<PAGE>
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, 1997
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
(847) 948-2000
<PAGE>
BAXTER INTERNATIONAL INC.
AND SUBSIDIARIES
INCENTIVE INVESTMENT PLAN
-------------------------
FINANCIAL STATEMENTS AND
ADDITIONAL INFORMATION
----------------------
DECEMBER 31, 1997 AND 1996
--------------------------
<PAGE>
BAXTER INTERNATIONAL INC. AND SUBSIDIARIES
INCENTIVE INVESTMENT PLAN
-------------------------
INDEX TO FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for
Benefits, with Fund Information, as of
December 31, 1997 and 1996 2-3
Statement of Changes in Net Assets Available
for Benefits, with Fund Information, for the
years ended December 31, 1997 and 1996 4-5
Notes to Financial Statements 6-10
Additional Information:*
Schedule I: Schedule of Assets Held for Investment Purposes as of
December 31, 1997
Schedule II: Schedule of Reportable Transactions as of December 31, 1997
</TABLE>
*Other Schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under ERISA have been omitted
because they are not applicable.
<PAGE>
Report of Independent Accountants
---------------------------------
June 25, 1998
To the Administrative Committee of
the Baxter International Inc. and
Subsidiaries Incentive Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Baxter International Inc. and Subsidiaries Incentive Investment Plan (the
"Plan") at December 31, 1997 and 1996, and the changes in net assets available
for benefits for the years then ended, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The Fund
Information in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets available
for plan benefits and changes in net assets available for benefits of each fund.
The supplemental schedules and Fund Information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Price Waterhouse LLP
Chicago, Illinois
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1997
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------
Stable Baxter General Allegiance
Assets Income Common Stock Composite Equity Stock
- ------ ------ ------------ --------- ------ -----
<S> <C> <C> <C> <C> <C>
Investments, at fair value:
Cash and cash equivalents $ 2,180,507 $ 4,355,140 $ 11,273,983 $ 12,278,222 $ 205,747
Common stock - 100,322,407 159,480,862 211,404,864 11,985,990
Fixed income securities - - 72,851,371 9,940,177 -
Commingled fund - - - - -
Participant loans - - - - -
------------ ------------ ------------ ------------ -----------
2,180,507 104,677,547 243,606,216 233,623,263 12,191,737
------------ ------------ ------------ ------------ -----------
Group annuity and fixed income securities,
at cost plus accrued interest 402,307,650 - - - -
------------ ------------ ------------ ------------ -----------
404,488,157 104,677,547 243,606,216 233,623,263 12,191,737
------------ ------------ ------------ ------------ -----------
Receivables:
Dividend and interest 6,821 636,395 1,431,264 575,022 34,932
Due from brokers for
securities sold - - 574,628 661,662 -
------------ ------------ ------------ ------------ -----------
404,494,978 105,313,942 245,612,108 234,859,947 12,226,669
------------ ------------ ------------ ------------ -----------
Liabilities
- -----------
Accounts payable 1,522,686 (3,739) 227,884 724,979 2,224
Due to brokers for
securities purchased - - 547,665 725,974 -
------------ ------------ ------------ ------------ -----------
Net assets available for benefits $402,972,292 $105,317,681 $244,836,559 $233,408,994 $12,224,445
============= ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------
S&P 500
Assets Flagship Fund Daily EAFE Loan Total
- ------ ------------- ---------- ---- -----
<S> <C> <C> <C> <C>
Investments, at fair value:
Cash and cash equivalents $ 51,339 - - $ 30,344,938
Common stock - - - 483,194,123
Fixed income securities - - - 82,791,548
Commingled fund 95,790,906 $ 11,432,283 - 107,223,189
Participant loans - - $ 29,059,790 29,059,790
------------ ------------ ------------ --------------
95,842,245 11,432,283 29,059,790 732,613,588
------------ ------------ ------------ --------------
Group annuity and fixed income securities,
at cost plus accrued interest - - - 402,307,650
------------ ------------ ------------ --------------
95,842,245 11,432,283 29,059,790 1,134,921,238
------------ ------------ ------------ --------------
Receivables:
Dividend and interest - - - 2,684,434
Due from brokers for
securities sold - - - 1,236,290
------------ ------------ ------------ --------------
95,842,245 11,432,283 29,059,790 1,138,841,962
------------ ------------ ------------ --------------
Liabilities
- -----------
Accounts payable 51,838 22,196 - 2,548,068
Due to brokers for
securities purchased - - - 1,273,639
------------ ------------ ------------ --------------
Net assets available for benefits $ 95,790,407 $ 11,410,087 $ 29,059,790 $1,135,020,255
============ ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan
-------------------------
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1996
-----------------------
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------------------------
Stable Baxter General Allegiance
Assets Income Common Stock Composite Equity Stock
- ------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Investments, at fair value:
Cash and cash equivalents $ 9,128,614 $ 2,795,702 $ 9,267,521 $ 11,117,827 $ 516,207
Common stock - 85,583,564 126,630,114 169,719,322 10,569,878
Fixed income securities - - 37,048,567 7,075,801 -
Commingled fund - - - - -
Participant loans - - - - -
------------ ----------- ------------ ------------ ------------
9,128,614 88,379,266 172,946,202 187,912,950 11,086,085
------------ ----------- ------------ ------------ ------------
Group annuity and
fixed income securities,
at cost plus accrued interest 403,850,382 - - - -
------------ ----------- ------------ ------------ ------------
412,978,996 88,379,266 172,946,202 187,912,950 11,086,085
------------ ----------- ------------ ------------ ------------
Receivables:
Dividend and interest 40,327 635,494 852,503 411,074 40,971
Due from brokers for
securities sold - - 209,945 281,371 36,195
------------ ----------- ------------ ------------ ------------
413,019,323 89,014,760 174,008,650 188,605,395 11,163,251
------------ ----------- ------------ ------------ ------------
Liabilities
- -----------
Accounts payable 1,648,013 - 244,475 346,742 -
Due to brokers for
securities purchased - - 496,923 665,982 -
------------ ----------- ------------ ------------ ------------
Net assets available for benefits $411,371,310 $89,014,760 $173,267,252 $187,592,671 $ 11,163,251
============ =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------
S&P 500
Flagship Fund Daily EAFE Loan Total
-------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
- ------
Investments, at fair value:
Cash and cash equivalents - - - $ 32,825,871
Common stock - - - 392,502,878
Fixed income securities - - - 44,124,368
Commingled fund $48,130,052 $9,280,569 - 57,410,621
Participant loans - - $30,733,352 30,733,352
----------- ---------- ----------- ------------
48,130,052 9,280,569 30,733,352 557,597,090
----------- ---------- ----------- ------------
Group annuity and
fixed income securities,
at cost plus accrued interest - - - 403,850,382
----------- ---------- ----------- ------------
48,130,052 9,280,569 30,733,352 961,447,472
----------- ---------- ----------- ------------
Receivables:
Dividend and interest - - - 1,980,369
Due from brokers for
securities sold - - - 527,511
----------- ---------- ----------- ------------
48,130,052 9,280,569 30,733,352 963,955,352
----------- ---------- ----------- ------------
Liabilities
- -----------
Accounts payable 12,834 7,903 - 2,259,967
Due to brokers for
securities purchased - - - 1,162,905
----------- ---------- ----------- ------------
Net assets available for benefits $48,117,218 $9,272,666 $30,733,352 $960,532,480
=========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan
-------------------------
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the year ended December 31, 1997
------------------------------------
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------
Stable Baxter General Allegiance
Income Common Stock Composite Equity Stock
------ ------------ --------- ------ -----
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest $ 28,144,140 $ 176,418 $ 4,038,737 $ 1,090,644 $ 14,236
Dividends - 2,176,594 2,374,095 3,147,057 143,273
Net appreciation in fair value of assets - 18,189,607 41,239,800 52,204,258 2,704,303
------------ ------------ ------------ ------------ -----------
28,144,140 20,542,619 47,652,632 56,441,959 2,861,812
------------ ------------ ------------ ------------ -----------
Contributions:
Loan repayments 6,645,537 2,831,038 1,542,604 2,044,847 -
Employer contributions 5,025,766 3,152,669 1,995,587 2,645,313 -
Employee contributions 12,158,515 2,051,832 7,751,069 10,274,674 -
------------ ------------ ------------ ------------ -----------
23,829,818 8,035,539 11,289,260 14,964,834 -
------------ ------------ ------------ ------------ -----------
Transfers from other plans 4,507,796 901,161 4,457,970 5,909,402 -
------------ ------------ ------------ ------------ -----------
Total additions 56,481,754 29,479,319 63,399,862 77,316,195 2,861,812
------------ ------------ ------------ ------------ -----------
Deductions from net assets attributed to:
Benefits paid 35,186,418 6,670,504 10,643,589 14,108,944 771,313
Loans issued 5,225,316 2,153,554 1,608,332 2,131,976 173,016
Plan expenses 1,878,181 169,553 1,109,770 1,666,843 28,923
------------ ------------ ------------ ------------ -----------
Total deductions 42,289,915 8,993,611 13,361,691 17,907,763 973,252
------------ ------------ ------------ ------------ -----------
Net increase prior to interfund transfers 14,191,839 20,485,708 50,038,172 59,408,431 1,888,560
Interfund transfers (22,590,857) (4,182,787) 21,531,136 (13,592,109) (827,366)
------------ ------------ ------------ ------------ -----------
Net increase (decrease) (8,399,018) 16,302,921 71,569,307 45,816,323 1,061,194
Net assets available for benefits:
Beginning of year 411,371,310 89,014,760 173,267,252 187,592,671 11,163,251
------------ ------------ ------------ ------------ -----------
End of year $402,972,292 $105,317,681 $244,836,559 $233,408,994 $12,224,445
============ ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------------------
S&P 500 Flagship Fund Daily EAFE Loan Total
--------------------- ---------- ---- -----
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest - - $ 2,638,715 $ 36,102,890
Dividends - - - 7,841,019
Net appreciation in fair value of assets $19,798,119 $ 10,033 - 134,146,120
----------- ----------- ------------ --------------
19,798,119 10,033 2,638,715 178,090,029
----------- ----------- ------------ --------------
Contributions:
Loan repayments 1,000,912 146,848 (14,211,786) -
Employer contributions 1,697,251 357,563 - 14,874,149
Employee contributions 6,167,166 1,348,271 - 39,751,527
----------- ----------- ------------ --------------
8,865,329 1,852,682 (14,211,786) 54,625,676
----------- ----------- ------------ --------------
Transfers from other plans 4,207,626 1,420,428 586,911 21,991,294
----------- ----------- ------------ --------------
Total additions 32,871,074 3,283,143 (10,986,160) 254,706,999
----------- ----------- ------------ --------------
Deductions from net assets attributed to:
Benefits paid 4,098,352 593,999 3,114,377 75,187,496
Loans issued 972,576 162,205 (12,426,975) -
Plan expenses 153,025 25,433 - 5,031,728
----------- ----------- ------------ --------------
Total deductions 5,223,953 781,637 (9,312,598) 80,219,224
----------- ----------- ------------ --------------
Net increase prior to interfund transfers 27,647,121 2,501,506 (1,673,562) 174,487,775
Interfund transfers 20,026,068 (364,085) - -
----------- ----------- ------------ --------------
Net increase (decrease) 47,673,189 2,137,421 (1,673,562) 174,487,775
Net assets available for benefits:
Beginning of year 48,117,218 9,272,666 30,733,352 960,532,480
----------- ----------- ------------ --------------
End of year $95,790,407 $11,410,087 $ 29,059,790 $1,135,020,255
=========== =========== ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan
-------------------------
Statement of Changes in Net Assets Available for Benefits, with Fund Information
For the year ended December 31, 1996
------------------------------------
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------
Stable Baxter General Allegiance
Income Common Stock Composite Equity Stock
------ ------------ --------- ------ ------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest $ 33,958,845 $ 102,622 $ 4,014,081 $ 1,514,701 $ 6,451
Dividends - 2,889,156 2,612,632 3,200,197 38,652
Net appreciation (depreciation) in fair value of assets (18,000) (19,034,110) 20,213,479 29,160,527 11,251,301
------------ ------------ ------------ ------------ -----------
33,940,845 (16,042,332) 26,840,192 33,875,425 11,296,404
------------ ------------ ------------ ------------ -----------
Contributions:
Loan repayments 8,958,416 4,184,487 3,190,237 1,066,684 -
Employer contributions 8,362,213 5,450,393 4,970,296 1,129,326 -
Employee contributions 18,304,100 2,604,822 8,746,406 14,510,088 -
------------ ------------ ------------ ------------ -----------
35,624,729 12,239,702 16,906,939 16,706,098 -
------------ ------------ ------------ ------------ -----------
Total additions 69,565,574 (3,802,630) 43,747,131 50,581,523 11,296,404
------------ ------------ ------------ ------------ -----------
Deductions from net assets attributed to:
Benefits paid 42,989,870 6,223,522 11,557,822 16,685,269 155,668
Loans issued 10,798,524 5,340,510 4,169,569 1,872,314 47,439
Plan expenses 2,561,596 235,584 973,998 1,104,861 2,717
Transfer to/from other plans, net 98,886,872 21,682,677 61,311,506 47,340,204 -
------------ ------------ ------------ ------------ -----------
Total deductions 155,236,862 33,482,293 78,012,895 67,002,648 205,824
------------ ------------ ------------ ------------ -----------
Net (decrease) increase prior to interfund transfers (85,671,288) (37,284,923) (34,265,764) (16,421,125) 11,090,580
Interfund transfers (27,579,542) 8,278,557 (5,474,206) (6,227,699) 72,671
------------ ------------ ------------ ------------ -----------
Net increase (decrease) 113,250,830) (29,006,366) (39,739,970) (22,648,824) 11,163,251
Net assets available for benefits:
Beginning of year 524,622,140 118,021,126 213,007,222 210,241,495 -
------------ ------------ ------------ ------------ -----------
End of year $411,371,310 $ 89,014,760 $173,267,252 $187,592,671 $11,163,251
============ ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------
S&P 500
Flagship Fund Daily EAFE Loan Total
------------- ---------- ---- -----
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Interest $ 2,278 $ 694 $ 3,952,088 $ 43,551,760
Dividends - - - 8,740,637
Net appreciation (depreciation) in fair value of assets 6,880,137 359,585 - 48,812,919
----------- ----------- ------------ --------------
6,882,415 360,279 3,952,088 101,105,316
----------- ----------- ------------ --------------
Contributions:
Loan repayments 703,512 121,749 (18,225,085) -
Employer contributions 1,310,452 301,668 - 21,524,348
Employee contributions 4,400,661 1,042,372 - 49,608,449
----------- ----------- ------------ --------------
6,414,625 1,465,789 (18,225,085) 71,132,797
----------- ----------- ------------ --------------
Total additions 13,297,040 1,826,068 (14,272,997) 172,238,113
----------- ----------- ------------ --------------
Deductions from net assets attributed to:
Benefits paid 2,492,141 758,885 1,981,730 82,844,907
Loans issued 875,094 126,102 (23,229,552) -
Plan expenses 91,280 28,086 - 4,998,122
Transfer to/from other plans, net 15,511,724 3,343,106 19,543,188 267,619,277
----------- ----------- ------------ --------------
Total deductions 18,970,239 4,256,179 (1,704,634) 355,462,306
----------- ----------- ------------ --------------
Net (decrease) increase prior to interfund transfers (5,673,199) (2,430,111) (12,568,363) (183,224,193)
Interfund transfers 25,002,455 5,758,396 169,368 -
----------- ----------- ------------ --------------
Net increase (decrease) 19,329,256 3,328,285 (12,398,995) (183,224,193)
Net assets available for benefits:
Beginning of year 28,787,962 5,944,381 43,132,347 1,143,756,673
----------- ----------- ------------ --------------
End of year $48,117,218 $ 9,272,666 $ 30,733,352 $ 960,532,480
=========== =========== ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
BAXTER INTERNATIONAL INC. AND SUBSIDIARIES
INCENTIVE INVESTMENT PLAN
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - GENERAL DESCRIPTION OF THE PLAN
- ----------------------------------------
The following brief 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 agreement for
more complete information.
The Plan allows tax deferred contributions in compliance with Section 401(k) of
the Internal Revenue Code. Eligible participants may make pre-tax contributions
up to 12% of their eligible annual compensation within certain limitations. The
Plan sponsor, Baxter International Inc. ("Baxter"), matches contributions of
their respective employees up to a maximum of 3% of compensation. Participant
contributions are fully vested at all times. Vesting in the Plan sponsor
matching contributions is based on years of continuous service. A participant
vests in annual increments of 20% and is 100 percent vested after five years of
credited service.
Upon enrollment in the Plan, a participant may direct contributions in any of
six investment options: Stable Income, Baxter Common Stock, Composite, General
Equity, S&P 500 Flagship and Daily EAFE. The Allegiance Common Stock fund was
added in 1996 to allow participants to receive a stock dividend that consisted
of one Allegiance Healthcare Corporation ("Allegiance") share for every five
shares of Baxter stock owned as of September 26, 1996. Participants are not able
to make contributions to this fund.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
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. Plan investments, other than
group annuity contracts, are stated at fair value determined as follows:
<TABLE>
<CAPTION>
<S> <C>
U.S. government and government Value based on the last reported
agency issues sale price from a national security
exchange on the valuation date
Corporate and other bonds Value based on the last reported
sale price from a national security
exchange on the valuation date
Common stock:
Traded on national exchanges Value based on composite pricing of all
national closing sales prices on the
valuation date
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Traded on over-the-counter Value based on last reported sale price
market defaulting to bid quotations
Commingled investments Value based on closing prices
of the underlying securities on
the valuation date
Group annuity contracts Value based on cost plus accrued interest
Short term investments Value based on cost which approximates fair
value
Loan fund Participant note receivables are valued at
cost which approximates fair value
</TABLE>
Plan investment return includes dividend and interest income, gains and losses
on sales of investments and unrealized appreciation or depreciation of
investments. The financial statements reflect the net appreciation in the fair
value of the Plan's investments. This net 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.
Amounts funded to insurance companies under various contracts are maintained in
deposit accounts which are credited monthly with earnings on the underlying
investments and charged for Plan withdrawals and expenses. These contracts are
reported in the financial statements at contract value, which represents
contributions made under the contracts, plus earnings, less withdrawals and
expenses, because they are considered fully benefit responsive. The fair values
at December 31, 1997 and 1996 approximate the contract values and the average
yields and crediting interest rates were between 7%-8% for 1997 and 1996.
Employee contributions and matching contributions are recorded in the period in
which they are earned by participants.
Accounts receivable from or payable to broker consists of the net cash value of
security trades which settled after December 31, 1997 and December 31, 1996 with
various brokers.
Concentration of Credit Risk
- ----------------------------
The Plan holds significant investments under contracts with insurance companies
that subject the Plan to credit risk. The Plan does not generally require
collateral for these contracts and does not anticipate a failure of the
insurance companies to meet their obligations established under these contracts.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
NOTE 3 - ELIGIBILITY REQUIREMENTS
- ---------------------------------
Employees become eligible to participate in the Plan as of the first day of the
month following one calendar month of employment for 1996 through June 30, 1997.
Effective July 1, 1997, employees become eligible to participate in the Plan on
the first day following one year of employment. Eligible employees are those who
meet the following requirements:
1. U.S. employees of Baxter or its subsidiaries which have adopted the
Plan.
-7-
<PAGE>
2. U.S. employees not covered by a collective bargaining agreement
unless the agreement provides for coverage under the Plan.
3. U.S. employees who are not leased employees.
NOTE 4 - ADMINISTRATION OF THE PLAN
- -----------------------------------
State Street Bank and Trust Company serves as trustee 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 for from the assets of the Plan.
NOTE 5 - INVESTMENTS
- --------------------
Investments representing five percent or more of the Plan's assets at December
31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------------------- ----------------------------
Fair Fair
Value Cost Value Cost
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Baxter Common Stock, 1,989,044 shares and
2,087,404 shares at December 31, 1997
and 1996, respectively $ 100,322,407 $59,136,931 $85,583,564 $50,620,588
S&P 500 Flagship 95,790,906 70,703,628 48,130,052 40,095,685
Bernstein Fixed Income Portfolio 79,644,686 79,644,686 77,670,225 77,670,225
Loomis Fixed Income Portfolio 81,817,235 81,817,235 78,783,217 78,783,217
PIMCO Fixed Income Portfolio 49,751,369 49,751,369 48,545,046 48,545,046
</TABLE>
Investments are segregated into various investment funds as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------------------- ----------------------------
Fair Fair
Value Cost Value Cost
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Stable Income Fund $ 402,972,292 $402,134,169 $412,978,996 $412,978,996
Baxter Common Stock Fund 105,317,681 63,492,071 88,379,266 53,416,290
Composite Fund 244,836,559 200,529,634 172,946,202 139,647,020
General Equity Fund 233,408,994 178,538,875 187,912,950 143,546,464
Allegiance Stock Fund 12,224,445 1,109,093 11,086,085 1,192,176
S&P 500 Flagship Fund 95,790,407 70,703,628 48,130,052 40,095,685
Daily EAFE Fund 11,410,087 11,156,877 9,280,569 8,817,304
Loan Fund 29,059,790 29,059,790 30,733,352 30,733,352
-------------- ------------ ------------ ------------
$1,135,020,255 $956,724,137 $961,447,472 $830,427,287
============== ============ ============ ============
</TABLE>
During 1997 and 1996, the change in unrealized appreciation of the investments
was $44,762,843 and $60,942,050, respectively. The realized gain (loss) on sale
of investments during 1997 and 1996 was $89,383,277 and ($12,129,131),
respectively.
-8-
<PAGE>
The net appreciation (depreciation) in fair value for each significant class of
investment, which includes realized and unrealized gains and losses, is as
follows:
Year ended December 31,
-----------------------
1997 1996
---- ----
U.S. government and government
agency issues $ 2,052,326 ($ 1,894,708)
Corporate and other bonds 288,455 (595,024)
Commingled investments 19,808,151 7,239,722
Common stock 111,997,188 44,062,929
------------ -------------
$134,146,120 $ 48,812,919
============ =============
NOTE 6 - TRANSFERS OF ASSETS
- ----------------------------
Included in total transfers from other plans in 1997, are net assets of
$19,990,353, which were transferred from the PSICOR, Inc. Retirement Savings
Plan.
During 1996, net assets of $279,190,957 associated with participants of
Allegiance were transferred from the Plan to the Allegiance Corporation
Retirement Plan due to the spin-off of Allegiance. Also during 1996, net assets
of $5,242,326 and $6,329,354 were transferred into the Plan from the Clintec
401(k) Savings Plan and PSICOR, Inc. Employee Stock Ownership Plan and Trust,
respectively.
NOTE 7 - DISTRIBUTION PRIORITIES UPON TERMINATION OF THE PLAN
- -------------------------------------------------------------
Upon termination of the Plan, the account balance of each participant will
become 100% vested and all assets, net of expenses, will be distributed to the
participants or beneficiaries.
NOTE 8 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
- ------------------------------------------------------------
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
December 31,
------------
1997 1996
---- ----
Net assets available for benefits per the
financial statements $1,135,020,255 $1,134,452,672
Amounts allocated to withdrawing participants (89,037) -
-------------- --------------
Net assets available for benefits
per the Form 5500 $1,134,931,218 $1,134,452,672
============== ==============
-9-
<PAGE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year ended
December 31, 1997
-----------------
Benefits paid to participants per the financial statements $75,187,496
Add: Amounts allocated to withdrawing participants at
December 31, 1997 89,037
Less: Amounts allocated to withdrawing participants at
December 31, 1996 -
-----------
Benefits paid to participants per Form 5500 $75,276,533
===========
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
NOTE 9 - TAX STATUS OF THE PLAN
- -------------------------------
The Internal Revenue Service has determined and informed the Company by a letter
dated March 29, 1996 that the Plan is designed in accordance with applicable
sections of the Internal Revenue Code ("IRC"). The Plan has been amended since
receiving the determination letter. The Plan sponsor, Baxter, is in the process
of drafting a request for a determination letter on the amended Plan. The Plan
sponsor and the Plan's tax counsel believe that the Plan is designed and
currently being operated in compliance with applicable provisions of the IRC.
NOTE 10 - RELATED PARTIES
- -------------------------
At December 31, 1997 and 1996, the Plan held units of participation in certain
common/collective trust funds and short term investment funds of State Street
Bank and Trust Company, the Plan Trustee, and held shares of common stock of
Baxter, the Plan sponsor. These transactions are allowable party-in-interest
transactions under ERISA and the regulations promulgated thereunder.
-10-
<PAGE>
Baxter International Inc. and Subsidiaries Schedule I
Incentive Investment Plan Page 1 of 6
Line 27a Form 5500 - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Identity of Description of Cost of Current
issue Investment asset value
- ------------------------------- -------------------- ----------- -----------
<S> <C> <C> <C>
Cash & cash equivalents:
* State Street Bank
and Trust Co. Short Term Inv. Fund $30,344,938 $30,344,938
----------- -----------
$30,344,938 $30,344,938
----------- -----------
Common stocks:
3Com Corp Common Stock $ 2,102,539 $ 1,991,438
Abbott Labs Com NPV 2,330,632 2,353,694
Aetna Inc Common Stock 2,519,423 3,528,125
Airtouch Communications Inc Common Stock 351,495 486,281
Albany Int'l Corp New Class A 1,087,210 1,219,000
Alcan Alum Ltd Common Stock 2,401,275 2,492,825
Allegheny Energy Inc Common Stock 2,607,219 2,900,820
Allegiance Corp. Common Stock 903,346 11,985,990
Allmerica Financial Corp Common Stock 632,100 1,503,119
Allstate Corp Common Stock 1,024,251 3,544,125
Ambac Finl Group Inc Common Stock 726,060 1,656,000
Amerada Hess Corp Com NPV 773,042 806,663
American Elec Pwr Inc Common Stock 4,607,246 5,735,538
American Gen Corp Common Stock 1,067,357 1,589,438
American Grettings Corp Cl A 2,016,284 2,464,875
American Home Products Corp Common Stock 2,202,371 2,363,850
American Std Cos Inc Del Common Stock 1,152,939 1,149,375
Amgen Inc Common Stock 574,952 627,850
Amp Inc Common Stock 900,772 751,800
Analog Devices Inc Common Stock 763,017 878,607
Anheuser Busch Cos Inc Common Stock 693,572 1,240,800
Applied Materials Inc Common Stock 293,720 617,563
Arrow Electrs Inc Common Stock 1,871,705 2,153,850
Atmel Corp Common Stock 842,009 608,850
Autozone Inc Common Stock 1,217,112 1,487,700
Avnet Inc Common Stock 1,017,934 1,320,000
Baker Hughes Inc Common Stock 1,342,032 1,304,388
Banc One Corp Common Stock 1,356,176 2,717,798
Banc One Corp Common Stock 2,226,461 3,557,469
Baxter International Inc Common Stock 1,358,510 1,402,163
Baxter International Inc Common Stock 59,136,931 100,322,407
Bear Stearns Cos Inc Common Stock 1,169,187 1,220,750
BergenBrunswig Corp Class A 398,407 641,353
Bestfoods Common Stock 834,530 948,200
Betzdearborn Inc Rts call thru 9/19/98 983,146 928,150
Beverly Enterprises Inc Common Stock New 1,033,798 1,716,000
Biogen Inc Common Stock 492,309 640,200
Borg Warner Automotive Inc Common Stock 1,705,595 2,444,000
Boston Scientific Corp Common Stock 1,060,104 935,850
Bristol Myers Squibb Co Common Stock 1,666,513 1,996,588
Browning Ferris Inds Inc Common Stock 2,032,154 2,316,200
Cadence Design Sys Inc Common Stock 391,556 524,300
Canadian Pac Ltd New Common Stock 2,934,286 4,700,625
* Party-in-interest
</TABLE>
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan Schedule I
Line 27a Form 5500 - Schedule of Assets Held for Page 2 of 6
Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Identity of Description of Cost of Current
issue Investment asset value
- ------------------------------ ---------------------------------- --------------- -----------------
<S> <C> <C> <C>
Carnival Corp Common Stock 934,484 1,733,238
Centex Corp Common Stock 524,955 1,139,169
Century Tel Enterprises Inc Common Stock 2,586,142 4,234,063
Champion Int'l Corp Common Stock 3,485,004 2,813,906
Chase Manhattan Corp New Common Stock 528,799 1,894,350
Chubb Corp Common Stock 2,745,567 4,000,563
Cigna Corp Common Stock 2,550,264 6,126,413
Cisco Sys Inc Common Stock 954,636 2,165,888
Clear Channel Communications Common Stock 776,849 1,000,913
Compaq Computer Corp Common Stock 5,418,163 7,754,513
Computer Association Int'l Inc Common Stock 857,124 1,475,213
Computer Sciences Corp Common Stock 1,614,058 1,887,100
Crown Cork + Seal Inc Common Stock 924,058 887,213
CSX Corp Common Stock 2,542,500 2,543,400
CVS Corp Common Stock 390,002 582,969
Department 56 Inc Common Stock 821,200 1,092,500
Dole Food Inc Common Stock 549,820 608,475
DQE Common Stock 1,415,868 1,563,063
Eastman Chemical Co Common Stock 226,300 232,294
Emerson Electric Co Common Stock 1,602,680 1,647,975
Enrol Corp Common Stock 1,035,819 1,309,219
Federal Express Corp Common Stock 757,251 2,204,356
Federal National Mtg Assn Common Stock 5,366,383 14,374,044
Federated Dept Stores Inc Del Common Stock 1,299,942 1,459,819
First Data Corp Common Stock 1,554,006 1,339,650
First Health Group Corp Common Stock 715,146 659,513
First UN Corp Common Stock 1,376,840 1,353,000
Fleet Financial Group Inc Common Stock 811,328 2,727,725
Fleming Cos Inc Common Stock 31,948 13,438
FMC Corp Common Stock New 912,335 1,077,000
Ford Motor Co Del Common Stock 5,582,807 9,674,206
Foundational Health Sys Inc Common Stock 722,051 674,830
Fruit of the Loom CL A 889,239 902,000
General Electric Co Common Stock 1,795,001 1,951,775
General Motors Corp CL H New 748,665 823,706
Golden West Financial Corp Del Common Stock 646,179 1,535,656
Goodrich B F Co Common Stock 820,256 1,098,094
Goodyear Tire and Rubber Common Stock 394,798 394,475
Harris Corp Del Common Stock 907,879 972,550
Hasbro Inc Common Stock 2,973,401 3,969,000
Heinz H J Co Common Stock 865,697 1,006,088
Hewlett Packard Co Common Stock 1,333,507 1,362,500
Hibernia Corp Common Stock 588,619 585,069
Hilton Hotels Corp Common Stock 1,276,052 1,306,025
Home Depot Inc Common Stock 664,301 1,389,391
Honeywell Inc Common Stock 1,044,707 945,300
Intel Corp Common Stock 2,084,050 3,105,050
International Business Machs Common Stock 6,528,173 12,254,725
International Paper Co Common Stock 3,331,003 2,712,563
John Alden Financial Corp Common Stock 2,496,693 3,036,000
Johnson & Johnson Common Stock 1,193,743 1,258,213
Kaufman & Broad Home Corp Common Stock 1,397,012 2,468,125
Keycorp New Common Stock 588,544 580,663
Leggett & Platt Co Common Stock 801,724 1,201,813
</TABLE>
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan Schedule I
Line 27a Form 5500 - Schedule of Assets Held for Page 3 of 6
Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Identity of Description of Cost of Current
issue Investment asset value
- ----------------------------- ---------------------------------- --------------- -----------------
<S> <C> <C> <C>
Lilly Eli & Co Common Stock 1,648,893 2,005,200
Lincoln National Corp IN Common Stock 1,145,567 1,500,000
Linear Technology Corp Common Stock 980,871 1,100,638
Loews Corp Common Stock 2,354,403 4,138,875
Lone Star Steakhouse & Saloon Common Stock 902,000 770,000
Lowes Cos Inc USDO.50 665,968 815,456
Lubrizol Corp Common Stock 1,169,895 1,500,813
Magna International Inc Common Stock 1,538,623 1,695,938
Mapco Inc Common Stock 857,498 1,369,000
May Dept Stores Co Common Stock 2,906,429 2,882,006
MBIA Inc Common Stock 4,568,161 7,843,788
McCormick & Co Com Non VTG 713,974 784,000
Mead Corp Common Stock 320,064 281,400
Mellon BK Corp Common Stock 951,622 3,213,125
Merck & Co Inc Common Stock 1,679,624 2,890,000
Merrill Lynch & Co Inc Common Stock 1,173,694 1,145,119
Mgic Invt Corp Wis Common Stock 601,967 678,300
Mobil Corp Common Stock 648,567 1,155,000
Morgan Stanley Dean Witter Common Stock New 3,356,530 5,374,463
National Semiconductor Corp Common Stock 1,663,849 1,216,469
Nationsbank Corp Common Stock 1,526,874 2,219,656
Newell Co Common Stock 1,427,470 1,861,500
Nine West Group Inc Common Stock 1,193,213 830,000
Nord Res Corp Common Stock - 8,305
Occidental Pete Corp Common Stock 2,303,350 2,828,656
Old Rep International Corp Common Stock 388,183 978,031
Oracle Corp Common Stock 1,140,288 720,694
Owens Corning Common Stock 1,135,574 986,213
Pacificare Health Systems Class B 1,716,877 1,235,422
Parametric Technology Corp Common Stock 1,482,996 1,582,325
Partnerre Ltd Common Stock 1,641,197 3,594,063
Penney J C Inc Common Stock 3,518,607 4,326,216
Pepsico Inc Common Stock 2,148,447 2,393,944
Pfizer Inc Common Stock 679,869 894,750
PG&E Corp Common Stock 5,331,768 6,916,648
Pharmerica Inc Common Stock 432,505 687,087
Philip Morris Cos Inc Common Stock 8,145,480 14,191,875
Polaris Inds Inc Common Stock 1,343,647 1,635,094
Procter & Gamble Co Common Stock 343,679 407,044
Puget Sound Energy Inc Rts call thru 1/25/01 1,252,790 1,593,900
Quantum Corp Common Stock 2,654,743 2,684,363
Raytheon Co CL A 609,250 619,238
Republic NY Corp Common Stock 229,510 424,207
Reynolds & Reynolds Co CL A 820,258 767,000
RJR Nabisco Hldgs Corp Common Stock New 1,834,265 2,308,163
Royal Dutch Pete Co NY Registry sh par n gldr 1.2 979,428 1,933,735
Ryder Sys Inc Common Stock 360,986 501,075
Safeco Corp Common Stock 2,661,723 2,652,000
Sara Lee Corp Common Stock 804,925 1,086,831
SBC Communications Inc Common Stock 670,293 1,339,816
Schlumberger Ltd Common Stock 1,186,894 1,271,900
Seagate Technology Common Stock 2,477,821 1,642,025
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan Schedule I
Line 27a Form 5500 - Schedule of Assets Held for Investment Purposes Page 4 of 6
December 31, 1997
Identity of Description of Cost of Current
issue Investment asset value
------------------------------ -------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Sears Roebuck & Co Common Stock 2,008,225 1,692,350
Service Corp Int'l Common Stock 1,406,644 1,724,981
Solectron Corp Common Stock 924,697 1,687,438
Southwest Airlines Co Common Stock 2,877,425 4,430,038
St. Paul Cos Inc Common Stock 2,040,303 3,134,788
Sterling Software Inc Common Stock 1,376,356 2,009,000
Sun Inc Common Stock 1,086,741 1,493,219
Sun Microsystems Inc Common Stock 1,735,534 2,843,088
Supervalu Inc Common Stock 802,557 1,067,813
Tech Data Corp Common Stock 386,017 628,648
Tellabs Inc Common Stock 478,971 481,163
Tenet Healthcare Corp Common Stock 1,298,167 1,500,563
Teradyne Inc Rts call thru 3/26/00 1,398,885 1,100,800
Texaco Inc Common Stock 367,860 652,500
Texas Instruments Inc Common Stock 1,508,410 2,115,000
Tidewater Co Common Stock 2,423,344 2,921,625
Toys R Us Inc Common Stock 4,128,453 4,102,594
Union Camp Corp Common Stock 1,684,363 1,873,962
Union Carbide Corp Common Stock 3,759,170 3,506,920
United Healthcare Corp Common Stock 2,411,752 2,484,375
United Technologies Corp Common Stock 2,035,457 1,769,344
Unocal Corp Common Stock 239,769 232,875
Ust Inc Com USDO.50 3,336,964 3,948,619
V F Corp Common Stock 630,237 1,277,063
Varian Assoc Inc Common Stock 3,076,264 2,780,938
Wal Mart Stores Inc Common Stock 1,894,442 3,155,000
Warner Lambert Co Common Stock 771,976 1,116,000
Western Digital Corp Rts call thru 11/30/98 1,212,964 899,500
Westvaco Corp Common Stock 2,092,953 1,905,113
Whirlpool Corp Common Stock 649,414 715,000
Worldcome Inc Ga Common Stock 1,385,082 1,579,050
------------ ------------
$335,505,357 $483,194,124
------------ ------------
Fixed income securities:
Airplanes Passthru Trust SER 1 CL C 8.150 3/15/2019 $364,547 $370,150
American Airlines CL A 1 9.710 1/2/2007 182,327 202,889
AON Corp. 6.875 10/1/1999 263,368 278,358
Associates Corp. North Amer. SR NT 6.375 8/15/1999 652,717 652,763
Associates Corp. North Amer. 6.450 10/15/2001 753,135 755,378
Avon Energy Partners Hlds SR NT 144A 6.730 12/11/2002 625,000 629,313
Banc One CR Card Master TR Asset backed CTF Ser 95 A CL 6.150 7/15/2002 274,570 274,912
BankAmerica Corp. SR NT 6.650 5/1/2001 707,770 709,442
BankAmerica Manufactured HSG SR/Sub Ctf Ser 97 2 CL A 6 6.470 4/10/2015 1,300,000 1,299,594
BCH Cayman Is. LTD Guar Sub NT 6.50 2/15/2006 346,224 344,708
California Infrastructure PG + E1 Ser 97 1 Ctf CL A3 6.150 6/25/2002 649,927 651,828
Columbia / HCA Healthcare Corp Tranche SR 00014 6.870 9/15/2003 543,923 539,270
Continental Cablevision Inc SR NT 8.30 5/15/2006 308,907 327,423
Discover Card MT 1 7.750 4/16/2002 349,388 358,201
FED HM LN PC G50337 7.50 10/1/2000 542,452 542,618
FED HM LN PC G50371 6.50 9/1/2001 138,862 140,583
FED HM LN PC M90496 7.00 5/1/2002 76,874 77,724
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan Schedule I
Line 27a Form 5500 - Schedule of Assets Held for Investment Purposes Page 5 of 6
December 31, 1997
Identity of Description of Cost of Current
issue Investment asset value
- ------------------------------ -------------------------------------------- ---------- ----------
<S> <C> <C> <C>
FED HM LN PC 8.000 10/01/2027 457,036 457,658
FED HM LN PC 6.500 10/01/2008 203,107 200,361
FED HM LN PC 6.500 12/01/2008 349,927 347,543
Federal Home LN MTG Multiclass Ser 1831 CL 1831 PD 6.250 3/15/2011 531,867 544,500
Federal Home LN MTG PC GTD Ser 1229 CL 1229 J 8.00 4/15/2007 248,164 265,625
Federal Home LN MTG PC GTD Ser 1308 CL 1308 J 8.500 6/15/2007 353,008 384,013
Federal Nat'l Mtg Assn Remic Remic TR 1992 47 CL J 8.00 2/25/2007 246,475 261,640
Federal Nat'l Mtg Assn Remic Remic TR 1992 142 CL 152 M 7.750 8/25/2007 351,750 376,250
Federal Nat'l Mtg Assn Remic Remic TR 1993 47C 7.00 4/25/2008 913,047 913,779
Firststar Bk. Milwaukee Nat'l Tranche SR 00001 6.250 12/1/2002 949,932 948,165
FNBC 1993 A Pass thru TR Pass thru Ctf Ser 1993 A 8.08 1/5/2018 350,000 398,852
FNMA Pool 8.50 1/1/2002 1,433 1,485
FNMA Pool 8.50 3/1/2002 18,399 19,037
FNMA Pool 8.50 4/1/2002 12,265 12,574
FNMA Pool 6.00 1/1/2009 189,548 194,496
FNMA Pool 7.00 3/1/2024 410,533 412,315
FNMA Pool 7.50 3/1/1999 551,705 558,350
FNMA Pool 7.00 8/1/2023 682,917 675,818
FNMA Pool 7.50 6/1/2027 672,003 687,964
FNMA Pool 7.50 12/1/2027 1,136,026 1,139,846
FNMA Pool 6.50 5/1/2024 417,881 432,599
FNMA Pool 7.50 12/1/2010 201,013 204,681
FNMA Pool 6.50 4/1/2011 457,208 458,923
FNMA Pool 7.00 3/1/2027 785,467 795,270
GNMA Pool 7.00 4/15/2024 292,251 298,429
GNMA Pool 7.50 4/15/2027 120,650 124,505
GNMA Pool 11.50 4/15/2013 1,788 2,045
GNMA Pool 9.00 11/15/2016 322,238 318,196
GNMA Pool 9.50 12/15/2021 205,749 206,288
GNMA Pool 7.00 12/15/2023 128,024 132,316
GNMA Pool 9.00 10/15/2017 461,058 468,211
Green Tree Financial Corp. Ser 1995 7 CL A5 6.950 10/15/2026 349,863 355,467
Gruma SA DE CV 7.625 10/15/2007 499,160 491,330
IMC Home Equity LN TR Ser 1997 3 Pass thru Ctf CL 9A 7.08 8/20/2028 599,970 612,375
International Business Machs 7.50 6/15/2013 299,684 299,115
Jet Equip TR SR NT CL A 1995 B 144A 7.63 8/15/2012 271,376 291,670
La Quinta Inns Inc. SR NT 7.25 3/15/2004 268,604 281,669
LCI International Inc. SR NT 7.25 6/15/2007 498,795 518,150
Lehman Bros Inc. SR Sub NT 1.00 12/15/2003 402,324 417,484
Lehman Brothers Hldgs Inc. Tranche 00268 6.150 12/20/1999 949,259 948,196
Mashantucket Western Pequot Taxable SPL REV BD SER A 144A 6.910 9/1/2012 500,000 516,075
MBNA Master CR Card TR SER 1992 2A 6.20 8/15/1999 41,602 41,575
MBNA Master CR Card TR SER 1993 3 Asset Backe CTF5.40 9/15/2000 353,719 347,701
Medpartners Inc. SR NT 7.375 10/1/2006 138,818 138,047
Merry LD & Invt. Inc. NT 7.250 6/15/2005 348,467 359,191
Morgan Stanley Group Inc Shelf 17 6.875 3/1/2007 348,744 357,613
Peoples Bank Bridgeport CT Sub NT 7.20 12/1/2006 348,789 358,183
Praxair Inc. DEB 8.70 7/15/2022 375,000 412,680
Railcar TR NO NO 1992 1 TR NT 7.75 6/1/2004 420,215 441,473
Residential Accredit Ins Inc. Mtg Ctf Ser 95 QS1 CL A2 6.90 1/25/2020 251,738 252,397
Sea GCA Rlty. Partnership L P NT 7.25 10/21/2007 548,570 555,913
Simon Debartolo Group LP NT 6.875 11/15/2006 348,817 352,989
SLM Student LN TR Ln Bks NT SR 1997 3 Cla 1 F R 1.00 4/25/2006 1,121,616 1,120,430
Southwest Airlines Co DEB 7.375 3/1/2027 274,007 293,953
</TABLE>
<PAGE>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan Schedule I
Line 27a Form 5500 - Schedule of Assets Held for Page 6 of 6
Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Identity of Description of Cost of Current
issue Investment asset value
- ----------------------------- -------------------------------------------- ---------- ----------
<S> <C> <C> <C>
Spintab AB Undated Sub NT Step up 144A 1.00 12/29/2049 399,360 400,120
Standard CR Card Master TR I SER 1993 CL 3 A 5.50 2/7/2000 224,674 223,522
Staples Inc. SR NT 7.125 8/15/2007 498,935 507,980
Structured Asset Secs Corp. Coml Mtg Pass thru Ctf 97 LL 6.790 6/12/2004 757,715 763,638
Texaco Cap Inc. GTDNT 7.09 2/1/2007 300,000 315,666
Texas Utilities Co. SR NT SER A 144A 6.20 10/1/2002 389,626 390,230
Time Warner Entmt Co L P SR Deb 8.375 3/15/2023 364,697 399,413
U.S. Treasury Bonds 7.25PCT BND 15Aug22 11,370,662 12,071,422
U.S. Treasury Notes 6.5PCT 30April99 10,625,767 10,613,190
U.S. Treasury Notes 7.5PCT 15Feb05 7,378,121 7,539,552
U.S. Treasury Notes 7.25PCT 15May04 10,167,236 11,178,561
U.S. Treasury Notes 7.00PCT 15July06 6,094,039 6,260,346
United Air Lines Pass thru Ctf Ser 1991 A1 9.20 3/22/2008 414,773 460,159
USA Waste Svcs Inc. SR NT 7.00 10/1/2004 224,543 229,874
Wells Fargo & Co. 6.875 4/15/2003 273,171 280,830
World Finl Network CR Card TR Adch Ser 96 CL A 6.70 2/15/2004 274,484 280,156
World Svgs & Ln Assn Oakland Calif 9.90 7/1/2000 273,455 286,776
Worldcom Inc GA SR NT 7.75 4/1/2007 399,368 429,556
--------------- -----------------
$80,092,222 $82,791,548
--------------- -----------------
Common/collective trusts:
* State Street Bank & Trust Co S + P 500 Flagship fund $70,703,628 $95,790,906
* State Street Bank & Trust Co Daily EAFE fund 11,166,250 11,432,283
--------------- -----------------
$81,869,878 $107,223,188
--------------- -----------------
* Participant loans Maturing 1/1/98 through 12/31/2007, $ - $29,059,790
prime rate plus one percent --------------- -----------------
Group annuities:
Aetna Life Ins. 8.930 1/2/1998 $24,956,429 $25,138,389
Bernstein Fixed Income Portfolio variable rate, open ended maturity 79,644,686 97,934,663
Loomis Fixed Income Portfolio variable rate, open ended maturity 81,817,235 82,834,265
Brundage Fixed Income Portfolio variable rate, open ended maturity 43,022,100 42,461,195
Pimco Fixed Income Portfolio variable rate, open ended maturiy 49,751,369 60,236,428
Standish Ayer Wood II variable rate, open ended maturity 41,706,901 41,862,964
Met Life 7.510 6/30/1999 13,869,132 13,954,693
New York Life 7.510 6/30/1999 9,248,497 9,305,542
Provident Life & Acc. Inc. Co. 7.320 7/1/1998 9,188,476 9,243,772
Standish Ayer Wood variable rate, open ended maturity 46,748,837 50,099,377
--------------- -----------------
399,953,662 433,071,288
Bankers Trust Wrapper - open ended maturity - (18,362,649)
Chase Wrapper - open ended maturity - (3,056,279)
Deutsche Bank Wrapper - open ended maturity - (9,344,710)
--------------- -----------------
$399,953,662 $ 402,307,650
--------------- -----------------
$927,766,057 $1,134,921,238
=============== =================
</TABLE>
* Party-in-interest
<PAGE>
Schedule II
Baxter International Inc. and Subsidiaries
Incentive Investment Plan
Line 27d Form 5500 - Schedule of Reportable Transactions
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Description of
asset (include Number Expense Current Value Net
interest rate of incurred of Asset on Gain
Identity of and maturity Trans- Purchase Selling Lease with Transaction or
Party Involved in case of loan) actions Price Price Rental Transaction Cost of asset Date (Loss)
- -------------- ---------------- ------- ------------- ------------- ------ ----------- ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
State Street
Bank and Trust Short Term
Company Investment Fund 859 $ 377,051,381 $ - $ - $ - $ 377,051,381 $ 377,051,381 $ -
State Street
Bank and Trust Short Term
Company Investment Fund 859 $ - $ 379,170,149 $ - $ - $ 379,170,149 $ 379,170,149 $ -
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Plan Administrator has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized.
BAXTER INTERNATIONAL INC. AND SUBSIDIARIES
INCENTIVE INVESTMENT PLAN
Date: June 29, 1998 By: /s/ Brian P. Anderson
----------------------------
Brian P. Anderson
Senior Vice President and
Chief Financial Officer
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-47019) of Baxter International Inc. of our report
dated June 25, 1998 appearing on page 3 of this Form 11-K.
Price Waterhouse LLP
Chicago, Illinois
June 25, 1998
