardless of years of service with the Company, upon attaining age 65, upon becoming disabled in accordance with the provisions of the Plan or upon dying while employed by the Company. Forfeitures of nonvested accounts are used to reduce future employer contributions.

Participants may borrow from their vested accounts a minimum of $500 up to a maximum equal 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 the prime rate at the last day of the month prior to loan request, plus one percent.

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 by reason 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.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

Upon enrollment in the Plan, a participant may direct contributions into any of 20 investment options: Stable Income Fund, Baxter Common Stock Fund, Composite Fund, General Equity Fund, State Street Global Advisors S&P 500 Flagship Fund (SSgA S&P 500 Fund), State Street Global Advisors International EAFE Equity Index Fund (SSgA EAFE Equity Fund), State Street Global Advisors Small Cap Fund (SSgA Small Cap Fund), Northern Trust Domestic Mid Cap Fund, State Street Global Advisors Emerging Markets Fund (SSgA Emerging Markets Fund), ten different Target Date 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. Starting in 2013, participants are no longer able to make contributions to the Composite Fund and General Equity Fund, but may make transfers out of these funds at any time.

 

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.

Certain reclassifications have been made to conform the prior period financial statements to the current period presentation.

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, 2013 and 2012

 

 

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.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

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, Bank of America N.A. and MetLife. During 2013, certain assets underlying the synthetic GICs were transferred to an individual separate account with MetLife. The portfolio of assets 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 $129 thousand and a loss of $991 thousand at December 31, 2013 and 2012, 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 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 $696.9 million and $708.6 million at December 31, 2013 and 2012, 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 2.0% and 2.2% at December 31, 2013 and 2012, respectively. The average interest rate credited to participants on the synthetic GICs was approximately 2.7% and 3.4% for the years ended December 31, 2013 and 2012. The credit ratings for Transamerica were AA- at both December 31, 2013 and 2012, the credit ratings for Bank of America N.A. were A at both December 31, 2013 and 2012, and the credit rating for MetLife was AA- at December 31, 2013.

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.

Notes Receivables from Participants

Participant 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.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

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 broker for securities sold 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.

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 (corporate and other obligations). 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.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

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, 2013 and 2012

 

 

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, 2013				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		$	35,266			$	—			$	35,266			$	—
Common stock:
Healthcare			247,490				247,490				—				—
Consumer products			73,664				73,664				—				—
Information technology			65,805				65,805				—				—
Financial services			26,321				26,321				—				—
Industrial services and materials			32,801				32,801				—				—
Energy			17,939				17,939				—				—
Other			29,938				29,938				—				—
Total common stock			493,958				493,958				—				—
U.S. government and government agency issues			31,124				—				31,124				—
Corporate and other obligations			38,500				—				38,500				—
Commingled funds:
SSgA S&P 500 fund			279,286				—				279,286				—
SSgA EAFE equity fund			111,718				—				111,718				—
SSgA Small cap fund			142,953				—				142,953				—
Target date retirement funds			424,925				—				424,925				—
Other			18,917				—				18,917				—
Total commingled funds			977,799				—				977,799				—
Registered investment companies			14,879				14,879				—				—
Synthetic guaranteed investment contracts:
Corporate and other obligations			232,411				—				232,411				—
U.S. government and government agency issues			312,816				—				312,816				—
Individual separate account			172,672				—				172,672				—
Cash and cash equivalents			16,087				—				16,087				—
Wrapper contracts			(129	)			—				—				(129	)
Total synthetic guaranteed investment contracts			733,857				—				733,986				(129	)
Collateral held on loaned securities			14,078				—				14,078				—
Total assets		$	2,339,461			$	508,837			$	1,830,753			$	(129	)
Liability
Collateral to be paid on loaned securities		$	14,078			$	1,957			$	12,121			$	—

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

						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:
SSgA S&P 500 fund			197,250								197,250
SSgA EAFE equity fund			90,079								90,079
SSgA Small cap fund			94,187				—				94,187				—
Total commingled funds			381,516				—				381,516				—
Registered investment companies:
Target date 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			$	—

Transfers between hierarchy measurement levels are recognized by the Plan as of the beginning of the reporting period. In 2013, due to a change in the structure of the investment, the target date retirement funds are now classified as commingled funds. In 2012 they were classified as registered investment companies. The fair value of commingled funds is valued based upon the net asset value of the underlying securities and is classified as Level 2.

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

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, 2011		$	(343	)
Unrealized losses (relating to assets held at end of year)			(648	)
Balance at December 31, 2012			(991	)
Additions			65
Unrealized gains (relating to assets held at end of year)			797
Balance at December 31, 2013		$	(129	)

The unrealized losses from the wrapper contracts are excluded from the net appreciation 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. The additions are due to the new contract with MetLife as detailed in Note 2.

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, 2013 and 2012 are summarized as follows:

 

(in thousands, except per share data)		2013				2012
Baxter common stock, 2,585,408 shares and 2,516,782 shares at December 31, 2013 and 2012, respectively		$	179,815			$	167,769
SSgA S&P 500 Fund			279,286				197,250
MetLife Individual Separate Account			172,672				*
SSgA Small Cap Fund			142,953				*

 

*	Does not meet 5% threshold

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

Investments as of December 31, 2013 and 2012 are segregated into various investment fund options as follows:

 

		2013				2012
(in thousands)
Cash (available for investment)		$	6,121			$	6,597
Stable Income Fund			748,611				803,238
Baxter Common Stock Fund			181,520				168,607
Composite Fund			158,846				154,624
General Equity Fund			183,162				151,465
Cardinal Health Common Stock Fund			7,307				4,847
SSgA S&P 500 Fund			279,286				197,250
SSgA EAFE Equity Fund			111,718				90,079
Edwards Lifesciences Common Stock Fund			12,935				19,658
SSgA Small Cap Fund			142,953				94,187
Northern Trust Domestic Mid Cap			14,293				—
SSgA Emerging Markets Fund			4,624				—
Self-Managed Fund			49,082				44,397
Target Date Retirement Funds			424,925				291,573
Collateral held on loaned securities			14,078				18,842
Total investments at fair value			2,339,461				2,045,364
Adjustment from fair value to contract value for Stable Income Fund			(36,932	)			(68,692	)
Total investments		$	2,302,529			$	1,976,672

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

 

		2013				2012
(in thousands)
Baxter common stock		$	7,864			$	48,002
Other common stock			76,699				38,620
U.S. government and government agency issues			(1,653	)			38
Corporate and other obligations			(1,752	)			3,365
Commingled funds			191,201				54,283
Registered investment companies			1,537				24,320
		$	273,896			$	168,628

 

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, to the extent that such replacement securities are available on the open market and if to the extent that such proceeds are insufficient or the collateral is unavailable, the purchase of replacement securities shall be made at Trustee expense 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

 

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

proceeds from the collateral for such a loan to make the Plan whole. 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, 2013 and 2012, the Plan had securities on loan with a fair value of $13.8 million and $18.5 million, respectively, with cash collateral received of $14.1 million and $18.8 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, 2013 and 2012, and the net asset value of this fund was approximately $1.00 per unit. As of December 31, 2013 and 2012 the cash collateral received is reflected at its fair value of $14.1 million and $18.8 million in the 2013 and 2012 Statements of Net Assets Available for Benefits, respectively.

Non-cash collateral of $1.7 million received for securities on loan at December 31, 2013, consisted of U.S. government and government agency issues, equity securities, and corporate and other obligations held by the Trustee on behalf of the Plan. Non-cash collateral is not included with the collateral balance on the 2013 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. The Plan did not receive any non-cash collateral for securities on loan at December 31, 2012. Securities lending income allocated to the Plan amounted to $32 thousand and $45 thousand for 2013 and 2012, 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 September 16, 2013 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. U.S. GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2013 and 2012, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2010.

 

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, 2013 and 2012, 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

 

14

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Baxter International Inc. and Subsidiaries

Incentive Investment Plan

Notes to Financial Statements

December 31, 2013 and 2012

 

 

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; shares of common stock, bonds, an individual separate account and interest rate wrapper contracts of MetLife, issuer of the Plan’s fully benefit-responsive contracts; units of commingled funds managed by Northern Trust Corporation, an investment manager for the Plan; 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 2012, Baxter acquired Sigma International General Medical Apparatus, LLC (SIGMA). The SIGMA 401(k) Plan was merged into the Plan effective July 2013. As a result of this merger, total assets of approximately $4.9 million were transferred into the Plan.

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.

 

12.	Subsequent Event

On March 27, 2014, Baxter announced plans to create two separate, independent global healthcare companies – one focused on developing and marketing innovative biopharmaceuticals and the other on life-saving medical products. The transaction is intended to take the form of a tax-free distribution to Baxter shareholders of publicly traded stock in the new biopharmaceuticals company. The transaction is expected to be completed by mid-year 2015, subject to market, regulatory and certain other conditions, including final approval by the Baxter Board of Directors, receipt of a favorable opinion and/or rulings with respect to the tax-free nature of the transaction, and the effectiveness of a Form 10 registration statement that will be filed with the SEC. Any impact on the Plan as of the issuance date is unknown to the Plan Management.

 

15

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Cash & Cash Equivalents:
		Australian Dollar		Cash			—			$	190
*		SSGA Money Market Fund		Short-Term Investment Fund			—				9,264,693
*		State Street Bank & Trust Co		Short-Term Investment Fund			—				26,001,246
										$	35,266,129
**		Common Stock:
		1st Finl Svcs Corp		Common Stock			—				6,270
		22nd Centy Group Inc		Common Stock			—				19,260
		3D Systems Corp		Common Stock			—				10,129
		3Dicon Corp		Common Stock			—				145
		3M Company		Common Stock			—				24,017
		8X8 Inc		Common Stock			—				6,395
		ABB LTD		Common Stock			—				31,285
		Abbott Laboratories		Common Stock			—				2,404,065
		Abbott Laboratories		Common Stock			—				161,299
		Abbvie Inc		Common Stock			—				91,458
		Access Pharmaceuticals Inc		Common Stock			—				5,411
		Acclaim Entertainment Inc		Common Stock			—				—
		Ace Ltd		Common Stock			—				1,369,899
		Achillion Pharmaceuticals Inc		Common Stock			—				3,319
		Acorda Therapeutics Inc		Common Stock			—				14,600
		Activision Blizzard Inc		Common Stock			—				3,566
		Adaptive Broadband Corp		Common Stock			—				—
		Adarna Energy Corp		Common Stock			—				—
		Adobe Systems Inc		Common Stock			—				1,916,188
		Adolor Corporation Escrow		Common Stock			—				—
		ADT Corp		Common Stock			—				445
		Advanced Micro Devices Inc		Common Stock			—				27,477
		Advanced Optics Electronics Inc		Common Stock			—				—
		Advansource Biomaterials Corp		Common Stock			—				128
		Advanta Corp		Common Stock			—				—
		Aeropostale		Common Stock			—				909
		AES Corp		Common Stock			—				772,278
		Aethlon Medical Inc		Common Stock			—				16,898
		Affymax Inc		Common Stock			—				1,716
		Aflac Inc		Common Stock			—				12,556
		Agco Corp		Common Stock			—				26,384
		Agenus Inc		Common Stock			—				8,018
		Agilent Technologies Inc		Common Stock			—				683,318
		Agnico Eagle Mines Ltd		Common Stock			—				13,834
		Akorn Inc		Common Stock			—				55,395
		Aksys Ltd		Common Stock			—				2
		Alcatel Lucent		Common Stock			—				22,396
		Alcoa Inc		Common Stock			—				619,302
		Alcoa Inc		Common Stock			—				15,646

 

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Alexco Resource Corp		Common Stock			—				8,820
		Alexion Pharmaceuticals Inc		Common Stock			—				3,229,191
		Alj Regl Hldgs Inc		Common Stock			—				1,550
		All Amern Gold Corp		Common Stock			—				3
		Allergan Inc		Common Stock			—				3,336
		Allergan Inc		Common Stock			—				3,471,140
		Allergan Inc		Common Stock			—				811,680
		Alliance Pharmaceutical Corp		Common Stock			—				—
*		Alliancebernstein Hldg LP		Common Stock			—				11,131
		Allied Irish Banks		Common Stock			—				4,942
		Allscripts Healthcare Solutions Inc		Common Stock			—				7,452
		Allstate Corp		Common Stock			—				29,885
		Almaden Minerals Ltd		Common Stock			—				11,174
		Alnylam Pharmaceuticals Inc		Common Stock			—				6,430
		Alon USA Energy Inc		Common Stock			—				9,097
		Alternative Living Services		Common Stock			—				—
		Altria Group Inc		Common Stock			—				127,995
		Aluminum Corp China Ltd		Common Stock			—				148
		Amag Pharmaceuticals Inc		Common Stock			—				2,914
		Amarantus Bioscience Hldgs Inc		Common Stock			—				88
		Amarin Corp		Common Stock			—				39,045
		Amarium Technologies Inc		Common Stock			—				648
		Amazon.com Inc		Common Stock			—				157,522
		Amazon.com Inc		Common Stock			—				7,141,726
		Amcore Finl Inc		Common Stock			—				—
		Amdocs Ltd Ord		Common Stock			—				8,248
		Ameren Corp		Common Stock			—				4,024
		American Cap Agy Corp		Common Stock			—				27,704
		American Cap Ltd		Common Stock			—				9,384
		American Express		Common Stock			—				10,969
		American Graphite Technologies Inc		Common Stock			—				160
		American Intl Group		Common Stock			—				771,267
		American Intl Group		Common Stock			—				5,123
		American Intl Group		Common Stock			—				2,706
		American Lithium Minerals Inc		Common Stock			—				75
		American Rlty Cap Pptys Inc Com		Common Stock			—				6,675
		American Tower Corp		Common Stock			—				1,873,835
		American Tower Corp		Common Stock			—				18,570
		Amerigas Partners LP		Common Stock			—				9,360
		Amgen Inc		Common Stock			—				66,353
		Ampliphi Biosciences Corp		Common Stock			—				10
		Amstem Corp		Common Stock			—				—
		Anadarko Petroleum Corp		Common Stock			—				3,966
		Andrea Electronics Corp		Common Stock			—				43
		Anheuser-Busch Inbev		Common Stock			—				2,662
		Ani Pharmaceuticals Inc		Common Stock			—				40
		Annaly Mortgage Management Inc		Common Stock			—				121,229
		Antares Pharma Inc		Common Stock			—				32,893
		AOL Inc		Common Stock			—				653

 

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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Aon Plc		Common Stock			—				687,552
		Apache Corp		Common Stock			—				9,200
		Apollo Invt Corp		Common Stock			—				8,680
		Apple Inc		Common Stock			—				3,672,588
		Apple Inc		Common Stock			—				8,818,594
		Applied Materials Inc		Common Stock			—				1,061
		Applied Materials Inc		Common Stock			—				620,117
		Apricus Biosciences Inc		Common Stock			—				2,385
		Aqua America Inc		Common Stock			—				3,604
		Aradigm Corp		Common Stock			—				613
		Arcelormittal		Common Stock			—				17,840
		Arch Coal Inc		Common Stock			—				496
		Archer Daniels Midland		Common Stock			—				3,255
		Arena Pharmaceutical Inc		Common Stock			—				131,303
		Ariad Pharmaceutical Inc		Common Stock			—				12,515
		ARM Holdings Plc		Common Stock			—				13,683
		ARM Holdings Plc		Common Stock			—				1,806,840
		Armour Residential Reit Inc		Common Stock			—				8,020
		Array Biopharma Inc		Common Stock			—				6,764
		Artificial Life Inc		Common Stock			—				104
		Asanko Gold Inc		Common Stock			—				9,840
		Asia Pulp & Paper Co Ltd		Common Stock			—				—
		Astrazeneca Plc		Common Stock			—				2,672
		Astropower Inc		Common Stock			—				—
		AT&T Inc		Common Stock			—				114,582
		Atlantic Power Corp		Common Stock			—				5,336
		Atossa Genetics Inc		Common Stock			—				2,320
		ATP Oil & Gas Corp		Common Stock			—				150
		Atwood Oceanics Inc		Common Stock			—				5,339
		ATX Communications Inc		Common Stock			—				—
		Automatic Data Processing Inc		Common Stock			—				32,704
		Avalon Rare Metals Inc		Common Stock			—				1,100
		Avanir Pharmaceuticals		Common Stock			—				3,998
		Awilco Drilling Plc		Common Stock			—				21,500
		B/E Aerospace Inc		Common Stock			—				8,703
		Babson Cap Partn Invs		Common Stock			—				25,760
		Backweb Technologies Ltd		Common Stock			—				401
		Baidu Inc		Common Stock			—				38,244
		Baker Hughes Inc		Common Stock			—				540,211
		Banco Bilbao Vizcaya Argentaria Sa		Common Stock			—				10,674
		Banco Santander Sa		Common Stock			—				18,971
		Bank New York Mellon Corp		Common Stock			—				15,084
*		Bank of America		Common Stock			—				1,425,233
*		Bank of America		Common Stock			—				756,434
*		Bank of America		Common Stock			—				488,518
		Bank of Ireland		Common Stock			—				4,323
*		Baxter International Inc		Common Stock			—				179,285,293
*		Baxter International Inc		Common Stock			—				529,861
		Bayer AG		Common Stock			—				36,134

 

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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		BB & T Corp		Common Stock			—				6,531
		BB Liquidating Inc		Common Stock			—				1
		BCE Inc		Common Stock			—				916,922
		Beacon Pwr Corp		Common Stock			—				45
		Berkshire Hathaway Inc		Common Stock			—				177,840
		Best Buy Inc		Common Stock			—				4,601
		Beyond Corp		Common Stock			—				—
		Big Bear Mng Corp		Common Stock			—				—
		Biglari Hldgs Inc		Common Stock			—				507
		Bioelectronics Corp		Common Stock			—				—
		Biogen Idec Inc		Common Stock			—				44,452
		Biogen Idec Inc		Common Stock			—				4,481,451
		Biomedical Technology Solutions Hldgs Inc		Common Stock			—				44
		Biomerica Inc		Common Stock			—				10,920
		Biomoda Inc		Common Stock			—				27
		Bionovo Inc		Common Stock			—				50
		Biopharm Asia Inc		Common Stock			—				—
		Biozone Pharmaceutic Ls Inc		Common Stock			—				170
		Bizauctions Inc		Common Stock			—				—
		Black Hills Corp		Common Stock			—				5,776
		Blackberry Ltd		Common Stock			—				11,755
		Blackstone Group LP		Common Stock			—				4,884
		Blavod Extreme Spirits		Common Stock			—				71
		Blyth Inc		Common Stock			—				3,264
		Body Cent Corp		Common Stock			—				2,955
		Boeing Co		Common Stock			—				3,627,139
		Boeing Co		Common Stock			—				1,078,222
		Boeing Co		Common Stock			—				43,318
		Boingo Wireless Inc		Common Stock			—				6,154
		BP Plc		Common Stock			—				6,065
		BP Plc		Common Stock			—				825,603
		Braskem S.A.		Common Stock			—				1,785
		Brazil Minerals Inc		Common Stock			—				73
		Breitburn Energy Partners LP		Common Stock			—				20,859
		Bristol Myers Squibb Co		Common Stock			—				75,378
		Bristol Myers Squibb Co		Common Stock			—				3,886,699
		Broadcom Corp		Common Stock			—				17,231
		Broadridge Financial Solutions LLC		Common Stock			—				2,964
		Broadwind Energy Inc		Common Stock			—				94
		Brookfield Asset Mgmt Inc		Common Stock			—				9,708
		Brookfield Infrastructure Partners LP		Common Stock			—				8,324
		Brookfield Ppty Partners LP		Common Stock			—				279
		Brookfield Residential Pptys Inc		Common Stock			—				24
		Buckeye Partners LP		Common Stock			—				28,404
		Buffalo Wild Wings Inc		Common Stock			—				16,928
		C H Robinson Worldwide Inc		Common Stock			—				2,918
		CSX Corp		Common Stock			—				15,596
		Cadence Pharmaceuticals Inc		Common Stock			—				20,091
		Ceasars Entmt Corp		Common Stock			—				431

 

19

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Calamp Corp		Common Stock			—				179,623
		Calgon Carbon Corp		Common Stock			—				2,468
		Cambridge Heart Inc		Common Stock			—				10
		Cameron International Corp		Common Stock			—				590,771
		Cameron International Corp		Common Stock			—				4,643
		Camtek		Common Stock			—				2,430
		Canadian National Railways Co		Common Stock			—				11,404
		Canadian Natural Resources Ltd		Common Stock			—				6,768
		Canadian Pacific Railway Ltd		Common Stock			—				2,249,245
		Canadian Solar Inc		Common Stock			—				447
		Cancer Genetics Inc		Common Stock			—				13,780
		Cannabis Science Inc		Common Stock			—				520
		Cap Gemini		Common Stock			—				6,770
		Capital One		Common Stock			—				779,184
		Capital One		Common Stock			—				1,486,502
		Capitalsource Inc		Common Stock			—				13,292
		Capitol Bancorp Ltd		Common Stock			—				1
		Capstead Mtg Corp Com No Par		Common Stock			—				12,080
		Capstone Turbine Corp		Common Stock			—				129
		Cardinal Communications Inc		Common Stock			—				—
		Cardinal Health Inc		Common Stock			—				613,539
		Cardinal Health Inc		Common Stock			—				7,234,120
		Cardinal Health Inc		Common Stock			—				77,742
		Carefusion Corp		Common Stock			—				39,820
		Carlyle Group LP		Common Stock			—				3,258
		Carmax Inc		Common Stock			—				11,802
		Catamaran Corp		Common Stock			—				23,873
		Caterpillar Inc		Common Stock			—				137,170
		CBL & Assoc Pptys Inc		Common Stock			—				306
		Celgene Corp		Common Stock			—				32,780
		Celgene Corp		Common Stock			—				1,915,495
		Cell Therapeutics Inc		Common Stock			—				5,287
		Cellceutix Corp		Common Stock			—				4,180
		Cemex SA		Common Stock			—				35
		Central Fd Cda		Common Stock			—				13,250
		Centurytel Inc		Common Stock			—				2,739
		Ceragon Networks Ltd		Common Stock			—				446
		Cereplast Inc		Common Stock			—				28
		Cerus Corp		Common Stock			—				8,385
		Channeladvisor Corp		Common Stock			—				4,505
		Charter Comm Inc		Common Stock			—				—
		Chelsea Therapeutics Intl		Common Stock			—				8,870
		Cheniere Energy Inc		Common Stock			—				17,248
		Chesapeake Energy		Common Stock			—				82,897
		Chevron Corp		Common Stock			—				151,100
		China Biologic Prods Inc		Common Stock			—				2,885
		China Energy Svgs Technology Inc		Common Stock			—				—
		China Shen Zhou Mng & Res Inc		Common Stock			—				483
		Chipotle Mexican Grill Inc		Common Stock			—				1,944,452

 

20

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Chipotle Mexican Grill Inc		Common Stock			—				18,647
		Church & Dwight Inc		Common Stock			—				10,650
		Churchill Downs Inc		Common Stock			—				9,529
		Ciena Corp		Common Stock			—				48
		Circuit City Stores Inc		Common Stock			—				—
		Cisco Systems Inc		Common Stock			—				173,779
		Cisco Systems Inc		Common Stock			—				1,011,986
		CIT Group Inc		Common Stock			—				772,141
		Citadel Broadcasting Corp		Common Stock			—				—
		Citigroup Inc		Common Stock			—				766,699
		Citigroup Inc		Common Stock			—				130,489
		Citigroup Inc		Common Stock			—				1,443,349
		Citrix Systems Inc		Common Stock			—				793,198
		City Bank Lynnwood Wash		Common Stock			—				24
		Clarent Corp		Common Stock			—				—
		Clean Diesel Technologies Inc		Common Stock			—				3,000
		Clean Energy Fuels Corp		Common Stock			—				38,511
		Cliffs Nat Res Inc		Common Stock			—				24,998
		CMS Energy Corp		Common Stock			—				990
		Coach Inc		Common Stock			—				16,535
		Coca Cola Co		Common Stock			—				94,329
		Coca Cola Co		Common Stock			—				911,696
		Coeur D Alene Mines Corp		Common Stock			—				8,951
		Coldwater Creek Inc		Common Stock			—				560
		Colonial Bancgroup		Common Stock			—				—
		Columbia Laboratories Inc		Common Stock			—				496
		Comcast Corp		Common Stock			—				620,889
		Comcast Corp		Common Stock			—				5,197
		Commtouch Software Limited		Common Stock			—				1,294
		Compagnie Financiere Richemont SA		Common Stock			—				2,018
		Compass Minerals Intl Inc		Common Stock			—				9,080
		Conagra Foods Inc		Common Stock			—				8,425
		Concho Resources Inc		Common Stock			—				1,997,144
		Conocophillips		Common Stock			—				184,266
		Consolidated Communications Hldgs Inc		Common Stock			—				1,775
		Consolidated Edison Hldg Co Inc		Common Stock			—				27,640
		Constellation Energy Partners LLC		Common Stock			—				14,400
		Corinthian Colleges Inc		Common Stock			—				3,560
		Corning Inc		Common Stock			—				43,148
		Cortex Pharmaceuticals Inc		Common Stock			—				199
		Costco Wholesale Corp		Common Stock			—				26,577
		Costco Wholesale Corp		Common Stock			—				3,577,689
		Covidien Plc		Common Stock			—				850,658
		Covidien Plc		Common Stock			—				8,371
		Credit Suisse		Common Stock			—				6,408
		Cree Inc		Common Stock			—				631,452
		Crestwood Equity Partners LP		Common Stock			—				2,766
		Cross Timbers Royalty Trust		Common Stock			—				441
		Cryolife Inc		Common Stock			—				5,545

 

21

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Cst Brands Inc		Common Stock			—				2,353
		Ctrip Com Intl Ltd		Common Stock			—				6,451
		Cubist Pharmaceuticals Inc		Common Stock			—				5,510
		CUI Global Inc		Common Stock			—				101
		Cummins Inc		Common Stock			—				46,643
		CVR Partners LP		Common Stock			—				8,230
		CVS Caremark Corp		Common Stock			—				1,045,948
		CVS Caremark Corp		Common Stock			—				763,259
		CVS Caremark Corp		Common Stock			—				46,236
		Cyan Inc		Common Stock			—				10,580
		Cyber-Care Inc		Common Stock			—				—
		Cyberonics Inc		Common Stock			—				2,879
		Cyclacel Pharmaceuticals Inc		Common Stock			—				571
		Cytori Therapeutics Inc		Common Stock			—				1,928
		Cytosorbents Corp		Common Stock			—				938
		Cytrx Corp		Common Stock			—				34,197
		D R Horton Inc		Common Stock			—				1,562
		Dan River Inc		Common Stock			—				—
		Daulton Cap Corp		Common Stock			—				1
		Daystar Technologies Inc		Common Stock			—				1
		DBX ETF		Common Stock			—				174
		Decisionpoint Sys Inc		Common Stock			—				5
		Deckers Outdoor		Common Stock			—				38,007
		Deere & Co		Common Stock			—				6,793
		Delcath Systems Inc		Common Stock			—				605
		Denbury Res Inc		Common Stock			—				8,215
		Dendreon Corp		Common Stock			—				92,795
		Dennys Corp		Common Stock			—				1,079
		Derma Sciences Inc		Common Stock			—				2,164
		Destiny Media Technologies Inc		Common Stock			—				5,675
		Deutsche Bank AG		Common Stock			—				4,824
		Devon Energy Corp		Common Stock			—				9,281
		Diageo Plc		Common Stock			—				1,559,953
		Diamond Offshore Drilling Inc		Common Stock			—				854
		Diana Containerships Inc		Common Stock			—				28
		Diana Shipping Inc		Common Stock			—				3,052
		Digerati Technologies Inc		Common Stock			—				25
		Digital Rlty Tr Inc Com		Common Stock			—				3,938
		DirecTV		Common Stock			—				777,745
		DirecTV		Common Stock			—				20,027
		Discover Finl Svcs		Common Stock			—				27,416
		Discovery Communications		Common Stock			—				2,765,625
		Discovery Laboratories Inc		Common Stock			—				86
		Divine Inc		Common Stock			—				—
		Dolby Laboratories Inc		Common Stock			—				5,784
		Dollar General Corp		Common Stock			—				970,882
		Dollar General Corp		Common Stock			—				12,305
		Dominion Resources Inc		Common Stock			—				45,849
		Doral Financial Corp		Common Stock			—				31

 

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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Dow Chemical Co		Common Stock			—				69,364
		Downey Finl Corp		Common Stock			—				—
		Dryships Inc		Common Stock			—				31,026
		Du Pont E I De Nemours & Co		Common Stock			—				782,691
		Du Pont E I De Nemours & Co		Common Stock			—				52,304
		Duke Energy Corp		Common Stock			—				155,639
		Duke Realty Corp		Common Stock			—				6,768
		Duma Energy Corp		Common Stock			—				820
		Dunkin Brands Group Inc		Common Stock			—				2,165,017
		Dunkin Brands Group Inc		Common Stock			—				7,326
		Dynacor Gold Mines Inc		Common Stock			—				3,369
		Dynamic Materials Corp		Common Stock			—				761
		Dynegy Inc		Common Stock			—				4
		E M C Corp		Common Stock			—				14,845
		E Trade Finl Corp		Common Stock			—				14,573
		Eagle Bulk Shipping Inc		Common Stock			—				115
		Eastman Kodak Co		Common Stock			—				3,471
		Eaton Corp Plc		Common Stock			—				22,836
		Eaton Scientific Sys Inc		Common Stock			—				60
		EB2B Commerce Inc		Common Stock			—				—
		Ebay Inc		Common Stock			—				14,484
		Ebay Inc		Common Stock			—				1,662,899
		Ecolocap Solutions Inc		Common Stock			—				—
		E-Commerce China Dangdang Inc		Common Stock			—				4,775
		EDAP Tms S.A.		Common Stock			—				88,500
		Edwards Lifesciences Corp		Common Stock			—				12,805,716
		Edwards Lifesciences Corp		Common Stock			—				193,860
		Eldorado Gold Corp		Common Stock			—				17,243
		Eline Entertainment Group Inc		Common Stock			—				—
		Emcore Corp		Common Stock			—				5
		Emerson Electric Co		Common Stock			—				5,448
		Emulex Corp		Common Stock			—				823
		Enbridge Energy Partners LP		Common Stock			—				2,987
		Enbridge Inc		Common Stock			—				4,368
		Encana Corp		Common Stock			—				537,381
		Encana Corp		Common Stock			—				17,148
		Endeavour Silver Corp		Common Stock			—				1,815
		Endologix Inc		Common Stock			—				1,744
		Energy Conversion Devices Inc		Common Stock			—				—
		Energy Focus Inc		Common Stock			—				2,350
		Energy Transfer Partners LP		Common Stock			—				30,663
		Engility Hldgs Inc		Common Stock			—				200
		Enron Corp		Common Stock			—				—
		Enterprise Products Pptns LP		Common Stock			—				105,977
		Entravision Communications Corp		Common Stock			—				914
		Entremed Inc		Common Stock			—				62
		EOG Resources Inc		Common Stock			—				2,227,471
		Epix Pharmaceuticals Inc		Common Stock			—				—
		Erickson Air-Crane Inc		Common Stock			—				10,395

 

23

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Escrow Cdc Liquidating Trust		Common Stock			—				—
		Estee Lauder Companies		Common Stock			—				2,806,843
		Evergreen Solar Inc		Common Stock			—				—
		Evolving Sys Inc		Common Stock			—				19,480
		Exelixis Inc		Common Stock			—				4,322
		Exelon Corp		Common Stock			—				903,350
		Exelon Corp		Common Stock			—				24,596
		Exeter Resource Corp		Common Stock			—				2,120
		Exone Co		Common Stock			—				7,074
		Expedia Inc		Common Stock			—				2,159
		Expeditors Intl Wash Inc		Common Stock			—				13,671
		Express Scripts Holding Co		Common Stock			—				20,018
		Express Scripts Holding Co		Common Stock			—				2,546,441
		Exxon Mobil Corp		Common Stock			—				53,899
		Exxon Mobil Corp		Common Stock			—				2,298,401
		F5 Networks Inc		Common Stock			—				13,629
		Facebook Inc		Common Stock			—				3,798,981
		Facebook Inc		Common Stock			—				726,121
		Fairpoint Communications Inc		Common Stock			—				—
		Federal Natl Mtg Assn		Common Stock			—				98,328
		Ferrellgas Partners LP		Common Stock			—				2,295
		Fireeye Inc		Common Stock			—				402,983
		First China Pharmaceutical Group Inc		Common Stock			—				2,025
		First Majestic Silver Corp		Common Stock			—				9,800
		First Physicians Cap Group Inc		Common Stock			—				—
		First Solar Inc		Common Stock			—				3,552
		Flexsteel Inds Inc		Common Stock			—				6,146
		Flextronics Intl Ltd		Common Stock			—				7,770
		Flextronics Intl Ltd		Common Stock			—				593,854
		Fluor Corp		Common Stock			—				4,169
		FMC Technologies Inc		Common Stock			—				947,839
		Focus Gold Corp		Common Stock			—				—
		Food Technology Svc Inc		Common Stock			—				3,550
		Ford Motor Co		Common Stock			—				1,256,244
		Ford Motor Co		Common Stock			—				219,236
		Fortress Invt Group Llc Del Cl A Delaware		Common Stock			—				4,280
		Fossil Group Inc		Common Stock			—				2,399
		Foster Wheeler AG		Common Stock			—				23,101
		Franco Nevada Corp		Common Stock			—				41,001
		Franklin Res Inc		Common Stock			—				38,690
		Freddie Mac		Common Stock			—				68,605
		Freeport Mcmoran Copper & Gold Inc		Common Stock			—				127,167
		Fresenius Kabi Pharmaceuticals Hldg Inc		Common Stock			—				—
		Frontier		Common Stock			—				28,090
		Fuel Sys Solutions Inc		Common Stock			—				3,468
		Fuel Tech Inc		Common Stock			—				553
		Futuremedia Plc		Common Stock			—				—
		FX Energy Inc		Common Stock			—				512
		Galena Biopharma		Common Stock			—				645

 

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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Gas Nat Inc		Common Stock			—				2,435
		Geeknet Inc		Common Stock			—				4,034
		Generac Hldgs Inc		Common Stock			—				22,826
		General Dynamics Corp		Common Stock			—				14,396
		General Electric Co		Common Stock			—				2,327,751
		General Electric Co		Common Stock			—				318,060
		General Electric Co		Common Stock			—				766,691
		General Mills Inc		Common Stock			—				96,183
		General Motors Co		Common Stock			—				14,305
		Generex Biotechnology Corp		Common Stock			—				225
		Genetic Technologies Ltd		Common Stock			—				14
		Geo Group Inc		Common Stock			—				945
		Geopharma Inc		Common Stock			—				17
		Giant Interactive Group Inc		Common Stock			—				4,413
		Gilead Sciences Inc		Common Stock			—				3,360,327
		Gilead Sciences Inc		Common Stock			—				53,396
		Glaxosmithkline Plc		Common Stock			—				1,335
		GMX Resources Inc		Common Stock			—				2
		Gogo Inc		Common Stock			—				1,067
		Gold Fields Ltd		Common Stock			—				1,280
		Goldcorp Inc		Common Stock			—				22
		Golden Star Resources Ltd		Common Stock			—				1,760
		Goldman Sachs Group Inc		Common Stock			—				3,213,492
		Goldman Sachs Group Inc		Common Stock			—				12,617
		Google Inc		Common Stock			—				8,073,019
		Google Inc		Common Stock			—				719,323
		Google Inc		Common Stock			—				66,122
		GPO Aeroportuario Del Sureste Sab		Common Stock			—				2,690
		Grace W R & Co Del		Common Stock			—				29,661
		Grand Pacaraima Gold Corp		Common Stock			—				2
		Graphic Packaging Hldg Co		Common Stock			—				1,920
		Great Basin Gold		Common Stock			—				28
		Great Panther Silver Limited		Common Stock			—				3,650
		Green Earth Technologies Inc		Common Stock			—				1,020
		Green Innovations Ltd		Common Stock			—				234
		Greenhunter Energy Inc		Common Stock			—				—
		Grifols Sa		Common Stock			—				2,853
		Groupon Inc		Common Stock			—				8,000
		GSI Technology Inc		Common Stock			—				3,320
		Guess? Inc		Common Stock			—				1,119
		Guggenheim		Common Stock			—				18,708
		Halliburton Co		Common Stock			—				1,222,766
		Halliburton Co		Common Stock			—				1,817
		Halozyme Therapeutics Inc		Common Stock			—				176,567
		Hannon Armstrong Sustainable Infl		Common Stock			—				2,792
		Hansen Med Inc		Common Stock			—				3,028
		Hanwha Solarone Company Ltd		Common Stock			—				28
		Hartford Finl Svcs Group Inc		Common Stock			—				4,862
		Hasbro Inc		Common Stock			—				7,633

 

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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Hatteras Finl Corp Com		Common Stock			—				3,754
		HCA Hldgs Inc		Common Stock			—				23,855
		HCP Inc Com		Common Stock			—				11,300
		Headwaters Inc		Common Stock			—				12,238
		Health Care Reit Inc		Common Stock			—				5,357
		Healthwarehouse.com		Common Stock			—				9
		Hecla Mining Co		Common Stock			—				9,223
		Hemp Inc		Common Stock			—				200
		Henry Jack & Associates Inc		Common Stock			—				11,013
		Hercules Offshore Inc		Common Stock			—				26,736
		Hermes International		Common Stock			—				4,357
		Hertz Global Hldgs Inc		Common Stock			—				18,031
		Hess Corp		Common Stock			—				762,217
		Hewlett-Packard Co		Common Stock			—				39,432
		Hi-Crush Partners LP		Common Stock			—				3,704
		Hipcricket Inc		Common Stock			—				36,700
		Hollyfrontier Corporation		Common Stock			—				30,969
		Hologic Inc		Common Stock			—				2,235
		Home Depot Inc		Common Stock			—				217,081
		Home Solutions Amer Inc		Common Stock			—				—
		Honda Motor Co		Common Stock			—				26,878
		Honeywell International Inc		Common Stock			—				1,222,532
		Honeywell International Inc		Common Stock			—				45,779
		Horizon Lines Inc		Common Stock			—				34
		Hospira Inc		Common Stock			—				14,861
		Hospira Inc		Common Stock			—				533,984
		Houston Amern Energy Corp		Common Stock			—				7,725
		Hovnanian Enterprise Inc		Common Stock			—				12,419
		Howard Hughes Corp		Common Stock			—				3,123
		HSBC Holdings Plc		Common Stock			—				34,610
		HSN Inc		Common Stock			—				748
		Hugoton Rty Tr Tex Unit Ben Int		Common Stock			—				1,377
		Huntington Bancshares Inc		Common Stock			—				6,626
		Hydrogenics Corporation		Common Stock			—				1,379
		Hyperdynamics Corp		Common Stock			—				4,831
		IAC / Interactivecrp		Common Stock			—				2,128
		Iamgold Corp		Common Stock			—				6,660
		Icahn Enterprises LP		Common Stock			—				47,046
		ICG Group Inc		Common Stock			—				1,397
		Idearc Inc		Common Stock			—				—
		Idera Pharmaceuticals Inc		Common Stock			—				4,630
		IGI Laboratories Inc		Common Stock			—				1,052
		Igo Inc		Common Stock			—				10
		Illinois Tool Works		Common Stock			—				5,435
		Illumina Inc		Common Stock			—				11,059
		Illumina Inc		Common Stock			—				548,237
		Imaging3 Inc		Common Stock			—				—
		Imation Corp		Common Stock			—				468
		Implant Sciences Corp		Common Stock			—				9,398

 

26

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		Inception Mng Inc		Common Stock			—				14
		Incyte Genomics Inc		Common Stock			—				146,574
		Inditex Unspon Adr		Common Stock			—				3,929,974
		Indymac Bancorp Inc		Common Stock			—				—
		Infinera Corp		Common Stock			—				8,802
		Infinity Energy Resources Inc		Common Stock			—				20,989
		Infosys Technologies Limited		Common Stock			—				2,830
		ING		Common Stock			—				8,221
		Ingles Mkts Inc		Common Stock			—				21,236
		Inovio Biomedical Corp		Common Stock			—				435,000
		Inplay Technologies Inc		Common Stock			—				—
		Insmed Incorporated		Common Stock			—				2,516
		Insys Therapeutics Inc		Common Stock			—				1,239
		Intel Corp		Common Stock			—				188,649
		Intelsat SA		Common Stock			—				2,254
		Interactive Leisure Sys Inc		Common Stock			—				6
		Intercontinental Exchange Grp Inc		Common Stock			—				22,557
		Intermolecular Inc		Common Stock			—				12,300
		Intermune Inc		Common Stock			—				18,118
		Interoil Corp		Common Stock			—				24,715
		Interval Leisure Group Inc		Common Stock			—				371
		Intl Business Mach		Common Stock			—				39,077
		Intl Fuel Tech Inc		Common Stock			—				156
		Intrexon Corp		Common Stock			—				23,800
		Intuitive Surgical Inc		Common Stock			—				1,920
		Invensense Inc		Common Stock			—				10,390
		Invesco Ltd		Common Stock			—				733,245
		Invesco Van Kampen		Common Stock			—				2,297
		Invivo Therapeutics Hldgs Corp		Common Stock			—				2,296
		Invo Bioscience Inc		Common Stock			—				108
		IPG Photonics Corp		Common Stock			—				14,746
		ISC8 Inc		Common Stock			—				13
		Isis Pharmaceuticals		Common Stock			—				3,586
		Italk Inc		Common Stock			—				56
		Itc Hldgs Corp		Common Stock			—				2,396
		Ivanhoe Energy Inc		Common Stock			—				1,198
		Ja Solar Holdings Co Ltd		Common Stock			—				2,430
		Jabil Circuit Inc		Common Stock			—				26,160
		James Riv Coal Co		Common Stock			—				2,700
		Jazz Pharmaceuticals Plc		Common Stock			—				12,656
		JDS Uniphase Corp		Common Stock			—				2,428
		Jensen Portfolio, Inc		Common Stock			—				94,495
		Jetblue Awys Corp		Common Stock			—				10,675
		John Bean Technologies Corp		Common Stock			—				676
		Johnson & Johnson		Common Stock			—				194,499
		Johnson & Johnson		Common Stock			—				850,146
		Johnson Controls Inc		Common Stock			—				1,248,682
		Johnson Controls Inc		Common Stock			—				9,051
		Joy Global Inc		Common Stock			—				4,387

 

27

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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, 2013

 

 

Identity of Issue				Description of Investment		Cost (1)				Current Value
		JP Morgan Chase & Co		Common Stock			—				39,675
		JP Morgan Chase & Co		Common Stock			—				9,270
		JP Morgan Chase & Co		Common Stock			—				1,235,773
		Juniper Networks Inc		Common Stock			—				38,369
		Kandi Technologies Corp		Common Stock			—				17,685
		Kansas City Southern		Common Stock			—				938,350
		Kearny Finl Corp		Common Stock			—				11,630
		Keryx Biopharmaceuticals Inc		Common Stock			—				1,295
		Keycorp		Common Stock			—				13,420
		Kilroy Realty Corp		Common Stock			—				3,385
		Kimberly Clark Corp		Common Stock			—				41,784
		Kinder Morgan Energy Partners LP		Common Stock			—				244,692
		Kinder Morgan Inc Delaware		Common Stock			—				21,664
		Kinder Morgan Mgmt LLC		Common Stock			—				73,962
		Kinross Gold Corp		Common Stock			—				8,760
		KKR & Co LP		Common Stock			—				9,736
		Kma Global Solutions Intl Inc		Common Stock			—				70
		Knightsbridge Tank		Common Stock			—				8,914
		Kobex Minerals Inc		Common Stock			—				471
		Kodiak Oil & Gas Corp		Common Stock			—				11,210
		Kohl’s Corp		Common Stock			—				622,023
		Kohl’s Corp		Common Stock			—				65,925
		Kraft Foods Group Inc		Common Stock			—				54,689
		Krispy Kreme Doughnuts Inc		Common Stock			—				19,290
		Kronos Worldwide Inc		Common Stock			—				79
		L-3 Communications Hldgs Inc		Common Stock			—				4,043
		Laboratory Corp Of America Hldgs		Common Stock			—				18,274
		LDK Solar Co Ltd		Common Stock			—				1,006
		Leap Wireless Intl Inc		Common Stock			—				—
		Legacy Resvs LP		Common Stock			—				2,816
		Lehman Brothers Holdings Inc		Common Stock			—				—
		Level 3		Common Stock			—				6,634
		Lifeline Biotechnologies Inc		Common Stock			—				—
		Lilly Eli & Co		Common Stock			—				16,575
		Limelight Networks Inc		Common Stock			—				2,970
		Linkedin Corp		Common Stock			—				3,348,037
		Linn Co Llc		Common Stock			—				4,382
		Linn Energy LLC		Common Stock			—				99,461
		Linux Gold Corp		Common Stock			—				25
		Lions Gate Entertainment Corp		Common Stock			—				12,664
		Lithia Motors Inc		Common Stock			—				3,493
		Live Nation Entertainment Inc		Common Stock			—				336
		Lone Pine Resources Inc		Common Stock