BXLT Baxalta Incorporated

N otes to Financial Statement

December 31, 2015

General:

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

The Plan was established effective as of May 1, 2015 in anticipation of the spin-off of Baxalta Incorporated, (Baxalta) from Baxter International Inc. (Baxter). The spin-off was completed on July 1, 2015. In connection with the spin-off, certain employees who had been employed by Baxter and its affiliates immediately prior to the spin-off were transferred to, and became employees of Baxalta and its affiliates. Certain of those employees were eligible to participate in the Baxter International Inc. and Subsidiaries Incentive Investment Plan (Baxter IIP) prior to the spin-off. The account balances of those transferred employees were spun-off from the Baxter IIP to the Plan contemporaneously with the corporate spin-off. References in this financial statement to periods prior to May 1, 2015 refer to periods where an employee may have been employed by Baxter or one of its affiliates and had been eligible for the Baxter IIP.

Contributions:

The Plan is a defined contribution plan and was created for the purpose of providing retirement benefits to United States employees of Baxalta (the Sponsor or the Company) and its subsidiaries, and to encourage and assist employees in adopting a regular savings program by means of payroll deductions through a plan that qualifies under the United States Internal Revenue Code. Plan participants may authorize the Company to make payroll deductions under the Plan ranging from 1% to 50% of their pre-tax monthly compensation limited to a maximum of $18,000 a year in 2015. Participants who have attained the age of 50 by the end of the year may contribute up to an additional $6,000 per year in “catch-up” contributions. Newly hired employees are deemed to have elected to contribute 3.0% of compensation (increased by 1% per year to a total of 6%) unless they make a contrary election. The Company matches a participant’s savings contributions on a dollar for dollar basis up to 3.0% of the participant’s compensation, and matches any contributions between 3% and 4% of compensation at the rate of 50 cents for each dollar of a participant’s pre-tax contribution, so that the maximum matching contribution for participant who contribute at least 4% of their compensation is 3.5% of compensation. The Company also contributes an additional non-matching 3% of compensation for employees that are not eligible to participate in the Company’s U.S. qualified defined benefit pension plan. The carrying amounts of contribution receivables reflect fair value due to their short-term maturity.

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

Participant Accounts and Investment Options:

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

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Baxalta Incorporated and Subsidiaries

Incentive Investment Plan

Notes to Financial Statement

December 31, 2015

Upon enrollment in the Plan, a participant may direct contributions into any of 17 investment options: Stable Income Fund, State Street Global Advisors S&P 500 Index Non-Lending Series Fund (SSgA S&P 500 Fund), State Street Global Advisors International Index Non-Lending Fund (SSgA EAFE Equity Fund), State Street Global Advisors Russell Small Cap Index Non-Lending Series Fund (SSgA Small Cap Fund), Northern Trust S&P 400 Index Fund — DC-Non-Lending, State Street Global Advisors Emerging Markets Index Non-Lending Series Fund (SSgA Emerging Markets Fund), ten different Target Date Retirement Funds and the Self-Directed brokerage account. In addition, certain participants may maintain shares received in connection with Baxter’s 1996 spin-off of Allegiance Corporation (Allegiance), which were subsequently converted into common shares of Cardinal Health Inc. (Cardinal) upon Cardinal’s acquisition of Allegiance in 1999. These shares are maintained in the Cardinal Health Common Stock Fund. Additionally, certain participants maintain shares in Edwards Lifesciences Corporation. These shares were placed into the Edwards Lifesciences Common Stock Fund in connection with Baxter’s 2000 spin-off of its cardiovascular business. Participants are not able to make contributions or transfer existing account balances to the Cardinal Health Common Stock Fund or the Edwards Lifesciences Common Stock Fund, but may make transfers out of these funds at any time.

In conjunction with Baxter’s spin-off of Baxalta, participants who maintained shares in the Baxter Common Stock Fund in the Baxter IIP were allocated shares in the Baxalta Common Stock Fund. Both of these funds were removed as investment options as of May 1, 2015. Participants cannot make contributions or transfer existing account balances to either of these Funds, but may make transfers out of these funds at any time.

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 January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10) — Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires that equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value, with subsequent changes in fair value recognized in net income. In addition, the ASU requires a qualitative assessment of equity investments without readily determinable fair values when assessing impairment, the evaluation of a valuation allowance on a deferred tax asset related to available-for-sale securities and certain presentation and disclosures for financial instruments. ASU 2016-01 is applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, which will be January 1, 2018. Early adoption is permitted for certain items. The Plan is currently evaluating the impact of adopting this standard on the Plan’s consolidated financial statements.

Recently Adopted Accounting Policies

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures of Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), which removes the disclosure requirement to categorize within the fair value hierarchy all investments that measure fair value using the net asset value per share as a practical expedient and certain disclosures associated with these types of investments. ASU 2015-07 will be effective for the Plan beginning on January 1, 2016, and retrospective application is required. Early adoption is permitted. The Plan adopted this standard effective for the 2015 plan year.

In July 2015, the FASB issued ASU No. 2015-12, Plan Accounting (Topic 962): Part I, Fully Benefit-Responsive Investment Contracts, and Part II, Plan Investment Disclosures. Part I of the ASU requires those investments meeting the definition of fully benefit-responsive contracts to be measured and reported at contract value. Previous to this ASU, fully-benefit responsive contracts were measured at fair value. Part II of the ASU eliminates the requirement to disclose investments that are 5 percent or more of net assets available for benefits, the appreciation and/or depreciation of investments by general type and the investment strategy for investments that use the net asset value per share measurement as a practical expedient. ASU 2015-12 will be effective for the Plan beginning on January 1, 2016, and retrospective application is required. Early adoption is permitted. The Plan adopted this standard effective for the 2015 plan year.

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Baxalta Incorporated and Subsidiaries

Incentive Investment Plan

Notes to Financial Statement

December 31, 2015

Income Recognition

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

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

Synthetic Guaranteed Investment Contracts

The Plan holds synthetic guaranteed investment contracts (GICs) as part of the Stable Income Fund. The synthetic GICs provide for a fixed return on principal over a specified time through fully benefit-responsive contracts issued by Transamerica, Prudential and MetLife. The portfolio of assets underlying the synthetic GICs primarily includes common-collective trusts, which are owned by the Plan, and a separate account with MetLife, for which MetLife owns the underlying securities of the separate account.

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Baxalta Incorporated and Subsidiaries

Incentive Investment Plan

Notes to Financial Statement

December 31, 2015

Contract value is the relevant measurement attribute for the Plan’s investment in the fully benefit-responsive investment contracts. 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 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 credit rating for Transamerica was A– at December 31, 2015, the credit rating for Prudential was A at December 31, 2015, and the credit rating for MetLife was A– at December 31, 2015.

Events that lead to market value withdrawals that exceed 10 percent of the contract value of the GIC’s of Prudential, Transamerica and MetLife would limit the ability of the Plan to transact at contract value with participants. These events include restructurings, early retirement plans, divestitures, bankruptcies, or legal, tax or regulatory changes. The Plan sponsor believes that the occurrence of any such event is remote.

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

Notes Receivables from Participants

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, which is determined by the Benefits Committee and is typically stated at the prime rate at the last day of the month prior to loan request, plus one percent.

Participant loans are reported at their unpaid principal balance plus any accrued but unpaid interest, with no allowance for credit losses, as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participant’s account balances.

Payment of Benefits and Fees

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

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

Use of Estimates

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

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Baxalta Incorporated and Subsidiaries

Incentive Investment Plan

Notes to Financial Statement

December 31, 2015

Risks and Uncertainties

The Plan provides for various investment options which invest in any combination of common stock, common-collective trusts, 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 Statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits. Individual participants’ accounts bear the risk of loss resulting from fluctuations in investment values.

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

State Street Bank and Trust Company (the Trustee) serves as trustee and Voya Institutional Plan Services, LLC, serves as record-keeper for the Plan. Self-directed brokerage account assets are held in the custody of Charles Schwab & Co. Inc. (“Charles Schwab” or the “Custodian”) and are maintained by the Trustee.

The Benefits Committee administers the Plan and they have the administrative and investment authority, responsibility and control over the assets of the Plan. Members of the committee are appointed by the Board of Directors of Baxalta and are employees of Baxalta.

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

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

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Baxalta Incorporated and Subsidiaries

Incentive Investment Plan

Notes to Financial Statement

December 31, 2015

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

*Investments that are measured at fair value using the net asset value per share or its equivalent as a practical expedient are not required to be classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy and the Statement of Net Assets Available for Benefits. The Self-directed account includes a money market fund that is measured at net asset value.

Transfers between hierarchy measurement levels are recognized by the Plan as of the beginning of the reporting period. The Plan did not have any transfers between Levels 1 and 2 during 2015.

See Valuation of Investments in Note 2 above for a discussion of the methodologies used to determine the fair values of the Plan’s investments. 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.

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

The Company filed an application for determination with Internal Revenue Service (IRS) on January 27, 2016, but has not received a determination letter that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (the IRC). The Company believes that the Plan and its amendments are currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan’s financial statements. U.S. GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2015, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statement. The Plan is subject to routine audits by taxing jurisdictions; however there are currently no audits for any tax periods in progress.

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Baxalta Incorporated and Subsidiaries

Incentive Investment Plan

Notes to Financial Statement

December 31, 2015

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

At December 31, 2015, the Plan held common-collective trusts and short-term investment funds of State Street Bank and Trust Company, the Plan trustee; shares of common stock and dividend income on those shares of Baxalta, the Plan sponsor; loans with participants; interest rate wrapper contracts of Prudential for 2015, issuer of the Plan’s fully benefit-responsive contracts; interest rate wrapper contracts of Transamerica, issuer of the Plan’s fully benefit-responsive contracts; interest rate wrapper contracts of MetLife, issuer of the Plan’s fully benefit-responsive contracts; and units of common-collective trusts managed by Northern Trust Corporation, 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.

On January 11, 2016, Baxalta entered into an Agreement and Plan of Merger with Shire plc, a Jersey public company (Shire) and BearTracks, Inc., a wholly-owned subsidiary of Shire (Merger Sub), pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub merged with and into Baxalta, with Baxalta surviving as an indirect wholly-owned subsidiary of Shire. The merger was completed on June 3, 2016. Upon completion of the merger, the Company filed Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (No. 333-205327), pertaining to the removal from registration any registered but unsold or otherwise unissued shares of the Company’s common stock issuable under the Plan. The Company does not intend to file any additional annual reports for the Plan following this Form 11-K.

Under the terms of the merger agreement, Baxalta stockholders in the Plan received $18.00 in cash and 0.1482 of Shire American Depository Receipts (ADRs) per each Baxalta share.

The Company expects the Plan will continue for the foreseeable future. For those participants that hold shares in the Baxalta Common Stock Fund, the cash consideration will be invested in the appropriate Target Date Retirement Funds based upon the participant’s age and the ADRs received will be invested in a new Shire Stock Fund. For those participants that hold shares in the Self-Directed Fund, both the cash and ADRs will remain in the Self-Directed Fund with the participant having the ability to invest the cash or transfer it to another fund.

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SUPPLEMENTAL SCHEDULE

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