<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, 1998
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
SUPPLEMENTAL SCHEDULES
----------------------
DECEMBER 31, 1998 AND 1997
--------------------------
<PAGE>
BAXTER INTERNATIONAL INC. AND SUBSIDIARIES
INCENTIVE INVESTMENT PLAN
-------------------------
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
--------------------------
<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, 1998 and 1997 2-3
Statement of Changes in Net Assets Available
for Benefits, with Fund Information, for the
years ended December 31, 1998 and 1997 4-5
Notes to Financial Statements 6-10
Supplemental Schedules:*
</TABLE>
Schedule I: Schedule of Assets Held for Investment Purposes as of December 31,
1998
Schedule II: Schedule of Reportable Transactions for the year ended December
31, 1998
*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, 1999
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, 1998 and 1997, 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 conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets
Held for Investment Purposes as of December 31, 1998 and Reportable Transactions
for the year ended December 31, 1998 are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules are the responsibility of the
Plan's management. 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.
<PAGE>
Baxter International Inc Subsidiaries
Incentive Investment Plan
-------------------------
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1998
-----------------------
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------------------
Stable Baxter General Allegiance
Income Common Stock Composite Equity Stock
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Cash and cash equivalents $ 56,212,494 $ 2,853,826 $ 4,426,287 $ 2,643,256 $ 463,555
Common stock - 102,763,156 175,792,634 233,668,668 27,949,729
Fixed income securities - - 88,132,272 - -
Commingled funds - - - - -
Participant loans - - - - -
------------ ------------ ------------ ----------- ------------
56,212,494 105,616,982 268,351,193 236,311,924 28,413,284
------------ ------------ ------------ ----------- ------------
Group annuity and fixed
income securities, at cost
plus accrued interest 409,911,438 - - - -
------------ ------------ ------------ ----------- ------------
466,123,932 105,616,982 268,351,193 236,311,924 28,413,284
------------ ------------ ------------ ----------- ------------
Receivables:
Dividend and interest 225,986 523,743 1,312,703 381,001 33,760
Due from brokers for securities sold - - 1,616,273 2,142,501 -
------------ ------------ ------------ ----------- ------------
466,349,918 106,140,725 271,280,169 238,835,426 28,447,044
------------ ------------ ------------ ----------- ------------
Liabilities
- -----------
Accounts payable 1,538,752 22,986 575,442 290,531 6,725
Due to brokers for securities purchased - - 685,800 909,086 -
------------ ------------ ------------ ------------ ------------
Net assets available for benefits $464,811,166 $106,117,739 $270,018,927 $237,635,809 $ 28,440,319
============ ============ ============ ============ ============
<CAPTION>
Fund Information
--------------------------------------------------------------
International
S&P 500 EAFE
Equity Index Equity Index Loan Total
Fund Fund Fund
<S> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Cash and cash equivalents $ 238,201 $ 12,557 - $ 66,850,176
Common stock - - - 540,174,187
Fixed income securities - - - 88,132,272
Commingled funds 159,064,206 14,907,445 - 173,971,651
Participant loans - - $ 27,912,005 27,912,005
------------ ------------ ------------ --------------
159,302,407 14,920,002 27,912,005 897,040,291
------------ ------------ ------------ --------------
Group annuity and fixed
income securities, at cost
plus accrued interest - - - 409,911,438
------------ ------------ ------------ --------------
159,302,407 14,920,002 27,912,005 1,306,951,729
------------ ------------ ------------ --------------
Receivables:
Dividend and interest - - - 2,477,193
Due from brokers for securities sold - - - 3,758,774
------------ ------------ ------------ --------------
159,302,407 14,920,002 27,912,005 1,313,187,696
------------ ------------ ------------ --------------
Liabilities
- -----------
Accounts payable 303,429 571 - 2,738,436
Due to brokers for securities purchased - - - 1,594,886
------------ ------------ ------------ --------------
Net assets available for benefits $158,998,978 $ 14,919,431 $ 27,912,005 $1,308,854,374
============ ============ ============ ==============
</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, 1997
-----------------------
<TABLE>
<CAPTION>
Fund
Information
----------------------------------------------------------------------------------------------
Stable Baxter General Allegiance
Income Common Stock Composite Equity Stock
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Assets:
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
funds - - - - -
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
============= ============ ============ ============ ===========
<CAPTION>
---------------------------------------------------
International
S&P 500 EAFE
Equity Index Equity Index Loan Total
Fund Fund Fund
<S> <C> <C> <C> <C>
Assets:
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
funds 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.
- -3-
-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, 1998
------------------------------------
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------------------------
Stable Baxter General Allegiance S&P 500
Income Common Stock Composite Equity Stock Equity Index
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Additions to net
assets attributed
to:
Investment income:
Interest $ 28,178,848 $ 154,695 $ 5,923,834 $ 955,485 $ 17,303 -
Dividends - 2,003,957 2,749,954 3,645,289 129,601 -
Net
appreciation
in fair value - 25,692,869 26,040,931 31,328,740 18,063,713 $ 31,550,951
of assets
--------------- ------------ ------------ ------------ ------------ -----------
28,178,848 27,851,521 34,714,719 35,929,514 18,210,617 31,550,951
--------------- ------------ ------------ ------------ ------------ -----------
Contributions:
Loan 6,312,829 2,709,888 2,282,734 1,787,521 1,736 1,667,248
repayments
Employer 5,110,458 2,992,300 3,062,384 2,279,115 - 2,589,459
contributions
Employee 10,768,169 2,249,356 7,047,482 11,465,522 - 7,788,523
contributions
--------------- ------------ ------------ ------------ ------------ -----------
22,191,456 7,951,544 12,392,600 15,532,158 1,736 12,045,230
--------------- ------------ ------------ ------------ ------------ -----------
Transfers from
other plans 1,899,270 267,351 5,645,107 7,483,048 - 5,151,919
--------------- ------------ ------------ ------------ ------------ -----------
Total additions 52,269,574 36,070,416 52,752,426 58,944,720 18,212,353 48,748,100
--------------- ------------ ------------ ------------ ------------ -----------
Deductions from net
assets attributed to:
Benefits paid 29,768,943 6,351,401 14,078,402 16,515,177 1,084,637 9,436,505
Loans issued 5,277,755 2,032,401 2,110,950 1,645,251 168,182 1,629,460
Plan expenses 2,060,407 308,123 1,248,825 1,419,883 94,836 361,785
--------------- ------------ ------------ ------------ ------------ -----------
Total deductions 37,107,105 8,691,925 17,438,177 19,580,311 1,347,655 11,427,750
--------------- ------------ ----------- ------------ ------------ -----------
Net increase prior to
interfund transfers 15,162,469 27,378,491 35,314,249 39,364,409 16,864,698 37,320,350
Interfund
transfers 46,676,405 (26,578,433) (10,131,881) (35,137,594) (648,824) 25,888,221
--------------- ------------ ------------ ------------ ------------ -----------
Net increase
(decrease) 61,838,874 800,058 25,182,368 4,226,815 16,215,874 63,208,571
Net assets
available for
benefits:
Beginning of
year 402,972,292 105,317,681 244,836,559 233,408,994 12,224,445 95,790,407
--------------- ------------ ----------- ------------ ------------ -----------
End of year $464,811,166 $106,117,739 $270,018,927 $237,635,809 $28,440,319 $158,998,978
=============== ============ ============ ============ ============ ===========
<CAPTION>
-----------------------------------------------------
International
EAFE
Equity Index Loan Total
Fund Fund
<S> <C> <C> <C>
Additions to net
assets attributed
to:
Investment income:
Interest - $ 2,617,036 $ 37,847,201
Dividends - - 8,528,801
Net
appreciation
in fair value
of assets $ 2,227,643 - 134,904,847
---------------- ------------- --------------
2,227,643 2,617,036 181,280,849
---------------- ------------- ---------------
Contributions:
Loan
repayments 180,700 (14,942,656) -
Employer
contributions 408,140 - 16,441,856
Employee
contributions 1,199,459 - 40,518,511
---------------- -------------- ---------------
1,788,299 (14,942,656) 56,960,367
---------------- ------------- ---------------
Transfers from
other plans 860,347 - 21,307,042
---------------- -------------- ---------------
Total additions 4,876,289 (12,325,620) 259,548,258
---------------- -------------- ---------------
Deductions from net
assets attributed to:
Benefits paid 1,069,622 1,828,035 80,132,722
Loans issued 141,871 (13,005,870) -
Plan expenses 87,558 - 5,581,417
---------------- ------------- ---------------
Total deductions 1,299,051 (11,177,835) 85,714,139
---------------- ------------- ---------------
Net increase prior to
interfund transfers 3,577,238 (1,147,785) 173,834,119
Interfund
transfers (67,894) - -
---------------- ------------- ---------------
Net increase
(decrease) 3,509,344 (1,147,785) 173,834,119
Net assets
available for
benefits:
Beginning of
year 11,410,087 29,059,790 1,135,020,255
---------------- -------------- ---------------
End of year $14,919,431 $ 27,912,005 $1,308,854,374
================ ============== ===============
</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, 1997
------------------------------------
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------------------------------
Stable Baxter General Allegiance S&P 500
Income Common Stock Composite Equity Stock Equity Index
Fund Fund Fund Fund Fund Fund
<S> <C> <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 $ 19,798,119
------------- ------------ ------------ ------------ ------------ ------------
28,144,140 20,542,619 47,652,632 56,441,959 2,861,812 19,798,119
------------- ------------ ------------ ------------ ------------ ------------
Contributions:
Loan repayments 6,645,537 2,831,038 1,542,604 2,044,847 - 1,000,912
Employer contributions 5,025,766 3,152,669 1,995,587 2,645,313 - 1,697,251
Employee contributions 12,158,515 2,051,832 7,751,069 10,274,674 - 6,167,166
------------ ------------ ------------ ------------ ------------ ------------
23,829,818 8,035,539 11,289,260 14,964,834 - 8,865,329
------------ ------------ ------------ ------------ ------------ ------------
Transfers from other plans: 4,507,796 901,161 4,457,970 5,909,402 - 4,207,626
------------ ------------ ------------ ------------ ------------ ------------
Total additions 56,481,754 29,479,319 63,399,862 77,316,195 2,861,812 32,871,074
------------ ------------ ------------ ------------ ------------ ------------
Deductions from net assets attributed to:
Benefits paid 35,186,418 6,670,504 10,643,589 14,108,944 771,313 4,098,352
Loans issued 5,225,316 2,153,554 1,608,332 2,131,976 173,016 972,576
Plan expenses 1,878,181 169,553 1,109,770 1,666,843 28,923 153,025
------------ ------------ ------------ ------------ ------------ ------------
Total deductions 42,289,915 8,993,611 13,361,691 17,907,763 973,252 5,223,953
------------ ------------ ------------ ------------ ------------ ------------
Net increase prior to interfund transfers 14,191,839 20,485,708 50,038,171 59,408,432 1,888,560 27,647,121
Interfund transfers (22,590,857) (4,182,787) 21,531,136 (13,592,109) (827,366) 20,026,068
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) (8,399,018) 16,302,921 71,569,307 45,816,323 1,061,194 47,673,189
Net assets available for benefits:
Beginning of year 411,371,310 89,014,760 173,267,252 187,592,671 11,163,251 48,117,218
------------ ------------ ------------ ------------ ------------ ------------
End of year $402,972,292 $105,317,681 $244,836,559 $233,408,994 $ 12,224,445 $ 95,790,407
============ ============ ============ ============ ============ ============
<CAPTION>
Fund Information
---------------------------
International
EAFE
Equity Index Loan Total
Fund Fund
<S> <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 $ 10,033 - 134,146,120
------------ ------------ --------------
10,033 2,638,715 178,090,029
------------ ------------ --------------
Contributions:
Loan repayments 146,848 (14,211,786) -
Employer contributions 357,563 - 14,874,149
Employee contributions 1,348,271 - 39,751,527
------------ ------------ --------------
1,852,682 (14,211,786) 54,625,676
------------ ------------ --------------
Transfers from other plans: 1,420,428 586,911 21,991,294
------------ ------------ --------------
Total additions 3,283,143 (10,986,160) 254,706,999
------------ ------------ --------------
Deductions from net assets attributed to:
Benefits paid 593,999 3,114,377 75,187,496
Loans issued 162,205 (12,426,975) -
Plan expenses 25,433 - 5,031,728
------------ ------------ --------------
Total deductions 781,637 (9,312,598) 80,219,224
------------ ------------ --------------
Net increase prior to
interfund transfers 2,501,506 (1,673,562) 174,487,775
Interfund transfers (364,085) - -
------------ ------------ --------------
Net increase (decrease) 2,137,421 (1,673,562) 174,487,775
Net assets available for benefits:
Beginning of year 9,272,666 30,733,352 960,532,480
------------ ------------ --------------
End of year $ 11,410,087 $ 29,059,790 $1,135,020,255
============ ============ ==============
</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:
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
-6-
<PAGE>
national closing sales prices on the
valuation date
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
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, 1998 and 1997 approximate the contract values and the average
yields and crediting interest rates were between 7%-8% for 1998 and 1997.
Employee contributions and employer matching contributions are recorded in the
period in which they are withheld from employees and earned by participants,
respectively.
Accounts receivable from or payable to broker consists of the net cash value of
security trades with various brokers which settled after December 31, 1998 and
December 31, 1997, respectively.
Concentration of Credit Risk
- ----------------------------
The Plan holds 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.
-7-
<PAGE>
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 on the first month
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.
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 from the assets of the Plan.
NOTE 5 - INVESTMENTS
- --------------------
Investments representing five percent or more of the Plan's assets at December
31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------------ --------------------------
Fair Fair
Value Cost Value Cost
----- ---- ----- ----
<S> <C> <C> <C> <C>
Baxter Common Stock, 1,851,385 shares and
2,087,404 shares at December 31, 1998 and
and 1997, respectively $102,763,156 $ 59,022,248 $100,322,407 $59,136,931
S&P 500 Flagship 159,064,206 109,665,390 95,790,906 70,703,628
Bernstein Fixed Income Portfolio 93,793,654 86,917,839 97,934,663 79,644,686
Loomis Fixed Income Portfolio 89,893,957 89,553,168 82,834,265 81,817,235
PIMCO Fixed Income Portfolio 73,856,387 59,135,990 60,236,428 49,751,369
</TABLE>
-8-
<PAGE>
Investments are segregated into various investment funds as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
-------------------------------- ------------------------------
Fair Fair
Value Cost Value Cost
----- ---- ----- ----
<S> <C> <C> <C> <C>
Stable Income Fund $ 466,123,932 $ 460,361,548 $ 404,488,157 $402,134,169
Baxter Common Stock Fund 105,616,982 61,876,074 104,677,547 63,492,071
Composite Fund 268,351,193 230,757,574 243,606,216 200,529,634
General Equity Fund 236,311,924 188,856,984 233,623,263 178,538,875
Allegiance Stock Fund 28,413,284 1,308,030 12,191,737 1,109,093
S&P 500 Equity Index Fund 159,302,407 109,903,591 95,842,245 70,703,628
International EAFE Equity Index Fund 14,920,002 14,461,915 11,432,283 11,156,877
Loan Fund 27,912,005 27,912,005 29,059,790 29,059,790
-------------- -------------- -------------- ------------
$1,306,951,729 $1,095,437,721 $1,134,921,238 $956,724,137
============== ============== ============== ============
</TABLE>
During 1998 and 1997, the change in unrealized appreciation of the investments
was $31,181,022 and $44,762,843, respectively. Net realized gains on sale of
investments during 1998 and 1997 were $103,723,825 and $89,383,277,
respectively.
Net appreciation (depreciation) in fair value for each significant class of
investment, which includes realized and unrealized gains and losses, is as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
U.S. government and government
agency issues $ 2,265,051 $ 2,052,326
Corporate and other bonds 80,135 288,455
Commingled investments 33,778,594 19,808,151
Common stock 98,781,067 111,997,188
------------ ------------
$134,904,847 $134,146,120
============ ============
</TABLE>
NOTE 6 - TRANSFERS OF ASSETS
- ----------------------------
Included in total transfers from other plans in 1998, are net assets of
$16,592,777 which were transferred from the BOC Group Incorporated Savings
Investment Plan. Also during 1998, net assets of $4,714,265 were transferred
into the Plan from the Somatogen Incorporated Custom 401k Plan.
During 1997, net assets of $19,990,353 were transferred from the PSICOR Inc.
Retirement Savings Plan.
-9-
<PAGE>
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 - TAX STATUS OF THE PLAN
- -------------------------------
The Internal Revenue Service has determined and informed the Company by a letter
dated May 4, 1999 that the Plan is designed in accordance with applicable
sections of the Internal Revenue Code. The Plan has not been amended since
receiving the determination letter.
NOTE 9 - RELATED PARTIES
- ------------------------
At December 31, 1998 and 1997, 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>
<TABLE>
<CAPTION>
Baxter International Inc. and Subsidiaries
Incentive Investment Plan Schedule I
Line 27a Form 5500 - Schedule of Assets Held for Investment Purposes Page 1 of 6
December 31, 1998
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 $66,850,176 $ 66,850,176
--------------- ------------
$66,850,176 $ 66,850,176
--------------- ------------
Common stocks:
Aetna Inc Common Stock 4,872,659 6,250,007
Airtouch Communications Inc Common Stock 4,455,910 6,681,601
Alcan Alum Ltd Common Stock 3,272,906 3,328,555
Allegheny Energy Inc Common Stock 1,729,171 2,042,602
Allegiance Corp. Common Stock 844,475 27,949,729
Allstate Corp Common Stock 2,107,905 3,903,478
Ambac Finl Group Inc Common Stock 2,261,618 3,816,536
America Online Inc. Common Stock 181,292 530,644
American Elec Pwr Inc Common Stock 4,564,829 5,180,505
American Gen Corp Common Stock 1,057,530 2,272,087
American Grettings Corp Cl A 2,225,464 2,807,227
American Intl Group Common Stock 491,859 564,839
American Std Cos Inc Del Common Stock 2,790,163 2,860,618
Amp Inc Common Stock 771,786 804,698
Arrow Electrs Inc Common Stock 1,854,473 1,755,735
Ashland Inc Common Stock 1,122,543 1,049,659
Associates First Cap Corp Class A 1,972,079 2,292,290
AT + T Corp Common Stock 3,468,187 3,541,467
Avnet Inc Common Stock 1,108,034 1,300,763
Bank One Corp Common Stock 2,892,944 4,123,279
Bankamerica Corp New Common Stock 9,161,034 9,865,032
* Baxter International Inc Common Stock 59,022,248 102,763,156
Borg Warner Automotive Inc Common Stock 1,546,071 2,377,842
Bristol Myers Squibb Co Common Stock 3,151,996 4,401,674
Brunswick Corp Common Stock 1,487,993 2,991,700
Cabot Corp Common Stock 242,064 274,035
Calenergy Inc Common Stock 3,593,399 4,570,963
Canadian Pac Ltd New Common Stock 2,907,271 3,225,961
Century Tel Enterprises Inc Common Stock 904,353 3,009,535
Champion Int'l Corp Common Stock 4,208,333 3,266,067
Chase Manhattan Corp New Common Stock 791,475 2,245,614
Chubb Corp Common Stock 2,720,289 3,400,291
Cigna Corp Common Stock 2,526,785 8,134,995
Cisco Sys Inc Common Stock 2,484,102 5,839,333
Citigroup Inc Common Stock 434,129 350,667
Citizens Utils Co Del Cl B 1,411,249 1,352,936
Colgate Palmolive Co Common Stock 862,727 920,199
Compaq Computer Corp Common Stock 104,436 128,809
Consolidated Papers Inc Common Stock 967,940 1,076,249
Crompton + Knowles Common Stock 1,951,561 1,988,213
CSX Corp Common Stock 8,091,389 6,607,075
Dayton Hudson Corp. Common Stock 2,566,659 3,139,031
</TABLE>
* Party-in-interest
<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 2 of 6
December 31, 1998
Identity of Description of Cost of Current
issue Investment asset value
---------------------------------- ---------------------------------------- --------------- ---------------
<S> <C> <C> <C>
Dell Computer Corp Common Stock 4,231,737 7,099,090
Delta Air Lines Inc Common Stock 370,369 381,257
Dillards Inc CL A 1,048,259 1,040,209
Dow Chem Co Common Stock 8,280,653 7,941,077
Eastman Chemical Co Common Stock 2,914,998 2,020,527
Eaton Corp Common Stock 958,415 1,078,565
E M C Corp Common Stock 3,009,170 4,303,511
Enron Corp Common Stock 2,493,035 3,335,691
Federal Home Loan Mtg Corp Common Stock 1,282,632 1,634,413
Federal National Mtg Assn Common Stock 2,556,588 7,529,831
Federated Dept Stores Inc Del Common Stock 2,258,003 2,758,016
Fifth Third Bancorp Common Stock 469,852 544,051
First UN Corp Common Stock 5,548,302 6,296,399
Fluor Corp Common Stock 880,561 834,979
FMC Corp Common Stock New 903,936 887,751
Ford Motor Co Del Common Stock 2,649,692 7,291,657
Foundational Health Sys Inc Common Stock 715,403 356,720
General Electric Co Common Stock 817,849 1,061,790
Goodrich B F Co Common Stock 122,310 131,515
Goodyear Tire and Rubber Common Stock 5,589,583 4,860,587
Hasbro Inc Common Stock 2,455,021 3,758,203
HBO + CO Common Stock 2,211,027 2,325,033
Home Depot Inc Common Stock 3,415,762 7,384,023
IMS Health Inc. Common Stock 1,264,622 1,539,705
Intel Corp Common Stock 2,839,911 3,841,299
International Business Machs Common Stock 2,391,446 7,029,084
International Paper Co Common Stock 4,278,644 3,793,441
Kaufman & Broad Home Corp Common Stock 1,384,151 3,133,384
Kimberly Clark Corp Common Stock 2,958,684 3,374,890
Kohls Corp. Common Stock 1,330,127 1,929,638
Kroger Co. Common Stock 914,433 977,071
Litton Inds Inc Common Stock 1,842,498 2,042,917
Loews Corp Common Stock 3,896,459 5,353,999
Lowes Cos Inc USDO.50 1,064,147 1,196,903
Lubrizol Corp Common Stock 1,159,125 1,035,856
Lucent Technologies Inc Common Stock 1,533,406 2,168,847
Lyondell Chemical Co Common Stock 926,569 602,799
Magna International Inc Common Stock 3,756,329 3,808,610
Mallinckrodt Inc New Common Stock 2,375,573 2,472,834
May Dept Stores Co Common Stock 1,858,330 2,093,670
MBIA Inc Common Stock 3,760,755 5,528,001
MBNA Corp Common Stock 5,059,577 5,299,846
MCI Worldcom Inc Common Stock 2,141,682 2,914,666
Mead Corp Common Stock 683,544 625,869
Merck & Co Inc Common Stock 1,147,177 1,243,786
Microsoft Corp Common Stock 2,546,022 3,696,346
Millennium Chemicals Inc Common Stock 1,238,391 736,481
Minnesota Mng + Mfg Co Common Stock 2,010,581 1,761,754
Morgan Stanley Dean Witter Common Stock New 1,227,792 1,322,511
Nalco Chemical Co Common Stock 1,271,133 1,154,684
National Semiconductor Corp Common Stock 1,684,191 703,562
Nokia Corp Common Stock 4,463,587 8,555,866
Northwest Airlines Class A 2,731,668 1,215,703
Old Rep International Corp Common Stock 374,860 857,160
</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 3 of 6
December 31, 1998
Identity of Description of Cost of Current
issue Investment asset value
------------------------------------------ ---------------------------------------- --------------- ---------------
<S> <C> <C> <C>
Pacificare Health Systems Class B 1,701,070 1,857,981
Parametric Technology Corp Common Stock 2,656,595 4,275,087
Partnerre Ltd Common Stock 2,054,787 4,056,927
Penney J C Inc Common Stock 5,902,674 5,747,468
Pfizer Inc Common Stock 4,102,143 5,468,436
PG&E Corp Common Stock 3,053,080 4,098,870
Philip Morris Cos Inc Common Stock 3,737,904 7,198,411
PMI Group Inc Common Stock 3,749,924 2,372,640
Polaris Inds Inc Common Stock 552,418 861,953
Progressive Corp Ohio Common Stock 647,831 855,860
Puget Sound Energy Inc Rts call thru 1/25/01 1,241,256 1,458,250
Quantum Corp Common Stock 1,518,904 1,732,774
Republic Inds Inc Common Stock 6,362,452 4,077,362
Republic NY Corp Common Stock 1,659,373 1,728,978
Rite Aid Corp Common Stock 1,002,151 1,203,102
RJR Nabisco Hldgs Corp Common Stock New 1,817,377 1,810,472
Ryder Sys Inc Common Stock 357,662 394,138
Schering Plough Corp Common Stock 2,945,001 3,831,893
Sears Roebuck & Co Common Stock 3,892,852 4,002,812
Southwest Airlines Co Common Stock 2,180,412 4,590,686
St. Paul Cos Inc Common Stock 4,288,687 4,427,707
Sunoco Inc Common Stock 2,716,930 2,572,595
Sun Microsystems Inc Common Stock 1,085,455 1,145,295
Sunamerica Inc. Common Stock 330,191 377,777
Tech Data Corp Common Stock 504,020 486,529
Tele Communications Inc New Com TCI Group Ser A 166,778 219,213
Tele Communications Inc New Com Liberty Media Group Ser A 1,991,685 2,683,539
Temple Inland Inc Common Stock 868,990 1,034,289
Texas Instruments Inc Common Stock 1,458,811 3,857,251
Texas Utils Co Common Stock 4,447,570 4,949,570
Tricon Global Restaurants Inc Common Stock 2,928,217 4,693,202
Tyco Intl Ltd New Common Stock 4,373,801 6,001,861
UAL Corp Com Par 0.01 1,337,461 922,552
Unicom Corp Common Stock 2,216,305 2,506,410
Union Camp Corp Common Stock 1,668,855 2,334,396
Union Carbide Corp Common Stock 4,132,433 3,839,262
United Technologies Corp Common Stock 1,401,550 1,680,881
US Bancorp Del Common Stock 1,741,794 1,526,515
Ust Inc Com USDO.50 3,093,866 3,455,392
V F Corp Common Stock 624,434 1,291,128
Valassis Communications Inc Common Stock 1,493,967 2,148,288
Varian Assoc Inc Common Stock 2,116,934 1,433,505
Wal Mart Stores Inc Common Stock 2,791,921 3,937,561
Warner Lambert Co Common Stock 875,980 908,842
Washington Mutual Inc Common Stock 2,411,158 2,137,351
Weatherford Intl Inc New Common Stock 3,564,296 1,938,859
Westvaco Corp Common Stock 2,073,683 1,609,878
Whirlpool Corp Common Stock 2,233,931 2,578,663
--------------- ---------------
$386,557,474 $540,174,187
--------------- ---------------
</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, 1998
Identity of Description of Cost of Current
issue Investment asset value
---------------------------------- ---------------------------------------------- ----------- ---------------
Fixed income securities:
<S> <C> <C> <C>
American Airlines CL A 1 9.710 1/2/2007 446 513
Americredit Autompbil Red TR 1998 B NT CL A 4 6.06 12/12/2002 599,898 607,500
Associates Corp. North Amer. SR NT 5.75 11/01/2003 349,864 353,140
Associates Corp. North Amer. SR NT 6.25 11/01/2008 698,145 724,864
Avon Energy Partners Hlds SR NT 144A 6.730 12/11/2002 625,000 645,506
BankAmerica Corp. SR NT 6.650 5/1/2001 707,770 719,082
BankAmerica Manufactured HSG SR/Sub Ctf Ser 97 2 CL A 6 6.470 4/10/2015 1,300,000 1,322,152
BCH Cayman Is. LTD Guar Sub NT 6.50 2/15/2006 694,365 704,809
CIT RV TR 1998 A asset bkd NT CL A 3 5.990 05/15/2009 724,890 734,425
Columbia / HCA Healthcare Corp Tranche SR 00014 6.870 9/15/2003 543,923 529,447
Contimorgage Home Equity T 1998 1 passthru CTF CL A 3 6.22 1/15/2013 450,984 451,404
Contimorgage Home Equity Pass Thru CTF CL A 3 6.13 3/15/2013 1,499,784 1,503,270
Continental Airlines 6.748 9/15/2018 700,000 755,090
Continental Cablevision Inc SR NT 8.30 5/15/2006 308,907 332,883
EOP Oper Ltd Partnership 6.625 2/15/2005 799,134 784,184
ERP Oper Ltd Partnership Mandatory Par Put Remktd Sec 1.00 4/13/2015 1,153,320 1,134,774
FED HM LN PC G50337 7.50 10/1/2000 290,164 287,050
FED HM LN PC G50371 6.50 9/1/2001 91,338 92,348
FED HM LN PC M90496 7.00 5/1/2002 49,697 49,921
FED HM LN PC 6.500 12/01/2008 275,902 276,931
FED HM LN PC 6.500 10/01/2008 155,535 155,062
FED HM LN PC 6.000 12/01/2028 1,222,805 1,222,415
FED HM LN BKS 5.125 9/15/2003 300,291 299,907
Federal Home LN MTG Corp Ser 2081 CL PC 6.25 10/15/2026 787,844 807,500
Federal Home LN MTG Multiclass Ser 1831 CL 1831 PD 6.250 3/15/2011 531,867 554,296
Federal Home LN MTG PC GTD Ser 1229 CL 1229 J 8.00 4/15/2007 248,164 260,545
Federal Home LN MTG PC GTD Ser 1308 CL 1308 J 8.500 6/15/2007 353,008 375,701
Federal Nat'l Mtg Assn Remic Remic TR 1992 47 CL J 8.00 2/25/2007 246,475 255,233
Federal Nat'l Mtg Assn Remic Remic TR 1992 152 CL 152 M 7.750 8/25/2007 351,750 370,013
Federal Nat'l Mtg Assn Remic Remic TR 1993 47C 7.00 4/25/2008 913,047 918,837
Federal Nat'l Mtg Assn Benchmark NT 5.75 6/15/2005 2,487,300 2,581,250
Felco Fdg II LLC 98 1 Auto Lease Bkd NT 144A A A 5.97 10/15/2000 499,725 501,406
Finova Cap Corp 6.25 11/01/2002 996,170 1,001,818
Firstplus Home Ln Owner Asset Bkd NT CL A 4 6.80 3/10/2012 1,008,750 999,375
Firststar Bk. Milwaukee Nat'l Tranche SR 00001 6.250 12/1/2002 949,932 973,551
FNBC 1993 A Pass thru TR Pass thru Ctf Ser 1993 A 8.08 1/5/2018 350,000 403,211
FNMA Pool 6.50 8/01/2028 476,612 481,998
FNMA Pool 8.50 1/1/2002 677 696
FNMA Pool 8.50 3/1/2002 5,083 5,214
FNMA Pool 8.50 4/1/2002 3,424 3,540
FNMA Pool 7.00 10/01/2012 1,985,510 1,984,599
FNMA Pool 6.00 12/01/2013 1,581,031 1,565,191
FNMA Pool 7.50 3/1/1999 198,840 196,284
FNMA Pool 7.00 8/1/2023 12 12
FNMA Pool 7.00 11/1/2027 1,122,000 1,122,000
FNMA Pool 6.00 4/01/2028 2,491,994 2,489,065
FNMA Pool 6.50 5/1/2024 383,262 402,885
FNMA Pool 7.00 7/01/2028 431,519 433,912
FNMA Pool 6.50 4/1/2011 334,119 339,342
FNMA Pool 6.00 8/01/2028 1,256,062 1,258,047
FNMA Pool 6.50 10/01/2028 1,095,126 1,095,126
</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, 1998+A313
Identity of Description of Cost of Current
issue Investment asset value
------------------------------ ----------------------------------------------- --------------- ---------------
<S> <C> <C> <C>
FNMA Pool 6.00 10/01/2013 2,014,369 2,006,704
FNMA Pool 6.00 12/01/2013 2,503,906 2,536,563
Ford Motor Cr Co 6.125 4/28/2003 598,854 612,774
General Motors Accep Corp 5.875 1/22/2003 348,831 353,962
GNMA Pool 8.00 11/15/2026 893,609 894,143
GNMA Pool 7.50 3/15/2028 1,863,128 1,859,141
GNMA Pool 11.50 4/15/2013 1,372 1,520
GNMA Pool 9.00 11/15/2016 220,755 218,747
GNMA Pool 9.50 12/15/2021 137,414 136,424
GNMA Pool 7.00 4/15/2028 694,917 699,723
GNMA Pool 7.50 4/15.2027 86,814 90,161
GNMA Pool 8.00 11/15/2022 694,036 691,123
GNMA Pool 7.50 11/15/2027 692,475 693,001
Goldman Sachs Group LP 144A 6.375 6/15/2000 607,278 606,654
Green Tree Financial Corp. 1998 B Home Equity LN CLA 1 A 6.17 11/15/2029 649,898 651,625
Green Tree Financial Corp. Ser 1995 7 CL A5 6.950 10/15/2026 349,863 354,921
Gruma SA DE CV 7.625 10/15/2007 499,160 438,750
IMC Home Equity LN TR Ser 1997 3 Pass thru Ctf CL 9A 7.08 8/20/2028 599,970 613,686
International Business Machs 7.50 6/15/2013 299,684 310,404
Intl Lease Fin Corp Mtn Tranche TR 00437 5.78 3/01/2001 794,576 806,448
Jet Equip TR SR NT CL A 1995 B 144A 7.63 8/15/2012 264,325 283,393
La Quinta Inns Inc. SR NT 7.25 3/15/2004 268,604 247,107
LCI International Inc. SR NT 7.25 6/15/2007 498,795 506,260
Lehman Bros Inc. SR Sub NT 1.00 12/15/2003 276,598 284,523
Mariot Intl Inc NT Ser B 6.875 11/15/2005 1,002,720 1,002,700
Mashantucket Western Pequot Taxable SPL REV BD SER A 144A 6.910 9/1/2012 500,000 533,680
MBNA Master CR Card TR SER 1993 3 Asset Backe CTF5.40 9/15/2000 88,430 87,308
Merrill Lynch + Co Inc NT 6.375 10.15/2008 499,215 517,425
Merry LD + Invt Inc 7.25 6/15/2005 348,467 348,618
Morgan Stanley Group Inc Shelf 17 6.875 3/1/2007 348,744 369,562
Peoples Bank Bridgeport CT Sub NT 7.20 12/1/2006 348,789 329,767
Premier Auto Tr Ser .97 3 CL.A5 6.340 1/6/2002 277,686 279,813
R B Falcon Corp SR NT Ser B 6.75 4/15/2005 695,401 665,406
Railcar TR NO NO 1992 1 TR NT 7.75 6/1/2004 0 0
Sea GCA Rlty. Partnership L P NT 7.25 10/21/2007 548,570 503,173
Simon Debartolo Group LP NT 6.875 11/15/2006 348,817 341,653
Southwest Airlines Co DEB 7.375 3/1/2027 274,007 289,603
Sprint Cap Corp 6.125 11/15/2008 999,260 1,021,830
Spintab AB Undated Sub NT Step up 144A 1.00 12/29/2049 399,360 391,948
Standard CR Card Master TR I SER 1993 CL 3 A 5.50 2/7/2000 224,674 225,000
Staples Inc. SR NT 7.125 8/15/2007 498,935 507,170
Structured Asset Secs Corp. Coml Mtg Pass thru Ctf 97 LL 6.790 6/12/2004 740,463 761,473
Team Fleet Fing Corp 1998 2 Rentl Car Nt 144A CL A 6.070 7/25/2002 849,936 847,078
Texaco Cap Inc. GTDNT 7.09 2/1/2007 300,000 326,664
Texas Utilities Co. SR NT SER A 144A 6.20 10/1/2002 389,626 399,824
Time Warner Entmt Co L P SR Deb 8.375 3/15/2023 364,697 424,893
Tyco Intl Group S A 6.125 6/15/2001 799,515 807,704
U.S. Treasury Bonds 7.25PCT BND 15Aug22 12,867,392 14,313,935
U.S. Treasury Notes 6.5PCT 30April99 5,560,558 5,532,670
U.S. Treasury Notes 7.5PCT 15Feb05 3,435,633 3,617,055
U.S. Treasury Notes 5.625PCT 31Dec99 908,438 908,720
USA Waste Svcs Inc. SR NT 7.00 10/1/2004 224,543 234,907
Wells Fargo & Co. 6.875 4/15/2003 273,171 288,846
</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 6 of 6
December 31, 1998
Identity of Description of Cost of Current
issue Investment asset value
------------------------------- -------------------------------------- ------------------- -------------
<S> <C> <C> <C>
World Finl Network CR Card TR Adch Ser 96 CL A 6.70 2/15/2004 274,484 283,336
World Svgs & Ln Assn Oakland Calif 9.90 7/1/2000 273,455 277,912
Worldcom Inc GA 6.40 8/15/2005 698,586 727,524
------------------ --------------
$ 85,854,264 $ 88,132,272
------------------ --------------
Common/collective trusts:
* State Street Bank & Trust Co S + P 500 Flagship fund $ 109,665,390 $ 159,064,206
* State Street Bank & Trust Co Daily EAFE fund 14,449,358 14,907,445
------------------ --------------
$ 124,114,748 $ 173,971,651
------------------ --------------
* Participant loans $ 27,912,005 $ 27,912,005
------------------ --------------
Group annuities:
Bernstein Fixed Income Portfolio variable rate, open ended maturity 86,917,839 93,793,654
Loomis Fixed Income Portfolio variable rate, open ended maturity 89,553,168 89,893,957
Brundage Fixed Income Portfolio variable rate, open ended maturity 48,801,155 49,012,546
Pimco Fixed Income Portfolio variable rate, open ended maturity 59,135,990 73,856,387
Standish Ayer Wood II variable rate, open ended maturity 40,855,197 42,417,843
Met Life 7.510 6/30/1999 14,285,732 14,371,010
New York Life 7.510 6/30/1999 9,529,388 9,588,154
Standish Ayer Wood variable rate, open ended maturity 55,070,585 59,692,900
------------------ --------------
404,149,054 432,626,451
Bankers Trust Wrapper - open ended maturity (2,709,798)
Chase Wrapper - open ended maturity (4,306,187)
Deutsche Bank Wrapper - open ended maturity (15,699,027)
------------------ --------------
404,149,054 409,911,439
------------------ --------------
$1,095,437,721 $1,306,951,729
================== ==============
</TABLE>
* Party-in-interest
<PAGE>
Baxter International Inc. and Subsidiaries Schedule II
Incentive Investment Plan
Line 27d Form 5500 - Schedule of Reportable Transactions
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Description of asset
Identity of (include interest rate and Number of Purchase Selling Lease Expense incurred
Party Involved maturity in case of loan) Transactions Price Price Rental with Transaction
- -------------- -------------------------- ------------ ----- ----- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
State Street
Bank and Trust Short Term
Company Investment Fund 765 $508,908,901 $ - $ - $ -
State Street
Bank and Trust Short Term
Company Investment Fund 848 $ - $472,616,185 $ - $ -
<CAPTION>
Description of asset Current Value of
Identity of (include interest rate and Asset on Net Gain
Party Involved maturity in case of loan) Cost of asset Transaction Date or (Loss)
- -------------- -------------------------- ------------- ---------------- ---------
<S> <C> <C> <C> <C>
State Street
Bank and Trust Short Term
Company Investment Fund $508,908,901 $508,908,901 $ -
State Street
Bank and Trust Short Term
Company Investment Fund $472,616,185 $472,616,185 $ -
</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, 1999 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, 1999 relating to the financial statements of the Baxter
International Inc. and Subsidiaries Incentive Investment Plan, which appears in
this Form 11-K.
PricewaterhouseCoopers LLP
Chicago, Illinois
June 29, 1999
