SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 11-K

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

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

A.

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

B.

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

 

 

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Financial Statements and Supplemental Schedule
December 31, 2010 and 2009

Index
December 31, 2010 and 2009

		Page(s)
Report of Independent Registered Public Accounting Firm			1
Financial Statements
Statements of Net Assets Available for Benefits as of December 31, 2010 and 2009			2
Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2010 and 2009			3
Notes to Financial Statements			4-15
Supplemental Information
Schedule I: Schedule of Assets (Held at End of Year) as of December 31, 2010			16-41

Report of Independent Registered Public Accounting Firm

To the Participants and Administrative Committee of
the Baxter Healthcare of Puerto Rico Savings and Investment Plan
Deerfield, Illinois

We have audited the accompanying statements of net assets available for benefits of the Baxter Healthcare of Puerto Rico Savings and Investment Plan (Plan) as of December 31, 2010 and 2009, and the related statements of changes in net assets available for benefits for the years ended December 31, 2010 and 2009. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2010 and 2009, and the changes in net assets available for benefits for the years ended December 31, 2010 and 2009, in conformity with U.S. generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, Line 4i — Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic 2010 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2010 financial statements taken as a whole.

/s/Crowe Horwath LLP

Oak Brook, Illinois

June 22, 2011

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Statements of Net Assets Available for Benefits
December 31, 2010 and 2009 (in thousands)

		2010				2009
Assets
Investments
Cash and cash equivalents		$	616			$	822
Common stock (including securities on loan of $79 in 2010 and $350 in 2009)			8,543				9,234
U.S. government and government agency issues (including securities on loan of $53 in 2010 and $101 in 2009)			233				174
Corporate and other obligations (including securities on loan of $35 in 2010 and $62 in 2009)			554				459
Commingled funds			7,485				6,368
Registered investment companies			1,059				458
Synthetic guaranteed investment contracts (including securities on loan of $4,995 in 2010 and $3,929 in 2009)			16,877				14,786
Collateral held on loaned securities			5,198				4,478
Total investments at fair value			40,565				36,779
Receivables
Participant loans			3,591				3,858
Sponsor contributions			199				160
Accrued interest and dividends			46				44
Due from brokers for securities sold			8				7
			3,844				4,069
Total assets			44,409				40,848
Liabilities
Accounts payable			215				47
Due to brokers for securities purchased			—				18
Collateral to be paid on loaned securities			5,255				4,550
Total liabilities			5,470				4,615
Net assets available for benefits, reflecting investments at fair value			38,939				36,233
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			(1,156	)			(116	)
Net assets available for benefits		$	37,783			$	36,117

The accompanying notes are an integral part of these financial statements

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2010 and 2009 (in thousands)

		2010				2009
Additions to net assets attributed to
Investment income
Net appreciation in fair value of investments		$	473			$	2,730
Interest and dividends			920				719
Net investment income			1,393				3,449
Participant loan interest			196				245
Contributions
Sponsor			1,466				1,469
Participant			2,722				2,655
			4,188				4,124
Net additions			5,777				7,818
Deductions from net assets attributed to
Benefits paid			3,761				3,612
Plan expenses			350				220
Total deductions			4,111				3,832
Net increase			1,666				3,986
Net assets available for benefits
Beginning of year			36,117				32,131
End of year		$	37,783			$	36,117

The accompanying notes are an integral part of these financial statements

Notes to Financial Statements
December 31, 2010 and 2009

 

1.		General Description of the Plan
		The following brief description of Baxter Healthcare of Puerto Rico Savings and Investment Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan agreement and summary plan description for more complete information. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
		General The Plan is a defined contribution plan which became effective on January 1, 1998. The Plan covers substantially all employees of Baxter Healthcare S.A. (Puerto Rico Branch), and Baxter Sales and Distribution Corporation (collectively, the Sponsor or the Company), subsidiaries of Baxter International Inc. (Baxter) as of the first day of the month following the completion of thirty days of employment. The Plan was created for the purpose of providing retirement benefits to employees and to encourage and assist employees in adopting a regular savings program by means of payroll deductions through a plan that qualifies under the applicable laws of the Commonwealth of Puerto Rico and the United States Internal Revenue Code.
		Contributions Plan participants may authorize the Company to make payroll deductions under the Plan ranging from 1% to 50% of their pre-tax monthly compensation in both 2010 and 2009, limited to a maximum of $9,000 a year in 2010 and 2009, respectively. Newly hired employees are deemed to have elected to contribute 3% of compensation unless they make a contrary election. The Company matches a participant’s savings contributions at the rate of 50 cents for each dollar of a participant’s pre-tax contribution, up to a maximum of 6% of a participant’s compensation. The Company also contributes an additional non-matching 3% of compensation for employees that are not eligible to participate in the Company’s Puerto Rico defined benefit pension plan, which includes all new employees hired on or after January 1, 2008. The Company may make additional discretionary contributions in such amounts as the Company may determine.
		Participant Accounts Each participant’s account is credited with the participant’s contribution and allocations of the Company’s contributions and Plan earnings, and is charged with his or her withdrawals and an allocation of Plan-related expenses. Allocations are based on participant earnings or account balances, as defined in the Plan document. The net income of the Plan is posted to the participant’s accounts on a daily basis. Each participant directs the investment of his or her account to any of the investment options available under the Plan.
		Vesting Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company’s matching and discretionary contributions plus actual earnings thereon is based on years of service. The contributions vest in accordance with the following vesting schedule:

Years of Service		Vesting %
1		20%
2		40%
3		60%
4		80%
5 or more		100%

Employees are fully vested in the Company’s matching contributions account, regardless of years of service with the Company, upon attaining age 65, upon becoming disabled in accordance with the provisions of the Plan or upon dying while employed by the Company. The Company’s additional non-matching contribution becomes fully vested after three years of service. Forfeitures of nonvested accounts are used to reduce future Company contributions.

Notes to Financial Statements
December 31, 2010 and 2009

 

		Participant Loans Participants may borrow from their vested accounts a minimum of $500 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The loans are secured by the balance in the participant’s account and bear interest at the prime rate at the last day of the month prior to loan request, plus one percent. These loans are reported at their principal balance plus any accrued but unpaid interest, with no allowance for credit losses, as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participant’s account balances.
		Investment Options Upon enrollment in the Plan, a participant may direct contributions into various investment options: Stable Income Fund, Baxter Common Stock Fund, Composite Fund, General Equity Fund, S&P 500 Flagship Fund, International EAFE Equity Index Fund, Small Cap Fund and ten different Target Retirement Funds. However, non-matching contributions may not be invested in the Baxter Common Stock Fund. In addition, certain participants maintain shares in Edwards Lifesciences Corporation. These shares were placed into the Edwards Lifesciences Common Stock Fund in connection with Baxter’s 2000 spin-off of its cardiovascular business. Participants are not able to make contributions or transfer existing account balances to the Edwards Lifesciences Common Stock Fund, but may make transfers out of these funds at any time.
		Payments of Benefits Plan participants can not request withdrawals from the Plan unless they are at least 591/2 years old or incur a financial hardship. On termination of service due to retirement or other reasons, a participant may elect to receive either a lump sum amount equal to their entire vested account balance or installment payments. In the case of a participant termination because of death or disability, the entire vested amount is paid to the person or persons legally entitled thereto.
2.		Summary of Significant Accounting Policies
		Basis of Accounting The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting. Accordingly, investment income is recognized when earned and expenses are recognized when incurred.
		New Accounting Standards In September 2010, the Financial Accounting Standards Board (FASB) amended existing standards with respect to the reporting of participant loans for defined contribution pension plans. The guidance requires that loans issued to participants be reported as receivables, segregated from plan investments, and to be measured at their unpaid principal balances plus accrued but unpaid interest. This guidance was adopted by the Plan effective December 31, 2010 and was applied retrospectively to all periods presented. The adoption of this standard had no effect on the Plan’s net assets available for benefits.
		In January 2010, the FASB issued a new accounting standard effective for the December 31, 2010 reporting period, which clarified existing fair value disclosures about the level of disaggregation and inputs and valuation techniques used to measure fair value, and required that significant transfers in and out of Levels 1 and 2 of the fair value hierarchy be disclosed. The Plan did not have any transfers between Levels 1 and 2 during 2010. In addition, effective for reporting periods beginning after December 15, 2010, an entity will be required to separately present information related to purchases, sales, issuances and settlements in the reconciliation of fair value measurements classified as Level 3.

Notes to Financial Statements
December 31, 2010 and 2009

 

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

		Cash and cash equivalents		These largely consist of a short-term investment fund and a money market fund, the fair value of which is based on the net asset value. The investment objectives for these funds are to provide safety for principal, daily liquidity and a competitive yield by investing in high quality instruments.
		Common stock		Value based on closing prices on the valuation date in an active market on national and international securities exchanges.
		U.S. government and government agency issues		Value based on reputable pricing vendors that typically use pricing matrices or models.
		Corporate and other obligations		Value based on reputable pricing vendors that typically use pricing matrices or models.
		Commingled funds		Value based on net asset values reported by the fund managers as of the financial statement dates and recent transaction prices. The investment objectives of these funds are to track the performances of the S&P 500 (S&P 500 Flagship Fund); Europe, Australasia and the Far East (EAFE) (International EAFE Equity Index Fund); or Russell 2000 (Small Cap Fund) indexes. The underlying investments vary, with some holding diversified portfolios of domestic stocks and government and government agency bonds, and others holding collective investment funds. Each fund provides for daily redemptions by the Plan at reported net asset values per share, with no advance notice requirement. Refer to Note 5 for amounts invested in each of these funds.
		Registered investment companies		Value based on the last reported sale price from a national security exchange on the valuation date.
		Synthetic guaranteed investment contracts		Value based on the fair value of the underlying securities in the contract on the valuation date plus the fair value of wrapper contracts, which is calculated using a replacement cost approach. See below for more information.

Notes to Financial Statements
December 31, 2010 and 2009

 

		Collateral held on loaned securities		Value based upon the net asset value per unit of the short-term investment funds where the collateral is invested. Refer to Note 6 for more information on the securities lending program.
		Collateral to be paid on loaned securities		Value based on the fair value of the underlying securities loaned on the valuation date, plus an incremental margin.

		Income Recognition Plan investment return includes dividend and interest income, gains and losses on sales of investments and unrealized appreciation or depreciation of investments. Purchases and sales of investments are recorded on a trade date basis. Dividends are recorded on the ex-dividend date.
		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.
		Synthetic Guaranteed Investment Contracts The Plan holds synthetic guaranteed investment contracts (GICs) as part of the Stable Income Fund. The synthetic GICs provide for a fixed return on principal over a specified time through fully benefit-responsive contracts issued by Aegon Institutional Markets and Bank of America N.A. The portfolio of assets, overall of investment grade, underlying the synthetic GICs primarily includes cash and cash equivalents, U.S. government and government agency issues, corporate and other obligations, and registered investment companies.
		The fair value of the synthetic GICs equals the total of the fair value of the underlying assets plus the fair value of the wrapper contracts. The fair value of the wrapper contracts is computed using a replacement cost approach that incorporates a comparison of the current fee rate on similar wrapper contracts to the fee being paid by the Plan. Using this approach, the fair value of the wrapper contracts were $38,076 and $37,348 at December 31, 2010 and 2009, respectively.
		While Plan investments are presented at fair value in the Statement of Net Assets Available for Benefits, any material difference between the fair value of the Plan’s direct and indirect interests in fully benefit-responsive investment contracts and their contract value is presented as an adjustment line in the Statement of Net Assets Available for Benefits, because contract value is the relevant measurement attribute for that portion of the Plan’s net assets available for benefits. Contract value represents contributions, plus earnings, less participant withdrawals and administrative expenses. The wrapper contracts used by the Plan are fully benefit-responsive because the wrapper contract issuers are contractually obligated to make up any shortfall in the event that the underlying asset portfolio has been liquidated and is inadequate to cover participant withdrawals and transfers at contract value. There are currently no reserves against contract values for credit risk of the contract issuers or any other risk. The contract value for the synthetic GICs was $15.7 million and $14.7 million at December 31, 2010 and 2009, respectively.
		The crediting interest rate, which is reset quarterly, can never fall below zero. The crediting rate formula smoothes the impact of interest rate changes on participant returns by amortizing any difference between market value and book value over a period of years equal to the duration of the portfolio benchmark. The average yield on the synthetic GICs was approximately 3.5% and 4.2% at December 31, 2010 and 2009, respectively. The average interest rate credited to participants on the synthetic GICs was approximately 4.1% for both years ended December 31, 2010 and 2009. The credit ratings for Aegon Institutional Markets were AA- at both December 31, 2010 and 2009, and the credit ratings for Bank of America N.A. were A+ at both December 31, 2010 and 2009.

Notes to Financial Statements
December 31, 2010 and 2009

 

		Events that lead to market value withdrawals that exceed 20 percent of the contract value would limit the ability of the Plan to transact at contract value with participants. These events include restructurings, early retirement plans, divestitures, bankruptcies, or legal, tax or regulatory changes. The Plan sponsor believes that the occurrence of any such event is remote.
		The wrapper providers can only terminate at a value different than contract value under an event of default (that was not remedied) such as failure to follow the terms of the contract. If a wrapper provider would like to exit the contract for another reason, the Plan can maintain the contract through an extended termination process designed to ensure continued benefit-responsive treatment for withdrawals.
		Payment of Benefits Benefits are recorded when paid.
		Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to the financial statements. Changes in such estimates may affect amounts reported in future periods.
		Other Due from or due to brokers for securities sold or purchased, respectively, represent the net cash value of security trades initiated but not yet settled at each respective year-end.
		Risks and Uncertainties The Plan provides for various investment options which invest in any combination of registered investment companies, U.S. government and government agency issues, corporate and other obligations, common stock, commingled funds, synthetic guaranteed investment contracts and short-term investments. Investment securities are exposed to various risks, such as interest rate, market, liquidity and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits. Individual participants’ accounts bear the risk of loss resulting from fluctuations in investment values.
		Investments underlying the Plan’s synthetic GICs include securities with contractual cash flows, such as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities, including securities backed by subprime mortgage loans. The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate values, delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.
3.		Administration of the Plan
		Banco Popular de Puerto Rico (the Trustee) and State Street Bank and Trust Company (the Custodian) serve as trustee and custodian, respectively, for the Plan. ING Institutional Plan Services, LLC serves as recordkeeper for the Plan.
		The Administrative Committee is responsible for the general administration of the Plan and for carrying out the provisions thereof. 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.

Notes to Financial Statements
December 31, 2010 and 2009

 

		Substantially all investment manager, trustee and administrative fees incurred in the administration of the Plan were paid from the assets of the Plan.
4.		Fair Value of Measurements
		The fair value hierarchy under the accounting standard for fair value measurements consists of the following three levels:

	•		Level 1 — Quoted prices in active markets that the Plan has the ability to access for identical assets or liabilities;
	•		Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market; and
	•		Level 3 — Valuations using significant inputs that are unobservable in the market and include the use of judgment by the Plan’s management about the assumptions market participants would use in pricing the asset or liability.

Notes to Financial Statements
December 31, 2010 and 2009

 

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

						Basis of Fair Value Measurement
						Quoted Prices				Significant
						in Active				Other				Significant
		Balance at				Markets for				Observable				Unobservable
		December 31,				Identical Assets				Inputs				Inputs
(in thousands)		2010				(Level 1)				(Level 2)				(Level 3)
Assets
Cash and cash equivalents		$	616			$	—			$	616			$	—
Common stock:
Healthcare			4,399				4,399				—				—
Information technology			967				967				—				—
Financial services			691				691				—				—
Consumer products			1,012				1,012				—				—
Industrial services and materials			735				735				—				—
Energy			597				597				—				—
Other			142				142				—				—
Total common stock			8,543				8,543				—				—
U.S. government and government agency issues			233				—				233				—
Corporate and other obligations			554				—				554				—
Commingled funds			7,485				—				7,485				—
Registered investment companies (1)			1,059				1,059				—				—
Synthetic guaranteed investment contracts:
Corporate and other obligations			6,167				—				6,167				—
U.S. government and government agency issues			10,180				—				10,180				—
Cash and cash equivalents			492				—				492				—
Wrapper contracts			38				—				—				38
Total synthetic guaranteed investment contracts			16,877				—				16,839				38
Collateral held on loaned securities			5,198				—				5,198				—
Total assets		$	40,565			$	9,602			$	30,925			$	38
Liability
Collateral to be paid on loaned securities		$	5,255			$	139			$	5,116			$	—

Notes to Financial Statements
December 31, 2010 and 2009

 

						Basis of Fair Value Measurement
						Quoted Prices				Significant
						in Active				Other				Significant
		Balance at				Markets for				Observable				Unobservable
		December 31,				Identical Assets				Inputs				Inputs
(in thousands)		2009				(Level 1)				(Level 2)				(Level 3)
Assets
Cash and cash equivalents		$	822			$	—			$	822			$	—
Common stock:
Healthcare			6,999				6,999				—				—
Information technology			602				602				—				—
Financial services			487				487				—				—
Consumer products			386				386				—				—
Industrial services and materials			330				330				—				—
Energy			327				327				—				—
Other			103				103				—				—
Total common stock			9,234				9,234				—				—
U.S. government and government agency issues			174				—				174				—
Corporate and other obligations			459				—				459				—
Commingled funds			6,368				—				6,368				—
Registered investment companies (1)			458				458				—				—
Synthetic guaranteed investment contracts:
Corporate and other obligations			6,722				—				6,722				—
U.S. government and government agency issues			6,399				—				6,399				—
Cash and cash equivalents			936				—				936				—
Registered investment companies			683				683				—				—
Wrapper contracts			37				—				—				37
Other			9				—				9				—
Total synthetic guaranteed investment contracts			14,786				683				14,066				37
Collateral held on loaned securities			4,478				—				4,478				—
Total assets		$	36,779			$	10,375			$	26,367			$	37
Liability
Collateral to be paid on loaned securities		$	4,550			$	520			$	4,030			$	—

Notes to Financial Statements
December 31, 2010 and 2009

 

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

		Wrapper
(in thousands)		Contracts
Balance at December 31, 2008		$	30
Unrealized gains (relating to assets held at end of year)			7
Purchases, sales, issuances and settlements (net)			—
Balance at December 31, 2009			37
Unrealized gains (relating to assets held at end of year)			1
Purchases, sales, issuances and settlements (net)			—
Balance at December 31, 2010		$	38

		See Valuation of Investments and Collateral in Note 2 above for a discussion of the methodologies used to determine the fair values of the Plan’s investments and collateral. These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
5.		Investments
		The following presents the Plan’s investments that represent five percent or more of the Plan’s net assets available for benefits at December 31.

(values in thousands, except per share)		2010				2009
Baxter common stock, 113,065 shares and 112,317 shares at December 31, 2010 and 2009, respectively		$	5,723			$	6,591
State Street Global Advisors (SSgA) S&P 500 Flagship Fund			3,961				3,423
SSgA International EAFE Equity Index Fund			*				1,853
State Street Bank Quality D Short-Term Investment Fund (Collateral held on loaned securities)			*				4,478
Baxter International Savings Trust Separate Account (Collateral held on loaned securities)			4,872				*

Notes to Financial Statements
December 31, 2010 and 2009

 

Investments as of December 31, 2010 and 2009 are segregated into various investment fund options as follows:

(in thousands)		2010				2009
Cash (available for investment)		$	113			$	147
Stable Income Fund			17,172				15,270
Baxter Common Stock Fund			5,822				6,687
Composite Fund			1,755				1,677
General Equity Fund			1,862				1,638
SSgA S&P 500 Flagship Fund			3,966				3,423
SSgA International EAFE Equity Index Fund			1,831				1,853
Edwards Lifesciences Common Stock Fund			92				55
SSgA Small Cap Fund			1,695				1,093
Target Retirement Funds			1,060				458
Collateral held on loaned securities			5,198				4,478
Total investments at fair value			40,566				36,779
Adjustment from fair value to contract value for Stable Income Fund			(1,156	)			(116	)
Total investments		$	39,410			$	36,663

During 2010 and 2009, the Plan’s investments, including gains and losses on investments bought and sold as well as held during the year, appreciated (depreciated) in value as follows:

(in thousands)		2010				2009
Baxter common stock		$	(892	)		$	548
Other common stock			287				626
U.S. government and government agency issues			2				2
Corporate and other obligations			29				89
Commingled funds			944				1,317
Registered investment companies			88				64
Collateral held on loaned securities			15				84
		$	473			$	2,730

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

Notes to Financial Statements
December 31, 2010 and 2009

 

		The fair value of the investment of cash collateral received pursuant to securities lending transactions is reflected on the Statements of Net Assets Available for Benefits as an asset and the obligation to return the amount received is reflected as a liability.
		As of December 31, 2009, the Plan had securities on loan with a fair market value of $4.4 million with cash collateral received of $4.6 million. As of December 31, 2010, the Plan had securities on loan with a fair market value of $5.2 million, with cash collateral received of $5.3 million, of which $4.9 million was redeemed during 2010 from the State Street Quality D Short-term Investment Fund and held in a separate fund (Baxter International Savings Trust Separate Account) for liquidation due to an agreement between the Plan and the Custodian to terminate the securities lending program for the securities within the Stable Income Fund. The assets underlying both funds primarily consisted of cash and cash equivalents and asset-backed securities. As of December 31, 2010, the net asset values of the Baxter International Savings Trust Separate Account and State Street Quality D Short-term Investment Fund were $0.9929 and $0.9925, respectively, per unit. As of December 31, 2009, the net asset value of the State Street Quality D Short-term Investment Fund was $0.9842 per unit. As a result of the increase in net asset values, an unrealized gain of $15,203 is reflected in the 2010 Statement of Changes in Net Assets Available for Benefits compared with an unrealized gain of $83,903 reported in 2009. As of December 31, 2010 and 2009, the cash collateral received is reflected at its fair value of $5.2 million and $4.5 million, respectively, in the 2010 and 2009 Statements of Net Assets Available for Benefits.
		Non-cash collateral of $78,112 and $139,702 received for securities on loan at December 31, 2010 and 2009, respectively, consisted of U.S. government and government agency issues held by the Custodian on behalf of the Plan. Non-cash collateral is not included with the collateral balance on the 2010 and 2009 Statement of Net Assets Available for Benefits because it may not be sold or repledged. A portion of the income generated upon investment of cash collateral is remitted to the Borrowers, and the remainder is allocated between the Plan and the Custodian in its capacity as a security agent. Securities lending income allocated to the Plan amounted to $8,679 and $732 for 2010 and 2009, respectively. Securities lending income is classified as interest income in the Statements of Changes in Net Assets Available for Benefits.
7.		Plan Termination
		Although it has not expressed any intent to do so, the Plan sponsor has the right under the Plan to reduce, suspend or discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event the Plan terminates, the interest of each participating employee in the Plan shall become fully vested and such termination of the Plan would not reduce the interest of any participating employee or their beneficiaries accrued under the Plan up to the date of such termination.
8.		Tax Status of the Plan
		The Puerto Rico Treasury Department has determined and informed the Plan sponsor that the Plan and the related trust are designed in accordance with applicable sections entitling exemption from income taxes. The Plan sponsor has also obtained a favorable determination letter dated October 1, 2003, from the Internal Revenue Service (IRS) stating that the Plan is in compliance with IRS regulations. The Plan has been amended since receiving the determination letter. The Plan Sponsor believes that the Plan is currently designed and being operated in compliance with the applicable tax requirements. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
9.		Related Parties
		Parties-in-interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others.

Notes to Financial Statements
December 31, 2010 and 2009

 

		At December 31, 2010 and 2009, the Plan held shares of common stock and bonds of Baxter, the Plan sponsor’s parent; units of participation in certain commingled funds and short-term investment funds of State Street Bank and Trust Company, the Plan’s Custodian; loans with participants; shares of common stock, bonds, and interest rate wrapper contracts of Bank of America, issuer of the Plan’s fully benefit-responsive contracts; interest rate wrapper contracts of Aegon Institutional Markets, issuer of the Plan’s fully benefit-responsive contracts; and units of registered investment companies managed by Pacific Investment Management Company, an investment manager for the Plan. These transactions are allowable party-in-interest transactions under ERISA and the regulations promulgated thereunder.
		Fees paid by the Plan for investment management, recordkeeping and consulting services, also qualify as party-in-interest transactions and are included in Plan expenses in the accompanying financial statements. The Company pays certain expenses for the administration of the Plan. These transactions are exempt from the party-in interest transaction prohibitions of ERISA.

SUPPLEMENTAL SCHEDULE

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year) Employer Identification Number: 66-0678126 and Plan Number 024 December 31, 2010		Schedule I

Identity of Issue				Description of Investment		Cost(1)				Current Value
Cash and Cash Equivalents:
*		State Street Bank & Trust Co		Short-Term Investment Fund			—				615,593
		Cash and cash equivalents								$	615,593
** Common Stock:
		Abbott Laboratories		Common Stock			—				15,866
		Accenture PLC		Common Stock			—				23,211
		AES Corp		Common Stock			—				15,187
		Agrium Inc		Common Stock			—				4,001
		Alcoa Inc		Common Stock			—				7,001
		Alcon Inc		Common Stock			—				74,938
		Allergan Inc		Common Stock			—				9,072
		Altria Group Inc		Common Stock			—				9,430
		Amazon.com Inc		Common Stock			—				14,711
		AON Corp		Common Stock			—				7,646
		Apollo Group		Common Stock			—				13,590
		Apple Inc		Common Stock			—				105,547
		Applied Materials Inc		Common Stock			—				15,498
		Astrazeneca PLC		Common Stock			—				20,141
		AT&T Inc		Common Stock			—				6,683
		Baker Hughes Inc		Common Stock			—				11,993
*		Bank of America Corp		Common Stock			—				17,985
*		Baxter Intl Inc		Common Stock			—				5,723,344
		BB&T Corp		Common Stock			—				6,537
		Blackstone Group LP		Common Stock			—				10,734
		Broadcom Corp		Common Stock			—				22,891
		Bunge Ltd		Common Stock			—				11,582
		Bunge Ltd		Common Stock			—				13,590
		Cablevision Systems		Common Stock			—				3,230
		Cameron International		Common Stock			—				9,620
		Carnival Corp		Common Stock			—				23,076
		Capital One Financial		Common Stock			—				6,671
		Celgene Corp		Common Stock			—				16,697
		Centurylink Inc		Common Stock			—				6,638
		CF Industries Holdings		Common Stock			—				7,008
		Charles Schwab Corp		Common Stock			—				16,999
		Cisco Systems		Common Stock			—				37,050
		Citigroup Inc		Common Stock			—				21,071
		Citrix Systems Inc		Common Stock			—				20,087
		CME Group		Common Stock			—				25,102
		Coca Cola Co		Common Stock			—				11,782
		Comcast Corp		Common Stock			—				11,418
		Comcast Corp		Common Stock			—				15,028
		Comcast Corp		Common Stock			—				15,225
		Comerica Inc		Common Stock			—				5,476
		Commercial Metals Co		Common Stock			—				4,008

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year) Employer Identification Number: 66-0678126 and Plan Number 024 December 31, 2010		Schedule I

		ConocoPhilips		Common Stock			—				10,112
		Constellation Brands Inc		Common Stock			—				9,998
		Constellation Energy Group		Common Stock			—				4,909
		Cooper Industries		Common Stock			—				34,389
		Corning Inc		Common Stock			—				3,711
		Costco Wholesale Corp		Common Stock			—				16,135
		Credit Suisse Group		Common Stock			—				16,573
		CVS Caremark Corp		Common Stock			—				15,612
		Danaher Corp		Common Stock			—				35,364
		Deere & Co		Common Stock			—				18,694
		Dell Inc		Common Stock			—				16,224
		Delta Air Line		Common Stock			—				8,880
		Devon Energy		Common Stock			—				17,025
		Devon Energy Corp		Common Stock			—				18,875
		Directv		Common Stock			—				3,106
		Dow Chemical Co		Common Stock			—				4,949
		Dow Chemical Co		Common Stock			—				43,936
		Eaton Corp		Common Stock			—				9,570
		Ebay Inc		Common Stock			—				13,742
		Edison International		Common Stock			—				4,913
		Edwards Lifesciences Corp		Common Stock			—				90,992
		El Paso Corp		Common Stock			—				8,416
		EMC Corp		Common Stock			—				32,361
		Ensco PLC		Common Stock			—				12,833
		EOG Resources Inc		Common Stock			—				12,195
		EQT Corp		Common Stock			—				16,382
		Exelon Corp		Common Stock			—				17,716
		Express Scripts Inc		Common Stock			—				16,364
		Fifth Third Bancorp		Common Stock			—				7,353
		Flextronics Intl		Common Stock			—				17,346
		Flowserve Corp		Common Stock			—				8,297
		Ford Motor Co		Common Stock			—				8,251
		Ford Motor Co		Common Stock			—				19,926
		Freeport McMoran Copper		Common Stock			—				9,305
		Gannett Co		Common Stock			—				3,877
		Gap Inc		Common Stock			—				10,150
		Garmin Ltd		Common Stock			—				6,464
		General Electric Co		Common Stock			—				9,657
		General Motors Co		Common Stock			—				2,606
		General Motors Co		Common Stock			—				12,641
		Gilead Sciences		Common Stock			—				9,183
		Gilead Sciences Inc		Common Stock			—				32,100
		Goldman Sachs Group		Common Stock			—				6,936
		Goldman Sachs Group		Common Stock			—				53,092
		Goodrich Corp		Common Stock			—				19,383
		Google Inc		Common Stock			—				73,010
		Health Net Inc		Common Stock			—				3,216
		Hess Corp		Common Stock			—				7,487
		Hewlett Packard Co		Common Stock			—				10,270

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year) Employer Identification Number: 66-0678126 and Plan Number 024 December 31, 2010		Schedule I

		Honeywell International		Common Stock			—				14,660
		Ingersoll Rand PLC		Common Stock			—				14,041
		Intel Corp		Common Stock			—				17,354
		Intl Game Technology		Common Stock			—				14,614
		Intuit Inc		Common Stock			—				6,101
		Intuitive Surgical Inc		Common Stock			—				7,199
		Invesco Ltd		Common Stock			—				13,724
		Johnson & Johnson		Common Stock			—				27,917
		Johnson Controls Inc		Common Stock			—				26,195
		JPMorgan Chase & Co		Common Stock			—				29,846
		JPMorgan Chase & Co		Common Stock			—				73,179
		Kimberly Clark Corp		Common Stock			—				5,943
		KLA Tencor Corp		Common Stock			—				7,591
		Kohls Corp		Common Stock			—				10,631
		Kohls Corp		Common Stock			—				29,030
		Kroger Co		Common Stock			—				6,746
		Lear Corp		Common Stock			—				6,747
		Limited Brands Inc		Common Stock			—				15,212
		Lowes Co		Common Stock			—				6,443
		Lowes Co		Common Stock			—				11,202
		Lyondellbasell Indu		Common Stock			—				14,635
		Marathon Oil Corp		Common Stock			—				14,881
		Marathon Oil Corp		Common Stock			—				15,405
		Marvell Technology Group		Common Stock			—				24,604
		Microsoft Corp		Common Stock			—				8,851
		Microsoft Corp		Common Stock			—				19,821
		Microsoft Corp		Common Stock			—				20,664
		Monsanto Co		Common Stock			—				5,006
		Morgan Stanley		Common Stock			—				6,542
		Morgan Stanley		Common Stock			—				15,200
		New Corp Cl		Common Stock			—				21,772
		Newfield Exploration Co		Common Stock			—				8,243
		Newmont Mining Corp		Common Stock			—				13,393
		News Corp Cl		Common Stock			—				12,578
		Nexen Inc		Common Stock			—				9,122
		Noble Energy		Common Stock			—				28,359
		Northrop Grumman Corp		Common Stock			—				19,926
		Novartis Ag		Common Stock			—				12,297
		NVR Inc		Common Stock			—				6,922
		Occidental Petroleum		Common Stock			—				23,909
		Office Depot Inc		Common Stock			—				2,902
		Oracle Corp		Common Stock			—				31,506
		Parker Hannifin Corp		Common Stock			—				13,323
		Pepisco Inc		Common Stock			—				14,906
		Pfizer Inc		Common Stock			—				20,244
		Pfizer Inc		Common Stock			—				25,939
		Potash Corp of Saskatche		Common Stock			—				17,617
		Raytheon Company		Common Stock			—				3,113
		Rovi Corp		Common Stock			—				6,745

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year) Employer Identification Number: 66-0678126 and Plan Number 024 December 31, 2010		Schedule I

		Royal Caribbean Cruises Ltd		Common Stock			—				5,650
		Safeway Inc		Common Stock			—				10,178
		Sara Lee Corp		Common Stock			—				7,800
		Schlumberger Ltd		Common Stock			—				70,577
		Smithfield Foods Inc		Common Stock			—				7,318
		Southwest Airlines		Common Stock			—				14,593
		Southwestern Energy Co		Common Stock			—				24,550
		Stanley Black & Decker		Common Stock			—				14,284
		Starbucks Corp		Common Stock			—				11,852
*		State Street Corp		Common Stock			—				15,182
		Suncor Energy		Common Stock			—				16,802
		Sunoco Inc		Common Stock			—				14,869
		Symantec Corp		Common Stock			—				13,987
		Target Corp		Common Stock			—				8,518
		Teva Pharmaceuticals		Common Stock			—				26,209
		Texas Instruments Inc		Common Stock			—				11,452
		Time Warner Cable		Common Stock			—				16,030
		Time Warner Inc		Common Stock			—				3,298
		Time Warner Inc		Common Stock			—				14,976
		Travelers Cos		Common Stock			—				10,833
		Tyco Electronics		Common Stock			—				9,011
		United Parcel Service		Common Stock			—				34,664
		Valero Energy Corp		Common Stock			—				10,436
		Vertex Pharmaceuticals		Common Stock			—				12,839
		Viacom Inc		Common Stock			—				6,582
		Visa Inc		Common Stock			—				5,234
		Visa Inc		Common Stock			—				12,193
		Vodafone Group		Common Stock			—				9,438
		Wal Mart Stores Inc		Common Stock			—				19,131
		Walt Disney Co		Common Stock			—				26,655
		Wells Fargo & Co		Common Stock			—				28,924
		XL Group PLC		Common Stock			—				4,216
		Common Stock								$	8,542,971
** U.S Government and Government Agency Issues:
		Fed HM LN Pool A37176		5.0% 01 Sep 2035			—				7,082
		Fed HM LN Pool A46049		5.0% 01 Jul 2035			—				5,657
		Fed HM LN Pool C48827		6.0% 01 Mar 2031			—				148
		Fed HM LN Pool G12334		5.0% 01 Sep 2021			—				3,425
		Federal Home LN Mtg		5.0% 15 Dec 2023			—				41
		Federal Home LN Mtg		5.0% 15 Sep 2018			—				154
		Federal Home LN Mtg		5.0% 15 Mar 2019			—				915
		Federal Home LN Mtg		5.0% 15 Jan 2030			—				1,752
		FNMA Pool 256398		6.0% 01 Sep 2021			—				742
		FNMA Pool 323887		6.0% 01 Dec 2013			—				414
		FNMA Pool 581043		6.0% 01 May 2016			—				272
		FNMA Pool 615005		6.0% 01 Dec 2016			—				477

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year) Employer Identification Number: 66-0678126 and Plan Number 024 December 31, 2010		Schedule I

		FNMA Pool 694448		5.5% 01 Apr 2033			—				4,898
		FNMA Pool 725690		6.0% 01 Aug 2034			—				3,614
		FNMA Pool 745418		5.5% 01 Apr 2036			—				2,195
		FNMA Pool 748115		6.0% 01 Oct 2033			—				1,099
		FNMA Pool 815316		5.5% 01 May 2035			—				6,274
		FNMA Pool 822979		5.5% 01 Apr 2035			—				5,954
		FNMA Pool 885504		6.0% 01 Jun 2021			—				2,113
		FNMA Pool 888102		5.5% 01 May 2036			—				343
		FNMA Pool 902793		6.5% 01 Nov 2036			—				3,031
		FNMA Pool AB1149		5.0% 01 Jun 2040			—				14,874
		Mexico St		8.0% 17 Dec 2015			—				1,395
		United States Treas NTS		0.875% 28 Feb 2011			—				20,155
		United States Treas NTS		1.125% 15 Dec 2011			—				48,337
		US Treasury N/B		4.375% 15 May 2040			—				7,514
		US Treasury N/B		4.5% 15 Aug 2039			—				7,912
		US Treasury N/B		3.375% 15 Nov 2019			—				8,163
		US Treasury N/B		1.375% 15 Sep 2012			—				36,299
		US Treasury N/B		1.0% 31 Dec 2011			—				38,271
		U.S Government and Government Agency Issues								$	233,520
**   Corporate and Other Obligations:
		Abu Dhabi Natl Energy		7.25% 01 Aug 2018			—				4,078
		AES Corp		7.75% 15 Oct 2015			—				1,842
		AES Corp		8.0% 15 Oct 2017			—				2,068
		AESP Funding II LLC		5.68% 20 Feb 2014			—				2,465
		Agilent Technologies Inc		6.5% 01 Nov 2017			—				5,929
		Albertson’s Inc		6.625% 01 Jun 2028			—				201
		Albertson’s Inc		7.5% 15 Feb 2011			—				2,995
		Alcoa Inc		5.95% 01 Feb 2011			—				1,617
		Alcoa Inc		6.15% 15 Aug 2020			—				3,840
		Ally Financial Inc		6.25% 01 Dec 2017			—				3,221
		Alta Wind Holdings		7.0% 30 Jun 2035			—				2,393
		Altria Group Inc		9.25% 06 Aug 2019			—				826
		Altria Group Inc		9.95% 10 Nov 2038			—				5,674
		American Tower Corp		4.625% 01 Apr 2015			—				1,731
		American Tower Corp		4.5% 15 Jan 2018			—				2,395
		Anheuser Busch Cos		4.95% 15 Jan 2014			—				248
		Anheuser Busch Cos		6.5% 01 May 2042			—				1,674
		Anheuser Busch InBev		4.125% 15 Jan 2015			—				6,604
		ArcelorMittal		3.75% 05 Aug 2015			—				8,120
		AT&T Corp		6.5% 15 Mar 2029			—				240
		Ball Corp		6.75% 15 Sep 2020			—				1,027
*		Banc Amer Coml Mtg		1.0% 10 Apr 2049			—				1,803
*		Bank Amer Corp		4.75% 15 Aug 2013			—				2,571
*		Bank of America Credit Card		1.0% 15 Jan 2016			—				888
*		Bank of America Credit Card		1.0% 16 Jun 2014			—				1,078
		Bank One Issuance Trust		4.77% 16 Feb 2016			—				1,278

Baxter Healthcare of Puerto Rico
Savings and Investment Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year) Employer Identification Number: 66-0678126 and Plan Number 024 December 31, 2010		Schedule I

		Barclays Bank PLC		5.0% 22 Sep 2016			—				2,435
		Barclays Bank PLC		5.2% 10 Jul 2014			—				2,485
		Bear Stearns Coml Mtg		1.0% 11 Jun 2040			—				2,148
		Bemis Company Inc		5.65% 01 Aug 2014			—				680
		Biomed Realty LP		6.125% 15 Apr 2020			—				1,093
		Bottling Group LLC		5.125% 15 Jan 2019			—				1,883
		BP Capital Markets		4.5% 01 Oct 2020			—				5,911
		Brocade Communications		6.875% 15 Jan 2020			—				551
		Brocade Communications		6.625% 15 Jan 2018			—				1,695
		Camden PPTY Tr		5.0% 15 Jun 2015			—				304
		Camden PPTY Tr		5.375% 15 Dec 2013			—				308
		Cameron Intl Corp		6.375% 15 Jul 2018			—				140
		Cameron Intl Corp		7.0% 15 Jul 2038			—				490
		Canadian Pacific RR Co		7.25% 15 May 2019			—				1,163
		Capital One Multi Asset		1.0% 15 Jul 2020			—				1,218
		Case New Holland Inc		7.75% 01 Sep 2013			—				742
		CBS Corp		5.75% 15 Apr 2020			—				1,528
		CC Holdings GS		7.75% 01 May 2017			—				2,137
		CD		5.322% 11 Dec 2049			—				6,559
		CF Industries Holdings		6.875% 01 May 2018			—				923
		Chesapeake Energy Corp		6.5% 15 Aug 2017			—				173
		Chesapeake Energy Corp		7.625% 15 Jul 2013			—				1,434
		Chevron Phillips Chemical		7.0% 15 Jun 2014			—				2,191
		Cincinnati Bell Inc		8.75% 15 Mar 2018			—				1,780
		CIT Equip Coll		6.59% 22 Dec 2014			—				1,871
		Citibank Credit Card Issuance		6.3% 20 Jun 2014			—				7,789
		Citigroup Coml Mtg		5.431% 15 Oct 2049			—				614
		Citigroup Inc		5.0% 15 Sep 2014			—				5,058
		Citizens Communications Co		7.875% 15 Jan 2027			—				3,203
		Colorado Intst Gas Co		6.8% 15 Nov 2015			—				199
		Colorado Intst Gas Co		5.95% 15 Mar 2015			—				263
		Columbia HCA Healthcare Corp		7.58% 15 Sep 2025			—				106
		Columbia HCA Healthcare Corp		7.5% 15 Dec 2023			—				264
		Columbia HCA Healthcare Corp		7.69% 15 Jun 2025			—				497
		Comcast Corp		6.45% 15 Mar 2037			—				1,168
		Comcast Corp		6.95% 15 Aug 2037			—				1,900
		Comcast Corp		6.4% 01 Mar 2029			—				1,948
		Comcast Corp		6.4% 15 May 2038			—				2,336
		Comcast Corp		5.65% 15 Jun 2035			—				2,995
		Comm Mtg Tr		1.0% 10 Dec 2049			—				619
		Comm Mtg Tr		5.736% 10 Dec 2049			—				2,796
		Contl Airlines		5.983% 19 Oct 2023			—				3,512
		Corning Inc		6.85% 01 Mar 2029			—				191
		Corning Inc		7.25% 15 Aug 2036			—				786
		Covidien Intl		6.0% 15 Oct 2017			—				3,033
		Credit Suisse Coml Mtg		1.0% 15 Sep 2040			—				5,434
		Credit Suisse NY		6.0% 15 Feb 2018			—				3,701
		Crown Castle Towers LLC		3.214% 15 Aug 2035			—				1,133
		Crown Castle Towers LLC		4.523% 15 Jan 2035			—				1,255