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<SEC-DOCUMENT>0000897101-01-500449.txt : 20010727
<SEC-HEADER>0000897101-01-500449.hdr.sgml : 20010727
ACCESSION NUMBER:		0000897101-01-500449
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20010427
FILED AS OF DATE:		20010726

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MEDTRONIC INC
		CENTRAL INDEX KEY:			0000064670
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
		IRS NUMBER:				410793183
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			0430

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		
		SEC FILE NUMBER:	001-07707
		FILM NUMBER:		1689989

	BUSINESS ADDRESS:	
		STREET 1:		7000 CENTRAL AVE NE
		STREET 2:		MS 316
		CITY:			MINNEAPOLIS
		STATE:			MN
		ZIP:			55432
		BUSINESS PHONE:		6125744000
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>medtronic012520_10k.txt
<DESCRIPTION>MEDTRONIC, INC. FORM 10-K
<TEXT>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934. FOR THE FISCAL YEAR ENDED APRIL 27, 2001

                           COMMISSION FILE NO. 1-7707

                             ----------------------

                                     [LOGO]
                                   MEDTRONIC

                                 MEDTRONIC, INC.

               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

MINNESOTA                                                             41-0793183
(STATE OF INCORPORATION)                    (I.R.S. EMPLOYER IDENTIFICATION NO.)

                              710 MEDTRONIC PARKWAY
                          MINNEAPOLIS, MINNESOTA 55432
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                        TELEPHONE NUMBER: (763) 514-4000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED

COMMON STOCK, PAR VALUE $.10 PER SHARE             NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS                    NEW YORK STOCK EXCHANGE, INC.

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

                             ----------------------

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES __X__ NO _____

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]

AGGREGATE MARKET VALUE OF VOTING STOCK OF MEDTRONIC, INC. HELD BY NONAFFILIATES
OF THE REGISTRANT AS OF JULY 20, 2001, BASED ON THE CLOSING PRICE OF $48.58, AS
REPORTED ON THE NEW YORK STOCK EXCHANGE: APPROXIMATELY $58.6 BILLION.

SHARES OF COMMON STOCK OUTSTANDING ON JULY 20, 2001: 1,209,923,966

                       DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF REGISTRANT'S 2001 ANNUAL REPORT ARE INCORPORATED BY REFERENCE INTO
PARTS I, II AND IV; PORTIONS OF REGISTRANT'S PROXY STATEMENT FOR ITS 2001 ANNUAL
MEETING ARE INCORPORATED BY REFERENCE INTO PART III.

<PAGE>


                                TABLE OF CONTENTS


ITEM                               DESCRIPTION                              PAGE
- ----                               -----------                              ----

                                     PART I

  1.   Business.........................................................      1
  2.   Properties.......................................................     14
  3.   Legal Proceedings................................................     14
  4.   Submission of Matters to a Vote of Security-Holders..............     16


                                     PART II

  5.   Market for Registrant's Common Equity and Related
          Stockholder Matters...........................................     16
  6.   Selected Financial Data..........................................     16
  7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations.....................................     16
  7A.  Quantitative and Qualitative Disclosures About Market Risk ......     16
  8.   Financial Statements and Supplementary Data......................     16
  9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure......................................     16


                                    PART III

 10.   Directors and Executive Officers of the Registrant...............     16
 11.   Executive Compensation...........................................     16
 12.   Security Ownership of Certain Beneficial Owners and Management...     16
 13.   Certain Relationships and Related Transactions...................     16


                                     PART IV

 14.   Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K......................................................     17


TRADEMARKS AND OTHER RIGHTS

This Report contains trademarks, service marks and registered marks of
Medtronic, Inc. and its subsidiaries, and other companies, as indicated.


ANNUAL MEETING AND RECORD DATES

Medtronic's Annual Meeting of Shareholders will be held on Thursday, August 30,
2001 at 10:30 a.m., Central Daylight Time at the Company's world headquarters.
The record date for the Annual Meeting is now July 31, 2001 and all shareholders
of record at the close of business on July 31, 2001 will be entitled to vote at
the Annual Meeting.

<PAGE>


                                     PART I


ITEM 1. BUSINESS

         OVERVIEW. Medtronic, Inc., together with its subsidiaries ("Medtronic"
or the "company"), is the world's leading medical technology company, providing
lifelong solutions for people with chronic disease. The company is committed to
offering market-leading therapies to restore patients worldwide to fuller,
healthier lives. Medtronic's primary products are used for bradycardia pacing,
tachyarrhythmia management, atrial fibrillation, heart failure, coronary and
peripheral vascular disease, minimally invasive cardiac surgery, heart valve
replacement, extracorporeal cardiac support, spinal and neurosurgery, malignant
and non-malignant pain, movement disorders, neurodegenerative disorders, and
ear, nose and throat (ENT) surgery. Medtronic's businesses operate in four
business units that comprise one reportable segment, that of manufacturing and
selling device-based medical therapies. The business units are Cardiac Rhythm
Management; Vascular; Cardiac Surgery; and Neurological, Spinal and ENT.

         Medtronic was founded in 1949, incorporated in 1957 and today serves
physicians, clinicians and patients in more than 120 countries worldwide. The
company remains committed to a mission written by its founder over 40 years ago:
"to contribute to human welfare by application of biomedical engineering in the
research, design, manufacture, and sale of instruments or appliances that
alleviate pain, restore health and extend life." Beginning with the development
of the heart pacemaker in the 1950s, the company has assembled a broad portfolio
of progressive technology expertise both through internal development of core
technologies as well as acquisitions, establishing the company as a leader in
new medical technologies. Since 1998, Medtronic has accelerated its growth
through the acquisition of six major businesses and will continue to evaluate
additional acquisition opportunities. Medtronic selects its acquisition
candidates to expand its broad base of market leadership and leverage its
technology portfolio to treat an increasing number of chronic diseases.

         Medtronic's success in leading global advances in medical technology is
based upon an active collaboration with customers. The company's new therapies
and products are often successful because the company works closely with
physicians and patients to identify unmet needs in clinics, hospitals and
surgical suites. This collaboration allows Medtronic to continually introduce
new products offering improved solutions for medical practitioners and the
patients they treat. These new products drive the company's financial results.
During fiscal year 2001, about two-thirds of the company's revenues were
generated from sales of products introduced within the last two years. By
staying close to its market, the company believes it can direct its substantial
technological resources to the development of solutions that hold the most
promise for serving patients and creating successful products.

         In January 2000, Medtronic introduced Vision 2010, the company's
strategic initiative to provide patients and the medical community with
comprehensive, life-long solutions for the management of chronic disease. In the
next decade, the company anticipates that the internet, technology advancements
and increasing patient participation in treatment decisions will transform the
nature of healthcare services. The convergence of these factors will result in
better care at lower cost to the health care system and greater quality of life
and convenience to the patient. The company has embraced these trends by forming
innovative alliances with information industry leaders Microsoft Corporation,
International Business Machines Corporation (IBM) and Healtheon/WebMD. Through
these alliances, Medtronic intends to provide physicians better tools to collect
and monitor patient data and provide health care information to the increasing
number of patients who seek an active and informed role in their own health care
decisions.

         RECENT ACQUISITIONS. The company continues to grow through a
combination of acquisitions and internally generated technological advances. In
fiscal 2001, Medtronic acquired PercuSurge, Inc. (PercuSurge"), a private
company that develops and markets interventional embolic protection devices. In
June 2001, PercuSurge commercially released in the United States its patented
system to remove embolic material dislodged during the treatment of
arteriosclerosis. This system has been commercially available in Europe since
1999 and has been used in more than 5,000 procedures. Shareholders of PercuSurge
received 3.7 million shares of Medtronic Common


                                       1
<PAGE>


Stock in the merger in exchange for the outstanding stock of PercuSurge. The
acquisition was accounted for as a pooling-of-interests, and Medtronic's
consolidated financial statements for fiscal 2001 and prior years have been
restated to include the results of operations, financial positions, and cash
flows of PercuSurge.

         In May 2001, the company announced that it had signed an agreement to
purchase MiniMed Inc., the world leader in the design, development, manufacture
and marketing of advanced medical systems for the treatment of diabetes. MiniMed
develops and sells glucose monitoring systems, external insulin pumps and
related disposable products for use by patients with diabetes. Medtronic has
also agreed to purchase Medical Research Group, Inc., a privately held
corporation that designs and develops implantable devices used for the treatment
of diabetes. MiniMed is a shareholder of Medical Research Group, Inc. MiniMed
and Medical Research Group are currently developing an implantable insulin pump
and long-term glucose sensor. In combination, these new implantable products
would allow for more efficient regulation of blood glucose levels and may
decrease the frequency and severity of diabetic complications. The Company
expects to complete the transactions in the second quarter of fiscal 2002.

         CARDIAC RHYTHM MANAGEMENT. Cardiac Rhythm Management products consist
primarily of products for bradycardia pacing, tachyarrhythmia management, atrial
fibrillation and congestive heart failure.

         Bradycardia pacing systems, which treat patients with slow or irregular
heartbeats, include pacemakers, leads and accessories. The pacemakers can be
noninvasively programmed by the physician to adjust sensing, electrical pulse
intensity, rate, duration and other characteristics, and can produce impulses to
cause contractions in either the upper or lower heart chamber, or both, in
relation to heart activity. The company's Model 9790 programmer can be used
interchangeably with all of the company's bradycardia pacemakers as well as with
its tachyarrhythmia management devices. The primary physician users for
bradycardia products include electrophysiologists, implanting cardiologists and
cardiovascular surgeons.

         The company's bradycardia pacemakers include the KAPPA(R), Sigma(TM),
and Vitatron(R) families of products. The KAPPA series of pacemakers includes
advanced products designed to adjust heart rates to match patient activity
without requiring a hospital or clinic visit. The KAPPA products also provide
physicians intuitive, easy-to-use diagnostic information and patient management
tools. The Medtronic Sigma pacing line competes in the standard and basic pacing
market segments by offering enhanced patient therapies and patient management
tools not typically found in those segments.

         The Vitatron organization of Medtronic, located in the Netherlands,
offers a broad range of pacing therapies. During fiscal 2001, sales of Vitatron
pacing systems grew at a faster rate than any of the company's other pacemaker
brands. In March 2001, Vitatron released its new Collection(TM)3 and Vita(TM)2
pacemaker series to the United States market, joining the advanced Vitatron
Clarity(TM) line of pacemakers introduced in the United States in December 2000.
Key features of the Vitatron systems include (i) Beat-to-Beat(TM) mode switching
which prevents intermittent periods of fast heart rates in the upper chambers
from disrupting the steady heart rhythm in the lower chambers; (ii) dual sensor
rate response to enable the pacemaker to adapt its rate to meet the patient's
metabolic needs; and (iii) in the Collection 3 series, collection of data that
reports certain cardiac events and suggests solutions that the physician can use
to adjust the pacemaker to the patient's needs.

         To further assist physicians, Vitatron also introduced its
user-friendly AFdiscover(TM) software tool to the United States market. The new
software is designed to be used with Vitatron's Selection(TM) AFm (Model 902)
system, the first pacing system available in the United States with new
capabilities intended to help physicians more effectively monitor atrial
fibrillation. AFdiscover software is designed for installation on a physician's
personal computer, where it can then be used to read and analyze patient data
that is obtained from the patient's pacemaker via the 9790 programmer. The
software produces the data in a user-friendly, easy-to-read, graphic format.

         Medtronic also markets the CapSureZ(R), CapSureFix(R) and the
CapSure(R) Epi steroid-eluting leads, which deliver more concentrated levels of
electrical energy that extend device life. The CapSureFix NOVUS(TM), a new
pacing lead with smaller size for increased maneuverability during implant, is
in clinical investigation.


                                       2
<PAGE>


         Tachyarrhythmia management products include implantable devices and
transvenous lead systems for treating ventricular tachyarrhythmias, which are
abnormally fast, and sometimes fatal, heart rhythms. The systems offer a tiered
therapy of pacing, cardioversion and defibrillation, and are implanted in the
upper chest using endocardial leads, which reduces patient trauma,
hospitalization time and costs. The primary physician users for tachyarrhythmia
products are electrophysiologists.

         Because many patients exhibit multiple heart rhythm problems, Medtronic
has developed products with the capability of addressing sometimes complex
combinations of arrhythmias, including atrial fibrillation. In atrial
fibrillation, the heart's upper chambers beat too rapidly, elevating the risk of
stroke fivefold. Atrial fibrillation is the world's most common arrhythmia and
affects 5 million people worldwide.

         Medtronic's Gem(R)family of implantable defibrillators is intended to
meet the needs of patients with multiple heart rhythm problems. In December
2000, the FDA cleared for United States commercial release the Gem
III(TM)DR(R)and the Gem III(TM)VR implantable cardioverter defibrillators (ICD),
used with Sprint(TM) defibrillation leads and the 9790 programmer. These systems
are designed to treat potentially lethal heart rhythms such as sudden cardiac
arrest. While the single-chamber Gem III VR provides pacing to the lower chamber
of the heart, the dual-chamber Gem III DR device is intended for patients with
conditions requiring that sensing take place in the upper chamber of the heart
as well as in the lower chamber to assure that the device circuitry correctly
evaluates arrhythmias to prevent inappropriate therapeutic impulses. In February
2001, the FDA cleared the Gem III AT for commercial release in the United
States. The Gem III AT ICD offers a comprehensive set of tools for managing both
atrial and ventricular arrhythmias. The Gem III DR defibrillator includes
enhanced PR (Pattern Recognition) Logic(TM)detection capability, a proprietary
algorithm designed to discriminate between, and deliver appropriate pacing for,
fast ventricular rhythms that are life threatening and fast atrial arrhythmias
that are not. Gem III defibrillators also offer increased device longevity.

         In August 2000, the Company released for commercial sale in Europe and
Canada its AT500(TM)pacing system, another tool for treating patients with
multiple heart rhythm problems including atrial fibrillation. The AT500 is
designed for bradycardia patients who are also at risk for atrial
tachyarrhythmias. The Jewel AF(R)implantable cardioverter defibrillator shares
with the Gem III the ability to provide rate responsive treatment of arrhythmias
in both the atrium and the ventricle. The Jewel AF was cleared by the FDA for
commercial use in the United States in June 2000.

         The Gem III AT, the AT500, and the Jewel AF each offer Medtronic's
AT(TM) trio of atrial tachyarrythmia management capabilities consisting of (i)
continuous monitoring and electrogram storage to guide atrial therapy; (ii)
pacing to prevent or suppress atrial fibrillation; and (iii) pacing to terminate
atrial tachyarrhythmias and restore a normal heartbeat.

         Medtronic markets a full line of active and passive steroid-eluting
defibrillator leads. The entire line of tachyarrhythmia devices, like the
bradycardia pacemakers, are programmed with the Model 9790 programmer.

         The company offers an implantable device, the Reveal(R) Plus Insertable
Loop Recorder (ILR), to diagnose complex arrhythmias or other chronic perplexing
heart problems. Once implanted, the Reveal Plus recorder continuously monitors
the heart's electrical activity and records electrocardiogram information in up
to a 42 minute loop. The monitor can be programmed to automatically capture the
ECG when a heart rhythm problem occurs. The information is stored and can be
non-invasively retrieved by the physician. The successor to the Reveal(R) ILR,
the Reveal Plus ILR, was commercially released in the United States in February
2000 and in Europe in March 2000.

         Medtronic commercially markets two products that monitor and treat
congestive heart failure, a seriously debilitating condition in which the heart
does not pump enough blood to meet the body's demands. Heart failure is the
leading cause of death in the United States, afflicting more than 22 million
people worldwide with varying degrees of severity. In June 2001, Medtronic
released for commercial sale in Europe, Canada and Middle Eastern markets, the
InSync(R) III cardiac resynchronization system designed to assist heart failure
patients by improving the contraction sequence of up to three chambers of the
heart to optimize cardiac function and cardiovascular circulation. Like its
predecessors, the InSync and InSync ICD(TM) cardiac resynchronization systems,
the InSync III


                                       3
<PAGE>


system, uses a pacemaker-like device to stimulate both ventricles, in addition
to the upper and lower chambers of the heart, to improve cardiac pumping
capability for patients with advanced heart failure.

         The InSync, InSync ICD and InSync III systems are used with Medtronic's
Attain(TM) Side-Wire lead system designed to provide lower left heart chamber
pacing in varied patient anatomies. In fiscal 2001, the company commercially
released, outside of the United States, another in its family of left-heart
leads and delivery systems designed to provide effective options for physicians
using cardiac resynchronization therapy to treat heart failure patients. The
system is designed to facilitate rapid coronary sinus cannulation and cardiac
vein selection in left-heart lead procedures. The company's InSync, InSync ICD,
InSync III, and all Attain cardiac resynchronization devices and lead systems
(except Model 4191) are currently under clinical investigation in the United
States.

         In September 2000, the Company announced the first use of a new patient
management system designed to help physicians manage patients with chronic
cardiovascular disease. The system's first use is to capture critical
physiologic information from a heart failure patient's implanted medical device
from the patient's home and deliver it to the attending physician via the
Internet. The new Chronicle(R) Patient Management System for heart failure
patients employs the Medtronic Chronicle(R) device that is intended to
continuously sense and collect unique and valuable information such as
intracardiac pressures, heart rate and physical activity from a proprietary
sensor placed directly in the heart's chamber. The patient periodically
downloads this information to a home-based device that transmits this critical
physiologic data securely over the Internet to the Medtronic Patient Management
Network. Physicians can access the network via a Web site at any time and review
screens that present summary information from the latest download, trend
information and detailed records from specified times or problem episodes. The
Chronicle Patient Management System is currently undergoing investigational
trials in the United States and Europe, and is not yet approved for commercial
sale.

         In fiscal 2001, the company commercially introduced in Europe, an
innovative pen-like device designed to help surgeons quickly treat one of the
world's most difficult cardiac arrhythmias at the same time they operate to
replace a heart valve or perform a coronary artery bypass procedure. The
Medtronic Cardioblate(TM) Surgical Ablation Pen, is a hand-held, single-use,
irrigated radiofrequency ablation instrument used to create spot or linear
lesions in the heart's upper chambers to block the errant electrical signals
that cause atrial fibrillation. Because it allows the surgeon to "draw" lines
that then form scar tissue - rather than the cutting and sewing of incisions
used in the complex "Maze" operation - the Cardioblate pen significantly reduces
the critical "cross-clamp" time required to complete the procedure.

         Medtronic also offers an integrated line of noninvasive emergency
cardiac defibrillator and vital sign assessment devices, disposable electrodes
and data management software. Sudden cardiac arrest (SCA) is unpredictable and
can happen without warning. SCA contributes to 225,000 deaths a year in the
United States alone. Two out of three of these deaths, on average, occur outside
of the hospital. Medtronic Physio-Control's LIFEPAK(R)series of automated
external defibrillators (AED's) can be used by individuals with minimal
training, including airline and public safety personnel, in public places to
save lives that might otherwise be lost due to SCA. For the highly trained
hospital personnel and emergency responder market, the company offers the more
comprehensive LIFEPACK(R)defibrillators and vital sign assessment devices with
noninvasive pacing, shock advisory, 12 lead ECG diagnostic capability, trending
capability, pulse oximetry, end-tidal CO2, invasive and noninvasive pressure
monitoring. An increase in the adoption of the ADAPTIVE(TM) biphasic technology
resulted from the wide range of energy settings with low peak current. These
energy settings are consistent with the American Heart Association's Guidelines
2000 and easily adapt to current protocols. The CODE-STAT(TM) and CODE-STAT
suite data management systems are Windows(R)based software programs that allow
users to conduct post-event review and data analysis.

         The company's Cardiac Rhythm Management products accounted for 47.9% of
Medtronic's net sales during the fiscal year ended April 27, 2001, 49.9% of
Medtronic's net sales during fiscal 2000 and 50.1% of net sales in fiscal 1999.

         VASCULAR. The Vascular product line supports the interventional
treatment of diseased coronary and peripheral blood vessels. Medtronic's primary
involvement in the vascular area had historically been in coronary angioplasty.
Medtronic's acquisition of Arterial Vascular Engineering, Inc. ("AVE") in
January 1999 significantly


                                       4
<PAGE>


expanded the company's portfolio of coronary stent systems, balloon catheters,
guidewires and guiding catheters. Customers for products treating coronary
artery disease are primarily interventional cardiologists, while products
treating peripheral artery disease may be used by interventional radiologists,
vascular surgeons and interventional cardiologists.

         Vascular products include both modular and laser-cut stent systems to
offer physicians a choice of products to suit their needs. In April 2001, the
company received approval from the FDA for commercial release of its modular S7
with Discrete Technology(TM) Coronary Stent System. Discrete Technology(TM)
refers to the precise alignment of the stent on the balloon, thereby ensuring
complete stent expansion while minimizing balloon overhang and potentially
reducing the likelihood of arterial damage. The S7 is not currently approved for
direct stenting in the United States. The company launched the S7 in Europe and
the United States during the fourth quarter of fiscal 2001.

         In May 2000, Medtronic also introduced, in the United States, the S660
With Discrete Technology(TM) Coronary Stent System specifically designed for
smaller vessels. The S660 is one of the lowest profile stents available on the
market.

         The BeStent(TM)2 with Discrete Technology(TM) Rapid Exchange Coronary
Stent Delivery System was commercially released in Europe in May 2000. The
company commercially released the United States versions in October and December
of 2000. The BeStent(TM)2 offers customized scaffolding, a very low crossing
profile and markers for precise placement. The company's coronary stents,
together with the R2(R) and D2 balloon catheters released in June 2001, comprise
complete therapeutic systems for treating cardiovascular disease.

         In June 2001, the company received FDA clearance to market in the
United States its PercuSurge GuardWire Plus Temporary Occlusion and Aspiration
System. The GuardWire Plus System is designed to allow cardiologists and other
interventional specialists to capture embolic debris that might otherwise block
downstream vessels and branches during interventional procedures and damage the
heart. The system consists of a balloon-tipped guidewire, which is inflated
briefly to occlude blood flow and capture any material dislodged from the wall
of the vessel during placement of a stent upstream. Captured material is then
withdrawn by using the PercuSurge Export aspiration catheter before the balloon
of the GuardWire Plus is deflated and blood flow restored. Available outside the
United States since 1999, the GuardWire Plus System is the first distal
protection system available in the United States and is indicated for use in
saphenous vein grafts.

         The company's line of coronary dilation catheters in the over-the-wire
category includes the D114S(TM) balloon catheter in the United States and, in
the rapid exchange segment of the market, the XIS(TM) balloon catheter in Europe
and the LTX2(TM) catheter in Japan. The D114S(TM) and R1 balloon catheter, plus
the D2 over-the-wire, minimally compliant balloon catheters released in June
2001, complete the company's comprehensive product line. The company also offers
enhanced coronary guide catheters, including the Z2(TM) line, and the Fusion(TM)
family of guidewires. Guide catheters are used towards the start of an
interventional procedure to provide physicians with a path inside the patient's
body that "guides" the stents, balloons, and other interventional devices
directly to the lesion site. Guide catheters come in a wide range of sizes and
curve styles to address a number of factors, such as the location of the lesion
(right or left coronary system), the anatomy of the patient and the entry point
for the intervention (femoral, brachial or radial).

         In May 2001, the company announced an exclusive licensing agreement
with AVI BioPharma, Inc. ("AVI"). Under the license, Medtronic will be entitled
to use several antisense compounds of AVI on certain medical devices, including
stents, to assist in the prevention of restenosis. Restenosis is the
reoccurrence of the narrowing or clogging of arteries following the placement of
a stent or balloon angioplasty procedure. AVI's antisense compounds are designed
to address the underlying genetic mechanism that leads to restenosis, and are
currently in clinical trials. AVI and Medtronic will work together to evaluate
the use of the antisense compounds on medical devices and to obtain regulatory
approval for these new therapeutic treatment combinations.


                                       5
<PAGE>


         The coronary vascular product line is complemented by a wide range of
peripheral vascular products, including the AneuRx(R) and Talent(TM) stent
grafts for minimally invasive abdominal aortic aneurysm repair therapy. These
products are commercially available in Europe and the AneuRx stent graft system
is available in the United States, having received FDA approval in September
1999. Available in select geographies outside the United States, the AneuRx(R)
Descending Thoracic Aorta (DTA) Stent Graft System adapts the technologies of
the AneuRx system for use in the endovascular treatment of aneurysms above the
abdomen in the descending thoracic aorta. The company also offers
balloon-expandable biliary stents in the U.S and balloon-expandable peripheral
vascular stent systems in markets outside the United States.

         In September 2000, the company received clearance in Europe for
commercial release of its INX(TM) Neurovascular Stent. The INX(TM) stent is the
first of its kind and the only stent designed specifically for use in the brain.
Indicated for the treatment of certain types of brain aneurysms, the INX(TM)
stent provides an alternative treatment option for those patients who are
considered high-risk surgical candidates. The INX(TM) stent is designed for use
in combination with other embolic devices or materials to isolate aneurysms and
reduce or eliminate the risk of aneurysm expansion and eventual bursting. The
delivery system incorporates the company's unique sinusoidal pattern and a
special balloon technology that provide a high degree of flexibility, enabling
it to be more easily threaded through the tortuous arteries of the head and
neck. The delivery system also incorporates the company's Discrete Technology.

         The company's Vascular products accounted for 16.7% of net sales in
fiscal 2001, 15.8% of net sales in fiscal 2000 and 17.0% of net sales in fiscal
1999.

         CARDIAC SURGERY. Cardiac Surgery products consist of heart valves,
perfusion systems, minimally invasive cardiac surgery products and surgical
accessories.

         The company markets enabling technologies in beating heart bypass
surgery, including the Medtronic Octopus(R) family of tissue stabilization
systems: the Octopus(R), Octopus2(TM), the Octopus2+(TM) and the Octopus(R)3
tissue stabilizing systems. These systems are used to stabilize sites on the
beating heart to enable the surgeon to complete bypass grafts. The Octopus 3 was
launched commercially on a worldwide basis in May 2000. Accompanying the launch
of the Octopus 3 were three other new cardiac surgery products: the ClearView(R)
Intracoronary Shunt, the QuickFlow DPS(TM) Distal Perfusion System and the
ClearView(R) Blower/Mister system. These new products are designed to provide
surgeons with added flexibility, visibility and access to the surgical site.

         The heart valve product line includes tissue and mechanical valves and
repair products for damaged or diseased heart valves. In August 2000, the
company received FDA clearance for commercial release of its Mosaic(R)
bioprosthetic heart valve in the US. Engineered from porcine tissue, the Mosaic
valve is a reduced-profile valve that incorporates a proven flexible stent. The
low profile and flexibility of the stent make it easier for the surgeon to
implant the valve. The company also markets the Freestyle(R) stentless aortic
tissue heart valve, featuring advanced tissue technology for improved blood flow
and increased durability, and the Hancock(R) II tissue valve, available in both
aortic and mitral models.

         Through a series of strategic acquisitions over the past decade,
including the acquisition of AVECOR Cardiovascular, Inc. in March 1999,
Medtronic now markets a complete line of blood-handling products that form the
patient's extracorporeal life-support circuit for maintaining and monitoring
blood circulation and coagulation status, oxygen supply and body temperature
during open-heart surgery. The company's principal customers for its cardiac
surgery products are cardiac surgeons.

         The company's Cardiac Surgery products accounted for 8.8% of
Medtronic's net sales during fiscal 2001, 9.3% of net sales during fiscal 2000
and 9.3% of net sales in fiscal 1999.

         NEUROLOGICAL, SPINAL AND ENT. Neurological, Spinal and ENT products
consist primarily of implantable neurostimulation devices, drug administration
systems, spinal products, neurosurgery products, functional diagnostic systems
and surgical products used by ENT physicians.


                                       6
<PAGE>


         Medtronic produces devices, instruments, computer-assisted
visualization products and biomaterials used by orthopedic surgeons and
neurosurgeons in the treatment of disorders of the cranium and spine, including
a wide range of sophisticated internal fixation devices, such as interbody
fusion systems. The company's spinal business also pioneered and leads the
industry in minimal access spine technologies, including the Med(R)
MicroEndoscopic Discectomy System used for the endoscopic removal of vertebral
discs, the Sextant Percutaneous Rod System used for fixation of the lumbar spine
through small incisions, and the CD Horizon(R) Eclipse System which allows for
the thoracoscopic treatment of scoliosis. In May 2000, Medtronic commercially
released its INTER FIX(TM) RP (Reduced Profile) Threaded Spinal Fusion Device,
designed to treat severe back pain caused by degenerative disc disease. In
February 2001, Medtronic commercially released its LT-CAGE(TM)Lumbar Tapered
Fusion Device, also designed to treat degenerative disc disease, which can be
implanted laparascopically or through an open frontal incision, to fuse spinal
bones. By avoiding incisions in the back muscles, the patient recovers more
quickly and with less pain.

         In May 2001, the company announced that its application for FDA
pre-market approval for a recombinant version of a naturally occurring bone
morphogenetic protein has been accepted for filing, and the product, known as
the InFUSE(TM) Bone Graft, is slated for expedited review by the FDA. The
company seeks approval for use of the InFUSE(TM) Bone Graft with the LT-CAGE
fusion device.

         In February 2001, the company entered into an agreement with Spinal
Dynamics to distribute the Spinal Dynamics Bryan Cervical Disc System(TM)
outside of the United States. The Bryan Cervical Disc System is designed to
replace the need for intervertebral fusion procedures, which are currently the
most common form of surgery for treating painful degenerative disc disease of
the cervical, or neck, region of the spine. In such procedures, the damaged disc
is removed and the vertebrae are fused together. The Bryan prosthesis duplicates
the anatomic function of the natural disc, thus allowing preservation of normal
motion. The prosthesis, which was approved for commercial release in Europe in
September 2000, is the first device of its type to reach commercialization. The
primary customers for the company's spinal products are orthopedic surgeons.

         The company also produces implantable systems for spinal cord and brain
stimulation to treat pain and movement disorders. Neurostimulation products
include the Itrel(R) 3 spinal cord stimulation system, which features a
patient-operated control unit, the Mattrix(R) stimulator, which offers a dual
stimulation mode for more effective pain management and the Synergy(TM)
Neurostimulation System, the first and only totally implantable dual channel
therapy designed to aid in the management of chronic intractable pain of the
trunk or limbs. The Activa(R) provides therapy for essential tremor and tremor
associated with Parkinson's disease. Activa Parkinson's Control Therapy for
other major symptoms of Parkinson's disease was commercially released in Europe
in fiscal 1998 and has received the FDA's advisory panel recommendation for
approval of commercial release in the United States. The Activa system allows
neurostimulation levels to be adjusted noninvasively after implant according to
the needs of each patient. Medtronic began commercial sales of the Medtronic
Kinetra(TM) neurostimulator throughout Europe and Canada in October 1999. The
Medtronic Kinetra provides dual channel brain stimulation for bilateral symptoms
of both Parkinson's disease and essential tremor through a single device. The
Kinetra neurostimulator and its new hand-held Access(TM) Therapy Controller are
used to deliver Activa Parkinson's Control Therapy and Tremor Control Therapy.
The Kinetra neurostimulator and the Access Therapy Controller are awaiting FDA
clearance in the United States. The primary customers for the company's
neurostimulation products are neurosurgeons, neurologists and pain management
specialists.

         In April 1999, Medtronic received FDA clearance for United States
commercial introduction of the InterStim(R) Therapy for additional urinary
control indications including urinary retention and symptoms of
urgency/frequency. InterStim Therapy uses neurostimulation from a
stopwatch-sized neurostimulator placed under the skin to send mild electrical
pulses to the sacral nerves in the lower back that control bladder function. The
Enterra(TM) Therapy was released in the United States in March 2000, under a
Humanitarian Device Exemption. Enterra Therapy uses an Itrel III
Neuro-Stimulator to deliver gastric stimulation in the treatment of chronic
vomiting and nausea caused by gastroparesis. The primary customers for the
company's InterStim and Enterra Therapies are urologists and
gastroenterologists.

         The drug delivery product line consists primarily of implantable
programmable and fixed rate drug delivery systems that are used in treating
chronic intractable pain and cerebral and spinal spasticity, including the


                                       7
<PAGE>


SynchroMed(R) EL (Extended Life) and IsoMed(R) drug delivery systems. The
SynchroMed EL drug delivery system is a small implantable drug pump that is
placed in the abdominal region and a catheter that delivers medication to the
fluid surrounding the spinal cord or other specific sites within the body. The
system delivers precise doses of medication directly to the central nervous
system. The SynchroMed EL offers extended battery life that increases the
average time between replacement surgeries. The IsoMed pump is commercially
available in Europe and the United States. The ISO Med(R) Constant-Flow Infusion
System is used in the treatment of hepatic cancer and the delivery of morphine
sulfate directly into the spinal fluid as a treatment for chronic malignant and
non-malignant pain. The primary customers for the company's drug delivery
product line are neurosurgeons, neurologists, pain management specialists and
oncologists.

         With Midas Rex, Medtronic acquired high speed neurological powered
instruments, including pneumatic instrumentation for surgical dissection of
bones, biometals, bioceramics and bioplastics. Other instruments manufactured by
Midas Rex assist in orthopedic, otolaryngological, maxillofacial and
craniofacial procedures, as well as plastic surgery. Medtronic's acquisition of
Xomed, Inc. in November 1999 established Medtronic Xomed as the global leader in
providing surgical products used by ENT surgeons, including powered
tissue-removal systems, nerve monitoring systems and image guided surgery
systems.

         The Neurological, Spinal and ENT products accounted for 26.6% of net
sales for fiscal 2001, 25.0% of net sales for fiscal 2000 and 23.6% of net sales
for fiscal 1999.

         GOVERNMENT REGULATION AND OTHER MATTERS. Government and private sector
initiatives to limit the growth of health care costs, including price
regulation, competitive pricing, coverage and payment policies and managed-care
arrangements, are continuing in many countries where the company does business,
including the United States. These changes are causing the marketplace to put
increased emphasis on the delivery of more cost-effective medical therapies.
Government programs including Medicare and Medicaid, private health care
insurance and managed care plans have attempted to control costs by limiting the
amount of reimbursement such third party payors will pay to hospitals, other
medical institutions and physicians for particular procedures or treatments.
Such limitations may create an increasing level of price sensitivity among
customers for the company's products. Some third party payors must also approve
coverage for new or breakthrough therapies before they will reimburse health
care providers using the products. Even though a new product may have been
cleared for commercial release by the United States Food and Drug Administration
(the "FDA") as described below, the company may find limited demand for a new or
breakthrough therapy until obtaining reimbursement approval from private and
governmental third party payors. Although the company believes it is
well-positioned to respond to changes resulting from this worldwide trend toward
cost containment, the uncertainty as to the outcome of any proposed legislation
or changes in the marketplace precludes the company from predicting the impact
of these changes on future operating results.

         In the United States, the FDA, among other governmental agencies, is
responsible for regulating the introduction of new medical devices, including
the review of design and manufacturing practices, labeling and recordkeeping for
medical devices, and review of manufacturers' required reports of adverse
experience and other information to identify potential problems with marketed
medical devices. The FDA can ban certain medical devices, detain or seize
adulterated or misbranded medical devices, order repair, replacement, or refund
of such devices, and require notification of health professionals and others
with regard to medical devices that present unreasonable risks of substantial
harm to the public health. The FDA may also enjoin and restrain certain
violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act
pertaining to medical devices, or initiate action for criminal prosecution of
such violations. Moreover, the FDA administers certain controls over the export
of such devices from the United States. Many of the devices that Medtronic
develops and markets are in a category for which the FDA has implemented
stringent clinical investigation and pre-market clearance requirements. Any
delay or acceleration experienced by the company in obtaining regulatory
approvals to conduct clinical trials or in obtaining required market clearances
(especially with respect to significant products in the regulatory process that
have been discussed in the company's announcements) may affect the company's
operations or the market's expectations for the timing of such events and,
consequently, the market price for the company's common stock.

         The FDA Modernization Act of 1997 was adopted with the intent of
bringing better definition to the FDA's product clearance process. While FDA
review times have improved since passage of the 1997 Act, there can


                                       8
<PAGE>


be no assurance that the FDA review process will not involve delays or that
clearances will be granted on a timely basis.

         Medical device laws are also in effect in many of the countries in
which Medtronic does business outside the United States. These range from
comprehensive device approval requirements for some or all of Medtronic's
medical device products to requests for product data or certifications. The
number and scope of these requirements are increasing.

         In keeping with the increased emphasis on cost-effectiveness in health
care delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to enhance
purchasing power. As a result, transactions with customers are more significant,
more complex and tend to involve more long-term contracts than in the past. This
enhanced purchasing power may also lead to pressure on product pricing and
increased use of preferred vendors.

         The company operates in an industry characterized by extensive patent
litigation. Patent litigation can result in significant damage awards and
injunctions that could prevent the manufacture and sale of affected products or
result in significant royalty payments in order to continue producing the
products. At any given time, the company is generally involved as both a
plaintiff and a defendant in a number of patent infringement actions. With
regard to patent applications, there can be no assurance that such applications
will result in issued patents or that patents issued or licensed to the company
will not be challenged or circumvented by competitors. While the company
believes that the patent litigation incident to its business will generally not
have a material adverse impact on the company's financial position or liquidity,
it may be material to the consolidated results of operations of any one period.

         The company also operates in an industry susceptible to significant
product liability claims. In recent years, there has been an increased public
interest in product liability claims for implanted medical devices, including
pacemakers, leads and spinal systems. These claims may be brought by individuals
seeking relief for themselves or, increasingly, by groups seeking to represent a
class. In addition, product liability claims may be asserted against the company
in the future relative to events not known to management at the present time.
Management believes that the company's risk management practices, including
insurance coverage, are reasonably adequate to protect against potential product
liability losses.

         The company is also subject to various environmental laws and
regulations both within and outside the United States. The operations of the
company, like those of other medical device companies, involve the use of
substances regulated under environmental laws, primarily in manufacturing and
sterilization processes. While it is difficult to quantify the potential impact
of compliance with environmental protection laws, management believes that such
compliance will not have a material impact on the company's financial position,
results of operations or liquidity.

         SALES, MARKETS AND DISTRIBUTION METHODS. The company's sales and
marketing strategy is focused on rapid, cost-effective delivery of high quality
products and services to a diverse group of customers worldwide. The primary
markets for Medtronic's products are hospitals, other medical institutions and
physicians. Medtronic sells most of its products and services directly through
its staff of trained, full-time sales representatives in the United States and
through a combination of direct sales representatives and independent
distributors in international markets. The main markets for products are the
United States, Western Europe and Japan.

         Large hospital and other purchasing groups are becoming increasingly
important to the company's business. Medtronic has entered into supply
agreements with these buying groups that in aggregate cover most of the
company's product lines. While purchasing groups often seek price discounts,
these agreements represent an opportunity for the company to build long-term
supply relationships with a large number of purchasers. The company is not
dependent on any single institution for more than 10% of its sales.

         In March 2000, Johnson & Johnson, GE Medical Systems, Baxter
International, Inc., Medtronic and Abbott Laboratories announced the creation of
an independent, internet-based global health care exchange company. Many other
suppliers have since joined the exchange. This global health care exchange will
help healthcare providers


                                       9
<PAGE>


make quicker, more efficient purchasing decisions and simplify business
processes by providing a single source for ordering healthcare purchases. This
will facilitate the exchange of information related to ordering medical
equipment, devices and healthcare products and services worldwide, and also
provide access to extensive clinical content. It will provide equal access to
all healthcare manufacturers, suppliers, distributors, providers, group
purchasing organizations and other healthcare trading partners.

         PRODUCTION AND RAW MATERIALS. Medtronic generally has vertically
integrated manufacturing operations and makes its own microprocessors, lithium
batteries, feedthroughs, integrated and hybrid circuits, and certain other
components. Medtronic purchases many of the parts and materials used in
manufacturing its components and products from external suppliers. Medtronic's
single-and sole-sourced materials include materials such as adhesives, polymers,
elastomers and resins; certain integrated circuits and other
electrical/electronic/mechanical components; power sources, battery anodes,
pyrolytic carbon discs, pharmaceutical preparations such as Lioresal(R)
(baclofen, USP) Intrathecal (registered trademark of Novartis Pharmaceutical
Corporation), and computer and other peripheral equipment.

         Certain of the raw materials and components used in Medtronic products
are available only from a sole supplier. Materials are purchased from single
sources for reasons of quality assurance, sole source availability or cost
effectiveness. Medtronic works closely with its suppliers to assure continuity
of supply while maintaining high quality and reliability. However, in an effort
to reduce potential product liability exposure, certain suppliers have
terminated or may terminate sales of certain materials and parts to companies
that manufacture implantable medical devices. The United States Biomaterials
Access Assurance Act was adopted in 1998 to help ensure availability of raw
materials and component parts essential to the manufacture of medical devices.
Management cannot estimate the impact of this law on supplier arrangements.

         PATENTS AND LICENSES. Medtronic owns patents on certain of its
inventions, and obtains licenses from others as it deems necessary to its
business. Medtronic's policy is to obtain patents on its inventions whenever
practical. Technological advancement characteristically has been rapid in the
medical device industry, and Medtronic does not consider its business to be
materially dependent upon any individual patent.

         SEASONALITY. Worldwide sales do not reflect any significant degree of
seasonality.

         COMPETITION AND INDUSTRY. Medtronic sells therapeutic and diagnostic
medical devices in the United States and around the world. In the product lines
in which Medtronic competes, the company faces a mixture of competitors ranging
from large multi-line manufacturers to smaller manufacturers that offer a
limited selection of products. In addition, the company faces competition from
providers of alternative medical therapies such as pharmaceutical companies.
Important factors to Medtronic's customers include product reliability and
performance, product technology that provides for improved patient benefits,
breadth of product lines and related product services provided by the
manufacturer, and product price. Major shifts in industry market share have
occurred in connection with product problems, physician advisories and safety
alerts, reflecting the importance of product quality in the medical device
industry. In the current environment of managed care, economically motivated
buyers, consolidation among health care providers, increased competition and
declining reimbursement rates, Medtronic has been increasingly required to
compete on the basis of price. Medtronic believes that its continued competitive
success will depend upon its continued ability to create or acquire
scientifically advanced technology, apply its technology cost-effectively across
product lines and markets, develop or acquire proprietary products, attract and
retain skilled development personnel, obtain regulatory approvals, and
manufacture and successfully market its products.

         Medtronic is the leading manufacturer and supplier of implantable
cardiac rhythm management devices in both the United States and non-United
States markets. Worldwide, approximately eight manufacturers compete in the
pacemaker industry. In the United States, Medtronic and two other manufacturers
account for most pacemaker sales. Medtronic and four other manufacturers account
for most of the non-United States pacemaker sales. Medtronic and two other
manufacturers based in the United States account for most sales of implantable
defibrillators within and outside the United States. At least four other
companies have devices in various stages of development and clinical evaluation.
Like Medtronic, the company's primary competitors offer a full range of cardiac
rhythm management products, including pacemakers, defibrillators, leads and
catheters.


                                       10
<PAGE>


         In the vascular market, which includes implantable stents and
integrated stent delivery systems, balloon and guiding catheters and guidewires,
there are numerous competitors worldwide. Medtronic and four other manufacturers
account for most coronary balloon and guiding catheter sales. In coronary
stents, Medtronic and three other competitors account for most sales in the
United States, while multiple competitors participate outside the United States.
Several new competitors are emerging, particularly in newer markets such as
stent grafts for abdominal aortic aneurysms and neurovascular devices.

         In neurological devices, Medtronic is the leading manufacturer and
supplier of implantable neurostimulation and drug delivery systems. Medtronic
and two competitors account for most sales worldwide. In spinal and neurosurgery
devices, Medtronic is the leading manufacturer and supplier of instruments and
biomaterials used in the treatment of spinal and cranial disorders. Medtronic
and four competitors account for most sales worldwide. Medtronic and several
other manufacturers account for a significant portion of the diagnostic testing
market for urology, gastroenterology and neuromuscular disorders.

         In the minimally invasive cardiac surgery and extracorporeal
circulation markets, there are approximately seven companies that account for a
significant portion of the United States and non-United States markets.
Medtronic is the market leader in the minimally invasive cardiac surgery and
extracorporeal circulation makets. In the heart valve business, Medtronic is the
third largest manufacturer and supplier of prosthetic heart valves (consisting
of tissue and mechanical heart valves) within and outside the United States.
These three companies are the major competitors in heart valves.

         RESEARCH AND DEVELOPMENT. Medtronic spent the following amounts on
research and development: $577.6 million in fiscal 2001 (10.4% of sales), $488.2
million in fiscal 2000 (9.7% of sales), and $441.6 million in fiscal 1999 (10.4%
of sales). These amounts have been applied toward improving existing products,
expanding their applications, and developing new products. Medtronic's research
and development projects span such areas as sensing and treatment of
cardiovascular disorders (including bradycardia and tachyarrhythmia,
fibrillation and sinus node abnormalities); improved heart valves, membrane
oxygenators and centrifugal blood pump systems; products for the heart/lung
bypass circuit; emergency defibrillation and vital sign assessment; implantable
drug delivery systems for pain, spasticity and other neurological applications;
muscle and neurological stimulators; spinal fusion products, biological products
to induce bone growth, prosthetic discs and visualization technology to aid
surgeons; therapeutic angioplasty catheters; coronary and peripheral stents and
stented grafts, and treatments for restenosis; implantable physiologic sensors;
treatments for heart failure; and materials and coatings to enhance the
blood/device interface.

         Medtronic has not engaged in significant customer or government
sponsored research.

         EMPLOYEES. On April 27, 2001, Medtronic and its subsidiaries employed
23,290 people on a regular, full-time basis and, including temporary and
part-time employees, a total of 26,050 employees on a full-time equivalent
basis.

         UNITED STATES AND NON-UNITED STATES OPERATIONS. Medtronic sells
products in more than 120 countries. For financial reporting purposes, revenues
and long-lived assets attributable to significant geographic areas are presented
in Note 14 to the consolidated financial statements, incorporated herein by
reference to Medtronic's 2001 Annual Report.

         Operation in countries outside the United States is accompanied by
certain financial and other risks. Relationships with customers and effective
terms of sale frequently vary by country, often with longer-term receivables
than are typical in the United States. Inventory management is an important
business concern due to the potential for rapidly changing business conditions
and currency exposure. Currency exchange rate fluctuations can affect income
from, and profitability of, non-United States operations. Medtronic attempts to
hedge these exposures to reduce the effects of foreign currency fluctuations on
net earnings. See the "Market Risk" section of Management's Discussion and
Analysis of Results of Operations and Financial Condition and Note 4 to the
consolidated financial statements, incorporated herein by reference to
Medtronic's 2001 Annual Report. Certain countries also limit or regulate the
repatriation of earnings to the United States. Non-


                                       11
<PAGE>


United States operations in general present complex tax and money management
issues requiring sophisticated analysis to meet the company's financial
objectives.

         CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS. Certain statements
contained in this Annual Report on Form 10-K and other written and oral
statements made from time to time by the company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "could," "estimate," "expect," "forecast," "intend,"
"may," "plan," "possible," "project," "should," "will" and similar words or
expressions. The company's forward-looking statements generally relate to its
growth strategies, financial results, product development and regulatory
approval programs, and sales efforts. One must carefully consider
forward-looking statements and understand that such statements involve a variety
of risks and uncertainties, known and unknown, and may be affected by inaccurate
assumptions. Consequently, no forward-looking statement can be guaranteed and
actual results may vary materially. It is not possible to foresee or identify
all factors affecting the company's forward-looking statements and investors
therefore should not consider any list of such factors to be an exhaustive
statement of all risks, uncertainties or potentially inaccurate assumptions. The
company undertakes no obligation to update any forward-looking statement.

         Although it is not possible to create a comprehensive list of all
factors that may cause actual results to differ from the company's
forward-looking statements, the factors include those noted in the preceding
sections of this Annual Report on Form 10-K and in the section entitled
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" incorporated herein by reference from the company's 2001 Annual
Report, as well as (i) trends toward managed care, health care cost containment,
and other changes in government and private sector initiatives, in the United
States and other countries in which the company does business, that are placing
increased emphasis on the delivery of more cost-effective medical therapies;
(ii) the trend of consolidation in the medical device industry as well as among
customers of medical device manufacturers, resulting in more significant,
complex, and long-term contracts than in the past and potentially greater
pricing pressures; (iii) the difficulties and uncertainties associated with the
lengthy and costly new product development and regulatory clearance processes,
which may result in lost market opportunities or preclude product
commercialization; (iv) efficacy or safety concerns with respect to marketed
products, whether scientifically justified or not, that may lead to product
recalls, withdrawals, or declining sales; (v) changes in governmental laws,
regulations, and accounting standards and the enforcement thereof that may be
adverse to the company; (vi) increased public interest in recent years in
product liability claims for implanted medical devices, including pacemakers,
leads and spinal systems, and adverse developments in litigation involving the
company; (vii) other legal factors including environmental concerns and patent
disputes with competitors; (viii) agency or government actions or investigations
affecting the industry in general or the company in particular; (ix) the
development of new products or technologies by competitors, technological
obsolescence, and other changes in competitive factors; (x) risks associated
with maintaining and expanding international operations; (xi) business
acquisitions, dispositions, discontinuations or restructurings by the company;
(xii) the integration of businesses acquired by the company; (xiii) the price
and volume fluctuations in the stock markets and their effect on the market
prices of technology and health care companies; and (xiv) economic factors over
which the company has no control, including changes in inflation, foreign
currency rates, and interest rates.

         The company notes these factors as permitted by the Private Securities
Litigation Reform Act of 1995.


                         EXECUTIVE OFFICERS OF MEDTRONIC

         Set forth below are the names and ages of current executive officers of
Medtronic, Inc., as well as information regarding their positions with
Medtronic, Inc., their periods of service in these capacities, and their
business experience for the past five or more years. Executive officers
generally serve terms of office of approximately one year. There are no family
relationships among any of the officers named, nor is there any arrangement or
understanding pursuant to which any person was selected as an officer.

         ARTHUR D. COLLINS, JR., age 53, has been President and Chief Executive
Officer since May 2001, was President and Chief Operating Officer from August
1996 to April 2001, was Chief Operating Officer from January


                                       12
<PAGE>


1994 to August 1996 and from June 1992 to January 1994 was Executive Vice
President and President of Medtronic International. He has been a director since
August 1994. Prior to joining the company, Mr. Collins was Corporate Vice
President, Diagnostic Products, at Abbott Laboratories from October 1989 to May
1992 and Divisional Vice President, Diagnostic Products, from May 1984 to
October 1989. During his 14 years with Abbott, Mr. Collins served in various
general management positions both in the United States and Europe.

         GLEN D. NELSON, M.D., age 64, has been Vice Chairman since July 1988,
and has been a director since 1980. From August 1986 to July 1988, he was
Executive Vice President of the company. Dr. Nelson was Chairman and Chief
Executive Officer of American MedCenters, Inc., an HMO management corporation,
from July 1984 to August 1986.

         JEFFREY A. BALAGNA, age 40, has been Senior Vice President and Chief
Information Officer of the company since March 2001. Prior to joining the
company, Mr. Balagna held several management positions within General Electric
Company from June 1997 to March, 2001 including, most recently, General Manager,
Operations for GE Medical Systems Americas; he also served as Chief Information
Officer, GE Medical Systems and Chief Information Officer, GE Consumer Motors
and Controls. Prior to his tenure at General Electric, Mr. Balagna was Manager,
Information Management at Ford Motor Company from October 1995 to June 1997.

         JANET S. FIOLA, age 59, has been Senior Vice President, Human
Resources, since March 1994. She was Vice President, Human Resources, from
February 1993 to March 1994, and was Vice President, Corporate Human Resources,
from February 1988 to February 1993.

         ROBERT M. GUEZURAGA, age 52, has been Senior Vice President and
President, Cardiac Surgery, since August 1999, and served as Vice President and
General Manager of Medtronic Physio-Control International, Inc., from September
1998 to August 1999. Mr. Guezuraga joined the company after its acquisition of
Physio-Control International, Inc. in September 1998, where he had served as
President and Chief Operating Officer since August 1994. Prior to that, Mr.
Guezuraga served as President and CEO of Positron Corporation from 1987 to 1994
and held various management positions within General Electric Corporation,
including GE's Medical Systems division.

         STEPHEN H. MAHLE, age 55, has been Senior Vice President and President,
Cardiac Rhythm Management, since January 1998. Prior to that, he was President,
Brady Pacing, from May 1995 to December 1997 and Vice President and General
Manager, Brady Pacing, from January 1990 to May 1995. Mr. Mahle has been with
the company for 28 years and served in various general management positions
prior to 1990.

         ANDREW P. RASDAL, age 43, has been Senior Vice President and President,
Vascular since May 2000. Mr. Rasdal joined the company after its January 1999
acquisition of Arterial Vascular Engineering, Inc. ("AVE"), where he served as
Vice President and General Manager, Coronary Vascular, since February 1999.
Prior to that, he served as Vice President of Marketing for AVE since March 1998
and as Director of Marketing since February 1997. Prior to joining the company,
Mr. Rasdal held sales and marketing positions for EP Technologies, a division of
Boston Scientific Corporation, from March 1993 to February 1997. From 1990 to
1993, Mr. Rasdal served as a sales representative for SCIMED Lifesystems, Inc.
and as a sales representative and a business analyst for ACS (now Guidant
Corporation).

         ROBERT L. RYAN, age 58, has been Senior Vice President and Chief
Financial Officer since April 1993. Prior to joining the company, Mr. Ryan was
Vice President, Finance, and Chief Financial Officer of Union Texas Petroleum
Corp. from May 1984 to April 1993, Controller from May 1983 to May 1984, and
Treasurer from March 1982 to May 1983.

         DAVID J. SCOTT, age 48, has been Senior Vice President and General
Counsel since joining the company in May 1999 and Secretary since January 2000.
Prior to that, Mr. Scott was General Counsel of London-based United Distillers &
Vintners from December 1997 to April 1999, General Counsel of London-based
International Distillers & Vintners ("IDV") from April 1996 to November 1997,
and Senior Vice President and General Counsel of IDV's operating companies in
North and South America from January 1993 to March 1996.


                                       13
<PAGE>


         KEITH E. WILLIAMS, age 48, has been Senior Vice President and President
Neurological, Spinal, Neurologic Technologies and Ear, Nose and Throat
(ENT)/Opthalmic since August 2000. Prior to that he served as Senior Vice
President and President Asia/Pacific from May 1999 to August 2000. Mr. Williams
joined the company in April 1997 as President, Asia/Pacific, and Chairman,
Medtronic Japan. Prior to that he held various sales, marketing and general
management positions with General Electric Medical Systems for 23 years,
including President, GE Medical Systems China from 1993 to 1996.

         BARRY W. WILSON, age 57, has been Senior Vice President since September
1997 and was named President International in April 2001. He was President,
Europe, Middle East and Africa since joining the company in April 1995 through
March 2001. Prior to that, Mr. Wilson was President of the Lederle Division of
American Cyanamid/American Home Products from 1993 to 1995 and President, Europe
of Bristol-Myers Squibb from 1991 to 1993, where he also served internationally
in various general management positions from 1980 to 1991.


ITEM 2. PROPERTIES

         Medtronic's principal offices are owned by the company and located in
the Minneapolis, Minnesota metropolitan area. Manufacturing or research
facilities are located in Arizona, California, Colorado, Connecticut, Florida,
Indiana, Massachusetts, Michigan, Minnesota, Tennessee, Utah, Washington, Puerto
Rico, Canada, China, Denmark, France, Germany, India, Ireland, Japan, Mexico,
the Netherlands, Sweden and Switzerland. The company's total manufacturing and
research space is approximately 3.3 million square feet, of which approximately
75% is owned by the company and the balance is leased.

         Medtronic also maintains sales and administrative offices in the United
States at approximately 110 locations in 30 states or jurisdictions and outside
the United States at approximately 112 locations in 37 countries. Most of these
locations are leased. Medtronic is utilizing substantially all of its currently
available productive space to develop, manufacture and market its products. The
company's facilities are in good operating condition, suitable for their
respective uses and adequate for current needs.


ITEM 3. LEGAL PROCEEDINGS

         In October 1997, Cordis Corporation ("Cordis"), a subsidiary of Johnson
& Johnson, filed suit in federal court in the District Court of Delaware against
Arterial Vascular Engineering, Inc., which was acquired by the company in
January 1999 ("AVE"). The suit alleged that AVE's modular stents infringe
certain patents now owned by Cordis. Boston Scientific Corporation is also a
defendant in this suit. The complaint seeks injunctive relief and damages from
all defendants. In November 2000, a Delaware jury rendered a verdict that the
previously marketed MicroStent and GFX stents infringe valid claims of two
patents. Thereafter the jury awarded damages to Cordis totaling approximately
$270 million. In February 2001, the court heard evidence on the affirmative
defense of inequitable conduct and will consider that evidence along with other
post-trial motions. The jury verdict does not address products that are
currently marketed by Medtronic AVE.

         In September 2000, Cordis filed an additional suit against AVE in the
District Court of Delaware alleging that AVE's S670, S660 and S540 stents
infringe the patents asserted in the above case.

         In December 1999, Advanced Cardiovascular Systems, Inc. ("ACS"), a
subsidiary of Guidant Corporation, sued Medtronic and AVE in federal court in
the Northern District Court of California alleging that the S670 rapid exchange
perfusion stent delivery system infringes a patent held by ACS. The complaint
seeks injunctive relief and monetary damages. ACS filed a demand for arbitration
with the American Arbitration Association in Chicago simultaneously with the
lawsuit. AVE has filed a counterclaim denying infringement based on its license
to the patent for perfusion catheters as part of the assets acquired from C.R.
Bard in 1998 and has asserted that the license agreement requires disputes to be
resolved through arbitration. The parties have agreed to arbitrate all claims
against AVE. Litigation against Medtronic has been stayed pending the
arbitration decision. Arbitration hearings were held in February but the
arbitrators were unable to reach a decision. AVE has filed a new demand for
arbitration.


                                       14
<PAGE>


         In December 1997, ACS sued AVE in federal court in the Northern
District of California alleging that AVE's modular stents infringe certain
patents held by ACS and is seeking injunctive relief and monetary damages. AVE
denied infringement and in February 1998 AVE sued ACS in federal court in the
District Court of Delaware alleging infringement of certain of its stent
patents, for which AVE is seeking injunctive relief and monetary damages. The
cases have been consolidated in Delaware and an order has been entered staying
the proceedings until September 2002.

         In June 2000, Medtronic filed suit in United States District Court in
Minnesota against Guidant Corporation seeking a declaration that Medtronic's
Jewel AF device does not infringe certain patents held by Guidant and/or that
such patents were invalid. Thereafter, Guidant filed a counterclaim alleging
that the Jewel AF and the Gem III AT infringe certain patents relating to atrial
fibrillation. The case is in the early stages of discovery.

         The company believes that it has meritorious defenses against the above
infringement claims and intends to vigorously contest them. While it is not
possible to predict the outcome of these actions, the company believes that
costs associated with them will not have a material adverse impact on the
company's financial position or liquidity, but may be material to the
consolidated results of operations of any one period.

         In 1993, AcroMed Corporation commenced a patent infringement lawsuit
against Sofamor Danek Group, Inc., which was acquired by the company in January
1999 ("Sofamor Danek"), in the United States District Court in Cleveland, Ohio.
Sofamor Danek obtained summary judgment as to two of four patents and tried
claims with respect to the remaining two patents in May 1999. The jury found
that certain Sofamor Danek spinal fixation products infringed these two patents
and an injunction was issued by the court in December 1999. The court also
imposed damages, including pre-judgment interest, in the amount of $48 million.
The company appealed the judgment to the Court of Appeals for the Federal
Circuit, Washington, D.C., and in June 2001 that court affirmed the District
Court decision. The amount of the judgment, with post-judgment interest, is now
approximately $52 million.

         In March 2000, Boston Scientific Corporation ("BSX") sued AVE in
federal court in the Northern District of California alleging that the S670
rapid exchange perfusion stent delivery system infringes a patent held by Boston
Scientific. The complaint seeks injunctive relief and monetary damages. AVE
filed a counterclaim denying infringement based on its license to the patent for
perfusion catheters as part of the assets acquired from C.R. Bard in 1998 and
asserted that the license agreement requires disputes to be resolved through
arbitration. The court issued an order that the dispute must be arbitrated under
the terms of the license agreement. Arbitration hearings were held in April
2001 and, in July 2001, the arbitrators issued an award in favor of BSX, finding
infringement, awarding approximately $169 million in damages plus legal fees and
costs to BSX, and allowing for an injunction against future sales of certain
rapid exchange perfusion delivery systems.

         In 1997 and 1999, the company sued Guidant Corporation and Boston
Scientific Corp., respectively, in United States District Court in Minneapolis
claiming that Guidant's ACS RX Multi-Link(R)coronary stent and Boston
Scientific's Nir(R)stent infringed the company's Wiktor(R)stent patent.
Following a patent claims construction ruling in late 1999 in favor of Guidant
and Boston Scientific, the company consented to entry of judgment and filed an
appeal with the Court of Appeals for the Federal Circuit ("CAFC") in Washington,
D.C. In April 2001, the CAFC affirmed the judgment of the District Court.

         Beginning in 1994, Sofamor Danek was named as a defendant in
approximately 3,200 product liability lawsuits brought in various federal and
state courts around the country. The lawsuits alleged the plaintiffs were
injured by spinal implants manufactured by Sofamor Danek and other
manufacturers. All efforts to obtain class certification were denied or
subsequently withdrawn. In essence, the plaintiffs claim that they have suffered
a variety of injuries resulting from use of a spinal system for pedicle fixation
and that the company and other manufacturers have conspired to promote such
implant systems in violation of law. As of July 2001, virtually all of the suits
have been dismissed or resolved in a manner favorable to the company.

         In 1996, two former shareholders of Endovascular Support Systems, Inc.
("ESS") filed a lawsuit in Dallas District Court for the State of Texas against
AVE and several former officers, directors and shareholders of AVE. The lawsuit
alleges that AVE's acquisition of ESS assets was based on fraud and breach of
fiduciary duty and that plaintiffs were given insufficient value when they
exchanged their stock in ESS for AVE stock in several transactions that occurred
from 1993 to 1995. AVE has asserted counterclaims including breach of contract,
breach of covenant of good faith and fair dealing, business disparagement and
fraud, and has agreed to indemnify the individual defendants. The Court has
ruled that the defendants owed a fiduciary duty to plaintiffs. The company
believes the defendants have meritorious defenses and counterclaims against the
plaintiffs and will continue to defend the actions vigorously. A trial is
scheduled to commence in October 2001.


                                       15
<PAGE>


         Note 12 to the consolidated financial statements in Medtronic's 2001
Annual Report is incorporated herein by reference.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.



                                     PART II

ITEM 5. MARKET FOR MEDTRONIC'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

         The information in the sections entitled "Price Range of Medtronic
Stock" and "Investor Information" in Medtronic's 2001 Annual Report is
incorporated herein by reference.


ITEM 6. SELECTED FINANCIAL DATA

         The information for the fiscal years 1997 through 2001 in the section
entitled "Selected Financial Data" in Medtronic's 2001 Annual Report is
incorporated herein by reference.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

         The information in the section entitled "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in Medtronic's 2001
Annual Report is incorporated herein by reference.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The information in Management's Discussion and Analysis of Results of
Operations and Financial Condition in the section entitled "Market Risk" and
Note 4 to the consolidated financial statements in Medtronic's 2001 Annual
Report is incorporated herein by reference.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated financial statements and notes thereto, together with
the report thereon of independent accountants contained in Medtronic's 2001
Annual Report, are incorporated herein by reference.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         Not applicable.



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MEDTRONIC

         The information on pages 3 through 6 of Medtronic's Proxy Statement for
its 2001 Annual Shareholders' Meeting and the information entitled "Section
16(a) Beneficial Ownership Reporting Compliance" in such Proxy Statement is
incorporated herein by reference. See also "Executive Officers of Medtronic" on
pages 12 through 14 hereof.


ITEM 11. EXECUTIVE COMPENSATION

         The sections entitled "Proposal 1 -- Election of Directors -- Director
Compensation and "Executive Compensation" in Medtronic's Proxy Statement for its
2001 Annual Shareholders' Meeting are incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The section entitled "Share Ownership Information" in Medtronic's Proxy
Statement for its 2001 Annual Shareholders' Meeting is incorporated herein by
reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The section entitled "Proposal 1 -- Election of Directors -- Certain
Transactions" in Medtronic's Proxy Statement for its 2001 Annual Shareholders'
Meeting is incorporated herein by reference.


                                       16
<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      1.       FINANCIAL STATEMENTS

         The sections entitled "Report of Independent Accountants" and
         "Statement of Consolidated Earnings" -- years ended April 27, 2001,
         April 30, 2000 and 1999 in Medtronic's 2001 Annual Report are
         incorporated herein by reference.

         The section entitled "Consolidated Balance Sheet" -- April 27, 2001 and
         April 30, 2000 in Medtronic's 2001 Annual Report is incorporated herein
         by reference.

         The section entitled "Statement of Consolidated Shareholders' Equity"
         -- years ended April 27, 2001, April 30, 2000 and 1999 in Medtronic's
         2001 Annual Report is incorporated herein by reference.

         The section entitled "Statement of Consolidated Cash Flows" -- years
         ended April 27, 2001, April 30, 2000 and 1999 in Medtronic's 2001
         Annual Report is incorporated herein by reference.

         The section entitled "Notes to Consolidated Financial Statements" in
         Medtronic's 2001 Annual Report is incorporated herein by reference.

         2.       FINANCIAL STATEMENT SCHEDULES

         Schedule II. Valuation and Qualifying Accounts - years ended April 27,
         2001, April 30, 2000, and 1999 (set forth on page 21 of this report)

         All other schedules are omitted because they are not applicable or the
         required information is shown in the financial statements or notes
         thereto.

         3.       EXHIBITS

         2.1      Amended and Restated Agreement and Plan of Merger, dated as of
                  June 19, 2001, by and among Medtronic, Inc., MiniMed Inc. and
                  MMI Merger Sub, Inc., including the Exhibits thereto.(a)
         2.2      Agreement and Plan of Merger, dated October 19, 2000, by and
                  among Medtronic Inc., PercuSurge, Inc. and Trojan Merger
                  Corp., including the Exhibits thereto (Exhibit 2).(b)
         3.1      Medtronic Restated Articles of Incorporation, as amended to
                  date.
         3.2      Medtronic Bylaws, as amended to date (Exhibit 3.2).(c)
         4        Rights Agreement, dated as of October 26, 2000, between
                  Medtronic, Inc. and Wells Fargo Bank Minnesota, National
                  Association, including as: Exhibit A thereto the form of
                  Certificate of Designations, Preferences and Rights of Series
                  A Junior Participating Preferred Shares of Medtronic, Inc.;
                  and Exhibit B the form of Preferred Stock Purchase Right
                  Certificate. (Exhibit 4.1).(d)
         *10.1    1994 Stock Award Plan (Exhibit 10.1).(e)
         *10.2    Management Incentive Plan (Exhibit 10.2).(e)
         *10.3    1979 Restricted Stock and Performance Share Award Plan
                  (Exhibit 10.3).(f)
         *10.4    1979 Nonqualified Stock Option Plan, as amended (Exhibit
                  10.4).(c)
         *10.5    Form of Employment Agreement for Medtronic executive officers.
         *10.6    Capital Accumulation Plan Deferral Program.
         *10.7    Executive Nonqualified Supplemental Benefit Plan (Restated May
                  1, 1997). (Exhibit 10.10).(g)
         *10.8    Stock Option Replacement Program.
         *10.9    1998 Outside Director Stock Compensation Plan (Exhibit
                  10.10).(e)
         *10.10   Amendment effective March 5, 1998 to the 1979 Nonqualified
                  Stock Option Plan (Exhibit 10.14).(f)


                                       17
<PAGE>


         13       Those portions of Medtronic's 2001 Annual Report expressly
                  incorporated by reference herein, which shall be deemed filed
                  with the Commission.
         21       List of Subsidiaries.
         23       Consent and Report of Independent Accountants (set forth on
                  page 20 of this report).
         24       Powers of Attorney.

- --------------------
(a)      Incorporated herein by reference to Appendix A of the MiniMed Inc.
         Definitive Proxy Statement filed with the Commission on July 19, 2001.
(b)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Registration Statement on Form S-4 (Registration No. 333- 49928) filed
         with the Commission on November 14, 2000.
(c)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 1996, filed
         with the Commission on July 24, 1996.
(d)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Report on Form 8-A, including the exhibits thereto, filed with the
         Commission on November 3, 2000.
(e)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 2000, filed
         with the commission on July 21, 2000.
(f)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 1998, filed
         with the Commission on July 21, 1998.
(g)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 1997, filed
         with the Commission on July 23, 1997.

*Items that are management contracts or compensatory plans or arrangements
 required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

(b)      REPORTS ON FORM 8-K

         A report on Form 8-K, Item 8 was filed on February 12, 2001 respecting
the Company's change in its fiscal year end from April 30 to a 52/53 week year
ending on the last Friday in April annually, effective for the current fiscal
year.


                                       18
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                 MEDTRONIC, INC.
Dated: July 25, 2001
                                    BY: /s/ ARTHUR D. COLLINS, JR.
                                        ----------------------------------------
                                                 ARTHUR D. COLLINS, JR.
                                                     PRESIDENT  AND
                                                CHIEF EXECUTIVE OFFICER


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Dated: July 25, 2001                BY: /s/ ARTHUR D. COLLINS, JR.
                                        ----------------------------------------
                                                 ARTHUR D. COLLINS, JR.
                                                     PRESIDENT  AND
                                                CHIEF EXECUTIVE OFFICER


Dated: July 25, 2001                BY: /s/ ROBERT L. RYAN
                                        ----------------------------------------
                                                    ROBERT L. RYAN
                                               SENIOR VICE PRESIDENT AND
                                                CHIEF FINANCIAL OFFICER
                                    (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)



MICHAEL R. BONSIGNORE               )
WILLIAM R. BRODY, M.D., PH.D.       )
PAUL W. CHELLGREN                   )
ARTHUR D. COLLINS, JR.              )
WILLIAM W. GEORGE                   )
ANTONIO M. GOTTO, JR., M.D., D.PHIL.)
BERNADINE P. HEALY, M.D.            )
GLEN D. NELSON, M.D.                )      DIRECTORS
DENISE M. O'LEARY                   )
JEAN-PIERRE ROSSO                   )
JACK W. SCHULER                     )
GORDON M. SPRENGER                  )

         David J. Scott, by signing his name hereto, does hereby sign this
document on behalf of each of the above named directors of the registrant
pursuant to powers of attorney duly executed by such persons.

Dated: July 25, 2001                BY: /s/ DAVID J. SCOTT
                                        ----------------------------------------
                                                     DAVID J. SCOTT
                                                    ATTORNEY-IN-FACT


                                       19
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE


To the Board of Directors of Medtronic, Inc.

         Our audits of the consolidated financial statements referred to in our
report dated May 22, 2001, except for Note 3 and Note 15, which are as of July
18, 2001 appearing in the 2001 Annual Report to Shareholders of Medtronic, Inc.
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
financial statement schedule listed in Item 14(a)2 of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.


PricewaterhouseCoopers LLP

Minneapolis, Minnesota
May 22, 2001



                       CONSENT OF INDEPENDENT ACCOUNTANTS


         We hereby consent to the incorporation by reference in each
Registration Statement on Form S-8 (Registration Nos. 2-65157, 2-68408, 33-169,
33-36552, 2-65156, 33-24212, 33-37529, 33-44230, 33-55329, 33-63805, 33-64585,
333-04099, 333-07385, 333-65227, 333-71259, 333-71355, 333-74229, 333-75819,
333-90381, 333-52840 and 333-44766) of Medtronic, Inc. of our report dated May
22, 2001, except for Note 3 and Note 15, which are as of July 18, 2001 relating
to the financial statements, which appears in the Annual Report to Shareholders,
which is incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated May 22, 2001 relating to the
financial statement schedule, which appears in this Form 10-K.


PricewaterhouseCoopers LLP

Minneapolis, Minnesota
July 25, 2001


                                       20
<PAGE>


                        MEDTRONIC, INC. AND SUBSIDIARIES

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                            (IN MILLIONS OF DOLLARS)


                                               CHARGES/     OTHER
                                  BALANCE AT   (CREDITS)   CHANGES     BALANCE
                                   BEGINNING      TO       (DEBIT)    AT END OF
                                   OF PERIOD   EARNINGS    CREDIT      PERIOD
- --------------------------------  ----------   --------   ---------   ---------
Allowance for doubtful accounts:

  Year ended 4/27/01                 $30.2       $9.0      $(4.5)(a)    $34.9
                                                             0.2 (b)
  Year ended 4/30/00............      33.2        6.7      (10.4)(a)     30.2
                                                             0.7 (b)
  Year ended 4/30/99............      24.9       13.4       (4.7)(a)     33.2
                                                            (0.4)(b)

- -----------------------
(a)  Uncollectible accounts written off, less recoveries.

(b)  Reflects primarily the effects of foreign currency fluctuations.


                                       21
<PAGE>


                                                   Commission File Number 1-7707
================================================================================



                       SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.



                                ----------------



                                    EXHIBITS

                                       TO

                                   FORM 10-K



                      ANNUAL REPORT PURSUANT TO SECTION 13

                                       OF

                      THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED APRIL 27, 2001



                                ----------------



                                     [LOGO]
                                   MEDTRONIC

                                Medtronic, Inc.
                             710 Medtronic Parkway
                          Minneapolis, Minnesota 55432
                            Telephone: 763/514-4000



===============================================================================


<PAGE>


                                 EXHIBITS INDEX

         2.1      Amended and Restated Agreement and Plan of Merger, dated as of
                  June 19, 2001, by and among Medtronic, Inc., MiniMed Inc. and
                  MMI Merger Sub, Inc., including the Exhibits thereto.(a)
         2.2      Agreement and Plan of Merger, dated October 19, 2000, by and
                  among Medtronic Inc., PercuSurge, Inc. and Trojan Merger
                  Corp., including the Exhibits thereto (Exhibit 2).(b)
         3.1      Medtronic Restated Articles of Incorporation, as amended to
                  date.
         3.2      Medtronic Bylaws, as amended to date (Exhibit 3.2).(c)
         4        Rights Agreement, dated as of October 26, 2000, between
                  Medtronic, Inc. and Wells Fargo Bank Minnesota, National
                  Association, including as: Exhibit A thereto the form of
                  Certificate of Designations, Preferences and Rights of Series
                  A Junior Participating Preferred Shares of Medtronic, Inc.;
                  and Exhibit B the form of Preferred Stock Purchase Right
                  Certificate. (Exhibit 4.1).(d)
         *10.1    1994 Stock Award Plan (Exhibit 10.1).(e)
         *10.2    Management Incentive Plan (Exhibit 10.2).(e)
         *10.3    1979 Restricted Stock and Performance Share Award Plan
                  (Exhibit 10.3).(f)
         *10.4    1979 Nonqualified Stock Option Plan, as amended (Exhibit
                  10.4).(c)
         *10.5    Form of Employment Agreement for Medtronic executive officers.
         *10.6    Capital Accumulation Plan Deferral Program.
         *10.7    Executive Nonqualified Supplemental Benefit Plan (Restated May
                  1, 1997). (Exhibit 10.10).(g)
         *10.8    Stock Option Replacement Program.
         *10.9    1998 Outside Director Stock Compensation Plan (Exhibit
                  10.10).(e)
         *10.10   Amendment effective March 5, 1998 to the 1979 Nonqualified
                  Stock Option Plan (Exhibit 10.14).(f)
         13       Those portions of Medtronic's 2001 Annual Report expressly
                  incorporated by reference herein, which shall be deemed filed
                  with the Commission.
         21       List of Subsidiaries.
         23       Consent and Report of Independent Accountants (set forth on
                  page 20 of this report).
         24       Powers of Attorney.

- --------------------
(a)      Incorporated herein by reference to Appendix A of the MiniMed Inc.
         Definitive Proxy Statement filed with the Commission on July 19, 2001.
(b)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Registration Statement on Form S-4 (Registration No. 333- 49928) filed
         with the Commission on November 14, 2000.

<PAGE>


(c)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 1996, filed
         with the Commission on July 24, 1996.
(d)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Report on Form 8-A, including the exhibits thereto, filed with the
         Commission on November 3, 2000.
(e)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 2000, filed
         with the commission on July 21, 2000.
(f)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 1998, filed
         with the Commission on July 21, 1998.
(g)      Incorporated herein by reference to the cited exhibit in Medtronic's
         Annual Report on Form 10-K for the year ended April 30, 1997, filed
         with the Commission on July 23, 1997.

- --------------------
*Items that are management contracts or compensatory plans or arrangements
 required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>2
<FILENAME>medtronic012520_ex3-1.txt
<DESCRIPTION>EXHIBIT 3.1 ARTICLES OF INCORPORATION
<TEXT>

                                                                     EXHIBIT 3.1


                                    RESTATED
                            ARTICLES OF INCORPORATION
                                       OF
                                 MEDTRONIC, INC.
                     (AS AMENDED THROUGH FEBRUARY 27, 2001)


                                ARTICLE 1 - NAME

1.1      The name of the corporation shall be Medtronic, Inc.

                          ARTICLE 2 - REGISTERED OFFICE

2.1      The registered office of the corporation shall be located at 710
         Medtronic Parkway, Minneapolis, Minnesota.

                                ARTICLE 3 - STOCK

3.1      Authorized Shares; Establishment of Classes and Series. The aggregate
         number of shares the corporation has authority to issue shall be
         1,602,500,000 shares, which shall consist of 1,600,000,000 shares of
         Common Stock with a par value of $.10 per share, and 2,500,000 shares
         of Preferred Stock with a par value of $1.00 per share. The Board of
         Directors is authorized to establish from the shares of Preferred
         Stock, by resolution adopted and filed in the manner provided by law,
         one or more classes or series of Preferred Stock, and to set forth the
         designation of each such class or series and fix the relative rights
         and preferences of each such class or series of Preferred Stock,
         including, but not limited to, fixing the relative voting rights, if
         any, of each class or series of Preferred Stock to the full extent
         permitted by law. Holders of Common Stock shall be entitled to one vote
         for each share of Common Stock held of record.

3.2      Issuance of Shares to Holders of Another Class or Series. The Board of
         Directors is authorized to issue shares of the corporation of one class
         or series to holders of that class or series or to holders of another
         class or series to effectuate share dividends or splits.

                       ARTICLE 4 - RIGHTS OF SHAREHOLDERS

4.1      No Preemptive Rights. No holder of any class of stock of the
         corporation shall be entitled to subscribe for or purchase such
         holder's proportionate share of stock of any class of the corporation,
         now or hereafter authorized or issued.

4.2      No Cumulative Voting Rights. No shareholder shall be entitled to
         cumulate votes for the election of directors and there shall be no
         cumulative voting for any purpose whatsoever.
<PAGE>


                              ARTICLE 5 - DIRECTORS

5.1      Written Action by Directors. Any action required or permitted to be
         taken at a Board meeting may be taken by written action signed by all
         of the directors or, in cases where the action need not be approved by
         the shareholders, by written action signed by the number of directors
         that would be required to take the same action at a meeting of the
         Board at which all directors were present.

5.2      Elimination of Director Liability in Certain Circumstances. No director
         of the corporation shall be personally liable to the corporation or its
         shareholders for monetary damages for breach of fiduciary duty as a
         director, provided, however that this Article 5, Section 5.2 shall not
         eliminate or limit the liability of a director to the extent provided
         by applicable law (i) for any breach of the director's duty of loyalty
         to the corporation or its shareholders, (ii) for acts or omissions not
         in good faith or that involve intentional misconduct or a knowing
         violation of law, (iii) under section 302A.559 or 80A.23 of the
         Minnesota Statutes, (iv) for any transaction from which the director
         derived an improper personal benefit, or (v) for any act or omission
         occurring prior to the effective date of this Article 5, Section 5.2.
         No limiting amendment to or repeal of this Article 5, Section 5.2 shall
         apply to or have any effect on the liability or alleged liability of
         any director of the corporation for or with respect to any acts or
         omissions of such director occurring prior to such amendment or repeal.

5.3      Classification of the Board of Directors. The business and affairs of
         the corporation shall be managed by or under the direction of a Board
         of Directors consisting of not less than three nor more than fifteen
         persons, who need not be shareholders. The number of directors may be
         increased by the shareholders or Board of Directors or decreased by the
         shareholders from the number of directors on the Board of Directors
         immediately prior to the effective date of this Section 5.3 provided,
         however, that any change in the number of directors on the Board of
         Directors (including, without limitation, changes at annual meetings of
         shareholders) shall be approved by the affirmative vote of not less
         than seventy-five percent (75%) of the votes entitled to be cast by the
         holders of all then outstanding voting shares (as defined in Section
         6.2 of Article 6), voting together as a single class, unless such
         change shall have been approved by a majority of the entire Board of
         Directors. If such change shall not have been so approved, the number
         of directors shall remain the same. The directors shall be divided into
         three classes, designated Class I, Class II and Class III. Each class
         shall consist, as nearly as may be possible, of one-third of the total
         number of directors constituting the entire Board of Directors.

         At the 1989 annual meeting of shareholders, Class I directors shall be
         elected for a one-year term, Class II directors for a two-year term and
         Class III directors for a three-year term. At each succeeding annual
         meeting of shareholders beginning in 1990, successors to the class of
         directors whose term expires at that annual meeting shall be elected
         for a three-year term. If the number of directors is changed, any
         increase or decrease shall be apportioned among the classes so as to
         maintain the


                                       2
<PAGE>


         number of directors in each class as nearly equal as possible, and any
         additional director of any class elected to fill a vacancy resulting
         from an increase in such class shall hold office for a term that shall
         coincide with the remaining term of that class. In no case will a
         decrease in the number of directors shorten the term of any incumbent
         director. A director shall hold office until the annual meeting for the
         year in which the director's term expires and until a successor shall
         be elected and qualify, subject, however, to prior death, resignation,
         retirement, disqualification or removal from office. Removal of a
         director from office (including a director named by the Board of
         Directors to fill a vacancy or newly created directorship), with or
         without cause, shall require the affirmative vote of not less than
         seventy-five percent (75%) of the votes entitled to be cast by the
         holders of all then outstanding voting shares, voting together as a
         single class. Any vacancy on the Board of Directors that results from
         an increase in the number of directors shall be filled by a majority of
         the Board of Directors then in office, and any other vacancy occurring
         in the Board of Directors shall be filled by a majority of the
         directors then in office, although less than a quorum, or by a sole
         remaining director. Any director elected to fill a vacancy not
         resulting from an increase in the number of directors shall have the
         same remaining term as that of such director's predecessor.

         Notwithstanding the foregoing, whenever the holders of any one or more
         classes of preferred or preference stock issued by the corporation
         shall have the right, voting separately by class or series, to elect
         directors at an annual or special meeting of shareholders, the
         election, term of office, filling of vacancies and other features of
         such directorships shall be governed by or pursuant to the applicable
         terms of the certificate of designation or other instrument creating
         such class or series of preferred stock, and such directors so elected
         shall not be divided into classes pursuant to this Section 5.3 unless
         expressly provided by such terms.

         Only persons who are nominated in accordance with the procedures set
         forth in this Section 5.3 shall be eligible for election as directors.
         Nominations of persons for election to the Board of Directors of the
         corporation may be made at a meeting of shareholders (a) by or at the
         direction of the Board of Directors or (b) by any shareholder of the
         corporation entitled to vote for the election of directors at the
         meeting who complies with the notice procedures set forth in this
         Section 5.3. Nominations by shareholders shall be made pursuant to
         timely notice in writing to the Secretary of the corporation. To be
         timely, a shareholder's notice shall be delivered to or mailed and
         received at the principal executive offices of the corporation not less
         than 50 days nor more than 90 days prior to the meeting, provided,
         however, that in the event that less than 60 days' notice or prior
         public disclosure of the date of the meeting is given or made to
         shareholders, notice by the shareholder to be timely must be so
         received not later than the close of business on the 10th day following
         the day on which such notice of the date of the meeting was mailed or
         such public disclosure was made. Such shareholder's notice shall set
         forth (a) as to each person whom the shareholder proposes to nominate
         for election or re-election as a director, all information relating to
         such person that is required to be disclosed in solicitations of
         proxies for election of directors, or is otherwise


                                       3
<PAGE>


         required, in each case pursuant to Regulation 14A under the Securities
         Exchange Act of 1934, as amended (including such person's written
         consent to being named in the proxy statement as a nominee and to
         serving as a director if elected); and (b) as to the shareholder giving
         the notice (i) the name and address, as they appear on the
         corporation's books, of such shareholder and (ii) the class and number
         of shares of the corporation which are beneficially owned by such
         shareholder. At the request of the Board of Directors any person
         nominated by the Board of Directors for election as a director shall
         furnish to the Secretary of the corporation that information required
         to be set forth in a shareholder's notice of nomination which pertains
         to the nominee. No person shall be eligible for election as a Director
         of the corporation unless nominated in accordance with the procedures
         set forth in this Section 5.3. The Chairman of the meeting shall, if
         the facts warrant, determine and declare to the meeting that a
         nomination was not made in accordance with the procedures prescribed in
         this Section 5.3 and, if he should so determine, he shall so declare to
         the meeting and the defective nomination shall be disregarded.

         At any regular or special meeting of the shareholders, only such
         business shall be conducted as shall have been brought before the
         meeting (a) by or at the direction of the Board of Directors or (b) by
         any shareholder of the corporation who complies with the notice
         procedures set forth in this Section 5.3. For business to be properly
         brought before any regular or special meeting by a shareholder, the
         shareholder must have given timely notice thereof in writing to the
         Secretary of the corporation. To be timely, a shareholder's notice must
         be delivered to or mailed and received at the principal executive
         offices of the corporation not less than 50 days nor (except for
         shareholder proposals subject to Rule 14a-8(a)(3)(i) of the Securities
         Exchange Act of 1934, as amended) more than 90 days prior to the
         meeting, provided, however, that in the event that less than 60 days'
         notice or prior public disclosure of the date of the meeting is given
         or made to the shareholders, notice by the shareholder to be timely
         must be received not later than the close of business on the 10th day
         following the day on which such notice of the date of the regular or
         special meeting was mailed or such public disclosure was made. A
         shareholder's notice to the Secretary shall set forth as to each matter
         the shareholder proposes to bring before the regular or special meeting
         (a) a brief description of the business desired to be brought before
         the meeting and the reasons for conducting such business at the
         meeting, (b) the name and address, as they appear on the corporation's
         books, of the shareholder proposing such business, (c) the class and
         number of shares of the corporation which are beneficially owned by the
         shareholder and (d) any material interest of the shareholder in such
         business. Notwithstanding anything in the corporation's Bylaws to the
         contrary, no business shall be conducted at any regular or special
         meeting except in accordance with the procedures set forth in this
         Section 5.3. The Chairman of the meeting shall, if the facts warrant,
         determine and declare to the meeting that business was not properly
         brought before the meeting and in accordance with the provisions of
         this Section 5.3 and, if he should so determine, he shall so declare to
         the meeting and any such business not properly brought before the
         meeting shall not be transacted.


                                       4
<PAGE>


         Notwithstanding any other provisions of these Articles of Incorporation
         (and notwithstanding the fact that a lesser percentage or separate
         class vote may be specified by law or these Articles of Incorporation),
         the affirmative vote of the holders of not less than seventy-five
         percent (75%) of the votes entitled to be cast by the holders of all
         then outstanding voting shares, voting together as a single class,
         shall be required to amend or repeal, or adopt any provisions
         inconsistent with, this Section 5.3.

                ARTICLE 6 - RELATED PERSON BUSINESS TRANSACTIONS

6.1      Whether or not a vote of shareholders is otherwise required, the
         affirmative vote of the holders of not less than two-thirds of the
         voting power of the outstanding "voting shares" (as hereinafter
         defined) of the corporation shall be required for the approval or
         authorization of any "Related Person Business Transaction" (as
         hereinafter defined) involving the corporation or the approval or
         authorization by the corporation in its capacity as a shareholder of
         any Related Person Business Transaction involving a "Subsidiary" (as
         hereinafter defined) which requires the approval or authorization of
         the shareholders of the Subsidiary, provided, however, that such
         two-thirds voting requirement shall not be applicable if:

         (a)      The "Continuing Directors" (as hereinafter defined) by a
                  majority vote have expressly approved the Related Person
                  Business Transaction; or

         (b)      The Related Person Business Transaction is a merger,
                  consolidation, exchange of shares or sale of all or
                  substantially all of the assets of the corporation, and the
                  cash or fair market value of the property, securities or other
                  consideration to be received per share by holders of Common
                  Stock of the corporation other than the "Related Person" (as
                  hereinafter defined) in the Related Person Business
                  Transaction is an amount at least equal to the "Highest
                  Purchase Price" (as hereinafter defined).

6.2      For the purposes of this Article 6:

         (a)      The term "Related Person Business Transaction" shall mean (i)
                  any merger or consolidation of the corporation or a Subsidiary
                  with or into a Related Person, (ii) any exchange of shares of
                  the corporation or a Subsidiary for shares of a Related Person
                  which, in the absence of this Article, would have required the
                  affirmative vote of at least a majority of the voting power of
                  the outstanding shares of the corporation entitled to vote or
                  the affirmative vote of the corporation, in its capacity as a
                  shareholder of the Subsidiary, (iii) any sale, lease,
                  exchange, transfer or other disposition (in one transaction or
                  a series of transactions), including without limitation a
                  mortgage or any other security device, of all or any
                  "Substantial Part" (as hereinafter defined) of the assets
                  either of the corporation or of a Subsidiary to or with a
                  Related Person, (iv) any sale, lease, transfer or other
                  disposition (in one transaction or a series of transactions)
                  of all or any Substantial Part of the assets of a


                                       5
<PAGE>


                  Related Person to or with the corporation or a Subsidiary, (v)
                  the issuance, sale, transfer or other disposition to a Related
                  Person of any securities of the corporation (except pursuant
                  to stock dividends, stock splits, or similar transactions
                  which would not have the effect of increasing the
                  proportionate voting power of a Related Person) or of a
                  Subsidiary (except pursuant to a pro rata distribution to all
                  holders of Common Stock of the corporation), (vi) any
                  recapitalization or reclassification that would have the
                  effect of increasing the proportionate voting power of a
                  Related Person, and (vii) any agreement, contract, arrangement
                  or understanding providing for any of the transactions
                  described in this definition of Related Person Business
                  Transaction.

         (b)      The term "Related Person" shall mean and include (i) any
                  person or entity which, together with its "Affiliates" and
                  "Associates" (both as hereinafter defined), "beneficially
                  owns" (as hereinafter defined) in the aggregate 15 percent or
                  more of the outstanding voting shares of the corporation, and
                  (ii) any Affiliate or Associate (other than the corporation or
                  a wholly-owned Subsidiary of the corporation) of any such
                  person or entity. Two or more persons or entities acting as a
                  syndicate or group, or otherwise, for the purpose of
                  acquiring, holding or disposing of voting shares of the
                  corporation shall be deemed to be a "person" or "entity," as
                  the case may be.

         (c)      The term "Affiliate," used to indicate a relationship with a
                  specified person or entity, shall mean a person or entity that
                  directly, or indirectly through one or more intermediaries,
                  controls or is controlled by, or is under common control with,
                  the person or entity specified.

         (d)      The term "Associate," used to indicate a relationship with a
                  specified person or entity, shall mean (i) any entity of which
                  such specified person or entity is an officer or partner or
                  is, directly or indirectly, the beneficial owner of 10 percent
                  or more of any class of equity securities, (ii) any trust or
                  other estate in which such specified person or entity has a
                  substantial beneficial interest or as to which such specified
                  person or entity serves as trustee or in a similar fiduciary
                  capacity, (iii) any relative or spouse of such specified
                  person, or any relative of such spouse, who has the same home
                  as such specified person or who is a director or officer of
                  the corporation or any Subsidiary, and (iv) any person who is
                  a director or officer of such specified entity or any of its
                  parents or subsidiaries (other than the corporation or a
                  wholly-owned Subsidiary of the corporation).

         (e)      The term "Substantial Part" shall mean 30 percent or more of
                  the fair market value of the total assets of the person or
                  entity in question, as reflected on the most recent balance
                  sheet of such person or entity existing at the time the
                  shareholders of the corporation would be required to approve
                  or authorize the Related Person Business Transaction involving
                  the assets constituting any such Substantial Part.


                                       6
<PAGE>


         (f)      The term "Subsidiary" shall mean any corporation, a majority
                  of the equity securities of any class of which are owned by
                  the corporation, by another Subsidiary, or in the aggregate by
                  the corporation and one or more of its Subsidiaries.

         (g)      The term "Continuing Director" shall mean (i) a director who
                  was a member of the Board of Directors of the corporation
                  either on June 22, 1983 or immediately prior to the time that
                  any Related Person involved in the Related Person Business
                  Transaction in question became a Related Person and (ii) any
                  person becoming a director whose election, or nomination for
                  election by the corporation's shareholders, was approved by a
                  vote of a majority of the Continuing Directors, provided,
                  however, that in no event shall a Related Person involved in
                  the Related Person Business Transaction in question be deemed
                  to be a Continuing Director.

         (h)      The term "voting shares" shall mean shares of capital stock of
                  a corporation entitled to vote generally in the election of
                  directors, considered for the purposes of this Article as one
                  class.

         (i)      The term "Highest Purchase Price" shall mean the highest
                  amount of cash or the fair market value of the property,
                  securities or other consideration paid by the Related Person
                  for a share of Common Stock of the corporation at any time
                  while such person or entity was a Related Person or in the
                  transaction which resulted in such person or entity becoming a
                  Related Person, provided, however, that the Highest Purchase
                  Price shall be appropriately adjusted to reflect the
                  occurrence of any reclassification, recapitalization, stock
                  split, reverse stock split or other readjustment in the number
                  of outstanding shares of Common Stock of the corporation, or
                  the declaration of a stock dividend thereon, between the last
                  date upon which the Related Person paid the Highest Purchase
                  Price and the effective date of the merger, consolidation or
                  exchange of shares or the date of distribution to shareholders
                  of the corporation of the proceeds from the sale of all or
                  substantially all of the assets of the corporation.

         (j) (i)  A person or entity "beneficially owns" voting shares of the
                  corporation if such person or entity, directly or indirectly,
                  through any contract, arrangement, understanding, relationship
                  or otherwise has or shares (A) voting power which includes the
                  power to vote, or to direct the voting of, such voting shares
                  or (B) investment power which includes the power to dispose,
                  or to direct the disposition of, such voting shares. Any
                  person or entity which, directly or indirectly, creates or
                  uses a trust, proxy, power of attorney, pooling arrangement or
                  any other contract, arrangement, or device with the purpose or
                  effect of divesting such person or entity of beneficial
                  ownership of voting shares of the corporation or preventing
                  the vesting of such beneficial ownership as part of a plan or
                  scheme to avoid becoming a Related


                                       7
<PAGE>


                  Person shall be deemed for purposes of this Article 6 to be
                  the beneficial owner of such voting shares. All voting shares
                  of the corporation beneficially owned by a person or entity,
                  regardless of the form which such beneficial ownership takes,
                  shall be aggregated in calculating the number of voting shares
                  of the corporation beneficially owned by such person or
                  entity. Any voting shares of the corporation that any person
                  or entity has the right to acquire pursuant to any agreement,
                  contract, arrangement or understanding, or upon exercise of
                  any conversion right, warrant, or option, or pursuant to the
                  automatic termination of a trust, discretionary account or
                  similar arrangement, or otherwise shall be deemed beneficially
                  owned by such person or entity. Any voting shares of the
                  corporation not outstanding which any person or entity has a
                  right to acquire shall be deemed to be outstanding for the
                  purpose of computing the percentage of outstanding voting
                  shares of the corporation beneficially owned by such person or
                  entity but shall not be deemed to be outstanding for the
                  purpose of computing the percentage of outstanding voting
                  shares of the corporation beneficially owned by any other
                  person or entity.

         (ii)     Notwithstanding the foregoing provisions of subparagraph
                  6.2(j)(i) hereof:

                  (A)      A member of a national securities exchange shall not
                           be deemed to be a beneficial owner of voting shares
                           of the corporation held directly or indirectly by it
                           on behalf of another person or entity solely because
                           such member is the record holder of such voting
                           shares and, pursuant to the rules of such exchange,
                           may direct the vote of such voting shares, without
                           instruction, on other than contested matters or
                           matters that may affect substantially the rights or
                           privileges of the holders of the voting shares of the
                           corporation to be voted, but is otherwise precluded
                           by the rules of such exchange from voting without
                           instruction;

                  (B)      A commercial bank, broker or dealer or insurance
                           company which in the ordinary course of business is a
                           pledgee of voting shares of the corporation under a
                           written pledge agreement shall not be deemed to be
                           the beneficial owner of such pledged voting shares
                           until the pledgee has taken all formal steps
                           necessary to declare a default and determines that
                           the power to vote or to direct the vote or to dispose
                           or to direct the disposition of such pledged
                           securities will be exercised, provided that the
                           pledge agreement is bona fide and was not entered
                           into with the purpose nor with the effect of changing
                           or influencing the control of the corporation nor in
                           connection with


                                       8
<PAGE>


                           any transaction having such purpose or effect and,
                           prior to default, does not grant to the pledgee the
                           power to vote or to direct the vote of the pledged
                           voting shares of the corporation; and

                  (C)      A person or entity engaged in business as an
                           underwriter of securities who acquires voting shares
                           of the corporation through its participation in good
                           faith in a firm commitment underwriting registered
                           under the Securities Act of 1933, or comparable
                           successor law, rule or regulation, shall not be
                           deemed to be the beneficial owner of such voting
                           shares until the expiration of forty days after the
                           date of such acquisition.

6.3      For the purposes of this Article 6, the Continuing Directors by a
         majority vote shall have the power to make a good faith determination,
         on the basis of information known to them, of: (a) the number of voting
         shares of the corporation that any person or entity "beneficially
         owns," (b) whether a person or entity is an Affiliate or Associate of
         another, (c) whether the assets subject to any Related Person Business
         Transaction constitute a Substantial Part, (d) whether any business
         transaction is one in which a Related Person has an interest, (e)
         whether the cash or fair market value of the property, securities or
         other consideration to be received per share by holders of Common Stock
         of the corporation other than the Related Person in a Related Person
         Business Transaction is an amount at least equal to the Highest
         Purchase Price, and (f) such other matters with respect to which a
         determination is required under this Article 6.

6.4      The provisions set forth in this Article 6, including this Section 6.4,
         may not be repealed or amended in any respect unless such action is
         approved by the affirmative vote of the holders of not less than
         two-thirds of the voting power of the outstanding voting shares of the
         corporation.




                                       9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>medtronic012520_ex10-5.txt
<DESCRIPTION>EXHIBIT 10.5 EMPLOYMENT AGREEMENT
<TEXT>

                                                                    EXHIBIT 10.5


                              EMPLOYMENT AGREEMENT
                              --------------------


         AGREEMENT by and between Medtronic, Inc., a Minnesota corporation (the
"Company") and ____________________________ (the "Executive"), dated as of the
______ day of ____________________.

         The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which are competitive with those of other corporations and
which ensure that the compensation and benefits expectations of the Executive
will be satisfied. Therefore, in order to accomplish these objectives, the Board
has caused the Company to enter into this Agreement.

         NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

         1. Certain Definitions.

         (a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in Section l (b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated or the Executive ceases to be an officer of the
Company prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment or
cessation of status as an officer (i) was at the request of a third party who
has taken steps reasonably calculated to effect the Change of Control or (ii)
otherwise arose in connection with or anticipation of the Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or cessation of
status as an officer.

         (b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give written notice to the Executive that
the Change of Control Period shall not be so extended.


<PAGE>


         2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:

         (a) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person) becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the
then outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that, for purposes of this Section 2(a), the following acquisitions shall not
constitute a Change of Control: (1) any acquisition directly from the Company,
(2) any acquisition by the Company or any of its subsidiaries, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, (4) any acquisition by an
underwriter temporarily holding securities pursuant to an offering of such
securities or (5) any acquisition pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of Section 2(c); or

         (b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or

         (c) Consummation of a reorganization, merger, statutory share exchange
or consolidation (or similar corporate transaction) involving the Company or any
of its subsidiaries, a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of assets or stock of another
entity (a "Business Combination"), in each case, unless, immediately following
such Business Combination, (i) substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 55% of,
respectively, the then outstanding shares of common stock and the total voting
power of (A) the corporation resulting from such Business Combination (the
"Surviving Corporation") or (B) if applicable, the ultimate parent corporation
that directly or indirectly has beneficial ownership of 80% or more of the
voting securities eligible to elect directors of the Surviving Corporation (the
"Parent Corporation"), in substantially the same proportion as their ownership,
immediately prior to the Business Combination, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no
person (other than any employee benefit plan (or related trust) sponsored or
maintained by the Surviving Corporation or the Parent Corporation), is or
becomes the beneficial owner, directly or indirectly, of 30% or more of the
outstanding shares of common stock and the total voting power of the outstanding
voting


                                       2
<PAGE>


securities eligible to elect directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) and (iii) at least a
majority of the members of the board of directors of the Parent Corporation (or,
if there is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the time of
the Board's approval of the execution of the initial agreement providing for
such Business Combination; or

         (d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

         Notwithstanding the foregoing provisions of this Section 2, a Change of
Control shall not be deemed to occur with respect to the Executive if the
acquisition of the 30% or greater interest referred to in Section 2(a) is by a
group, acting in concert, that includes the Executive or if at least 40% of the
then outstanding common stock or combined voting power of the then outstanding
voting securities (or voting equity interests) of the Surviving Corporation or,
if applicable, the Parent Corporation shall be beneficially owned, directly or
indirectly, immediately after a Business Combination by a group, acting in
concert, that includes the Executive.

         3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the third anniversary of such date (the "Employment Period"), provided that
nothing stated in this Agreement shall restrict the right of the Company or the
Executive at any time to terminate the Executive's employment with the Company,
subject to the obligations of the Company provided for in this Agreement in the
event of such terminations.

         4. Terms of Employment.

         (a) Position and Duties.

               (i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 35 miles from such location.

               (ii) Except as otherwise expressly provided in this Agreement,
during the Employment Period, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking


                                       3
<PAGE>


engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.

         (b) Compensation.

               (i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary") which Annual Base
Salary shall be paid at a monthly rate, at least equal to 12 times the highest
monthly base salary paid or payable, including any base salary that has been
earned but deferred, whether in a deferred compensation program, by means of
exchange into stock options, or otherwise, to the Executive by the Company and
the affiliated companies in respect of the 12-month period immediately preceding
the month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially consistent with
increases in base salary generally awarded in the ordinary course of business to
other peer executives of the Company and its affiliated companies. Any increase
in Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.

               (ii) Annual Incentive Payments. (A) In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year ending during the
Employment Period, an annual bonus ("Annual Bonus") in cash at least equal to
the Executive's average annual or annualized (for any fiscal year consisting of
less than 12 full months or with respect to which the Executive has been
employed by the Company for less than 12 full months) award earned by the
Executive, including any award earned but deferred, whether in a deferred
compensation program, by means of exchange into stock options, or otherwise,
under the Company's Management Incentive Plan, as amended from time to time
prior to the Effective Date (or under any successor or replacement annual
incentive plan of the Company or any of the affiliated companies), for the last
three fiscal years immediately preceding the fiscal year in which the Effective
Date occurs (the "Three-Year Average Bonus").

                    (B) For each PSP Award (as defined below) of the Executive
outstanding as of the Effective Date, a pro rata payout shall be made to the
Executive as of the Effective Date, in shares or cash (at the election of the
Company) equal to the number of shares covered by the PSP Award multiplied by
the performance-based accrual percentage pertaining to such PSP Award as of the
Effective Date, multiplied by a fraction the numerator of which is the number of
months elapsed from the date the PSP Award was granted through the Effective
Date and the denominator of which is the number of months from the date the PSP
Award was granted through the PSP Award's scheduled maturity date. For purposes
of this Agreement, a PSP


                                       4
<PAGE>


Award is "granted" at the time that the Executive is notified that such award
has been reserved for him or her, and "distributed" at the time that it is paid
out to the Executive (e.g., under the Company's current plan, which has a
three-year performance cycle, a PSP Award granted in 2001 will be distributed in
2004).

                    (C) For each fiscal year during the Employment Period in
which the Company does not grant a PSP Award as part of a program complying with
Section 4(b)(iii) of this Agreement, the Executive shall also be provided an
annual incentive payment (the "Annual Performance Share Equivalent") in cash at
least equal to the average annual or annualized (for any fiscal year consisting
of less than 12 full months or with respect to which the Executive has been
employed by the Company for less than 12 full months) dollar value of awards
distributed to Executive (each such award, a "PSP Award"), including any such
distributions that were earned but deferred, whether in a deferred compensation
program, by means of exchange into stock options, or otherwise, for the three
fiscal years immediately preceding the fiscal year in which the Effective Date
occurs, pursuant to the terms of the Company's performance share or restricted
share plans or programs (or under any successor or replacement plan or program
of the Company or any of the affiliated companies), as amended from time to time
prior to the Effective Date (such three-year average, the "Three-Year Average
PSP Award"); PROVIDED, HOWEVER, that for each such prior year for which a PSP
Award was not distributed to the Executive, the calculation of the Three-Year
Average PSP Award shall include an amount that represents what the Executive's
PSP Award would have been in that year (or, if no PSP Awards were distributed in
such year, in the last preceding year in which PSP Awards were distributed) had
such award had a dollar value equal to the average dollar value of the PSP
Awards distributed to peer executives employed by the Company (who received PSP
Awards pursuant to the same category of benefit applicable to Executive) in that
year. (The Annual Bonus and the Annual Performance Share Equivalent are herein
referred to collectively as the "Annual Incentive Payments".) The Annual
Incentive Payments shall be paid to Executive, unless the Executive shall elect
to defer the receipt of such Annual Incentive Payments, no later than the end of
the third month of the fiscal year following the year for which the Annual
Incentive Payments are paid.

               (iii) Stock Programs, Savings Plans and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
plans, practices, policies and programs ("Plans") applicable generally to peer
executives of the Company and the affiliated companies, including, without
limitation, all such Plans providing for the receipt of common stock, restricted
stock, or stock options, and all such incentive, savings and retirement Plans;
provided, however, that in no event shall such Plans provide the Executive with
savings opportunities, retirement benefit opportunities, or incentive or stock
opportunities (measured with respect to both regular and special incentive or
stock opportunities, to the extent, if any, that such distinction is applicable)
in each case, that are less favorable, in the aggregate, than the most favorable
of those provided by the Company and the affiliated companies for the Executive
under such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company and the affiliated companies.

               (iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in


                                       5
<PAGE>


and shall receive all benefits under welfare benefit Plans provided by the
Company and the affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance Plans) to the extent applicable
generally to other peer executives of the Company and the affiliated companies,
but in no event shall such Plans provide the Executive with benefits which are
less favorable, in the aggregate, than the most favorable of such Plans in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company and the affiliated companies.

               (v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
affiliated companies.

               (vi) Business Allowance. During the Employment Period, the
Executive shall be entitled to a business allowance in accordance with the most
favorable Plans of the Company and the affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
affiliated companies.

               (vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and the affiliated companies.

               (viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacations in accordance with the most favorable Plans
of the Company and the affiliated companies as in effect for the Executive at
any time during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the
affiliated companies.

         5. Termination of Employment.

         (a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to


                                       6
<PAGE>


terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate on the 30th day after receipt of such notice by
the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).

         (b) Cause. (i) The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean (A) repeated violations by the Executive of the Executive's
obligations under Section 4(a) of this Agreement (other than as a result of
incapacity due to physical or mental illness) which are demonstrably willful and
deliberate on the Executive's part, which are committed in bad faith or without
the belief on the part of the Executive that such violations are in the best
interests of the Company and which are not remedied in a reasonable period of
time after receipt of written notice from the Company specifying such violations
or (B) the conviction of the Executive of a felony involving moral turpitude.

         (ii) For purposes of Section 5(b)(i)(A) of this Agreement, no act, or
failure to act, on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer of the Company or a senior officer
of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.

         (c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good Reason.
For purposes of this Agreement, "Good Reason" shall mean:

               (i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any diminution in such position,
authority, duties or responsibilities (whether or not occurring solely as a
result of the Company ceasing to be a publicly traded entity or becoming a
subsidiary), excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;

               (ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and that is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;


                                       7
<PAGE>


               (iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to be based at a location other than the
principal executive offices of the Company (if the Executive were employed at
such location immediately preceding the Effective Date) or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;

               (iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or

               (v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive during the 30-day
period immediately following the first anniversary of the Effective Date (the
"Window Period") which would not otherwise constitute Good Reason shall be
deemed to be a termination by the Executive for Good Reason for all purposes of
this Agreement. The Executive's mental or physical incapacity following the
occurrence of an event described above in clauses (i) through (v) shall not
affect the Executive's ability to terminate employment for Good Reason.

         (d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined herein) is other than the date of receipt of
such notice, specifies the Date of Termination (which Date of Termination shall
be not more than 30 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause,
respectively, shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive's or the Company's
respective rights hereunder.

         (e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (ii) if
the Executive's employment is terminated by the Company other than for Cause or
Disability or death, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.


                                       8
<PAGE>


         6. Obligations of the Company upon Termination.

         (a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Employment Period, the Company terminates the Executive's employment other
than for Cause or Disability or the Executive terminates employment for Good
Reason, in lieu of further payments pursuant to Section 4(b) with respect to
periods following the Date of Termination:

               (i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts (such aggregate shall be hereinafter referred to as the "Special
Termination Amount"):

                    (A) the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the sum of the Three-Year Average Bonus (or, if higher, the
Annual Bonus paid or payable, including any portion thereof that has been earned
but deferred, whether in a deferred compensation program, by means of exchange
into stock options, or otherwise (and annualized for any fiscal year consisting
of less than 12 full months or for which the Executive has been employed for
less than 12 full months), for the most recently completed fiscal year during
the Employment Period, if any), and, unless a PSP Award has previously been
granted to the Executive for the fiscal year in which the Date of Termination
occurs, the Annual Performance Share Equivalent, and (y) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365, in lieu of any amounts
otherwise payable pursuant to an Annual Bonus or Annual Performance Share
Equivalent, in each case solely with respect to the year in which the Date of
Termination occurs, (3) for each PSP Award outstanding as of the Date of
Termination, if any, a pro rata payout, in shares or cash (at the election of
the Company) equal to the number of shares covered by the PSP Award multiplied
by the performance-based accrual percentage pertaining to such PSP Award as of
the Date of Termination, multiplied by a fraction the numerator of which is the
number of months elapsed from the date the PSP Award was granted through the
Date of Termination and the denominator of which is the number of months from
the date the PSP Award was granted through the PSP Award's scheduled maturity
date, (4) any accrued vacation pay, in each case, to the extent not theretofore
paid, and (5) the amount of any compensation previously deferred by the
Executive, whether in a deferred compensation program, by means of exchange into
stock options, or otherwise (the sum of the amounts described in subclauses (1),
(2), (3), (4) and (5), the "Accrued Obligations"); and

                    (B) the amount equal to the product of (1) three (two, in
the case of a voluntary termination by the Executive during the Window Period
pursuant to the penultimate sentence of Section 5(c)), and (2) the sum of (x)
the Executive's Annual Base Salary, and (y) the higher of (I) the Three-Year
Average Bonus and (II) the Annual Bonus paid or payable to the Executive for the
most recently completed fiscal year during the Employment Period prior to the
Date of Termination;

                    (C) for the remainder of the Employment Period (or for the
lesser of two years or the remainder of the Employment Period, in the case of a
voluntary termination by the Executive during the Window Period pursuant to the
penultimate sentence of Section 5(c)), or such longer period as any plan,
program, practice or policy may provide, the


                                       9
<PAGE>


Company shall continue benefits to the Executive and/or the Executive's family
at least equal to those which would have been provided to them in accordance
with the Plans described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated, in accordance with the most
favorable Plans of the Company and the affiliated companies applicable generally
to other peer executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and the affiliated companies and their families, in either case upon
the same terms and conditions (including any applicable required employee
contributions); provided, however, that if the Executive becomes re-employed
with another employer and is eligible to receive medical, disability or other
welfare benefits under another employer-provided plan, the medical, disability
or other welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. Following
the end of the period during which medical benefits are provided pursuant to
this Section 6(a)(ii), the Executive shall be eligible for continued health
coverage as required by Section 4980B of the Code or other applicable law, as if
the Executive's employment with the Company had terminated as of the end of such
period. For purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
Plans, the Executive shall be considered to have remained employed until the end
of the Employment Period and to have retired on the last day of such period; and

               (ii) Except as otherwise set forth in the last sentence of
Section 7, to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits that the
Executive is otherwise entitled to receive under any other plan, program,
practice, policy, contract, arrangement or agreement of the Company or the
affiliated companies (such other amounts and benefits, the "Other Benefits").

         (b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, the Company shall provide the
Executive's estate or beneficiaries with the Accrued Obligations and the timely
payment or delivery of the Other Benefits, and shall have no other severance
obligations under this Agreement. The Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of the Other
Benefits, the term "Other Benefits" as used in this Section 6(b) shall include,
without limitation, and the Executive's estate and/or beneficiaries shall be
entitled to receive, benefits at least equal to the most favorable benefits
provided by the Company and the affiliated companies to the estates and
beneficiaries of peer executives of the Company and the affiliated companies
under such Plans relating to death benefits, if any, as in effect with respect
to other peer executives and their beneficiaries at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the affiliated companies and their beneficiaries.

         (c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be


                                       10
<PAGE>


paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
"Other Benefits" as used in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date to receive, disability and
other benefits at least equal to the most favorable of those generally provided
by the Company and the affiliated companies to disabled executives and/or their
families in accordance with such Plans relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other disabled peer executives of
the Company and the affiliated companies and their families.

         (d) Cause; Other Than for Good Reason. If the Executive's employment is
terminated for Cause during the Employment Period, the Company shall provide to
the Executive (i) the Executive's Annual Base Salary through the Date of
Termination, (ii) the amount of any compensation previously deferred by the
Executive, whether in a deferred compensation program, by means of exchange into
stock options, or otherwise, and (iii) the Other Benefits, in each case to the
extent theretofore unpaid, and shall have no other severance obligations under
this Agreement. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, the Company shall
provide to the Executive the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. In such case, all of the Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.

         7. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of the affiliated
companies (other than participation in any severance plan upon the Executive's
termination of employment during the Employment Period) and for which the
Executive may qualify, nor, subject to Section 12(f) of this Agreement, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of the affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of the affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. If the Executive receives payments and benefits
pursuant to Section 6(a) of this Agreement, the Executive shall not be entitled
to any other severance pay or benefits under any severance plan, program or
policy of the Company or the affiliated companies, unless expressly provided
therein in a specific reference to this Agreement.

         8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as


                                       11
<PAGE>


incurred (within 30 days following the Company's receipt of an invoice from the
Executive), to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").

         9. Certain Additional Payments by the Company.

         (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. The Company's obligation to make Gross-Up Payments
under this Section 9 shall not be conditioned upon the Executive's termination
of employment.

         (b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the "Accounting Firm" hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is


                                       12
<PAGE>


possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.

         (c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and the Executive shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:

               (i) give the Company any information reasonably requested by the
Company relating to such claim,

               (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order to
effectively contest such claim, and

               (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or


                                       13
<PAGE>


income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income in connection with
such advance; and provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which the Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

         (d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

         10. Confidential Information. The Executive shall comply with any and
all confidentiality agreements with the Company to which the Executive is, or
shall be, a party.

         11. Successors.

         (a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.

         (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Except as provided in Section 11(c)
of this Agreement, this Agreement shall not be assignable by the Company.

         (c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.

         12. Miscellaneous.

         (a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This


                                       14
<PAGE>

Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

         (b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:


         If to the Executive:
         --------------------



         If to the Company:
         ------------------

         Medtronic, Inc.
         [LEGAL DEPT. LC300
         710 MEDTRONIC PARKWAY
         MINNEAPOLIS, MN  55432-5604]
         Attention:  General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.

         (c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

         (d) The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

         (e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 5(c)(i) through 5(c)(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other provision or right
of this Agreement.

         (f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company may be
terminated by either the Executive or the Company at any time prior to the
Effective Date or, subject to the obligations of the Company provided for in
this Agreement in the event of a termination after the Effective Date, at any
time on or after the Effective Date. Moreover, if prior to the Effective Date,
(i) the Executive's employment with the Company terminates or (ii) the Executive
ceases to be an officer of the Company, then the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except with
respect to the agreements described in Section 10 hereof, this


                                       15
<PAGE>


Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, including, without limitation, the Management
Agreement, if any, between the Company and the Executive in effect immediately
prior to the execution of this Agreement.






                                       16
<PAGE>


         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.


_________________________________               MEDTRONIC, INC.


                                                By _____________________________



                                       17
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>medtronic012520_ex10-6.txt
<DESCRIPTION>EXHIBIT 10.6 CAPITAL ACCUM PLAN DEFERRAL PROGRAM
<TEXT>

                                                                    EXHIBIT 10.6

                                MEDTRONIC, INC.

                           CAPITAL ACCUMULATION PLAN

                                DEFERREL PROGRAM

                     AS RESTATED EFFECTIVE NOVEMBER 1, 1998



<PAGE>


                                TABLE OF CONTENTS

ARTICLE 1. DEFERRED COMPENSATION ACCOUNT.......................................1

   Section 1.1. Establishment of Account.......................................1

   Section 1.2. Property of Committee..........................................1

ARTICLE 2. DEFINITIONS, GENDER, AND NUMBER.....................................1

   Section 2.1. Definitions....................................................1

   Section 2.2. Gender and Number..............................................7

ARTICLE 3. PARTICIPATION.......................................................8

   Section 3.1. Who May Participate............................................8

   Section 3.2. Time and Conditions of Participation...........................8

   Section 3.3. Termination of Participation...................................8

   Section 3.4. Missing Persons................................................9

   Section 3.5. Relationship to Other Plans....................................9

ARTICLE 4. ENTRIES TO THE ACCOUNT..............................................9

   Section 4.1. Contributions..................................................9

   Section 4.2. Crediting Rate................................................10

ARTICLE 5. DEFERRAL OF RECEIPT OF COMMON STOCK UNDER STOCK OPTION AGREEMENTS..10

   Section 5.1. Purpose of Article............................................10

   Section 5.2. Deferral Election.............................................10

   Section 5.3. Accounting for Deferrals......................................11

   Section 5.4  Distributions.................................................11

   Section 5.5. Change in Control or Plan Termination.........................13


<PAGE>


   Section 5.6. Hardship Withdrawals..........................................13

   Section 5.7. Effect on Other Provisions....................................13

   Section 5.8. Adjustment to Deferred Stock Unit Accounts....................13

ARTICLE 6. DISTRIBUTION OF BENEFITS...........................................14

   Section 6.1. Distributions Pursuant to Deferral Election...................14

   Section 6.2. Distribution of Benefits Upon Termination of Employment.......14

   Section 6.3. Death Benefits................................................15

   Section 6.4. Minimum Amount and Frequency of Payments......................17

   Section 6.5. Acceleration of Distributions.................................17

   Section 6.6. Withdrawals...................................................17

   Section 6.7. Distributions on Plan Termination.............................18

   Section 6.8. Claims Procedure..............................................18

ARTICLE 7. FUNDING............................................................19

   Section 7.1. Source of Benefits............................................19

   Section 7.2  No Claim on Specific Assets...................................19

ARTICLE 8. ADMINISTRATION AND FINANCES........................................20

   Section 8.1. Administration................................................20

   Section 8.2. Powers of Committee...........................................20

   Section 8.3. Actions of the Committee......................................20

   Section 8.4. Delegation....................................................20

   Section 8.5. Reports and Records...........................................21

ARTICLE 9. AMENDMENTS AND TERMINATION.........................................21

   Section 9.1. Amendments....................................................21


                                       ii
<PAGE>


   Section 9.2. Termination...................................................21

ARTICLE 10. TRANSFERS.........................................................22

ARTICLE 11. CHANGE IN CONTROL PROVISIONS......................................22

   Section 11.1. Application of Article 11....................................22

   Section 11.2. Payments to and by the Trust.................................22

   Section 11.3. Legal Fees and Expenses......................................23

   Section 11.4. No Reduction in Crediting Rate...............................23

   Section 11.5. Late Payment and Additional Payment Provisions...............23

ARTICLE 12.  MISCELLANEOUS....................................................25

   Section 12.1. No Guarantee of Employment...................................25

   Section 12.2. Release......................................................25

   Section 12.3. Notices......................................................25

   Section 12.4. Nonalienation................................................25

   Section 12.5. Tax Liability................................................25

   Section 12.6. Captions.....................................................26

   Section 12.7. Applicable Law...............................................26

   Section 12.8. Invalidity of Certain Provisions.............................26

   Section 12.9. No Other Agreements..........................................26

   Section 12.10. Incapacity..................................................26


                                      iii
<PAGE>



                                 MEDTRONIC, INC.
                   CAPITAL ACCUMULATION PLAN DEFERRAL PROGRAM
                     As Restated Effective November 1, 1998

         Medtronic, Inc. (the "Company") established, effective January 1, 1989,
a non-qualified deferred compensation plan for the benefit of Executives of the
Company and of certain of the Company's Affiliates. This plan is known as the
Medtronic, Inc. Capital Accumulation Plan Deferral Program (the "Plan"). The
Plan has been amended and restated from time to time. The most recent
restatement was effective January 1, 1994. The Company hereby again restates the
Plan, effective November 1, 1998, as set forth herein.

         Except as otherwise specifically provided herein, this restatement
shall apply to Permissible Deferrals first effective on or after November 1,
1998. The provisions of the Plan, as in effect prior to this restatement, shall
apply to Permissible Deferrals first effective prior to November 1, 1998.

         The Plan is intended to be an unfunded plan maintained primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees as described in Sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").

         ARTICLE 1. DEFERRED COMPENSATION ACCOUNT.

         Section 1.1. Establishment of Account. The Company shall establish an
account ("Account") for each Participant which shall be utilized solely as a
device to measure and determine the amount of deferred compensation to be paid
under the Plan.

         Section 1.2. Property of Company. Any amounts so set aside for benefits
payable under the Plan are the property of the Company, except, and to the
extent, provided in the Trust.

         ARTICLE 2. DEFINITIONS, GENDER, AND NUMBER.

         Section 2.1. Definitions. Whenever used in the Plan, the following
words and phrases shall have the meanings set forth below unless the context
plainly requires a different meaning, and when a defined meaning is intended,
the term is capitalized.


                                       1
<PAGE>


                  2.1.1. "Account" means the device used to measure and
         determine the amount of deferred compensation to be paid to a
         Participant or Beneficiary under the Plan, and may refer to the
         separate Accounts that represent amounts deferred by a Participant
         under separate Permissible Deferral elections pursuant to Section
         4.1.1, by the Company pursuant to Section 4.1.2, or as a transfer from
         the Medtronic, Inc. Compensation Deferral Plan for Officers and Key
         Employees pursuant to Article 9.

                  2.1.2. "Affiliates" or "Affiliate" means a group of entities,
         including the Company, which constitutes a controlled group of
         corporations (as defined in section 414(b) of the Code), a group of
         trades or businesses (whether or not incorporated) under common control
         (as defined in section 414(c) of the Code), and members of an
         affiliated service group (within the meaning of section 414(m) of the
         Code.)

                  2.1.3. "Age" of a Participant means the number of whole
         calendar years that have elapsed since the date of the Participant's
         birth.

                  2.1.4. "Base Salary" of a Participant for any Plan Year means
         the total annual salary and wages paid by all Affiliates to such
         individual for such Plan Year, including any amount which would be
         included in the definition of Base Salary, but for the individual's
         election to defer some of his or her salary pursuant to this Plan or
         some other deferred compensation plan established by an Affiliate; but
         excluding any other remuneration paid by Affiliates, such as overtime,
         incentive compensation, stock options, distributions of compensation
         previously deferred, restricted stock, allowances for expenses
         (including moving, travel expenses, and automobile allowances), and
         fringe benefits whether payable in cash or in a form other than cash.
         In the case of an individual who is a participant in a plan sponsored
         by an Affiliate which is described in Section 401(k) or 125 of the
         Code, the term Base Salary shall include any amount which would be
         included in the definition of Base Salary but for the individual's
         election to reduce his salary and have the amount of the reduction
         contributed to or used to purchase benefits under such plan.


                                       2
<PAGE>


                  2.1.5. "Beneficiary" or "Beneficiaries" means the persons or
         trusts designated by a Participant in writing pursuant to Section 6.3.4
         of the Plan as being entitled to receive any benefit payable under the
         Plan by reason of the death of a Participant, or, in the absence of
         such designation, the persons specified in Section 6.3.5 of the Plan.

                  2.1.6. "Board" means the Board of Directors of the Company as
         constituted at the relevant time.

                  2.1.7. "Code" means the Internal Revenue Code of 1986, as
         amended from time to time and any successor statute. References to a
         Code section shall be deemed to be to that section or to any successor
         to that section.

                  2.1.8. "Committee" means the Committee or individual appointed
         by the Company's Board (or any person or entity designated by the
         Committee) to administer the Plan pursuant to Section 8.4. Until and
         unless changed by the Board, the Vice-President, Compensation and
         Benefits, shall serve as the Committee.

                  2.1.9. "Common Stock" means the Company's common stock $.10
         par value per share (as such par value may be adjusted from time to
         time).

                  2.1.10.  "Company" means Medtronic, Inc.

                  2.1.11. "Compensation" with respect to a Participant for any
         period means the sum of such Participant's Base Salary and Incentive
         Compensation for such period.

                  2.1.12. "Crediting Rate" with respect to any Plan Year means
         the rate set forth on Schedule B, hereto, which schedule may be revised
         from time to time by the Company's Chief Executive Officer, in his
         discretion. In general, the Crediting Rate in effect with respect to a
         Plan Year shall apply to all deferrals made in such Plan Year; however,
         if the Chief Executive Officer subsequently makes other rates
         ("alternative rates") available, a Participant may elect to have an
         alternate rate apply to such deferrals in accordance with rules
         established by the Company.


                                       3
<PAGE>


                  2.1.13. "Deferred Stock Unit Account" means the notational
         account established pursuant to Article 5 to record the Net Shares
         deferred by the Participant and the dividend equivalents with respect
         to such Net Shares.

                  2.1.14. "Disabled" or "Disability" with respect to a
         Participant shall have the same definition as in the Company's then
         existing long term group disability insurance program.

                  2.1.15. "Early Retirement Date" of a Participant means the
         last day of the calendar month in which the Participant has (a) reached
         Age 55 while in the employ of an Affiliate and has completed at least
         ten (10) Years of Service, or (b) reached the Age of 62 while in the
         employ of an Affiliate.

                  2.1.16. "Effective Date" means the date on which this Plan
         became effective, i.e., January 1, 1989.

                  2.1.17. "Executive" means any United States employee who is
         (a) an Officer or a Vice President of the Company, (b) a member of the
         Sales Force of a Participating Affiliate whose Compensation for the
         Participating Affiliate's fiscal year ending immediately prior to the
         date on which he first enters into a Permissible Deferral election
         equals or exceeds the dollar amount set forth on Schedule A, hereto,
         which schedule may be revised from time to time by the Company's Chief
         Executive Officer in his discretion, or (c) any individual designated
         as eligible to participate in the Plan by the Company's Chief Executive
         Officer.

                  2.1.18. "Incentive Compensation" of a Participant for any Plan
         Year means the total remuneration paid under the various incentive
         compensation programs maintained by Affiliates to such individual for
         that Plan Year including any amount which would be included in the
         definition of Incentive Compensation, but for the individual's election
         to defer some or all of his or her Incentive Compensation pursuant to
         this Plan or some other deferred compensation plan established by an
         Affiliate; but excluding long-term incentive awards (other than the
         cash portion of the


                                       4
<PAGE>


         Performance Share Plan) and any other remuneration paid by Affiliates,
         such as Base Salary, overtime, net commissions, stock options,
         distributions of compensation previously deferred, restricted stock,
         allowances for expenses (including moving, travel expenses, and
         automobile allowances), and fringe benefits whether payable in cash or
         in a form other than cash.

                  2.1.19. "Maximum Annual Deferral" with respect to a
         Participant for a Plan Year means the sum of (a) 50% of such
         Participant's Base Salary and (b) 100% of the cash portion of such
         Participant's Incentive Compensation for such Plan Year. Initially,
         Participants described in Section 2.1.17(b) may defer from Incentive
         Compensation only. The Committee may, in its discretion, adopt a policy
         to permit such Participants to also defer from Base Salary.

                  2.1.20. "Net Shares" with respect to an election made pursuant
         to Section 5.3, means the difference between the number of shares of
         Common Stock subject to the stock option exercise and the number of
         shares of Common Stock delivered to satisfy the stock option exercise
         price, less any shares used to satisfy FICA or any other taxes due upon
         the option exercise (as may be designated by the Company pursuant to
         Section 5.3).

                  2.1.21. "Normal Retirement Date" of a Participant means the
         last day of the calendar month in which the Participant has reached the
         Age of 65 while in the employ of an Affiliate.

                  2.1.22. "Officer or Vice President" means an employee who is
         either elected by the Board or appointed by the Company's Chief
         Executive Officer to such position.

                  2.1.23. "Participant" means an individual who is eligible to
         participate in the Plan and has elected to participate in the Plan.

                  2.1.24. "Participating Affiliate" or "Participating
         Affiliates" means the Company and such Affiliates as may be designated
         by the Chief Executive Officer of the Company, or his designee, from
         time to time.


                                       5
<PAGE>


                  2.1.25. "Performance Share Plan" means the Medtronic, Inc.
         1994 Stock Award Plan, as may be amended from time to time.

                  2.1.26. "Permissible Deferral" means one of the following
         options as selected by the Participant:

                           (a) A deferral from Base Salary for one (1) Plan Year
                  which is not less than $3,000 nor more than the Maximum Annual
                  Deferral.

                           (b) A deferral from Incentive Compensation for one
                  (1) Plan Year which is not less than $3,000 nor more than the
                  Maximum Annual Deferral.


                  Initially, Participants described in Section 2.1.17(b) may
         make deferrals pursuant to paragraph (b) of this Section only. The
         Committee may, in its discretion, adopt a policy to permit such
         Participants to also make deferrals pursuant to paragraph (a) of this
         Section. Participants other than those described in Section 2.1.17(b)
         may make deferrals pursuant to paragraph (a) or (b) of this Section, or
         a combination of both, but in no event may any deferrals exceed the
         Maximum Annual Deferral for any Plan Year.

                  Elections to defer from Base Salary or Incentive Compensation
         shall be made annually at a date to be determined by the Committee, but
         no later than December 30th of the calendar year immediately preceding
         the Plan Year during which the Base Salary or Incentive Compensation
         would otherwise have been paid to the Participant. All deferral
         elections must specify either the percentages (stated as integers) or
         dollar amounts, or combination of percentages and dollar amounts, as
         determined by the Committee in its discretion, of the deferrals that
         are intended to be deducted from Base Salary or Incentive Compensation,
         respectively. Each installment of a deferral shall be rounded to the
         nearest whole dollar amount. Only the cash portion of an award under
         the Performance Share Plan may be deferred.


                                       6
<PAGE>


                  No Permissible Deferral election for a deferral from Incentive
         Compensation payable under the Performance Share Plan or the Medtronic,
         Inc. Management Incentive Plan shall be effective for any Plan Year
         unless the cash amount payable to the Participant under such plan for
         the Plan Year (but for the election) is sufficient to satisfy such
         election.

                  Deferrals from Incentive Compensation for Participants
         described in Section 2.1.17(b) shall be made in periodic installments,
         as determined by the Committee in its discretion.

                  All deferrals must be completed by the end of the Plan Year in
         which the Participant attains Age 70.

                  2.1.27. "Plan" means the "Medtronic, Inc. Capital Accumulation
         Plan Deferral Program" as set forth herein and as amended or restated
         from time to time.

                  2.1.28.  "Plan Year" means January 1 through December 31.

                  2.1.29. "Premature Distribution" means a distribution to a
         Participant at his or her request prior to the time otherwise permitted
         under the Plan, subject to certain penalties, as described in Section
         6.6.2.

                  2.1.30. "Sales Force" means employees of Participating
         Affiliates whose primary employment responsibilities involve selling
         the products manufactured by Participating Affiliates.

                  2.1.31. "Stock Unit" means a notational unit representing the
         right to receive a share of Common Stock.

                  2.1.32. "Trust" means the Medtronic, Inc. Compensation Trust
         Agreement Number Two, as may be amended from time to time.

                  Section 2.2. Gender and Number. Except as otherwise indicated
         by context, masculine terminology used herein also includes the
         feminine and neuter, and terms used in the singular may also include
         the plural.


                                       7
<PAGE>


         ARTICLE 3.  PARTICIPATION.

         Section 3.1. Who May Participate. Participation in the Plan is limited
to Executives.

         Section 3.2. Time and Conditions of Participation. An eligible
Executive shall become a Participant only upon (a) the individual's completion
of a Permissible Deferral election form for the succeeding Plan Year, and (b)
compliance with such terms and conditions as the Committee may from time to time
establish for the implementation of the Plan, including, but not limited to, any
condition the Committee may deem necessary or appropriate for the Company to
meet its obligations under the Plan. To enable the Company to meet its financial
commitment under the Plan, the Company may purchase insurance on the lives of
each Participant. Consequently, participation in the Plan is contingent upon an
individual's insurability. The Committee may, in its sole discretion, accept or
reject for participation in the Plan individuals who are rated as uninsurable.
If the Committee accepts such an individual for participation in the Plan, such
individual's Account under the Plan may be credited with interest at a lesser
rate than provided in Section 4.2.

         An individual may make a Permissible Deferral election for any Plan
Year provided that the Participant's remaining Compensation, after all
deferrals, is sufficient to enable the Company to withhold from the
Participant's Compensation (a) any amounts necessary to satisfy withholding
requirements under applicable tax law; and (b) the amount of any contributions
which the employee may be required to make or may have elected to make under the
Company's various benefit plans.

         Section 3.3. Termination of Participation. Once an individual has
become a Participant in the Plan, participation shall continue until the first
to occur of (a) payment in full of all benefits to which the Participant or
Beneficiary is entitled under the Plan, or (b) the occurrence of an event
specified in Section 3.4 which results in loss of benefits. Except as otherwise
specified in the Plan, the Company may not terminate an individual's
participation in the Plan; provided, however, that if the Committee, in its
discretion, determines that it is likely that a Participant would not be
considered to be a member of a select group of management or highly compensated
employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, for any period, the


                                       8
<PAGE>


Committee may require that no contributions be made to the Plan by or on behalf
of such Participant during such period.

         Section 3.4. Missing Persons. If the Company is unable to locate the
Participant or his Beneficiary for purposes of making a distribution, the amount
of a Participant's benefits under the Plan that would otherwise be considered as
nonforfeitable shall be forfeited effective four (4) years after (a) the last
date a payment of said benefit was made, if at least one such payment was made,
or (b) the first date a payment of said benefit was directed to be made by the
Company pursuant to the terms of the Plan, if no payments have been made. If
such person is located after the date of such forfeiture, the benefits for such
Participant or Beneficiary shall not be reinstated hereunder.

         Section 3.5. Relationship to Other Plans. Participation in the Plan
shall not preclude participation of the Participant in any other fringe benefit
program or plan sponsored by an Affiliate for which such Participant would
otherwise be eligible.

         ARTICLE 4. ENTRIES TO THE ACCOUNT.

         Section 4.1.  Contributions.

                  Section 4.1.1. Deferrals. During each Plan Year, the Company
         shall post to the Account of each Participant the amount of Base Salary
         and Incentive Compensation to be deferred as designated by the
         Participant's Permissible Deferral election in effect for that Plan
         Year.

                  Section 4.1.2. Company Contributions. The Company may, in its
         discretion, make contributions to the Plan from time to time on behalf
         of a Participant equal to all or a portion of amounts which would have
         been contributed on behalf of the Participant under other benefit plans
         of the Company if the Participant had not made a Permissible Deferral
         election under the Plan.

                  Section 4.1.3. Disability. If a Participant becomes Disabled,
         deferrals and Company contributions shall continue to be posted as
         described in Sections 4.1.1 and 4.1.2 during the period in which the
         Participant is entitled to receive Base Salary from


                                       9
<PAGE>


         the Company. If a Participant continues to be Disabled after such
         period, deferrals and Company contributions will cease.

         Section 4.2. Crediting Rate. Except as otherwise provided in Sections
3.2, 6.2.2 and 9.2, a Participant's Account will be credited with interest at
the Crediting Rate as described in Section 2.1.12.

         ARTICLE 5. DEFERRAL OF RECEIPT OF COMMON STOCK UNDER STOCK OPTION
AGREEMENTS

         Section 5.1. Purpose of Article This Article establishes special
procedures for deferring the delivery and receipt of Common Stock which a
Participant identified in Section 5.3 may receive from the exercise of a
nonqualified stock option granted to the Participant by the Company. The stock
options are governed by the stock option plan under which they are granted. No
stock options or shares of Common Stock are authorized to be issued under the
Plan. Participants who elect to defer receipt of Common Stock issuable upon the
exercise of stock options will have no rights as stock-holders of the Company
with respect to allocations made to their Deferred Stock Unit Accounts except
the right to receive dividend equivalent allocations as hereafter described.

         Section 5.2. Deferral Election. A Participant at the level of Vice
President or above (or any other Participant designated by the Senior Vice
President of Human Resources) may elect to defer receipt of Net Shares of Common
Stock resulting from a stock-for-stock exercise of an exercisable stock option
issued to the Participant by completing and submitting to the Company an
irrevocable stock option deferral election by a date which is at least twelve
(12) months in advance of the date of exercise of the stock option and in the
calendar year prior to the date of the exercise of the stock option. The stock
option exercise must occur on or prior to the expiration date of the stock
option and must be accomplished by delivering by the attestation method, on or
prior to the exercise date, shares of Common Stock which have been personally
owned by the Participant for at least six (6) months prior to the exercise date
and have not been used in a stock swap in the prior six (6) months.


                                       10
<PAGE>


At the time of the deferral election, Medtronic may, in its discretion,
designate that some of the shares subject to the stock option shall be used to
satisfy FICA or any other taxes due upon the stock option exercise. A
Participant's deferral election shall not be effective if the stock option as to
which the Participant has made the deferral election terminates prior to the
exercise date selected by the Participant. If the Participant dies or fails to
deliver shares of Common Stock which have been personally owned by the
Participant at least six (6) months prior to the exercise date (and have not
been used in a stock swap in the prior six (6) months) in payment of the
exercise price, then the deferral election shall not be effective. Only whole
Net Shares may be deferred pursuant to this Section 5.2.

         Section 5.3. Accounting for Deferrals. A Deferred Stock Unit Account
will be established for each Participant with respect to each deferral election
made pursuant to this Article 5. For each Net Share deferred, a Stock Unit will
be credited as of the date of the stock option exercise to the Deferred Stock
Unit Account so established. The Committee shall adjust the Deferred Stock Unit
Account of each Participant to reflect dividends payable with respect to the
Company's Common Stock from time to time. The Committee shall determine the
manner in which any such adjustment shall be made. Each Participant will receive
a periodic statement of the number of whole and fractional units in his or her
Deferred Stock Unit Account.

         Section 5.4. Distributions. At the time of the Participant's deferral
election, a Participant must also elect:

         (a)      Whether distributions of the Deferred Stock Unit Account
                  established pursuant to the election will commence at (i) the
                  Participant's retirement, or (ii) a specified distribution
                  date, which must be at least two (2) years after the exercise
                  date of the stock option to which the deferral election
                  applies and may not be later than the date on which the
                  Participant reaches age seventy (70); and


                                       11
<PAGE>


         (b)      Whether distributions will be made in the form of a lump sum
                  or substantially equal annual installments. If the Participant
                  elects to receive distributions in the form of annual
                  installments, the Participant shall also elect the period over
                  which those installments will be made, which may be no less
                  than five (5) years and no greater than fifteen (15) years.

         Notwithstanding the Participant's election, if the Participant
terminates employment with all Affiliates for reasons other than death before
his or her Early Retirement Date and before distributions pursuant to his or her
deferral election have commenced, distribution of the Deferred Stock Unit
Account will be made in the form of a lump sum within an administratively
practicable period of time following the date on which the Participant
terminates employment.

         In the event a Participant dies after benefits have commenced pursuant
to this Section 5.4, the Participant's remaining benefits, if any, shall be paid
to the Participant's Beneficiary in the same manner as such benefits would had
been paid to the Participant had the Participant survived. In the event a
Participant dies before benefits have commenced pursuant to this Section 5.4,
the Participant's Deferred Stock Unit Account shall be paid to the Participant's
Beneficiary in a lump sum within an administratively practicable period of time
following the Participant's death.

         All distributions shall be made in either a lump sum or in annual
installments, as described in paragraph (b), above. All distributions shall be
in the form of Common Stock. The Participant shall receive a distribution
equivalent to the Stock Units, rounded up to the nearest whole number, credited
to the Participant's Deferred Stock Unit Account. In the case of any installment
delivery, the precise number of shares delivered in each installment shall be
determined in such a manner as to cause each installment to be essentially equal
based on the Stock Units credited to the Participant's Deferred Stock Unit
Account as of the date of the first installment, including dividend equivalents
credited prior to that date. Dividend equivalents credited to a Participant's
Deferred Stock Unit Account after the date of the first installment will be
distributed as part of the final installment. Installment


                                       12
<PAGE>


distributions shall be in whole shares of Common Stock. Any fractional Stock
Units remaining at the time of the final installment distribution shall be
rounded up to the nearest full Stock Unit.

         Section 5.5. Change in Control or Plan Termination. . Notwithstanding
anything in Section 5.4 to the contrary, all of a Participant's Deferred Stock
Units shall be distributed to the Participant or the Participant's Beneficiary
(in the event of the Participant's death) as soon as administratively
practicable following: (a) the occurrence of an Event (I.E., an event of change
in control), as referenced in Article 11, or (b) the termination of the Plan.

         Section 5.6. Hardship Withdrawals. A Participant shall be entitled to
make withdrawals from his or her Deferred Stock Unit Accounts in accordance with
Section 6.6 of the Plan. Distributions pursuant to such withdrawals shall be in
the form of Common Stock.

         Section 5.7. Effect on Other Provisions. The provisions of Article 6
shall not apply to amounts deferred pursuant to this Article 5, except for the
withdrawal provisions referenced in Section 5.6, above, the provisions
applicable to the marital deduction and designating a Beneficiary at Sections
6.3.3, 6.3.4 and 6.3.5, the acceleration provision at Section 6.5 and the claims
procedure at Section 6.8. Likewise the second paragraph of Section 9.2 shall not
apply to amounts deferred pursuant to this Article 5.

         Section 5.8. Adjustment to Deferred Stock Unit Accounts. In the event
that the Compensation Committee of the Company's Board of Directors determines
that any recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or exchange
of Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transactions or event affects the Common Stock, an
appropriate adjustment to the Participant's Deferred Stock Units shall be made
to prevent reduction or enlargement of the Participants' benefits under the
Plan.


                                       13
<PAGE>


         ARTICLE 6. DISTRIBUTION OF BENEFITS.

         Section 6.1. Distributions Pursuant to Deferral Election. The
Participant shall, as part of his or her Permissible Deferral election, elect to
begin receiving distributions with respect to a Permissible Deferral at either
(a) the Participant's retirement; or (b) a date specified by the Participant in
the election, which is at least five (5) years after the Plan Year to which the
Permissible Deferral applies. If the Participant elects to defer distribution
pursuant to (a), above, the timing and manner of distribution shall be
determined in accordance with Sections 6.2 and 6.3. If a Participant elects to
defer distributions pursuant to (b), above, distributions shall commence at the
time designated by the Participant in his or her election and shall be made in
the form of a lump sum (unless the Participant terminates employment or dies
before such date, in which case Section 6.2 or 6.3, as the case may be, shall
apply).

         Section 6.2. Distribution of Benefits Upon Termination of Employment.
If a Participant terminates employment for any reason, except death, prior to
distribution of the Participant's Account, the Participant's Account balance,
determined as of the first day of the first month following the date of such
termination, shall be distributed at the time and in the manner set forth in
this Section 6.2.

                  6.2.1. Benefits Upon Retirement. If a Participant terminates
         employment with all Affiliates on or after Early Retirement Date or
         Normal Retirement Date, the Participant shall receive the balance in
         his Account in monthly installments over a period of fifteen (15)
         years. The monthly benefit amount shall be a level amount for each
         twelve-month period calculated using the balance in the Account at the
         beginning of the twelve-month period and dividing it by the total
         periods remaining in the entire payment period. The benefit payment
         shall be adjusted each subsequent twelve-month period to reflect the
         Account as of that time. The Participant's Account shall be credited
         during the payment period with interest at the Crediting Rate.


                                       14
<PAGE>


                  Payments pursuant to this Section 6.2.1 shall commence within
         an administratively practicable period of time following the date on
         which the Participant terminates employment.

                  6.2.2. Benefits Upon Resignation or Discharge. If a
         Participant terminates employment with all Affiliates before Early
         Retirement Date or Normal Retirement Date for reasons other than death,
         the Participant shall receive the balance in his Account in the form of
         monthly installments over a five-year period. The monthly benefit
         amount shall be a level amount for each twelve-month period calculated
         using the balance in the Account at the beginning of the twelve-month
         period and dividing it by the total periods remaining in the entire
         payment period. The benefit payment shall be adjusted each subsequent
         twelve-month period to reflect the Account as of that time. The rate at
         which the Account has been credited with interest shall be reduced
         retroactively to 90% of the Crediting Rate. The Account shall continue
         to be credited with interest at this reduced rate during the payment
         period.

                  Payments pursuant to this Section 6.2.2 shall commence within
         an administratively practicable period of time following the date on
         which the Participant terminates employment. Section 6.3. Death
         Benefits.

                  6.3.1. Death After Benefit Commencement. In the event a
         Participant dies after benefits have commenced pursuant to Section
         6.2.1 or 6.2.2, the Participant's remaining benefits, if any, shall be
         paid to the Participant's Beneficiary in the same manner such benefits
         would have been paid to the Participant had the Participant survived.

                  6.3.2. Death Prior to Benefit Commencement. In the event a
         Participant dies prior to the date on which benefits commence pursuant
         to Sections 6.2.1 or 6.2.2, the Participant's Account balance shall be
         paid to the Participant's Beneficiary in a lump sum within an
         administratively practicable time following the Participant's death.


                                       15
<PAGE>


         Notwithstanding anything in the Plan to the contrary, the provisions of
         this Section 6.3.2 shall apply to the Participant's entire Account
         balance as of the date of his or her death, including any portion of
         the Participant's Account which may be attributable to Permissible
         Deferral elections first effective for Plan Years prior to 1994.

                  6.3.3. Marital Deduction. If any benefits are payable under
         the Plan to the surviving spouse of deceased Participant, the estate of
         the Participant's spouse shall be entitled to all remaining benefits,
         if any, at his or her death, unless specifically directed to the
         contrary by an effective beneficiary designation.

                  6.3.4. Designation by Participant. Each Participant has the
         right to designate primary and contingent Beneficiaries for death
         benefits payable under the Plan. Such Beneficiaries may be individuals
         or trusts for the benefit of individuals. A Beneficiary designation by
         a Participant shall be in writing on a form acceptable to the Committee
         and shall only be effective upon delivery to the Company. A Beneficiary
         designation may be revoked by a Participant at any time by delivering
         to the Company either written notice of revocation or a new Beneficiary
         designation form. The Beneficiary designation form last delivered to
         the Company prior to the death of a Participant shall control.

                  6.3.5. Failure to Designate Beneficiary. In the event there is
         no Beneficiary designation on file with the Company, or all
         Beneficiaries designated by a Participant have predeceased the
         Participant, the benefits payable by reason of the death of the
         Participant shall be paid to the Participant's spouse, if living; if
         the Participant does not leave a surviving spouse, to the Participant's
         issue by right of representation; or, if there are no such issue then
         living, to the Participant's estate. In the event there are benefits
         remaining unpaid at the death of a sole Beneficiary and no successor
         Beneficiary has been designated, the remaining balance of such benefit
         shall be paid to the deceased Beneficiary's estate. If there are
         benefits remaining unpaid at the death


                                       16
<PAGE>


         of a Beneficiary who is one of multiple concurrent Beneficiaries, such
         remaining benefits shall be paid proportionally to the surviving
         Beneficiaries.

                  Section 6.4. Minimum Amount and Frequency of Payments. The
         Committee may adjust the length of the distribution period under this
         Article 6 in order to assure that each monthly installment in not less
         than $1,000. The Committee may also, if it so elects, distribute
         benefits in installments on a basis which is more or less frequently
         than monthly.

                  Section 6.5. Acceleration of Distributions. The Committee may,
         in its discretion, accelerate the distribution of, or alter the method
         of payment of, benefits payable to a Participant under the Plan. In
         addition, the Chief Executive Officer of the Company may direct that
         distributions be accelerated in the event a Participant is not a
         resident of the United States, or a United States citizen is
         permanently reassigned to a position outside the United States and its
         territories. If the Internal Revenue Service determines that a
         Participant or Beneficiary has received an economic benefit or is in
         constructive receipt of a benefit under the Plan and has made a final
         assessment of an income tax deficiency with respect to such benefit or
         if a final judicial determination has been entered that an income tax
         deficiency exists, the Committee shall distribute to such Participant
         an amount equal to the taxable income recognized.

                  Section 6.6. Withdrawals.

                  6.6.1. Hardship Withdrawal. Upon the application of any
         Participant, the Committee, in accordance with its uniform,
         nondiscriminatory policy, may permit such Participant to terminate
         future deferrals or to withdraw some or all of his or her Account. A
         Participant must give a written petition of the termination of his or
         her deferral election at least thirty (30) days (or such shorter period
         of time as permitted by the Committee in its discretion) prior to the
         next deferral. A Participant must give a written petition of the intent
         to withdraw from his or her Account at least sixty (60) days (or such
         shorter time as permitted by the Committee in its discretion) prior to
         the date of withdrawal. No termination or withdrawal shall be made
         under the provisions of this Section except for the purpose of enabling
         a Participant to meet immediate


                                       17
<PAGE>


         needs created by a financial hardship for which the Participant does
         not have other reasonably available sources of funds as determined by
         the Committee in accordance with uniform rules. The term "financial
         hardship" shall include the need for funds to: meet uninsured medical
         expenses for the Participant or his dependents, meet a significant
         uninsured casualty loss for the Participant or his dependents, and meet
         other catastrophes of a "sudden and serious nature."


         If a withdrawal is permitted, the amount of the withdrawal shall be
distributed to the Participant in a single sum as soon as is administratively
practicable. If a termination of deferrals or a withdrawal is made under this
Section 6.6, the Participant may not enter into a new deferral election for two
(2) complete Plan Years from the date of the termination or withdrawal.

         6.6.2 Premature Distributions. Upon the application of any Participant,
the Committee shall permit such Participant to receive a distribution of his or
her entire Account prior to the time otherwise specified in the Plan for reasons
other than financial hardship. A Participant must give a written petition of his
or her intent to receive such a distribution at lease sixty (60) days (or such
shorter time as permitted by the Committee in its discretion) prior to the date
of the distribution. If a Participant elects to receive such a distribution: (a)
a penalty shall be imposed such that the value of the Participant's Account,
determined immediately prior to the distribution, shall be reduced by 10%; and
(b) the Participant may not enter into a new deferral election for two (2)
complete Plan Years following the date of the distribution.

         Section 6.7. Distributions on Plan Termination Notwithstanding anything
in this Article 5 to the contrary, if the Plan is terminated, distributions
shall be made in accordance with Section 9.2.

         Section 6.8. Claims Procedure Except as otherwise provided in Section
5.4(c) of the Trust, the following shall apply with respect to the claims of
Participants for benefits under the Plan. The Committee shall notify a
Participant in writing within ninety (90) days of the Participant's written
application for benefits of his eligibility or noneligibility for benefits under
the Plan. If the Committee determines that a Participant is not eligible for
benefits or full benefits, the notice shall set forth (a) the specific reasons
for such denial, (b) a specific reference to the provision of the Plan


                                       18
<PAGE>


on which the denial is based, (c) a description of any additional information or
material necessary for the claimant to perfect his claim, and a description of
why it is needed, and (d) an explanation of the Plan's claims review procedure
and other appropriate information as to the steps to be taken if the Participant
wishes to have his claim reviewed. If the Committee determines that there are
special circumstances requiring additional time to make a decision, the
Committee shall notify the Participant of the special circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional 90-day period. If a Participant is determined by the Committee to be
not eligible for benefits, or if the Participant believes that he is entitled to
greater or different benefits, he shall have the opportunity to have his claim
reviewed by the Committee by filing a petition for review with the Committee
within sixty (60) days after receipt by him of the notice issued by the
Committee. Said petition shall state the specific reasons the Participant
believes he is entitled to benefits or greater or different benefits. Within
sixty (60) days after receipt by the Committee of said petition, the Committee
shall afford the Participant (and his counsel, if any) an opportunity to present
his position to the Committee orally or in writing, and said Participant (or his
counsel) shall have the right to review the pertinent documents, and the
Committee shall notify the Participant of its decision in writing within said
sixty (60) day period, stating specifically the basis of said decision written
in a manner calculated to be understood by the Participant and the specific
provisions of the Plan on which the decision is based. If, because of the need
for a hearing, the sixty (60) day period is not sufficient, the decision may be
deferred for up to another sixty (60) day period at the election of the
Committee, but notice of this deferral shall be given to the Participant.

         ARTICLE 7. FUNDING

         Section 7.1. Source of Benefits. All benefits under the Plan shall be
paid when due by the Company out of its assets or from the Trust.

         Section 7.2. No Claim on Specific Assets. No Participant shall be
deemed to have, by virtue of being a Participant in the Plan, any claim on any
specific assets of the Company such that the Participant would be subject to
income taxation on his or her benefits under the Plan prior to


                                       19
<PAGE>


distribution and the rights of Participants and Beneficiaries to benefits to
which they are otherwise entitled under the Plan shall be those of an unsecured
general creditor of the Company.

         ARTICLE 8. ADMINISTRATION AND FINANCES

         Section 8.1. Administration. The Plan shall be administered by the
Committee. The Company shall bear all administrative costs of the Plan other
than those specifically charged to a Participant or Beneficiary.

         Section 8.2. Powers of Company. In addition to the other powers granted
under the Plan, the Committee shall have all powers necessary to administer the
Plan, including, without limitation, powers:

                  (a) to interpret the provisions of the Plan;

                  (b) to establish and revise the method of accounting for the
         Plan and to maintain the Accounts; and

                  (c) to establish rules for the administration of the Plan and
         to prescribe any forms required to administer the Plan.

         Section 8.3. Actions of the Committee. Except as modified by the Board,
the Committee (including any person or entity to whom the Committee has
delegated duties, responsibilities or authority, to the extent of such
delegation) has total and complete discretionary authority to determine
conclusively for all parties all questions arising in the administration of the
Plan, to interpret and construe the terms of the Plan, and to determine all
questions of eligibility and status of employees, Participants and Beneficiaries
under the Plan and their respective interests. Subject to the claims procedures
of Section 6.8, all determinations, interpretations, rules and decisions of the
Committee (including those made or established by any person or entity to whom
the Committee has delegated duties, responsibilities or authority, if made or
established pursuant to such delegation) are conclusive and binding upon all
persons having or claiming to have any interest or right under the Plan.

         Section 8.4. Delegation. The Committee, or any officer designated by
the Committee, shall have the power to delegate specific duties and
responsibilities to officers or other employees of the


                                       20
<PAGE>


Company or other individuals or entities. Any delegation may be rescinded by the
Committee at any time. Each person or entity to whom a duty or responsibility
has been delegated shall be responsible for the exercise of such duty or
responsibility and shall not be responsible for any act or failure to act of any
other person or entity.

         Section 8.5. Reports and Records. The Committee, and those to whom the
Committee has delegated duties under the Plan, shall keep records of all their
proceedings and actions and shall maintain books of account, records, and other
data as shall be necessary for the proper administration of the Plan and for
compliance with applicable law.

         ARTICLE 9. AMENDMENTS AND TERMINATION

         Section 9.1. Amendments. The Company, by action of the Compensation
Committee of the Board, or the Chief Executive Officer of the Company, to the
extent authorized by the Compensation Committee of the Board, may amend the
Plan, in whole or in part, at any time and from time to time. Any such amendment
shall be filed with the Plan documents. No amendment, however, may be effective
to eliminate or reduce the benefits of any retired Participant or the
Beneficiary of any deceased Participant then eligible for benefits or the
benefits in any active Participant's Account immediately before the date of such
amendment.

         Section 9.2. Termination. The Company expects the Plan to be permanent,
but necessarily must, and hereby does, reserve the right to terminate the Plan
at any time by action of the Board. Upon termination of the Plan, all deferrals,
transfers and Company contributions will cease and no future deferrals,
transfers or Company contributions will be made. Termination of the Plan shall
not operate to eliminate or reduce benefits of any retired Participant or the
Beneficiary of any deceased Participant then eligible for benefits or the
benefits in any active Participant's Account.

         If the Plan is terminated, payments from the Accounts of all
Participants and Beneficiaries shall be made as soon as administratively
convenient in the form of monthly payments over a three-year period, credited
with interest at 90% of the Crediting Rate during the payment period; however,
the Committee in its sole discretion may pay benefits in a lump sum.


                                       21
<PAGE>


         ARTICLE 10. TRANSFERS. A Participant may transfer to the Plan amounts
credited to the Participant under the Medtronic, Inc. Compensation Deferral Plan
for Officers and Key Employees. Any such transfer shall be in accordance with
procedures established by the Committee. Amounts transferred to the Plan
pursuant to this Article 10 shall be credited with interest in accordance with
Section 4.2. Distributions from the Account established pursuant to this Article
10 shall be made at the time and in the manner specified in Sections 6.2 through
6.8.

         ARTICLE 11. CHANGE IN CONTROL PROVISIONS

         Section 11.1. Application of Article 11. To the extent applicable, the
provisions of this Article 11 relating to an Event of change in control of the
Company shall control, notwithstanding any other provisions of the Plan to the
contrary, and shall supersede any other provisions of the Plan to the extent
inconsistent with the provisions of this Article 11. For purposes of this
Article 11, an "Event" refers to an event of change in control of the Company as
described in Section 3.1(b)(1) through (3) of the Trust.

         Section 11.2. Payments to and by the Trust. If the Company determines
that it is probable that an Event may occur within the six-month period
immediately following the date of determination, or if an Event in fact occurs
in those situations where the Company has not otherwise made such a
determination, the Company shall make a contribution to the Trust (if in
existence at the date of determination or the date of the Event, as the case may
be) in accordance with the provisions of the Trust. Solely for purposes of
determining the amount of such contribution (but in no way in limitation of the
Company's liability under the Plan as determined under other provisions of the
Plan), the Company's total liability under the Plan shall be equal to the value
of the current credit balances under all Accounts established under the Plan,
including any interest credited to such Accounts under the terms of the Plan,
which remain unpaid by the Company as of the date of determination or the date
of the Event, as the case may be, whether or not amounts are otherwise currently
payable to Participants or Beneficiaries under the Plan. All such contributions
shall be made as soon as possible after the date of determination or of the
Event, as the case may be, and shall be made in cash or property valued at fair
market value. Further, the Company may, in its


                                       22
<PAGE>


discretion, make other contributions to the Trust from time to time for purposes
of providing benefits hereunder, whether or not an Event has occurred or may
occur.

         Notwithstanding the foregoing, any contributions to the Trust, as well
as any income or gains thereon, shall be at all times subject to the provisions
of the Trust, including but not limited to the provisions permitting a return of
such contributions and income or gains thereon to the Company in certain
circumstances.

         Payments of amounts credited to Accounts under the Plan with respect to
those Participants and their Beneficiaries for whom Trust contributions are made
shall be made first from the Trust in accordance with the terms of the Trust,
but, to the extent not paid by the Trust, shall be paid by the Company.

         Section 11.3. Legal Fees and Expenses. The Company shall reimburse any
Participant or his or her Beneficiary for all reasonable legal fees and expenses
incurred by such Participant or Beneficiary after the date of any Event in
seeking to obtain any right or benefit provided by the Plan.

         Section 11.4. No Reduction in Crediting Rate. If the Company determines
that it is probable that an Event may occur within the six-month period
immediately following the date of determination, or if an Event in fact occurs
in those situations where the Company has not otherwise made such a
determination, the Company shall not from and after the date of the
determination or the date of the Event, as the case may be, amend the Plan to
cause a reduction in the crediting rate applicable to a Participant's Account
under the Plan.

         Section 11.5. Late Payment and Additional Payment Provisions. If, after
the date of an Event, there is a delay in the payment of any amounts credited to
an Account under the Plan beyond the final date for payment under the Plan, the
amounts otherwise payable to any Participant or Beneficiary shall be increased
by an amount equal to the stated interest which shall be credited to such
amounts from the final date for payment of such amounts through the date that
payment of such amounts (plus such credited interest) is actually made to the
Participant or Beneficiary, compounded quarterly on a calendar year basis. The
amount of stated interest to be so credited shall be equal to


                                       23
<PAGE>


the lesser of (i) the prime rate plus five (5) percentage points, or (ii) the
prime rate multiplied by two. For purposes hereof, the prime rate shall be the
prime rate of interest quoted by Wells Fargo Bank Minnesota, N.A., as its prime
rate, determined each calendar quarter as the average of the daily prime rates
in effect throughout such calendar quarter, averaged for the number of days for
which the prime rates are quoted during such calendar quarter. In the event that
stated interest is to be credited for some period less than a full calendar
quarter, however, the stated interest shall be determined and compounded for the
fractional quarter, with the prime rate determined as the average of the daily
prime rates in effect throughout such fractional calendar quarter averaged for
the number of days during such fractional calendar quarter for which prime rates
are quoted.

         The increase in amounts otherwise payable under the Plan by the
crediting of such stated interest represents a late payment penalty for the
delay in payment.

         For purposes hereof, the final date for payment under the Plan shall be
determined with reference to the otherwise applicable provisions of the Plan,
provided, however, that the final date for commencement of benefit payments
pursuant to Sections 6.2 and 6.3 shall be a date which is not later than
forty-five (45) days after the earliest to occur of the Participant's
retirement, resignation, discharge or death. In the event that payment of
benefits has commenced to a Participant or Beneficiary prior to the date of an
Event, then the final date for payment shall be determined with reference to the
payment provision which was in effect prior to the date of the Event. No
adjustment may be made to any payment form which was in effect prior to the date
of an Event with respect to any Account which would have the effect of delaying
payments otherwise to be made under the payment form or otherwise increasing the
period of time over which payments are to be made.

         Any payment of benefits by the Company after the final date for payment
of benefits as hereinabove determined shall be applied first against the first
due of such payment of benefits (with application first against any applicable
late payment penalty and next against the benefit amount itself) until fully
paid, and next against the next due of such payments in the same manner, and so
forth, for purposes of calculating the late payment penalties hereunder.


                                       24
<PAGE>


         Participants and their Beneficiaries shall be entitled to the payment
of amounts credited to their Accounts plus the late payment penalty referred to
hereinabove first from the Trust and secondarily from the Company, as otherwise
provided in Section 11.2.

         ARTICLE 12. MISCELLANEOUS

         Section 12.1. No Guarantee of Employment. Neither the adoption and
maintenance of the Plan nor the execution by the Company of a Permissible
Deferral agreement with any Participant shall be deemed to be a contract of
employment between an Affiliate and any Participant. Nothing contained herein
shall give any Participant the right to be retained in the employ of an
Affiliate or to interfere with the right of an Affiliate to discharge any
Participant at any time, nor shall it give an Affiliate the right to require any
Participant to remain in its employ or to interfere with the Participant's right
to terminate his employment at any time.

         Section 12.2. Release. Any payment of benefits to or for the benefit of
a Participant or a Participant's Beneficiaries that is made in good faith by the
Company in accordance with the Company's interpretation of its obligations
hereunder, shall be in full satisfaction of all claims against the Company for
benefits under this Plan to the extent of such payment.

         Section 12.3. Notices. Any notice permitted or required under the Plan
shall be in writing and shall be hand delivered or sent, postage prepaid, by
first class mail, or by certified or registered mail with return receipt
requested, to the principal office of the Company, if to the Company, or to the
address last shown on the records of the Company, if to a Participant or
Beneficiary. Any such notice shall be effective as of the date of hand delivery
or mailing.

         Section 12.4. Nonalienation. No benefit payable at any time under this
Plan shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, levy, attachment, or encumbrance of any kind by any Participant or
Beneficiary.

         Section 12.5. Tax Liability. The Company may withhold or direct the
trustee of the Trust to withhold from any payment of benefits such amounts as
the Company determines are reasonably necessary to pay any taxes (and interest
thereon) required to be withheld or for which the trustee of the Trust may
become liable under applicable law. The Company may also forward or direct the


                                       25
<PAGE>


trustee of the Trust to forward to the appropriate taxing authority any amounts
required to be paid by the Company or the Trust under the preceding sentence.

         Section 12.6. Captions. Article and section headings and captions are
provided for purposes of reference and convenience only and shall not be relied
upon in any way to construe, define, modify, limit, or extend the scope of any
provision of the Plan.

         Section 12.7. Applicable Law. The Plan and all rights hereunder shall
be governed by and construed according to the laws of the State of Minnesota,
except to the extent such laws are preempted by the laws of the United States of
America.

         Section 12.8. Invalidity of Certain Provisions. If any provision of the
Plan is held invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of the Plan and the Plan shall be construed and
enforced as if such provision had not been included.

         Section 12.9. No Other Agreements. The terms and conditions set forth
herein constitute the entire understanding of the Company and the Participants
with respect to the matters addressed herein.

         Section 12.10. Incapacity. In the event that any Participant is unable
to care for his or her affairs because of illness or accident, any payment due
may be paid to the Participant's spouse, parent, brother, sister or other person
deemed by the Committee to have incurred expenses for the care of such
Participant, unless a duly qualified guardian or other legal representative has
been appointed.

Dated: _______________


                                                  MEDTRONIC, INC.



                                                  By ___________________________
                                                     Its Chief Executive Officer


                                       26
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>medtronic012520_ex10-8.txt
<DESCRIPTION>EXHIBIT 10.8 STOCK OPTION REPLACEMENT PROGRAM
<TEXT>

                                                                    EXHIBIT 10.8


                        STOCK OPTION REPLACEMENT PROGRAM
                        --------------------------------


In keeping with the company's philosophy of encouraging stock ownership by
officers and employees, the company offers several programs which allow officers
and key employees to elect to receive stock options in lieu of some or all of
the compensation earned under certain incentive plans or as sales commissions.
By foregoing such compensation for stock options, the variable "at risk"
component of each officer's or employee's compensation package is increased,
motivating them to perform to enhance shareholder value over the long term.
Under the program, the amount of the stock option grants are determined by the
Compensation Committee of the Board of Directors and to date have primarily been
on the basis of $4 in fair market value of stock options for each $1 of
compensation foregone.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>medtronic012520_ex13.txt
<DESCRIPTION>EXH 13 PORTIONS OF MEDTRONIC'S 2001 ANNUAL REPORT
<TEXT>

                                                                      EXHIBIT 13


MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

SUMMARY
Medtronic is the world's leading medical technology company, providing lifelong
solutions for people with chronic disease. Primary products include those for
bradycardia pacing, tachyarrhythmia management, atrial fibrillation, heart
failure, coronary and peripheral vascular disease, heart valve replacement,
extracorporeal cardiac support, minimally invasive cardiac surgery, malignant
and non-malignant pain, movement disorders, spinal and neurosurgery,
neurodegenerative disorders and ear, nose and throat (ENT) surgery.

In fiscal 2001 Medtronic continued to benefit from the major acquisitions it
made during fiscal years 2000 and 1999. These acquisitions have effectively
diversified and strengthened the growth profile of the Company. During 2001 the
Company also launched major new products in every business unit and built a
strong pipeline for future product introductions. In December 2000, the Company
merged with PercuSurge, Inc. (PercuSurge), a leading developer of interventional
embolic protection devices. PercuSurge currently markets a patented system
outside the United States that helps remove embolic material that is often
dislodged during the treatment of arteriosclerosis, and has recently received
approval from the United States Food and Drug Administration (FDA) to market the
system in the United States. The merger with PercuSurge was accounted for as a
pooling of interests, and accordingly, all previously reported results have been
restated to include PercuSurge results. Subsequent to year-end, Medtronic
announced an agreement to acquire MiniMed Inc. (MiniMed), the world leader in
the design, development, manufacture and marketing of advanced medical systems
for the treatment of diabetes, and Medical Research Group, Inc. (MRG), a company
that designs and develops technologies related to implantable pumps and sensors
used in the treatment of diabetes. Medtronic expects to complete these two
acquisitions, valued at approximately $3.7 billion, during the second quarter of
fiscal 2002.

Fiscal 2001 revenue grew for the 16th consecutive year to $5,551.8 million, a
10.7% increase over the $5,016.3 million reported in fiscal 2000. Foreign
exchange rate fluctuations had an unfavorable year-to-year impact on
international revenues of $149.2 million in 2001, $33.5 million in 2000, and
$11.7 million in 1999. After excluding the effect of foreign currency
translation, revenues increased 13.7% and 19.3% in fiscal years 2001 and 2000,
respectively. Revenue growth during 2001 was balanced and diversified across all
of Medtronic's businesses, the result of strategic decisions made over the last
several years to add new growth platforms to the Company through mergers and
acquisitions, combined with solid internal growth driven by new product
introductions.

Net earnings and diluted earnings per share were $1,046.0 million and $0.85,
$1,084.2 million and $0.89, and $466.7 million and $0.39 in fiscal years 2001,
2000 and 1999, respectively. In these years, the Company recorded the following
non-recurring charges:



                                       1
<PAGE>

     *    Fiscal 2001: net pre-tax charges totaling $347.2 million for
          litigation and related asset write downs, contributions to the
          Medtronic Foundation, transaction costs related to the merger with
          PercuSurge and restructuring initiatives aimed at further streamlining
          operations.

     *    Fiscal 2000: pre-tax charges of $38.7 million for transaction costs
          related to the merger with Xomed Surgical Products, Inc. (Xomed), a
          litigation settlement and restructuring initiatives. In connection
          with the substantial completion of the 1999 restructuring initiatives,
          the Company identified and reversed $24.9 million of previously
          recorded reserves no longer considered necessary, resulting in a net
          pre-tax charge for fiscal 2000 of $13.8 million.

     *    Fiscal 1999: pre-tax charges totaling $554.1 million related to the
          acquisition and integration of Physio-Control International
          Corporation (Physio-Control), Sofamor Danek Group (Sofamor Danek),
          Arterial Vascular Engineering Inc. (AVE) and AVECOR Cardiovascular,
          Inc. (AVECOR).

Excluding the effects of these non-recurring charges, diluted earnings per share
in fiscal years 2001, 2000 and 1999 would have been $1.05, $0.90 and $0.75,
respectively, a growth of 16.7% in 2001 and 20.0% in 2000.

NET SALES
Sales in the United States increased 13.0% and 19.2% in fiscal years 2001 and
2000. Sales outside the United States increased 15.2% in fiscal 2001 and 19.5%
in fiscal 2000 on a constant currency basis. Foreign exchange rate movements had
an unfavorable year-to-year impact on international net sales. These exchange
rate movements are caused primarily by fluctuations in the value of the U.S.
dollar versus major European currencies and the Japanese yen. The impact of
foreign currency fluctuations on net sales is not indicative of the impact on
net earnings due to the offsetting foreign currency impact on operating costs
and expenses and the Company's hedging activities (see also Market Risk and Note
4 to the consolidated financial statements for further details on foreign
currency instruments and the Company's risk management strategies with respect
thereto).

The Company's business units include Cardiac Rhythm Management; Neurological,
Spinal and ENT; Vascular; and Cardiac Surgery. Net sales by business unit were
as follows (in millions):

                                  APRIL 27,        April 30,        April 30,
Year ended:                         2001             2000             1999
- --------------------------------------------------------------------------------
Cardiac Rhythm Management         $ 2,656.8        $ 2,504.7        $ 2,121.6
Neurological, Spinal and ENT        1,478.9          1,252.4            998.0
Vascular                              928.6            792.5            718.9
Cardiac Surgery                       487.5            466.7            394.0
- --------------------------------------------------------------------------------
                                  $ 5,551.8        $ 5,016.3        $ 4,232.5
================================================================================



                                       2
<PAGE>

Cardiac Rhythm Management sales grew 9.3% in fiscal 2001 and 19.0% in fiscal
2000, after removing the impact of foreign exchange rate fluctuations. Cardiac
Rhythm Management products consist primarily of pacemakers, implantable and
external defibrillators, leads and ablation products. Sales of pacing products
grew in the high single digits for the year, continuing to exceed market growth.
The Medtronic Kappa and Sigma pacemakers continued to lead the global pacing
industry, while the Medtronic Vitatron brand continued to be the fastest growing
pacemaker brand worldwide. Sales growth of implantable defibrillators declined
to the mid teens for the year, following a similar deceleration in the growth of
the tachyarrhythmia market. The Company expects the long-term growth rate for
this highly under-penetrated market to be in the mid teens. Major products
launched in the past year include the Medtronic Jewel AF, the world's first
implantable cardioverter defibrillator for treating multiple and rapid rhythm
problems, the GEM III, and the GEM III AT for the treatment of atrial and
ventricular fibrillation. In the yet untapped market for heart failure, the
Medtronic Attain over-the-wire, steroid eluting left-heart lead and InSync III,
the first triple chamber stimulator, entered clinical evaluations, and the
Medtronic InSync and InSync implantable cardioverter defibrillator designed to
provide cardiac resynchronization therapy were submitted to the FDA for
pre-market approval.

Neurological, Spinal, and ENT sales increased 20.4% in fiscal 2001 and 26.0% in
fiscal 2000, exclusive of the effects of foreign exchange rate fluctuations.
Neurological, Spinal and ENT products consist primarily of implantable
neurostimulation devices, drug administration systems, spinal products,
neurosurgery products, functional diagnostics equipment and surgical products
used by ENT physicians. Sales of spinal and neurosurgery products increased over
20% from the prior year, benefiting from the breadth of the product line,
including engineered bone dowels, bone wedges and spinal cages. During the year,
the Company announced the launch of the StealthStation TREON Treatment Guidance
System to further improve accuracy and precision during brain and spinal surgery
and the LT-CAGE Lumbar Tapered Fusion Device for use in spinal fusion surgery.
Sales of core neurological product lines (consisting of neurostimulation
devices, drug administration systems, and functional diagnostics equipment) grew
in the high teens from the prior year benefiting from the 2001 launch of the
Medtronic Synergy neurostimulation device for pain and the Medtronic IsoMed
Constant-Flow Infusion System used in the treatment of chronic pain and
colorectal cancer. The significant growth in fiscal 2000 was driven by the
introduction of several major new products. The Company is awaiting FDA approval
of its Activa Parkinson's Disease deep brain stimulation therapy and of its
recombinant version of naturally occurring bone morphogenetic protein (rh-BMP2),
known as InFUSE Bone Graft.

Net sales of Vascular products increased 20.7% and 10.8% in fiscal years 2001
and 2000, after excluding the effects of foreign exchange rate fluctuations.
Vascular products consist of stents, balloon and guiding catheters and
peripheral vascular products. Revenue growth was driven by strong acceptance of
the full-featured S660 and S670 coronary stents, as well as the BeStent 2
coronary stent. In the last quarter of the year the



                                       3
<PAGE>

Company announced the commercial release of the S7 coronary stent system, in
both over-the-wire and rapid exchange perfusion versions. In fiscal 2001 the
Company merged with PercuSurge and subsequent to year-end, it received FDA
approval for the Medtronic PercuSurge Guardwire Plus temporary occlusion and
aspiration system for distal protection. Subsequent to year end, an arbitration
panel determined that certain rapid exchange perfusion delivery systems marketed
by the Company infringed a patent held by Boston Scientific Corporation (Boston
Scientific), and allowed for an injunction on future U.S. sales of these
delivery systems. The Company believes that these actions will not materially
affect future worldwide revenues, as they only impact sales of these products in
the United States where the Company markets stents on alternative delivery
systems, which are not subject to the arbitration decision. In addition, the
Company offers the only distal protection system approved for the U.S. market.
Peripheral vascular revenues increased modestly from last year, as the Company
temporarily suspended manufacturing of the Medtronic AneurRx stent graft for the
treatment of abdominal aortic aneurysms during fiscal 2001 to implement
manufacturing improvements. The Company has resumed full production of this
product, the industry leader in the U.S. market.

Cardiac Surgery net sales increased 8.0% and 19.8% in 2001 and 2000,
respectively, after excluding the effects of foreign exchange rate fluctuations.
Cardiac Surgery products include heart valves, perfusion systems, minimally
invasive cardiac surgery products and surgical accessories. The growth in fiscal
2001 is the result of the growth in tissue valve sales and in sales of minimally
invasive cardiac surgery products, which facilitate precision suturing on a
beating heart. Perfusion systems revenues remained level with last year,
reflecting the continued industry shift toward beating-heart procedures. The
March 1999 purchase of AVECOR, which was accounted for as a purchase, accounted
for a portion of the growth during fiscal 2000. During fiscal 2001, the Company
received FDA clearance to market its Mosaic tissue heart valve, which is
expected to be fully released during fiscal 2002.

COSTS AND EXPENSES
The following is a summary of major costs and expenses as a percentage of net
sales:


                                            APRIL 27,   April 30,    April 30,
Year Ended:                                   2001        2000         1999
- --------------------------------------------------------------------------------
Cost of products sold                         25.4%       25.2%        26.1%
Research & development                        10.4         9.7         10.4
Selling, general & administrative             30.4        31.5         31.3
Non-recurring charges                          6.1         0.3         12.4
Other (income) expense                         1.2         1.4          0.8
Interest (income) expense                     (1.3)       (0.3)        (0.5)
================================================================================

Cost of Products Sold: Fiscal 2001 cost of products sold included an $8.4
million charge for excess inventory related to the July 2001 arbitration ruling,
which allows Boston Scientific to enjoin the Company from selling certain rapid
exchange perfusion delivery





                                       4
<PAGE>

systems found to be in violation of a patent held by Boston Scientific. Without
this charge, cost of products sold as a percentage of net sales in fiscal 2001
would have been 25.3%, consistent with fiscal 2000 levels. Fiscal 1999 cost of
products sold included $29.0 million of charges related to inventory
obsolescence in the vascular and cardiac surgery product lines following the
merger with AVE, and the acquisitions of the coronary catheter lab of C.R. Bard,
Inc. (Bard cath lab) and AVECOR. Without this charge, cost of products sold as a
percentage of net sales in fiscal 1999 would have been 25.4%. Future gross
margins will continue to be impacted by competitive pricing pressures, new
product introductions, the mix of products both within and among product lines
and geographies, and the effects of foreign currency fluctuations. Royalty
expense and intellectual property amortization expense, previously included in
cost of products sold, have been reclassified to Other Income/Expense for all
periods presented.

Research and Development: During fiscal 2001, Medtronic continued to invest
heavily in the future by spending aggressively on research and development (R&D)
efforts. The Company is committed to develop technological enhancements and new
indications for existing products, to develop less invasive and new technologies
to address unmet patient needs and to help reduce patient care costs and length
of hospital stay.

Selling, General & Administrative: The decrease in selling, general, and
administrative expense (SG&A), as a percent of sales in fiscal 2001 from prior
years' levels is attributable primarily to continued cost control measures,
partially offset by increased field sales coverage expenses. Royalty income,
foreign currency hedging gains and losses, minority investment gains and losses
and goodwill amortization, previously included in SG&A have been reclassified to
Other Income/Expense for all periods presented.

Non-Recurring Charges: As previously mentioned and as further discussed in Note
3 to the consolidated financial statements, the Company recorded pre-tax charges
totaling $347.2 million, $13.8 million and $554.1 million during fiscal years
2001, 2000 and 1999, respectively.

In fiscal 2001 the Company recorded net charges for litigation, contributions to
the Medtronic Foundation and transaction costs related to the merger with
PercuSurge. During the fourth quarter of the year, the Company announced
restructuring initiatives totaling $47.0 to $52.0 million aimed at further
streamlining operations. These initiatives are focused on restructuring certain
neurological sales organizations, reducing and consolidating certain
manufacturing operations, and streamlining and reorganizing European sales
organizations to further integrate prior acquisitions. These initiatives will
result in the termination of approximately 650 employees, a net reduction of 450
positions, and in annualized savings of approximately $35.0 to $40.0 million.
The Company recognized $14.5 million of the total estimated charges in the
current fiscal year, and intends to complete all activities necessary to
recognize the remaining charges in the first quarter of fiscal 2002.



                                       5
<PAGE>

Subsequent to year-end, the Company received two adverse patent infringement
decisions. In June 2001, an appeals court affirmed an earlier judgment against
the Company in a patent infringement lawsuit commenced by AcroMed Corporation.
The amount of the judgment plus interest totaled $52.1 million and was reflected
in fiscal 2001 results. In July 2001, an arbitration panel determined that
certain Medtronic rapid exchange perfusion delivery systems infringed a patent
held by Boston Scientific, and awarded damages of approximately $169.0 million,
plus legal costs. The Company had asserted that it had acquired the right to use
these patents as part of the Bard cath lab acquisition in 1998. In connection
with this arbitration award, the Company wrote off $21.0 million of intangible
assets specifically related to the rapid exchange perfusion technology, and
$37.2 million of the goodwill recorded for the Bard cath lab acquisition. The
goodwill impairment amount was determined on a pro rata basis using the relative
fair values of the long-lived assets and identifiable intangibles acquired from
C.R. Bard, Inc. The arbitration panel also allowed for an injunction on future
U.S. sales of these delivery systems, and accordingly, the Company wrote off
$8.4 million of excess rapid exchange perfusion inventory. These charges have
been reflected in fiscal 2001 results.

In fiscal 2000 the Company recorded charges for transaction costs in connection
with the merger with Xomed, a litigation settlement, the termination of a
distribution relationship and the conversion of certain direct sales operations
in Latin America to distributor arrangements. These restructuring efforts were
substantially completed during fiscal 2001.

During fiscal 1999, the Company recorded charges for transaction costs incurred
in connection with the mergers with Physio-Control, Sofamor Danek, and AVE.
These charges included $152.0 million for purchased in-process research and
development costs. The Company also purchased AVECOR during the fourth quarter
of fiscal 1999. In connection with these transactions, management identified
areas where duplicate manufacturing, sales and administrative capacity existed
and identified opportunities to leverage existing infrastructure and achieve
better economies of scale. During the third and fourth quarter of fiscal 1999,
management announced certain initiatives to restructure its new vascular,
cardiac surgery and spinal surgery organizations and announced the closure of
ten manufacturing facilities and the termination of 2,950 employees resulting in
2,450 net positions reduced. Of the employees identified for termination, 2,585
were in manufacturing positions. The Company estimated that these actions would
result in annual cost savings in excess of $70.0 million. The Company has
completed these initiatives and has achieved the cost savings originally
estimated. As the Company had substantially completed these initiatives in the
fourth quarter of fiscal 2000, it identified and reversed $24.9 million of
reserves no longer considered necessary.

During fiscal 1999 AVE acquired World Medical Manufacturing Corporation (World
Medical) and expensed $45.8 million of the purchase price for purchased
in-process research and development that had not yet reached technological
feasibility and had no alternative future use, including the Talent System and
two smaller programs. The Talent System is an endovascular stent graft used to
repair abdominal aortic aneurysms. At the




                                       6
<PAGE>

time of the World Medical acquisition, AVE did not have an endovascular stent
graft product offering and the Talent project was expected to enable AVE to
enter this high-potential new market. At the acquisition date, the clinical
trials and the receipt of regulatory approvals in the U.S. remained to be
completed in order to commercialize the product. At the present time the Talent
system is being sold in Europe and has completed U.S. clinical trials. The
expected costs associated with completing these tasks were $4.6 million in
fiscal 2001, $3.6 million in fiscal 2000, and $0.9 million in fiscal 1999. The
total remaining expected costs to commercialization are $3.4 million. These
costs are being funded by internally generated cash flows.

Also in fiscal 1999, AVE acquired Bard cath lab and expensed $95.3 million of
the purchase price for purchased in-process research and development that had
not yet reached technological feasibility and had no alternative use, including
a rapid exchange perfusion catheter, a stent development program and eight other
minor product categories. At the time of the Bard cath lab acquisition, AVE did
not have a rapid exchange perfusion catheter product offering and the rapid
exchange perfusion project was expected to enable AVE to better compete in this
market. The stent program was expected to result in significant improvements to
existing technology. In fiscal 1999, most of the Bard cath lab projects were in
the design stage, with clinical trials and regulatory approval remaining to be
completed in order to commercialize the products. In fiscal 2000, the Company
introduced its S670 rapid exchange perfusion coronary stent system in the U.S,
and in fiscal 2001 it launched the S660 with discrete technology rapid exchange
perfusion coronary stent system for smaller vessels and the BeStent 2 rapid
exchange perfusion coronary stent delivery system using technology from the
acquisition of Bard cath lab. In April 2001, the S7 with discrete technology
rapid exchange perfusion coronary stent system received FDA approval. Subsequent
to year end, an arbitration panel determined that certain Medtronic rapid
exchange perfusion delivery systems infringed a patent held by Boston
Scientific, as further discussed in Note 15 to the consolidated financial
statements. The expected costs associated with completing these tasks were $7.2
million in fiscal 2001, $4.6 million in fiscal 2000, and $0.8 million in fiscal
1999. The total remaining expected costs to commercialization are $1.0 million.
These costs are being funded by internally generated cash flows.

In April 1999, the Company acquired certain advanced catheter delivery
technology from Micro Motion and expensed $9.8 million for the purchase of
in-process research and development. In addition, during fiscal 1999 Xomed wrote
off approximately $1.1 million of the purchase price it paid for the acquisition
of Etalissements Boutmy, S.A. for purchased in-process research and development.

The values assigned to purchased in-process research and development were
determined by estimating the future after-tax net cash flows attributable to the
projects and discounting these cash flows back to their present value. Discount
rates included a factor that takes into account the uncertainty surrounding the
successful development of the purchased in-process research and development. The
values assigned to the World Medical and Bard cath lab purchased in-process
research and development were based on




                                       7
<PAGE>

valuations prepared by independent third-party appraisers and were determined by
identifying research projects in areas for which technological feasibility had
not been established.

The Company expects that all the acquired in-process research and development
will reach technological feasibility, but there can be no assurance that the
commercial viability of these products will actually be achieved. The nature of
the efforts to develop the acquired technologies into commercially viable
products consists principally of planning, designing and conducting clinical
trials necessary to obtain regulatory approvals. The risks associated with
achieving commercialization include, but are not limited to, delay or failure to
obtain regulatory approvals to conduct clinical trials, delay or failure to
obtain required market clearances, and patent litigation. If commercial
viability were not achieved, the Company would look to other alternatives to
provide these solutions.

The 1999 charges also included a $29.0 million charge for obsolete inventories
in the vascular and cardiac surgery product lines, following the acquisitions of
Bard cath lab and AVECOR. In conjunction with the integration efforts, and in
order to streamline production and improve operating efficiency, management
identified several duplicate product lines, which were to be discontinued over a
period of six months. Inventories associated with the product lines to be
discontinued, including finished goods, work in process, and dedicated raw
materials, were specifically identified by operating personnel. In the case of
vascular product lines, an estimate was made as to the amount of inventory that
would be required for sales through the stated date of discontinuation. In the
case of cardiac surgery product lines, an estimate was made as to the amount of
inventory that would be needed to service units in the field. In both cases, the
estimates were based on recent results, including actual monthly product sales
and historical warranty repairs. Inventories in excess of requirements were
written off in full, as the excess products had no alternative use or salvage
value.

Other Income/Expense: Other income/expense includes goodwill and intellectual
property amortization expense, royalty income and expense, minority investment
gains and losses and foreign currency hedging gains and losses. The increase in
other expense, net in 2001 and 2000 compared to 1999 levels is primarily the
result of goodwill amortization stemming from the acquisitions of Bard cath lab
and AVECOR during fiscal 1999, partially offset by gains from foreign currency
hedging activities.

Interest Income/Expense: Net interest income was $74.2 million, $15.7 million
and $23.0 million in fiscal years 2001, 2000 and 1999, respectively. Interest
income increased during fiscal 2001 as a result of higher cash balances
attributable to larger inflows from operations and the discontinuation of the
Company's systematic share repurchase program during the fourth quarter of
fiscal 2000. Interest income was higher in fiscal 1999 than in 2000 as the
result of higher average investment balances resulting from the September 1998
secondary stock offering. The proceeds of the secondary stock offering were used
to pay off debt of pooled entities and to fund purchase business combinations.



                                       8
<PAGE>

Subsequent to year-end, the Company announced its intention to acquire MiniMed
for cash consideration of approximately $3.3 billion and MRG for cash and stock
consideration of approximately $420.0 million. The Company is evaluating
alternatives to finance these acquisitions, some of which may have a significant
impact on interest income/expense in fiscal 2002.

INCOME TAXES
The Company's effective income tax rate was 32.5%, 32.9% and 43.4% for fiscal
years 2001, 2000 and 1999, respectively. Excluding non-recurring charges, the
effective income tax rate would have been 32.4%, 32.7% and 34.3%, respectively.
The reduction in the fiscal 2001 and 2000 effective income tax rate is due to
tax planning initiatives including proportionally higher profits generated in
low tax jurisdictions. The Company expects to further reduce its effective
income tax rate in fiscal 2002 as it pursues additional tax savings
opportunities.


LIQUIDITY AND CAPITAL RESOURCES

SUMMARY
The Company maintained its strong financial position in fiscal 2001. At April
27, 2001, working capital, the excess of current assets over current
liabilities, totaled $2,397.5 million compared to $2,041.9 million at April 30,
2000. The current ratio at April 27, 2001 and April 30, 2000, was 2.8:1 and
3.1:1, respectively. The Company's net cash position, defined as the sum of
cash, cash equivalents, and short-term investments less short-term borrowings
and long-term debt was $1,073.0 million at April 27, 2001, compared to $245.4
million at April 30, 2000. In addition, at April 27, 2001 the Company had
approximately $415.0 million of available-for-sale debt securities included in
long-term investments.

During fiscal 2000, the Company entered into an agreement that expires in 2003,
to sell, at its discretion, specific pools of its Japanese trade receivables. At
April 27, 2001, and April 30, 2000, the Company had sold approximately $60.0
million and $64.0 million, respectively, of its trade receivables to a financial
institution. The discount cost related to the sale was immaterial and was
recorded as interest expense in the accompanying consolidated financial
statements.

Subsequent to year-end the Company announced an agreement to acquire MiniMed and
MRG for consideration of approximately $3.7 billion. The Company is evaluating
alternatives to finance these transactions.

CASH FLOW
Cash provided by operating activities was $1,831.5 million in fiscal 2001,
$1,026.4 million in fiscal 2000 and $455.8 million in fiscal 1999. The increase
in operating cash flows in fiscal 2001 over fiscal 2000 is the result of growth
in earnings before non-recurring charges and significant decreases in prepaid
expenses, primarily income taxes, coupled with effective asset management
initiatives. Fiscal 2000 operating cash flows




                                       9
<PAGE>

increased over fiscal 1999 as a result of earnings growth, a high level of
transaction costs related to the 1999 mergers as well as restructuring spending
in fiscal 1999.

The Company invested $1,025.5 million, $377.0 million and $1,342.4 million of
its cash in purchases of marketable securities, acquisitions, and additions to
property, plant and equipment in fiscal years 2001, 2000 and 1999, respectively.
The Company expects future growth in capital spending to support increased
manufacturing capacity and operational requirements. This spending will be
financed primarily by funds from operations.

Repurchases of common stock totaled $497.4 million in fiscal 2000, and $377.2
million in fiscal 1999. There were no repurchases of common stock in fiscal 2001
as the Company discontinued its systematic share repurchase program in the
fourth quarter of fiscal 2000. Dividends paid to shareholders totaled $240.7
million, $189.5 million and $131.9 million in fiscal years 2001, 2000 and 1999,
respectively. Consistent with the Company's financial objectives, the Company
expects to continue paying dividends at a rate of approximately 20% of the
previous year's net earnings. In June 2001, the Company adopted a new share
repurchase program to purchase from time to time up to 25 million shares of its
common stock for general corporate purposes.

DEBT AND CAPITAL
The Company's capital structure consists of equity and interest-bearing debt.
Interest-bearing debt as a percent of total capital was 2.8% at April 27, 2001
and 6.8% at April 30, 2000. The Company has existing lines of credit totaling
$850.0 million with various banks, of which approximately $707.0 million was
available at April 27, 2001.

One of the Company's key financial objectives is achieving an annual return on
equity (ROE) of at least 20%. ROE compares net earnings to average shareholders'
equity and is a key measure of management's ability to utilize the shareholders'
investment in the Company effectively. ROE was 20.9%, 26.1% and 14.3% in fiscal
years 2001, 2000 and 1999, respectively. Excluding the effects of the $347.2
million, $13.8 million and $554.1 million pre-tax charges taken in fiscal years
2001, 2000, and 1999, ROE would have been 25.0%, 25.0% and 25.5%, respectively.
In each of the preceding thirteen years, ROE exceeded 20%.

The Company had a systematic stock repurchase program that was discontinued
during the fourth quarter of fiscal 2000. Shares repurchased and average price
per share were as follows: 13.0 million shares at an average price of $38.39 per
share during fiscal 2000 and 11.2 million shares at an average price of $33.80
per share during fiscal 1999. In addition to the repurchase of shares to offset
dilution resulting from the issuance of stock under the employee stock purchase
and award plans, the Company repurchased shares issued in conjunction with the
AVECOR purchase in fiscal 1999.

OPERATIONS OUTSIDE OF THE UNITED STATES
Sales outside the United States during fiscal years 2001, 2000 and 1999
accounted for 33.3%, 34.6% and 35.0% of total sales, respectively. International
sales have grown at a




                                       10
<PAGE>

slower rate than overall Company sales as a result of foreign exchange rate
fluctuations. Sales outside the United States are accompanied by certain
financial risks, such as collection of receivables, which typically have longer
payment terms. Outstanding receivables from customers located outside of the
United States totaled $527.6 million at April 27, 2001 or 41.8% of total
outstanding receivables, and $544.6 million or 43.9% of total receivables
outstanding at April 30, 2000. Operations outside the United States could be
negatively impacted by unfavorable changes in political, labor or economic
conditions, unexpected changes in regulatory requirements or potential adverse
foreign tax consequences, among other factors.

MARKET RISK
Due to the global nature of its operations, the Company is subject to the
exposures that arise from foreign exchange rate fluctuations. The Company
manages these exposures using operational and economic hedges as well as
derivative financial instruments. Main currencies hedged are the Yen and the
Euro.

The Company's objective in managing its exposure to foreign currency
fluctuations is to minimize earnings and cash flow volatility associated with
foreign exchange rate changes. The Company enters into various contracts,
principally forward contracts that change in value as foreign exchange rates
change, to protect the value of its existing foreign currency assets,
liabilities, net investments, and probable commitments. The gains and losses on
these contracts offset changes in the value of the related exposures. It is the
Company's policy to enter into foreign currency transactions only to the extent
true exposures exist; the Company does not enter into foreign currency
transactions for speculative purposes. The Company's risk management activities
for fiscal 2001 were successful in minimizing the net earnings and cash flow
impact of currency fluctuations despite volatile market conditions.

The Company had forward exchange contracts outstanding in notional amounts of
$382.3 million and $537.2 million at April 27, 2001 and April 30, 2000,
respectively. The fair value of all foreign currency derivative contracts
outstanding at April 27, 2001 was $18.3 million, which does not represent the
Company's annual exposure. A sensitivity analysis of changes of the fair value
of all derivative foreign exchange contracts outstanding at April 27, 2001
indicates that, if the U.S. dollar uniformly weakened by 10% against all
currencies, the fair value of these contracts would decrease by $35.1 million.
Conversely, if the U.S. dollar uniformly strengthened by 10% against all major
currencies, the fair value of these contracts would increase by $31.4 million.
Any gains and losses on the fair value of derivative contracts would be largely
offset by losses and gains on the underlying transactions. These offsetting
gains and losses are not reflected in the above analysis.

The Company is also exposed to interest rate changes affecting principally its
investments in interest rate sensitive instruments. A sensitivity analysis of
the impact on the Company's interest rate sensitive financial instruments of a
hypothetical 10% decrease in short-term interest rates compared to interest
rates at April 27, 2001 indicates that the fair




                                       11
<PAGE>

value of these instruments would increase by $4.2 million. Conversely, a 10%
increase would decrease the value of these instruments by $4.1 million.


GOVERNMENT REGULATION AND OTHER MATTERS
Government and private sector initiatives to limit the growth of health care
costs, including price regulation, competitive pricing, coverage and payment
policies and managed-care arrangements, are continuing in many countries where
the Company does business, including the United States. These changes are
causing the marketplace to put increased emphasis on the delivery of more
cost-effective medical therapies. Government programs including Medicare and
Medicaid, private health care insurance and managed care plans have attempted to
control costs by limiting the amount of reimbursement such third party payors
will pay to hospitals, other medical institutions and physicians for particular
procedures or treatments. Such limitations may create an increasing level of
price sensitivity among customers for the Company's products. Some third party
payors must also approve coverage for new or breakthrough therapies before they
will reimburse health care providers using the products. Even though a new
product may have been cleared for commercial release by the FDA as described
below, the Company may find limited demand for a new or breakthrough therapy
until obtaining reimbursement approval from private and governmental third party
payors. Although the Company believes it is well-positioned to respond to
changes resulting from this worldwide trend toward cost containment, the
uncertainty as to the outcome of any proposed legislation or changes in the
marketplace precludes the Company from predicting the impact of these changes on
future operating results.

In the United States, the FDA, among other governmental agencies, is responsible
for regulating the introduction of new medical devices, including the review of
design and manufacturing practices, labeling and recordkeeping for medical
devices, and review of manufacturers' required reports of adverse experience and
other information to identify potential problems with marketed medical devices.
The FDA can ban certain medical devices, detain or seize adulterated or
misbranded medical devices, order repair, replacement, or refund of such
devices, and require notification of health professionals and others with regard
to medical devices that present unreasonable risks of substantial harm to the
public health. The FDA may also enjoin and restrain certain violations of the
Food, Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to
medical devices, or initiate action for criminal prosecution of such violations.
Moreover, the FDA administers certain controls over the export of such devices
from the United States. Many of the devices that Medtronic develops and markets
are in a category for which the FDA has implemented stringent clinical
investigation and pre-market clearance requirements. Any delay or acceleration
experienced by the Company in obtaining regulatory approvals to conduct clinical
trials or in obtaining required market clearances (especially with respect to
significant products in the regulatory process that have been discussed in the
Company's announcements) may affect the Company's operations or the market's
expectations for the timing of such events and, consequently, the market price
for the Company's common stock.



                                       12
<PAGE>

The FDA Modernization Act of 1997 was adopted with the intent of bringing better
definition to the FDA's product clearance process. While FDA review times have
improved since passage of the 1997 Act, there can be no assurance that the FDA
review process will not involve delays or that clearances will be granted on a
timely basis.

Medical device laws are also in effect in many of the countries in which
Medtronic does business outside the United States. These range from
comprehensive device approval requirements for some or all of Medtronic's
medical device products to requests for product data or certifications. The
number and scope of these requirements are increasing.

In keeping with the increased emphasis on cost-effectiveness in health care
delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to enhance
purchasing power. As a result, transactions with customers are more significant,
more complex and tend to involve more long-term contracts than in the past. This
enhanced purchasing power may also lead to pressure on product pricing and
increased use of preferred vendors.

The Company operates in an industry characterized by extensive patent
litigation. Patent litigation can result in significant damage awards and
injunctions that could prevent the manufacture and sale of affected products or
result in significant royalty payments in order to continue producing the
products. At any given time, the Company is generally involved as both a
plaintiff and a defendant in a number of patent infringement actions. With
regard to patent applications, there can be no assurance that such applications
will result in issued patents or that patents issued or licensed to the Company
will not be challenged or circumvented by competitors. While the Company
believes that the patent litigation incident to its business will generally not
have a material adverse impact on the Company's financial position or liquidity,
it may be material to the consolidated results of operations of any one period.

The Company also operates in an industry susceptible to significant product
liability claims. In recent years, there has been increased public interest in
product liability claims for implanted medical devices, including pacemakers,
leads and spinal systems. These claims may be brought by individuals seeking
relief for themselves or, increasingly, by groups seeking to represent a class.
In addition, product liability claims may be asserted against the Company in the
future relative to events not known to management at the present time.
Management believes that the Company's risk management practices, including
insurance coverage, are reasonably adequate to protect against potential product
liability losses.

The Company is also subject to various environmental laws and regulations both
within and outside the United States. The operations of the Company, like those
of other medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes.
While it is difficult to quantify the potential impact of compliance with
environmental protection laws, management believes




                                       13
<PAGE>

that such compliance will not have a material impact on the Company's financial
position, results of operations or liquidity.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements contained in this Annual Report and other written and oral
statements made from time to time by the Company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "should," "will," "forecast" and similar words or
expressions. The Company's forward-looking statements generally relate to its
growth strategies, financial results, product development and regulatory
approval programs, and sales efforts. One must carefully consider
forward-looking statements and understand that such statements involve a variety
of risks and uncertainties, known and unknown, and may be affected by inaccurate
assumptions, including, among others, those discussed in the previous section
entitled "Government Regulation and Other Matters" and in Item 1 of the
Company's Annual Report on Form 10-K under the heading "Cautionary Factors That
May Affect Future Results." Consequently, no forward-looking statement can be
guaranteed and actual results may vary materially.

The Company undertakes no obligation to update any forward-looking statement,
but investors are advised to consult any further disclosures by the Company on
this subject in its filings with the Securities and Exchange Commission,
especially on Forms 10-K, 10-Q, and 8-K (if any), in which the Company discusses
in more detail various important factors that could cause actual results to
differ from expected or historic results. The Company notes these factors as
permitted by the Private Securities Litigation Reform Act of 1995. It is not
possible to foresee or identify all such factors. As such, investors should not
consider any list of such factors to be an exhaustive statement of all risks,
uncertainties or potentially inaccurate assumptions.






                                       14
<PAGE>


REPORT OF MANAGEMENT
The management of Medtronic, Inc., is responsible for the integrity of the
financial information presented in this Annual Report. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles. Where necessary, they reflect estimates based on
management's judgment.

Management relies upon established accounting procedures and related systems of
internal control for meeting its responsibilities to maintain reliable financial
records. These systems are designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with management's intentions. Internal auditors periodically review
the accounting and control systems, and these systems are revised if and when
weaknesses or deficiencies are found.

The Audit Committee of the Board of Directors, composed of directors from
outside the Company, meets regularly with management, the Company's internal
auditors, and its independent accountants to discuss audit scope and results,
internal control evaluations, and other accounting, reporting, and financial
matters. The independent accountants and internal auditors have access to the
Audit Committee without management's presence.






Arthur D. Collins, Jr.
President and Chief Executive Officer


Robert L. Ryan
Senior Vice President and Chief Financial Officer



                                       15
<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and
Board of Directors of Medtronic, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
statements of consolidated earnings, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Medtronic, Inc., and
its subsidiaries at April 27, 2001 and April 30, 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
April 27, 2001, in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company'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 auditing standards generally accepted in the
United States of America 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 our opinion.

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
May 22, 2001, except for Note 3 and Note 15, which are as of July 18, 2001



                                       16
<PAGE>

<TABLE>
<CAPTION>


STATEMENT OF CONSOLIDATED EARNINGS
(in millions, except per share data)                               Medtronic, Inc.
- -------------------------------------------------------------------------------------------------
Year ended                                           APRIL 27,         April 30,        April 30,
                                                       2001              2000             1999
- -------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>               <C>
NET SALES                                            $ 5,551.8        $  5,016.3        $ 4,232.5
COSTS AND EXPENSES:
  Cost of products sold                                1,410.6           1,265.8          1,105.3
  Research and development expense                       577.6             488.2            441.6
  Selling, general, and administrative
    expense                                            1,685.2           1,578.8          1,325.2
  Non-recurring charges                                  338.8              13.8            525.1
  Other (income)/expense                                  64.4              70.6             33.2
  Interest (income)/expense                              (74.2)            (15.7)           (23.0)
- -------------------------------------------------------------------------------------------------
       TOTAL COSTS AND EXPENSES                        4,002.4           3,401.5          3,407.4
EARNINGS BEFORE INCOME TAXES                           1,549.4           1,614.8            825.1
PROVISION FOR INCOME TAXES                               503.4             530.6            358.4
- -------------------------------------------------------------------------------------------------
       NET EARNINGS                                  $ 1,046.0        $  1,084.2        $   466.7
=================================================================================================

EARNINGS PER SHARE
       BASIC                                         $    0.87        $     0.91        $    0.40
- -------------------------------------------------------------------------------------------------
       DILUTED                                       $    0.85        $     0.89        $    0.39
=================================================================================================

Weighted average shares outstanding
       Basic                                           1,203.0           1,194.7          1,177.3
- -------------------------------------------------------------------------------------------------
       Diluted                                         1,226.0           1,223.4          1,209.6
=================================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.



                                       17
<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEET
(in millions of dollars, except per share data)                              Medtronic, Inc.
- -----------------------------------------------------------------------------------------------
                                                                         APRIL 27,    April 30,
                                                                           2001         2000
- -----------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                           $  1,030.3   $    467.8
    Short-term investments                                                   201.4        109.7
    Accounts receivable, less allowance
      for doubtful accounts of $34.9 and $30.2                             1,226.1      1,210.6
    Inventories                                                              729.5        691.7
    Deferred tax assets                                                      281.5        160.5
    Prepaid expenses and other current assets                                288.0        396.0
- -----------------------------------------------------------------------------------------------
       TOTAL CURRENT ASSETS                                                3,756.8      3,036.3
PROPERTY, PLANT, AND EQUIPMENT, NET                                        1,176.5        948.0
GOODWILL AND OTHER INTANGIBLE ASSETS, NET                                  1,235.3      1,361.4
LONG-TERM INVESTMENTS                                                        683.2        210.1
OTHER ASSETS                                                                 187.1        138.3
- -----------------------------------------------------------------------------------------------
        TOTAL ASSETS                                                    $  7,038.9   $  5,694.1
===============================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Short-term borrowings                                               $    145.4   $    317.2
    Accounts payable                                                         205.9        201.1
    Accrued compensation                                                     248.2        236.6
    Accrued income taxes                                                     204.1          -
    Other accrued expenses                                                   555.7        239.5
- -----------------------------------------------------------------------------------------------
        TOTAL CURRENT LIABILITIES                                          1,359.3        994.4
LONG-TERM DEBT                                                                13.3         14.9
DEFERRED TAX LIABILITIES                                                       -           15.2
LONG-TERM ACCRUED COMPENSATION                                                88.3         95.7
OTHER LONG-TERM LIABILITIES                                                   68.5         61.4
- -----------------------------------------------------------------------------------------------
        TOTAL LIABILITIES                                                  1,529.4      1,181.6
COMMITMENTS AND CONTINGENCIES                                                  -            -

SHAREHOLDERS' EQUITY:
      Preferred stock--par value $1.00; 2,500,000 shares authorized,           -            -
         none outstanding
      Common stock--par value $0.10; 1.6 billion shares authorized,
        1,209,514,816 and 1,198,357,035 shares issued and outstanding        121.0        119.8
      Retained earnings                                                    5,576.3      4,564.1
      Accumulated other non-owner changes in equity                         (168.8)      (151.9)
- -----------------------------------------------------------------------------------------------
                                                                           5,528.5      4,532.0
      Receivable from Employee Stock
        Ownership Plan                                                       (19.0)       (19.5)
- -----------------------------------------------------------------------------------------------
          TOTAL SHAREHOLDERS' EQUITY                                       5,509.5      4,512.5

          TOTAL LIABILITIES AND
            SHAREHOLDERS' EQUITY                                        $  7,038.9   $  5,694.1
===============================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.






                                       18
<PAGE>
<TABLE>
<CAPTION>

STATEMENT OF CONSOLIDATED SHAREHOLDER'S EQUITY
(in millions of dollars)                                                                                        Medtronic, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                       Accumulated
                                                                                        Other Non-   Receivable     Total
                                                                Common     Retained   Owner Changes     from    Shareholders'
                                                                Stock      Earnings     in Equity       ESOP        Equity
                                                               ----------------------------------------------------------------
<S>                                                            <C>          <C>          <C>          <C>          <C>
BALANCE APRIL 30, 1998                                         $  116.1     $2,712.9     $  (54.9)    $  (27.9)    $2,746.2

Net earnings                                                        -          466.7          -            -          466.7
OTHER NON-OWNER CHANGES IN EQUITY
      Change in unrealized gain (loss) on investments,
          net of $5.9 tax benefit                                   -            -          (10.9)         -          (10.9)
      Translation adjustment                                        -            -          (26.2)         -          (26.2)
      Minimum pension liability                                     -            -           (3.1)         -           (3.1)
                                                                                                                   --------
                  Total comprehensive income                        -            -            -            -          426.5
                                                                                                                   --------
Adjustment for poolings of interest                                 -           19.4          -            -           19.4
Dividends paid                                                      -         (131.9)         -            -         (131.9)
Issuance of common stock from secondary offering                    2.2        710.4          -            -          712.6
Issuance of common stock under employee benefits
    and incentive plans                                             0.2         56.0          -            -           56.2
Issuance of common stock for acquisition of subsidiaries            1.8        251.5          -            -          253.3
Issuance of common stock by pooled entities                         -           20.7          -            -           20.7
Repurchases of common stock                                        (1.2)      (376.0)         -            -         (377.2)
Income tax benefit from restricted stock and
    nonstatutory stock options                                      -           61.7          -            -           61.7
Repayments from ESOP                                                -            -            -            1.7          1.7
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE APRIL 30, 1999                                         $  119.1     $3,791.4     $  (95.1)    $  (26.2)    $3,789.2


Net earnings                                                        -        1,084.2          -            -        1,084.2
OTHER NON-OWNER CHANGES IN EQUITY
      Change in unrealized gain (loss) on
          investments, net of $8.3 tax benefit                      -            -          (15.6)         -          (15.6)
      Translation adjustment                                        -            -          (38.7)         -          (38.7)
      Minimum pension liability                                     -            -           (2.5)         -           (2.5)
                                                                                                                   --------
                   Total comprehensive income                       -            -            -            -        1,027.4
                                                                                                                   --------
Adjustment for poolings of interests                                -            0.6          -            -            0.6
Dividends paid                                                      -         (189.5)         -            -         (189.5)
Issuance of common stock under employee benefits
    and incentive plans                                             2.0        192.0          -            -          194.0
Issuance of common stock by pooled entities                         -           16.9          -            -           16.9
Repurchases of common stock                                        (1.3)      (496.1)         -            -         (497.4)
Income tax benefit from restricted stock and
    nonstatutory stock options                                      -          164.6          -            -          164.6
Repayments from ESOP                                                -            -            -            6.7          6.7
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE APRIL 30, 2000                                         $  119.8     $4,564.1     $ (151.9)    $  (19.5)    $4,512.5


Net earnings                                                        -        1,046.0          -            -        1,046.0
OTHER NON-OWNER CHANGES IN EQUITY
      Change in unrealized gain (loss)
          on investments, net of $10.6 tax expense                  -            -           19.4          -           19.4
      Translation adjustment                                        -            -          (39.2)         -          (39.2)
      Minimum pension liability                                     -            -            2.9          -            2.9
                                                                                                                   --------
                   Total comprehensive income                       -            -            -            -        1,029.1
                                                                                                                   --------
Adjustment for poolings of interests                                -           (1.4)         -            -           (1.4)
Dividends paid                                                      -         (240.7)         -            -         (240.7)
Issuance of common stock under employee benefits
    and incentive plans                                             1.2        147.5          -            -          148.7
Income tax benefit from restricted stock and
    nonstatutory stock options                                      -           60.8          -            -           60.8
Repayments from ESOP                                                -            -            -            0.5          0.5
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE APRIL 27, 2001                                         $  121.0     $5,576.3     $ (168.8)    $  (19.0)    $5,509.5
- ---------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.



                                       19
<PAGE>


<TABLE>
<CAPTION>


STATEMENT OF CONSOLIDATED CASH FLOWS
(in millions of dollars)                                                                 Medtronic, Inc.
- --------------------------------------------------------------------------------------------------------
Year ended                                                          APRIL 27,     April 30,    April 30,
                                                                       2001         2000         1999
- --------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>
OPERATING ACTIVITIES
    Net earnings                                                     $1,046.0     $1,084.2     $  466.7
    Adjustments to reconcile net earnings
      to net cash provided by operating activities:
            Depreciation and amortization                               297.3        243.9        219.1
            Non-recurring charges, net                                  317.1          8.5        179.6
            Deferred income taxes                                      (152.2)        71.1        (35.5)
            Changes in operating assets and
               liabilities:
              Accounts receivable                                       (44.1)      (193.2)      (184.4)
              Inventories                                               (44.5)      (120.0)       (91.3)
              Prepaid expenses and other assets                          45.6       (118.6)      (128.0)
              Accounts payable and accrued liabilities                   31.8        249.0         82.3
              Income tax receivable/payable                             333.4       (178.8)       (56.0)
              Other long-term liabilities                                 1.1        (19.7)         3.3
- -------------------------------------------------------------------------------------------------------
                NET CASH PROVIDED BY OPERATING ACTIVITIES             1,831.5      1,026.4        455.8
INVESTING ACTIVITIES
    Additions to property, plant,
      and equipment                                                    (439.7)      (342.5)      (236.2)
    Acquisitions, net of cash acquired                                    -            -       (1,017.4)
    Sales and maturities of
      marketable securities                                             923.0        268.9        659.0
    Purchases of marketable securities                               (1,390.0)      (258.4)      (701.6)
    Other investing activities                                         (118.8)       (45.0)       (46.2)
- -------------------------------------------------------------------------------------------------------
                NET CASH USED IN INVESTING ACTIVITIES                (1,025.5)      (377.0)    (1,342.4)
FINANCING ACTIVITIES
    Increase (decrease) in short-term borrowings                       (152.2)        59.1        113.6
    Payments on long-term debt                                          (10.2)        (9.7)      (615.2)
    Issuance of long-term debt                                            8.7           .6        572.7
    Dividends to shareholders                                          (240.7)      (189.5)      (131.9)
    Repurchases of common stock                                           -         (497.4)      (377.2)
    Issuance of common stock                                            148.7        210.9      1,042.8
- -------------------------------------------------------------------------------------------------------
                NET CASH PROVIDED BY (USED IN)
                  FINANCING ACTIVITIES                                 (245.7)      (426.0)       604.8
    Effect of exchange rate changes
      on cash and cash equivalents                                        2.2         (3.0)        (1.9)
    NET CHANGE IN CASH AND CASH
      EQUIVALENTS                                                       562.5        220.4       (283.7)
    Cash and cash equivalents
      at beginning of year                                              467.8        247.4        531.1
- -------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
  AT END OF YEAR                                                     $1,030.3     $  467.8     $  247.4
=======================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
    Cash paid during the year for:
        Income taxes                                                 $  338.1     $  401.8     $  376.2
        Interest                                                         17.0         14.0         29.2
- -------------------------------------------------------------------------------------------------------






                                       20
<PAGE>
Supplemental Non-cash Investing
  and Financing Activities
    Issuance of common stock for
      acquisition of subsidiary, net
       of cash acquired                                          $        -    $       -       $  164.3
- -------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.




                                       21
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Medtronic, Inc.
(dollar amounts in millions, except per share data)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Medtronic is the world's leading medical technology company, providing lifelong
solutions for people with chronic disease. The Company provides innovative
products and therapies for the health care needs of medical professionals and
their patients. Operations are focused primarily on providing therapeutic,
diagnostic, and monitoring systems for the cardiac rhythm management,
cardiovascular, neurological, spinal and ear, nose and throat (ENT) markets. The
Company is headquartered in Minneapolis, Minnesota, and markets its products
through a direct sales force in the United States and a combination of direct
sales representatives and independent distributors in international markets. The
main markets for products are the United States, Western Europe, and Japan.

PRINCIPLES OF CONSOLIDATION AND FISCAL YEAR END
The consolidated financial statements include the accounts of Medtronic, Inc.,
and all of its subsidiaries. All significant intercompany transactions and
accounts have been eliminated.

During fiscal 2001 the Company changed its fiscal year end from April 30th to
the last Friday in April. This change to a 52/53-week fiscal year did not have a
material effect on the Company's consolidated financial statements.

RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.

USE OF ESTIMATES
The preparation of the 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
accompanying notes. Actual results could differ from those estimates.

CASH EQUIVALENTS
The Company considers highly liquid investments with maturities of three months
or less from the date of purchase to be cash equivalents. These investments are
valued at cost, which approximates fair value.

INVESTMENTS
Investments in debt and equity securities that have readily determinable fair
values are classified and accounted for as available-for-sale or
held-to-maturity. Held-to-maturity investments consist principally of U.S.
government and corporate debt securities that the




                                       22
<PAGE>

Company has the positive intent and ability to hold until maturity. These
securities are recorded at amortized cost in short and long-term investments.
Available-for-sale securities consist of equity securities and debt instruments
that are recorded at fair value in short and long-term investments, with the
change in fair value recorded, net of taxes, as a component of accumulated other
non-owner changes in equity. Management determines the appropriate
classification of its investments in debt and equity securities at the time of
purchase and reevaluates such determinations at each balance sheet date.

INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined on a
first-in, first-out basis. Inventory balances were as follows:

<TABLE>
<CAPTION>
                                                          APRIL 27,      April 30,
                                                             2001          2000
- --------------------------------------------------------------------------------
<S>                                                         <C>           <C>
Finished goods                                              $400.7        $374.6
Work in process                                              131.5         129.9
Raw materials                                                197.3         187.2
- --------------------------------------------------------------------------------
Total                                                       $729.5        $691.7
- --------------------------------------------------------------------------------
</TABLE>

PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Additions and improvements
that extend the lives of the assets are capitalized while expenditures for
repairs and maintenance are expensed as incurred. Depreciation is provided using
the straight-line method over the estimated useful lives of the various assets.
Property, plant and equipment balances and corresponding lives were as follows:

<TABLE>
<CAPTION>
                                           APRIL 27,        April 30,
                                             2001              2000          Lives
- ------------------------------------------------------------------------------------------
<S>                                       <C>               <C>             <C>
Land and land improvements                $     57.7        $    57.7       20 years
Buildings and leasehold improvements           510.1            393.4       up to 40 years
Equipment                                    1,215.4          1,047.8       3-7 years
Construction in progress                       274.1            181.8         -
- ------------------------------------------------------------------------------------------
                                             2,057.3          1,680.7
Less: Accumulated depreciation                (880.8)          (732.7)
==========================================================================================
Property, Plant and Equipment, net        $  1,176.5        $   948.0
==========================================================================================
</TABLE>

INTANGIBLE ASSETS
Goodwill represents the excess of the cost over the fair value of net assets of
acquired businesses while other intangible assets consist primarily of purchased
technology and patents. Intangible assets are being amortized using the
straight-line method over their estimated useful lives, ranging from 3 to 35
years. The Company periodically reviews its goodwill and other intangible assets
for impairment and assesses whether significant events or changes in business
circumstances indicate that the carrying value of the assets




                                       23
<PAGE>

may not be recoverable, based on an undiscounted cash flow analysis. Balances of
intangible assets were as follows:

<TABLE>
<CAPTION>
                                                           APRIL 27,   April 30,
                                                             2001        2000
- --------------------------------------------------------------------------------
<S>                                                        <C>         <C>
Goodwill                                                   $1,258.9    $1,274.3
Less: Accumulated amortization                               (263.0)     (205.3)
- -------------------------------------------------------------------------------
                                                              995.9     1,069.0
- -------------------------------------------------------------------------------
Other intangible assets                                       380.9       404.7
Less: Accumulated amortization                               (141.5)     (112.3)
- -------------------------------------------------------------------------------
                                                              239.4       292.4
- -------------------------------------------------------------------------------
Goodwill and other intangible assets, net                  $1,235.3    $1,361.4
- -------------------------------------------------------------------------------
</TABLE>

REVENUE RECOGNITION
A significant portion of the Company's revenue is generated from consigned
inventory maintained at hospitals or with field representatives. For these
products, revenue is recognized at the time the Company is notified that the
product has been used or implanted. For all other transactions, the Company
recognizes revenue when title to the goods transfers to customers and there are
no remaining obligations that will affect the customer's final acceptance of the
sale. The Company records estimated sales returns, discounts and rebates as a
reduction of net sales in the same period revenue is recognized.

Medtronic sells its products primarily through a direct sales force. In cases
where the Company utilizes distributors, it recognizes revenue upon shipment
provided that all revenue recognition criteria have been met.

The Company has entered into certain agreements with buying organizations to
sell Medtronic's products to participating hospitals at pre-negotiated prices.
Revenue generated under these agreements is recognized following the same
revenue recognition criteria discussed above.

RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred.

OTHER INCOME/EXPENSE
Other income/expense includes primarily goodwill and intellectual property
amortization expense, royalty income and expense, minority investment gains and
losses and foreign currency hedging gains and losses.

STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method as prescribed under Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations.



                                       24
<PAGE>

FOREIGN CURRENCY TRANSLATION
Assets and liabilities are translated to U.S. dollars at year-end exchange
rates, while elements of the income statement are translated at average exchange
rates in effect during the year. Foreign currency transaction gains and losses
are included in the statement of consolidated earnings as other income/expense.
Gains and losses arising from the translation of net assets located outside the
United States are recorded as a component of accumulated other non-owner changes
in equity.

FOREIGN EXCHANGE CONTRACTS
The Company manages its exposure to fluctuations in foreign currency exchange
rates by entering into various contracts that change in value as foreign
exchange rates change. The Company designates and assigns certain financial
instruments as hedges for specific assets, liabilities, net investments or
anticipated transactions. When hedged assets or liabilities are sold or
extinguished or the anticipated transactions being hedged are no longer expected
to occur, the Company recognizes the gain or loss on the designated hedging
financial instruments. The Company classifies its derivative financial
instruments as held or issued for purposes other than trading. Unrealized gains
on forward contracts are recorded in the balance sheet as other assets while
unrealized losses on forward contracts are included in accrued liabilities.

EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted average number of
common shares outstanding, while diluted earnings per share is computed based on
the weighted average number of common shares outstanding adjusted by the number
of additional shares that would have been outstanding had the potentially
dilutive common shares been issued. Potentially dilutive shares of common stock
include stock options and other stock-based awards granted under stock-based
compensation plans and shares committed to be purchased under the employee stock
purchase plan.

NEW ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulleting (SAB) 101, "Revenue Recognition in Financial Statements," which was
later amended by SAB 101A and SAB 101B. The Company adopted SAB 101, as amended,
in the fourth quarter of fiscal 2001. The adoption of this pronouncement did not
have a material impact on the Company's consolidated financial statements.

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133). SFAS 133, as amended, requires companies to recognize all derivatives as
assets and liabilities on the balance sheet and to measure the instruments at
fair value through income unless the derivative qualifies as a hedge. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is




                                       25
<PAGE>

recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. The Company adopted SFAS 133
during the first quarter of fiscal 2002 and recorded, upon adoption, a
cumulative pre-tax unrealized gain of approximately $55.0 in accumulated other
non-owner changes in equity.

In July 2001, the FASB issued Statement No. 141, "Business Combinations," and
Statement No. 142, "Goodwill and Other Intangible Assets," (collectively, "the
Statements.") The Statements eliminate the pooling-of-interests method of
accounting for business combinations and the systematic amortization of
goodwill. The Company intends to adopt the Statements during the first quarter
of fiscal 2002 and estimates that the adoption of the Statements will reduce
fiscal 2002 amortization expense, on a pre-tax basis, by approximately $45.0 to
$55.0.

NOTE 2--ACQUISITIONS
POOLING-OF-INTERESTS METHOD
On December 21, 2000, the Company issued approximately 3.7 million shares of its
common stock in exchange for all of the outstanding capital stock of PercuSurge,
Inc. (PercuSurge) in a transaction valued at approximately $231.0. PercuSurge is
a leading developer of interventional embolic protection devices and currently
markets a patented system that helps remove embolic material that is often
dislodged during the treatment of arteriosclerosis.

On November 5, 1999, the Company issued approximately 21.4 million shares of its
common stock in exchange for all of the outstanding capital stock of Xomed
Surgical Products, Inc. (Xomed) in a transaction valued at approximately $850.0,
including $25.0 of assumed debt. Xomed is a leading developer, manufacturer and
marketer of surgical products for use by ear, nose and throat physicians. Xomed
offers a broad line of products that include powered tissue-removal systems,
nerve monitoring systems, disposable fluid-control products, image guided
surgery systems and bioabsorbable products.

On January 28, 1999, the Company issued approximately 101.2 million shares of
its common stock for all of the outstanding capital stock of Arterial Vascular
Engineering, Inc. (AVE) in a transaction valued at approximately $4,200.0
including $550.0 of assumed debt. AVE designs and manufactures minimally
invasive solutions for the treatment of coronary artery and peripheral vascular
disease. AVE's product offerings include coronary stents, balloon catheters,
guidewires and guiding catheters.

On January 27, 1999, the Company issued approximately 90.0 million shares of its
common stock for all of the outstanding capital stock of Sofamor Danek Group,
Inc. (Sofamor Danek) in a transaction valued at approximately $3,300.0. Sofamor
Danek is primarily involved in developing, manufacturing, and marketing devices,
instruments, computer-assisted visualization products and biomaterials used in
the treatment of spinal and cranial disorders.



                                       26
<PAGE>

On September 30, 1998, the Company issued approximately 17.2 million shares of
its common stock for all of the outstanding capital stock of Physio-Control
International Corporation (Physio-Control) in a transaction valued at
approximately $550.0. Physio-Control designs, manufactures, markets, and
services an integrated line of noninvasive emergency cardiac defibrillator and
vital sign assessment devices, disposable electrodes, and data management
software.

These acquisitions have been accounted for as poolings-of-interests, and,
accordingly, the Company's historical results have been restated to include the
results of these acquisitions. The Company's consolidated financial results for
fiscal 2000 and fiscal 1999 have been restated as follows:

<TABLE>
<CAPTION>

YEAR ENDED APRIL 30, 2000                                 NET SALES   NET EARNINGS
- --------------------------------------------------------------------------------
<S>                                                         <C>         <C>
Medtronic (as previously reported)                          $5,014.6    $1,098.5
PercuSurge                                                       1.7       (14.3)
- --------------------------------------------------------------------------------
Combined                                                    $5,016.3    $1,084.2
- --------------------------------------------------------------------------------

YEAR ENDED APRIL 30, 1999                                  NET SALES  NET EARNINGS
- --------------------------------------------------------------------------------
Medtronic (as previously reported)                          $4,134.1      $468.4
Xomed                                                           98.3         7.9
PercuSurge                                                        .1        (9.6)
- --------------------------------------------------------------------------------
Combined                                                    $4,232.5      $466.7
- --------------------------------------------------------------------------------
</TABLE>

The combined results for the fiscal year ended April 30, 2000 represent the
previously reported results of Medtronic for that fiscal year combined with the
historical results of PercuSurge for the twelve months ended March 31, 2000.
Effective May 1, 2000, PercuSurge's year-end has been changed from December 31
to the last Friday in April to conform to the Company's fiscal year-end.
Accordingly, PercuSurge's results for the one-month period ended April 30, 2000
has been excluded from the Company's combined results and have been reported as
an adjustment to May 1, 2000 retained earnings. PercuSurge's net sales and net
loss for the one-month period ended April 30, 2000 were $0.1 and $1.4,
respectively.

The combined results for the fiscal year ended April 30, 1999 represent the
previously reported results of Medtronic for that fiscal year combined with the
historical results of Xomed and PercuSurge for the twelve months ended March 31,
1999. Effective May 1, 1999, Xomed's fiscal year-end was changed from December
31 to April 30 to conform to the Company's fiscal year-end. Accordingly, Xomed's
results for the one-month period ended April 30, 1999 have been excluded from
the Company's combined results and have been reported as an adjustment to May 1,
1999 retained earnings. Xomed's net sales and net earnings for the one-month
period ended April 30, 1999 were $8.3 and $0.6, respectively.




                                       27
<PAGE>

PURCHASE METHOD
On April 30, 1999, the Company acquired all of the outstanding capital stock of
Micro Motion Sciences (Micro Motion) for $9.8. Micro Motion develops advanced
lead and catheter placement technology.

On March 8, 1999, the Company acquired all of the outstanding capital stock of
AVECOR Cardiovascular Inc. (AVECOR) for approximately $96.1 in Medtronic common
stock and other consideration. AVECOR develops, manufactures and markets
specialty medical devices for heart/lung bypass surgery and long-term
respiratory support. In March 1999, subsequent to the closing of this
transaction, the Company repurchased in the open market the equivalent number of
shares issued in the AVECOR acquisition.

Prior to the merger with the Company, AVE acquired all of the outstanding
capital stock of World Medical Manufacturing Corporation (World Medical) on
December 14, 1998 in exchange for approximately $70.8 in AVE common stock and
other consideration. World Medical develops, manufactures, and markets an
endovascular stented graft and delivery system for the treatment of abdominal
aortic aneurysms. In addition, on October 1, 1998, AVE acquired the coronary
catheter lab business of C. R. Bard, Inc. ("Bard cath lab") for a purchase price
of approximately $610.7. The Bard cath lab business includes a broad range of
catheter-based technologies including balloon catheters, guidewires, and
coronary stents.

On October 16, 1998, the Company acquired all of the assets and certain
liabilities of Midas Rex, L.P. (Midas Rex), for approximately $230.0 in cash.
Midas Rex is the market leader in high-speed neurological powered instruments,
including pneumatic instrumentation for surgical dissection of bones, biometals,
bioceramics and bioplastics. Other instruments manufactured by Midas Rex assist
in orthopedic, otolaryngological, maxillofacial and craniofacial procedures, as
well as plastic surgery.

The acquisitions of Micro Motion, AVECOR, Midas Rex, World Medical and Bard cath
lab were accounted for as purchases. Accordingly, the results of operations of
the acquired entities have been included in the Company's consolidated financial
statements since the respective dates of acquisition. Acquired goodwill,
patents, trademarks, and other intangible assets associated with these
acquisitions are being amortized using the straight-line method over periods
ranging from 3 to 15 years for intangibles and up to 25 years for goodwill.

The purchase price allocation was as follows:

         Net assets acquired        $    53.0
         Goodwill                       685.2
         In-process R&D                 150.9
         Other intangibles              128.3
                                        -----
                                    $ 1,017.4
                                    =========


                                       28
<PAGE>


Pro forma information has not been included, as these acquisitions did not have
a material impact on the Company's results of operations.

NOTE 3--NON-RECURRING CHARGES
FISCAL 2001 INITIATIVES
In fiscal year 2001, the Company recorded transaction and integration charges in
connection with its merger with PercuSurge and charges related to litigation.
Also, during 2001, the Company announced that it would contribute $20.4 of
proceeds from litigation settlements to the Medtronic Foundation.

During the fourth quarter of the year, the Company announced restructuring
activities totaling $47.0 to $52.0, primarily aimed at streamlining operations.
The Company recognized $14.5 of these charges in fiscal 2001 and intends to
complete all activities necessary to recognize the remaining charges in the
first quarter of fiscal 2002. These activities will be focused on restructuring
the sales organization of certain neurological product lines, reducing and
consolidating certain manufacturing operations, and streamlining and
reorganizing European sales organizations to further integrate prior
acquisitions. In connection with these activities the Company will terminate
approximately 650 employees, and will eliminate 450 positions. Of the employees
identified for termination, approximately 280 are in manufacturing positions.

Subsequent to year end, and as further described in Note 15, two adverse patent
infringement decisions were rendered against the Company. In June 2001, an
appeals court affirmed an earlier judgment against the Company in a lawsuit
commenced by AcroMed Corporation. The amount of the judgment plus interest
totaled $52.1 and has been reflected in fiscal 2001 results. In July 2001, an
arbitration panel found that certain Medtronic rapid exchange perfusion delivery
systems infringed a patent held by Boston Scientific Corporation (Boston
Scientific), and awarded damages of approximately $169.0, plus legal costs. In
connection with this finding, the Company wrote off $21.0 of intangible assets
specifically related to the rapid exchange perfusion technology, and $37.2 of
the goodwill recorded for the Bard cath lab acquisition. The goodwill impairment
amount was determined on a pro rata basis using the relative fair values of the
long-lived assets and identifiable intangibles acquired from C.R. Bard, Inc. The
arbitration panel also allowed for an injunction on future U.S. sales of these
delivery systems, and accordingly, the Company wrote off $8.4 of excess rapid
exchange perfusion inventory. These charges have been reflected in fiscal 2001
results.








                                       29
<PAGE>


Fiscal 2001 initiatives are summarized as follows:


<TABLE>
<CAPTION>
                                                     FISCAL 2001 UTILIZED  BALANCE AT
                                                      CHARGES    IN 2001   APRIL 27,
                                                                            2001
                                                     ----------------------------
<S>                                                  <C>        <C>        <C>
Facility reductions                                  $  1.3     $   -      $  1.3

Severance and related costs                            10.8        (1.5)      9.3

Contractual obligations                                10.9         -        10.9
                                                     ----------------------------
TOTAL RESTRUCTURING-RELATED ACCRUALS                   23.0        (1.5)     21.5

Transaction related costs                               4.2        (4.2)      -

Asset write downs                                      68.3       (68.3)      -

Litigation                                            251.7       (24.5)    227.2
                                                     ----------------------------
TOTAL                                                $347.2    $  (98.5)   $248.7
                                                     ----------------------------
</TABLE>


FISCAL 2000 INITIATIVES
In fiscal 2000, the Company recorded transaction charges in connection with its
merger with Xomed, a litigation settlement, the termination of a distribution
relationship and the closure of certain direct sales operations in Latin
America. In connection with these activities, the Company announced the
termination of 78 employees, mostly in administrative positions. All identified
actions were substantially completed as of the end of fiscal 2001.


Fiscal 2000 initiatives are summarized as follows:

<TABLE>
<CAPTION>
                                         FISCAL  UTILIZED BALANCE AT  UTILIZED BALANCE AT
                                          2000
                                        CHARGES   IN 2000  APRIL 30,  IN 2001  APRIL 27,
                                                             2000                2001
                                        ---------------------------------------------
<S>                                     <C>      <C>        <C>       <C>       <C>
Facility reductions                     $ 0.9    $  -       $ 0.9     $(0.2)    $ 0.7

Severance and related costs               1.4       -         1.4      (1.1)      0.3
                                        ---------------------------------------------
TOTAL RESTRUCTURING-RELATED ACCRUALS      2.3       -         2.3      (1.3)      1.0

Transaction related costs                14.7     (14.7)      -         -         -

Asset write downs                         6.2      (6.2)      -         -         -

Litigation                               15.5     (15.5)      -         -         -
                                        ---------------------------------------------
                                        $38.7    $(36.4)    $ 2.3     $(1.3)    $ 1.0
TOTAL                                   ---------------------------------------------
</TABLE>


FISCAL 1999 INITIATIVES
During fiscal 1999, the Company recorded transaction-related charges in
connection with the mergers with Physio-Control, Sofamor Danek, and AVE. The
Company also




                                       30
<PAGE>

purchased AVECOR during the fourth quarter of fiscal 1999. In connection with
these transactions, management identified areas where duplicate manufacturing,
sales and administrative capacity existed and identified opportunities to
leverage existing infrastructure and achieve better economies of scale. During
the third and fourth quarter of the fiscal year, management announced certain
initiatives to restructure its new vascular, cardiac surgery and spinal surgery
organizations and announced the closure of ten manufacturing facilities, the
termination of 2,950 employees and a net reduction of 2,450 positions. Of the
employees identified for termination, 2,585 were in manufacturing positions. As
the Company substantially completed these initiatives, it identified and
reversed $24.9 of reserves no longer considered necessary during the fourth
quarter of fiscal 2000.

Fiscal 1999 initiatives are summarized as follows:

<TABLE>
<CAPTION>
                               FISCAL    UTILIZED BALANCE AT   CHANGE    UTILIZED BALANCE AT  UTILIZED BALANCE AT
                                1999                              IN
                               CHARGES    IN 1999  APRIL 30,   ESTIMATE  IN 2000   APRIL 30,  IN 2001  APRIL 27,
                                                     1999                            2000                2001
                               -------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>        <C>       <C>       <C>       <C>        <C>
Facility reductions            $ 10.9     $ (1.8)    $  9.1     $  3.8    $ (9.1)   $  3.8    $ (3.8)    $ -

Severance and related costs      68.6       (8.1)      60.5      (21.2)    (28.6)     10.7     (10.7)      -

Contractual obligations          51.2      (10.5)      40.7       (0.2)    (33.8)      6.7      (6.7)      -
                               -------------------------------------------------------------------------------
TOTAL RESTRUCTURING-RELATED
        ACCRUALS                130.7      (20.4)     110.3      (17.6)    (71.5)     21.2     (21.2)      -

Transaction related costs       149.3     (136.5)      12.8        -       (12.8)      -         -         -

Asset write downs                92.1      (92.1)       -         (7.3)      7.3       -         -         -

Purchased in-process R&D        152.0     (152.0)       -          -         -         -         -         -
                               -------------------------------------------------------------------------------
TOTAL                          $524.1    $(401.0)    $123.1     $(24.9)   $(77.0)   $ 21.2    $(21.2)   $  -
                               -------------------------------------------------------------------------------
</TABLE>

During fiscal 1999 AVE acquired World Medical for consideration of $70.8 and
expensed $45.8 of the purchase price for purchased in-process research and
development that had not yet reached technological feasibility and had no
alternative future use, including the Talent System and two smaller programs.
The Talent System is currently sold in Europe and has completed U.S. clinical
trials.

Also during fiscal 1999, AVE acquired Bard cath lab for $610.7 and expensed
$95.3 of the purchase price for purchased in-process research and development
that had not yet reached technological feasibility and had no alternative use,
including a rapid exchange perfusion catheter, a stent development program and
eight other minor product categories. In fiscal 2000, the Company introduced its
S670 rapid exchange perfusion coronary stent system in the U.S and in fiscal
2001, it launched the S660 with discrete technology coronary stent system for
smaller vessels and the BeStent 2 coronary stent delivery system using
technology from the acquisition of Bard cath lab. In April 2001, the S7 with
discrete technology rapid exchange perfusion coronary stent system received
approval from the Food and Drug Administration (FDA). Subsequent to year end, an
arbitration panel determined that certain Medtronic rapid exchange perfusion
delivery systems infringed a patent held by Boston Scientific, as further
discussed in Note 15 to the consolidated financial statements.



                                       31
<PAGE>

In April 1999, the Company acquired certain advanced catheter delivery
technology from Micro Motion Sciences and expensed $9.8 for the purchase of
in-process research and development. In addition, during fiscal 1999 Xomed wrote
off approximately $1.1 of the $13.0 purchase price it paid for the acquisition
of Etalissements Boutmy, S.A. for purchased in-process research and development.

The values assigned to purchased in-process research and development were
determined by estimating the future after-tax net cash flows attributable to the
projects and discounting these cash flows back to their present value. Discount
rates included a factor that takes into account the uncertainty surrounding the
successful development of the purchased in-process research and development. The
values assigned to the World Medical and Bard cath lab purchased in-process
research and development were based on valuations prepared by independent third
party appraisers and were determined by identifying research projects in areas
for which technological feasibility had not been established. The Company
expects that all the acquired in-process research and development will reach
technological feasibility, but there can be no assurance that the commercial
viability of these products will actually be achieved. If commercial viability
were not achieved, the Company would look to other alternatives to provide these
solutions.

Facility reduction and asset write down charges were estimated as the difference
between the carrying value of the asset and its fair value less cost to sell and
including estimated subleasing proceeds. Facility reduction costs related to the
ten facilities identified for closure were higher than originally estimated due
to an inability to sub-lease two facilities as originally planned. Asset write
down charges included $29.0 of charges to cost of sales for discontinued product
lines in the vascular and cardiac surgery business. Estimated asset write downs
were favorably impacted by higher than planned sales proceeds.

During the fourth quarter of fiscal 2000 as the restructuring initiatives had
been substantially completed, the Company identified and reversed $21.2 of
severance related charges no longer deemed necessary, including a one-time
pension curtailment gain of $4.4 (see Note 10). Original estimates were
favorably impacted by foreign exchange rate fluctuations and voluntary
departures.

Fiscal 1999 charges also included $41.4 for non-cancelable contractual
commitments and other non-recurring expenses, $8.0 related to payments made by
Sofamor Danek under two strategic development and licensing agreements and $1.8
related to certain restructuring initiatives of Xomed.

PRE 1999 INITIATIVES
During fiscal 1997, Sofamor Danek recorded a product liability litigation charge
of $50.0 to recognize the anticipated costs associated with the defense and
conclusion of certain product liability cases in which Sofamor Danek is named a
defendant (see Note 12). During fiscal 1999, the Company recorded an additional
$25.0 reserve necessary to conclude outstanding litigation. The Company utilized
$1.2 of these charges in fiscal 1997, $11.6 in fiscal 1998, $21.7 in fiscal
1999, $12.4 in fiscal 2000 and $0.9 in fiscal 2001.





                                       32
<PAGE>



SUMMARY OF INITIATIVES
A summary of all initiatives is as follows:

<TABLE>
<CAPTION>
                                       BALANCE      FISCAL    UTILIZED    BALANCE    FISCAL     CHANGES     UTILIZED
                                          AT         1999                    AT       2000        IN
                                       APRIL 30,   CHARGES    IN 1999     APRIL 30,  CHARGES   ESTIMATES     IN 2000
                                         1998                              1999
                                       -----------------------------------------------------------------------------
<S>                                    <C>        <C>        <C>         <C>        <C>        <C>         <C>
Facility reductions                    $    4.0   $   10.9   $   (5.2)   $    9.7   $    0.9   $    3.8    $   (9.7)
Severance and related costs                44.8       73.6      (44.8)       73.6        1.4      (21.2)      (41.7)
Contractual obligations                    40.0       51.2      (50.5)       40.7        -         (0.2)      (33.8)
                                       ----------------------------------------------------------------------------
TOTAL RESTRUCTURING-RELATED ACCRUALS       88.8      135.7     (100.5)      124.0        2.3      (17.6)      (85.2)

Transaction related costs                   -        149.3     (136.5)       12.8       14.7        -         (27.5)
Asset write downs                           -         92.1      (92.1)        -          6.2       (7.3)        1.1
Purchased in-process R&D                    -        152.0     (152.0)        -          -          -           -
Litigation                                 37.2       25.0      (21.7)       40.5       15.5        -         (27.9)
                                       ----------------------------------------------------------------------------
TOTAL                                  $  126.0   $  554.1   $ (502.8)   $  177.3   $   38.7   $  (24.9)   $ (139.5)
                                       ----------------------------------------------------------------------------
</TABLE>

[wide table continued from above]

<TABLE>
<CAPTION>

                                       BALANCE     FISCAL    UTILIZED     BALANCE
                                           AT       2001                     AT
                                        APRIL 30,  CHARGES    IN 2001     APRIL 27,
                                         2000                              2001
                                       -------------------------------------------
<S>                                    <C>        <C>        <C>         <C>
Facility reductions                    $    4.7   $    1.3   $   (4.0)   $    2.0
Severance and related costs                12.1       10.8      (13.3)        9.6
Contractual obligations                     6.7       10.9       (6.7)       10.9
                                       ------------------------------------------
TOTAL RESTRUCTURING-RELATED ACCRUALS       23.5       23.0      (24.0)       22.5

Transaction related costs                   -          4.2       (4.2)        -
Asset write downs                           -         68.3      (68.3)        -
Purchased in-process R&D                    -          -          -           -
Litigation                                 28.1      251.7      (25.4)      254.4
                                       ------------------------------------------
TOTAL                                  $   51.6   $  347.2   $ (121.9)   $  276.9
                                       ------------------------------------------
</TABLE>

Reserve balances at April 27, 2001 include amounts necessary to complete the
initiatives announced during the fourth quarter of fiscal 2001, the Boston
Scientific and AcroMed litigation decisions, as well as amounts necessary to
conclude cases related to the Company's spinal system for pedicle fixation, as
described in Note 12.


NOTE 4--FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents and short-term debt
approximate fair value due to their short maturities. In addition, the carrying
amount of short-term investments, foreign currency derivative instruments, long-
term investments and long-term debt approximated fair value at April 27, 2001
and April 30, 2000.

The fair value of certain short-term and long-term investments was estimated
based on their quoted market prices or those of similar investments. For
long-term investments that have no quoted market prices and are accounted for on
a cost basis, a reasonable estimate of fair value was made using available
market and financial information. The fair value of foreign currency derivative
instruments was estimated based on quoted




                                       33
<PAGE>

market prices at April 27, 2001 and April 30, 2000. The fair value of long-term
debt was based on the current rates offered to the Company for debt of similar
maturities.

Information regarding the Company's available-for-sale instruments is as
follows:

<TABLE>
<CAPTION>

Year ended:                                    APRIL 27,    April 30,   April 30,
                                                  2001        2000        1999
- -------------------------------------------------------------------------------
<S>                                              <C>         <C>         <C>
Cost                                             $700.6      $144.0      $ 84.9
Gross unrealized gains                             31.1         6.2        33.2
Gross unrealized losses                           (12.1)      (16.3)      (19.4)
- -------------------------------------------------------------------------------
Fair value                                       $719.6      $133.9      $ 98.7
- -------------------------------------------------------------------------------

Proceeds from sales                              $ 49.2      $ 70.4      $ 38.4
- -------------------------------------------------------------------------------
Net gains realized                               $ 21.0      $ 22.4      $ 36.7
- -------------------------------------------------------------------------------
Impairment losses recognized                     $ 15.5      $   -       $   -
- -------------------------------------------------------------------------------
</TABLE>


Net realized gains and proceeds from sales of available-for-sale instruments
exclude amounts related to available-for-sale debt investments. Gains recognized
upon sale of these instruments are recorded as interest income. Gains or losses
from the sale of available-for-sale equity instruments are recorded as other
income/expense in the accompanying statements of consolidated earnings, and are
calculated based on the specific identification method.

Held-to-maturity investments were recorded at amortized cost of $165.0 and
$185.9 at April 27, 2001 and April 30, 2000, respectively, which approximated
fair value.

FOREIGN EXCHANGE RISK MANAGEMENT
The Company uses operational and economic hedges as well as derivative financial
instruments to manage the impact of foreign exchange rate changes on earnings
and cash flows. In order to reduce the uncertainty of foreign exchange rate
movements, the Company enters into various contracts with major international
financial institutions that change in value as foreign exchange rates change.
These contracts, which typically expire within two years, are designed to hedge
anticipated foreign currency transactions and changes in the value of specific
assets, liabilities or net investments. Foreign currency transactions, primarily
export intercompany sales, occur throughout the year and are probable but not
firmly committed. Principal currencies hedged are the Yen and the Euro.

Notional amounts of contracts outstanding at April 27, 2001 and April 30, 2000
were $382.3 and $537.2, respectively. Aggregate foreign currency transaction
gains and (losses) were $44.3, $30.8 and $(2.5) in fiscal years 2001, 2000 and
1999, respectively. These gains and losses, which were offset by the gains and
losses on related assets, liabilities and transactions being hedged, were
recorded in other income/expense in the accompanying consolidated financial
statements.



                                       34
<PAGE>

CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of interest-bearing
investments, foreign currency exchange contracts, and trade accounts receivable.

The Company maintains cash and cash equivalents, investments, and certain other
financial instruments with various major financial institutions. The Company
performs periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any one institution.

Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers and their dispersion across many
geographic areas. The Company monitors the creditworthiness of its customers to
which it grants credit terms in the normal course of business. However, a
significant amount of trade receivables are with national health care systems in
many countries. Although the Company does not currently foresee a credit risk
associated with these receivables, repayment is dependent upon the financial
stability of those countries' national economies.

NOTE 5--FINANCING ARRANGEMENTS

Debt consisted of the following:

<TABLE>
<CAPTION>
                                                Average         Maturity         APRIL 27,    April 30,
Short-Term Borrowings                        Interest Rate        Date              2001         2000
- -------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>                 <C>          <C>
Bank borrowings                                   1.6%               -             $142.7       $314.1
Current portion of long-term debt                 4.3%               -                2.7          3.1
- -------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM BORROWINGS                                                        $145.4       $317.2
- -------------------------------------------------------------------------------------------------------

Long-Term Debt
- -------------------------------------------------------------------------------------------------------
Various notes                                     1.2%         2001-2004             $6.4         $7.6
Subordinated
   convertible note                               5.5%            2004                4.5          4.5
Capitalized lease
   obligations                                    8.5%         2001-2009              2.4          2.8
- -------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT                                                                $13.3        $14.9
- -------------------------------------------------------------------------------------------------------

</TABLE>

Short-term borrowings consisted primarily of borrowings from non-U.S. banks at
interest rates considered favorable by management and where natural hedges can
be gained for foreign exchange purposes. The Company has existing lines of
credit of approximately $850.0 with various banks, of which approximately $707.0
was available at April 27, 2001. During fiscal 2000, the Company entered into an
agreement expiring in 2003 to sell, at its discretion, specific pools of its
Japanese trade receivables. The Company had sold approximately $60.0 and $64.0
of its trade receivables to a financial institution as of April 27, 2001 and
April 30, 2000, respectively. The discount cost related to the sale was
immaterial and was recorded as interest expense in the accompanying consolidated
financial statements.



                                       35
<PAGE>

Maturities of long-term debt for the next five fiscal years are as follows:
2002, $2.7; 2003, $4.5; 2004, $7.7; 2005, $0.2; 2006, $0.2; thereafter, $0.7.

NOTE 6--SHAREHOLDERS' EQUITY
On August 25, 1999, the Company's shareholders approved an amendment to
Medtronic's Restated Articles of Incorporation to increase the number of
authorized shares of common stock from 800 million to 1.6 billion. On the same
date the Board of Directors approved a two-for-one split of the Company's common
stock effective September 24, 1999, in the form of a 100 percent stock dividend
payable to shareholders of record at the close of business on September 10,
1999. The stock split resulted in the issuance of 587.4 million additional
shares and the reclassification of $58.7 from retained earnings to common stock,
representing the par value of the shares issued. All references in the financial
statements to earnings per share and average number of shares outstanding
amounts have been restated to reflect the stock split for all periods presented.

SHAREHOLDER RIGHTS PLAN
Under a Shareholder Rights Plan adopted by the Company's Board of Directors in
October 2000, all shareholders receive along with each common share owned a
preferred stock purchase right entitling them to purchase from the Company one
1/5000 of a share of Series A Junior Participating Preferred Stock at an
exercise price of $400 per share. The rights are not exercisable or transferable
apart from the common stock until 15 days after the public announcement that a
person or group (the Acquiring Person) has acquired 15% or more of the Company's
common stock or 15 business days after the announcement of a tender offer which
would increase the Acquiring Person's beneficial ownership to 15% or more of the
Company's common stock. After any person or group has become an Acquiring
Person, each right entitles the holder (other than the Acquiring Person), to
purchase, at the exercise price, common stock of the Company having a market
price of two times the exercise price. If the Company is acquired in a merger or
other business combination transaction, each exercisable right entitles the
holder to purchase, at the exercise price, common stock of the acquiring company
or an affiliate having a market price of two times the exercise price of the
right.

The Board of Directors may redeem the rights for $0.005 per right at any time
before any person or group becomes an Acquiring Person. The Board may also
reduce the threshold at which a person or group becomes an Acquiring Person from
15% to no less than 10% of the outstanding common stock. The rights expire on
October 26, 2010.

NOTE 7--EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan (ESOP) for eligible U.S.
employees. In December 1989, the ESOP borrowed $40.0 from the Company and used
the proceeds to purchase 18,932,928 shares of the Company's common stock. The
Company makes contributions to the plan that are used, in part, by the ESOP to
make loan and interest payments. ESOP expense is determined by debt service
requirements,




                                       36
<PAGE>

offset by dividends received. Compensation and interest expense recognized were
as follows:

<TABLE>
<CAPTION>

Year ended                                  April 27,      April 30,       April 30,
                                              2001           2000           1999
- ---------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>
Interest expense                             $  1.7         $  2.0         $  2.4
Dividends paid                                 (3.3)          (2.8)          (2.4)
- ---------------------------------------------------------------------------------
Net interest expense                           (1.6)          (0.8)           -
Compensation expense                            3.4            6.7            1.7
- ---------------------------------------------------------------------------------
Total expense                                $  1.8         $  5.9         $  1.7
=================================================================================
</TABLE>


Shares of common stock acquired by the plan are allocated to each employee in
amounts based on Company performance and the employee's annual compensation.
Allocations of 2.50%, 2.70%, and 2.59% of qualified compensation were made to
plan participants' accounts in fiscal years 2001, 2000 and 1999, respectively.
During fiscal 2000, and in connection with the Company's 50th Anniversary, the
Company made a special allocation to participant accounts of approximately 1.2
million shares. The Company match on the supplemental retirement plan is made in
the form of an annual allocation of Medtronic stock to the participants'
employee stock ownership plan account and the expense to the Company related to
this match is included in the table above.

At April 27, 2001 and April 30, 2000, cumulative allocated shares remaining in
the trust were 9,625,388 and 9,325,427 and unallocated shares were 7,235,074 and
8,239,154, respectively. Of the remaining unallocated shares at April 27, 2001
and April 30, 2000, 1,223,508 and 1,004,076, respectively, were committed-to-be
allocated. Unallocated shares are released based on the ratio of current debt
service to total remaining principal and interest. The loan from the Company to
the ESOP is payable over 20 years, ending on April 30, 2010. Interest is payable
annually at a rate of 9.0%. The receivable from the ESOP is recorded as a
reduction of the Company's shareholders' equity and allocated and unallocated
shares of the ESOP are treated as outstanding common stock in the computation of
earnings per share.

NOTE 8--STOCK PURCHASE AND AWARD PLANS

1994 Stock Award Plan
The 1994 stock award plan provides for the grant of nonqualified and incentive
stock options, stock appreciation rights, performance shares, and other
stock-based awards. There were 54.3 million shares available under this plan for
future grants at April 27, 2001.

Under the provisions of the 1994 stock award plan, nonqualified stock options
and other stock awards are granted to officers and key employees at prices not
less than fair market value at the date of grant.



                                       37
<PAGE>

In fiscal 1998, the Company adopted a new stock compensation plan for outside
directors which replaces the provisions in the 1994 stock award plan relating to
awards to outside directors. The table below includes awards granted under the
new plan, which at April 27, 2001 had 2.7 million shares available for future
grants.

A summary of nonqualified option transactions is as follows:

<TABLE>
<CAPTION>

                                           2001                               2000                              1999
                             --------------------------------  ---------------------------------  -----------------------------
                                                Wtd.Avg.                           Wtd.Avg.                            Wtd.Avg.
                                Options         Exercise              Options      Exercise               Options      Exercise
                             (in thousands)      Price             (in thousands)    Price             (in thousands)    Price
- --------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>                    <C>           <C>                    <C>          <C>
Beginning balance                 33,917        $24.77                 24,150        $19.91                 21,678       $13.97
Granted                           12,291         52.17                 14,425         31.42                  7,331        22.20
Exercised                          2,789         15.09                  3,278          9.88                  4,134         7.45
Canceled                           1,152         32.45                  1,380          8.29                    725         7.83
- --------------------------------------------------------------------------------------------------------------------------------
Outstanding at year-end           42,267        $33.11                 33,917        $24.77                 24,150       $19.91
- --------------------------------------------------------------------------------------------------------------------------------
Exercisable at year-end           22,238        $26.69                 17,195        $18.83                 14,569       $17.93
- --------------------------------------------------------------------------------------------------------------------------------

</TABLE>

Stock options assumed as a result of acquisition transactions in fiscal years
1996 through 2001 remain outstanding, although no additional grants have been
made under these plans since the date of acquisition. A summary of stock options
assumed as a result of the acquisitions is as follows for fiscal 2001:


<TABLE>
<CAPTION>
                                                 Options            Wtd. Avg.
                                              (in thousands)      Exercise Price
- --------------------------------------------------------------------------------
<S>                                              <C>                  <C>
Outstanding at May 1, 2000                       11,726               $15.49
Additional shares assumed                           446                15.49
Exercised                                         3,767                14.15
Canceled                                            319                19.43
- --------------------------------------------------------------------------------
Outstanding at April 27, 2001                     8,086               $15.94
- --------------------------------------------------------------------------------
Exercisable at April 27, 2001                     6,930               $14.76
- --------------------------------------------------------------------------------
</TABLE>



                                       38
<PAGE>

A summary of stock options as of April 27, 2001, including options assumed as a
result of acquisitions, is as follows:

<TABLE>
<CAPTION>
                                              Options
                                            Outstanding                               Options Exercisable
                         -------------------------------------------------      ---------------------------------
                                                             Wtd. Avg.
                                             Wtd. Avg.       Remaining                              Wtd. Avg.
      Range of                Options         Exercise      Contractual              Options        Exercise
   Exercise Prices        (in thousands)       Price      Life (in years)        (in thousands)       Price
- -----------------------------------------------------------------------------------------------------------------
<S>          <C>                 <C>          <C>              <C>                      <C>          <C>
$   0.01     $   2.50            269          $ 0.47           1.67                     266          $ 0.46
    2.51         5.00          2,856            4.47           2.24                   2,854            4.47
    5.01         7.50          3,472            6.37           3.16                   3,307            6.36
    7.51        10.00            838            9.00           4.65                     771            9.03
   10.01        20.00          6,420           15.57           5.54                   6,063           15.54
   20.01        30.00          7,951           23.83           6.55                   5,235           24.46
   30.01        40.00         16,029           33.67           7.79                   7,159           34.02
   40.01        50.00          1,430           47.26           9.31                      98           46.12
   50.01        60.38         11,088           52.70           9.06                   3,415           54.37
- -----------------------------------------------------------------------------------------------------------------
$   0.01     $  60.38         50,353         $ 30.26           6.91                  29,168          $23.88
- -----------------------------------------------------------------------------------------------------------------
</TABLE>


Nonqualified options are normally exercisable beginning one year from the date
of grant in cumulative yearly amounts of 25% of the shares under option and
generally have a contractual option term of 10 years. However, certain
nonqualified options granted are exercisable immediately.

Restricted stock, performance shares and other stock awards are dependent upon
continued employment and, in the case of performance shares, achievement of
certain performance objectives. These awards are expensed over their vesting
period, ranging from three to five years. Total expense recognized for
restricted stock, performance share and other stock awards was $14.2, $5.2 and
$8.2 in fiscal years 2001, 2000 and 1999, respectively.

If the Company had elected to recognize compensation expense for its stock-based
compensation plans based on the fair values at the grant dates consistent with
the methodology prescribed by SFAS No. 123, "Accounting for Stock-Based
Compensation," net income and earnings per share would have been reported as the
following pro forma amounts:

<TABLE>
<CAPTION>

                                             April 27,         April 30,         April 30,
Year ended                                     2001              2000              1999
- ----------------------------------------------------------------------------------------------
<S>                                          <C>               <C>               <C>
Net Earnings
  As reported                                $1,046.0          $1,084.2          $ 466.7
  Pro forma                                     926.4           1,009.1            427.9





                                       39
<PAGE>

- ----------------------------------------------------------------------------------------------
BASIC EARNINGS
 PER SHARE
   As reported                                $  0.87           $  0.91          $  0.40
   Pro forma                                     0.77              0.84             0.36
- ----------------------------------------------------------------------------------------------
DILUTED EARNINGS
 PER SHARE
   As reported                                $  0.85           $  0.89          $  0.39
   Pro forma                                     0.76              0.82             0.35
- ----------------------------------------------------------------------------------------------
</TABLE>


The fair value of options granted, $25.34, $16.58 and $11.72 for fiscal years
2001 and 2000 and 1999, respectively, was estimated using the Black-Scholes
option-pricing model using the following weighted-average assumptions:


<TABLE>
<CAPTION>

Assumptions                                 2001              2000             1999
- --------------------------------------------------------------------------------------
<S>                                         <C>               <C>              <C>
Risk-free interest rate                     5.85%             6.09%            5.06%
Expected dividend yield                     0.38%             0.47%            0.43%
Expected volatility factor                  37.8%             38.1%            27.1%
Expected option term                      7 years           7 years          7 years
</TABLE>


STOCK PURCHASE PLAN
The stock purchase plan enables employees to contribute up to 10% of their wages
toward purchase of the Company's common stock at 85% of the market value.
Employees purchased 1,607,773 shares at $30.23 per share in fiscal 2001. As of
April 27, 2001, plan participants have had approximately $31.4 withheld to
purchase shares at a price which is 85% of the market value of the Company's
common stock on the first or last day of the plan year ending October 31, 2001,
whichever is less.

NOTE 9--INCOME TAXES
The provision for income taxes is based on earnings before income taxes reported
for financial statement purposes. The components of earnings before income taxes
were:

<TABLE>
<CAPTION>

Year ended:                                                     APRIL 27,    April 30,    April 30,
                                                                   2001        2000           1999
- ----------------------------------------------------------------------------------------------------
<S>                                                              <C>         <C>             <C>
U.S.                                                             $1,062.2    $1,033.0        $681.2
International operations, including Puerto Rico                     487.2       581.8         143.9
- ----------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES                                     $1,549.4    $1,614.8        $825.1
- ----------------------------------------------------------------------------------------------------

</TABLE>





                                       40
<PAGE>

The provision for income taxes consisted of:

<TABLE>
<CAPTION>

                                                                  APRIL 27,  April 30,    April 30,
Year ended:                                                         2001       2000          1999
                                              ------------------------------------------------------
<S>                                                               <C>        <C>           <C>
Taxes currently payable:
  U.S. federal                                                    $ 432.2    $ 102.9       $ 267.0
  U.S. state and other                                               17.6       22.9          16.0
  International operations, including Puerto Rico                   144.6      163.0          45.3
- ----------------------------------------------------------------------------------------------------
    Total currently payable                                         594.4      288.8         328.3
Deferred tax (benefit) expense:
  U.S. federal                                                     (150.3)      94.9         (39.4)
  International operations, including Puerto Rico                    (3.3)     (16.8)          7.0
- ----------------------------------------------------------------------------------------------------
    Net deferred tax (benefit) expense                             (153.6)      78.1         (32.4)
Tax expense directly in
  shareholders' equity                                               62.6      163.7          62.5
- ----------------------------------------------------------------------------------------------------
TOTAL PROVISION                                                   $ 503.4    $ 530.6       $ 358.4
- ----------------------------------------------------------------------------------------------------

</TABLE>

Deferred tax assets (liabilities) were comprised of the following:


<TABLE>
<CAPTION>

                                                                  APRIL 27,   April 30,
                                                                    2001        2000
- --------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
Deferred tax assets:
  Inventory (Intercompany profit in inventory
    and excess of tax over book valuation)                         $121.0      $108.3
  Accrued liabilities                                               159.9        72.4
  Other                                                              98.3        61.8
- --------------------------------------------------------------------------------------
    Total deferred tax assets                                       379.2       242.5
Deferred tax liabilities:
  Intangible assets                                                 (31.6)      (19.3)
  Accumulated depreciation                                          (17.1)      (15.4)
  Unrealized (gain) loss on investments                              (7.1)        3.5
  Other                                                             (27.9)      (66.0)
- --------------------------------------------------------------------------------------
    Total deferred tax liabilities                                  (83.7)      (97.2)
- --------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS                                            $295.5      $145.3
- --------------------------------------------------------------------------------------
</TABLE>

The Company's effective income tax rate varied from the U.S. federal statutory
tax rate as follows:

<TABLE>
<CAPTION>

Year ended:                                              APRIL 27,       April 30,         April 30,
                                                           2001            2000               1999
- ----------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>                <C>
U.S. federal statutory tax rate                            35.0%           35.0%              35.0%
Increase (decrease) in tax rate
  resulting from:
  U.S. state taxes, net of federal
    tax benefit                                             1.1             1.4                1.9
  R&D credit                                               (1.7)           (1.1)              (1.3)


                                       41
<PAGE>

  International operations, including Puerto Rico          (1.9)           (3.5)               0.2
  Non-recurring Charges                                     0.7            (0.1)               7.7
  Other, net                                               (0.7)            1.2               (0.1)
- ----------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE                                         32.5%           32.9%              43.4%
- ----------------------------------------------------------------------------------------------------
</TABLE>


Taxes are not provided on undistributed earnings of non-U.S. subsidiaries
because such earnings are either permanently reinvested or do not exceed
available foreign tax credits. Current U.S. tax regulations provide that
earnings of the Company's manufacturing subsidiaries in Puerto Rico may be
repatriated tax free; however, the Commonwealth of Puerto Rico will assess a tax
of up to 7% in the event of repatriation of earnings prior to liquidation. The
Company has provided for the anticipated tax attributable to earnings intended
for dividend repatriation. At April 27, 2001, earnings permanently reinvested in
subsidiaries outside the United States were $249.9.

At April 27, 2001, approximately $39.0 of non-U.S. tax losses were available for
carryforward. These carryforwards are subject to valuation allowances and
generally expire within a period of one to five years.

NOTE 10--RETIREMENT BENEFIT PLANS

The Company has various retirement benefit plans covering substantially all U.S.
employees and many employees outside the United States. The cost of these plans
was $31.3 in fiscal 2001, $32.4 in fiscal 2000, and $23.1 in fiscal 1999.

In the United States, the Company maintains a qualified pension plan designed to
provide guaranteed minimum retirement benefits to substantially all U.S.
employees. Pension coverage for non-U.S. employees of the Company is provided,
to the extent deemed appropriate, through separate plans. In addition, U.S. and
non-U.S. employees of the Company are also eligible to receive specified Company
paid health care and life insurance benefits.

<TABLE>
<CAPTION>
                                                 Pension Benefits               Other Benefits
                                       ------------------------------------------------------------
                                              2001              2000         2001       2000
                                              ----              ----         ----       ----
<S>                                         <C>               <C>           <C>        <C>
CHANGE IN BENEFIT OBLIGATION

Benefit obligation at beginning
    of year                                 $238.0            $233.6        $49.2      $45.0
    Service cost                              21.4              21.8          4.6        5.1
    Interest cost                             17.9              15.4          3.6        3.2
    Actuarial (gain) loss                     36.4             (21.6)         5.1       (3.6)
    Curtailment gain (See Note 3)               -               (4.4)          -          -
    Benefits paid                             (7.3)             (6.8)        (0.8)      (0.5)
                                       ------------------------------------------------------------
Benefit obligation at end of year           $306.4            $238.0        $61.7      $49.2



                                       42
<PAGE>

CHANGE IN PLAN ASSETS

Fair value of plan assets at
    beginning of year                       $291.2            $271.5        $26.6      $25.1
    Actual return on plan assets              45.1              25.6          2.4        2.5
    Employer contributions                    62.5               0.1         14.6         -
    Benefits paid                             (6.9)             (6.0)        (2.7)      (1.0)
                                       ------------------------------------------------------------
FAIR VALUE OF PLAN ASSETS AT
    END OF YEAR                             $391.9            $291.2        $40.9      $26.6
Funded status                               $ 85.5            $ 53.2       ($20.8)    ($22.6)
Unrecognized net actuarial
    (gain) loss                              (20.4)            (40.2)         7.2         -
Unrecognized prior service cost                5.0              (3.5)          -          -
                                       ------------------------------------------------------------
PREPAID (ACCRUED) BENEFIT COST               $70.1              $9.5       ($13.6)    ($22.6)
                                       ============================================================

</TABLE>

Net periodic benefit cost of plans included the following components:

<TABLE>
<CAPTION>
                                            Pension Benefits                              Other Benefits
                                  ---------------------------------------------------------------------------------------
Year ended                             April 27,         April 30,       April 30,     April 27,    April 30,   April 30
                                       ---------         ---------       ---------     ---------    ---------   ---------
                                         2001              2000            1999          2001          2000        1999
                                         ----              ----            ----          ----          ----        ----
<S>                                      <C>               <C>             <C>           <C>           <C>         <C>
Service cost                             $21.4             $21.8           $16.5         $4.6          $5.1        $0.9
Interest cost                             17.9              15.4            12.7          3.6           3.2         2.5
Expected return on plan assets           (26.4)            (21.8)          (15.6)        (2.6)         (2.4)       (1.6)
Amortization of prior service cost        (1.4)              0.3             0.2           -             -           -
                                  ---------------------------------------------------------------------------------------
NET PERIODIC BENEFIT COST                $11.5             $15.7           $13.8         $5.6          $5.9        $1.8
                                  =======================================================================================
</TABLE>

Plan assets for the U.S. plan consist of a diversified portfolio of fixed-income
investments, debt and equity securities, and cash equivalents. Plan assets
include investments in the Company's common stock of $56.6 and $66.5 at April
27, 2001 and April 30, 2000, respectively.

Outside the U.S., the funding of pension plans is not a common practice in
certain countries as funding provides no economic benefit. Consequently, the
Company has certain non-U.S. plans that are unfunded. It is the Company's policy
to fund retirement costs within the limits of allowable tax deductions.




                                       43
<PAGE>

The actuarial assumptions were as follows:

<TABLE>
<CAPTION>
                                                 Pension Benefits                Other Benefits
                                      ----------------------------------------------------------------
                                           April 27,          April 30,       April 27,    April 30,
                                           ---------          ---------       ---------    ---------
WEIGHTED-AVERAGE ASSUMPTIONS                 2001               2000             2001        2000
                                             ----               ----             ----        ----
<S>                                          <C>                <C>                  <C>        <C>
Discount rate                                2.5% - 7.75%       3.5% - 7.75%         7.50%      7.75%
Expected return on plan assets                6.3% - 9.5%        4.0% - 9.5%         9.50%      9.50%
Rate of compensation increase                 2.5% - 6.5%        3.0% - 6.5%          N/A        N/A
Health care cost trend rate                          N/A                N/A          8.00%      8.00%

</TABLE>

In addition to the benefits provided under the qualified pension plan,
retirement benefits associated with wages in excess of the IRS allowable wages
are provided to certain employees under non-qualified plans. The net periodic
cost of non-qualified pension plans was $5.4, $4.2 and $2.7 in fiscal 2001, 2000
and 1999, respectively. The unfunded accrued pension cost related to these
non-qualified plans totaled $25.7 and $24.3 at April 27, 2001 and April 30,
2000, respectively. The health care cost trend rate is assumed to decrease
gradually to 6% by fiscal 2002. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects:

<TABLE>
<CAPTION>
                                        One-Percentage-    One-Percentage-
                                        Point Increase     Point Decrease
                                      ---------------------------------------
<S>                                          <C>               <C>
Effect on postretirement benefit
    cost                                     $1.0              ($0.8)
Effect on postretirement benefit
    obligation                                4.8               (4.0)

</TABLE>

DEFINED CONTRIBUTION PLANS

The Company has defined contribution savings plans that cover substantially all
U.S. employees and certain non-U.S. employees. The general purpose of these
plans is to provide additional financial security during retirement by providing
employees with an incentive to make regular savings. The Company match on the
supplemental retirement plan for U.S. employees is made in the form of an annual
allocation of Medtronic stock to the participants ESOP account (see Note 7).
Company contributions to the plans are based on employee contributions and
Company performance. Expense under these plans was $3.8 in fiscal 2001, $3.4 in
fiscal 2000, and $3.2 in fiscal 1999.



                                       44
<PAGE>

NOTE 11--LEASES
The Company leases office, manufacturing and research facilities, and
warehouses, as well as transportation, data processing and other equipment under
capital and operating leases. A substantial number of these leases contain
options that allow the Company to renew at the then fair rental value.

Future minimum payments under capitalized leases and non-cancelable operating
leases at April 27, 2001 were:

<TABLE>
<CAPTION>
                                                 Capitalized    Operating
                                                   Leases        Leases
- --------------------------------------------------------------------------------
<S>                                             <C>            <C>
2002                                            $    1.6       $  28.6
2003                                                 1.2          21.5
2004                                                 0.4          17.2
2005                                                 0.3          11.9
2006                                                 0.3           9.8
2007 and thereafter                                  0.6           6.4
- --------------------------------------------------------------------------------
Total minimum lease payments                    $    4.4       $  95.4

Less amounts representing interest                  (0.7)
- --------------------------------------------------------------------------------
Present value of net minimum lease payments     $    3.7
- --------------------------------------------------------------------------------
</TABLE>

Rent expense for all operating leases was $51.8, $49.8, and $47.3 in fiscal
years 2001, 2000 and 1999, respectively.

NOTE 12--COMMITMENTS AND CONTINGENCIES
The Medtronic Foundation (Foundation), funded entirely by the Company, was
established to maintain good corporate citizenship in its communities. In fiscal
2001, the Company made a commitment to contribute $20.4 to the Foundation. This
commitment is expected to fund the Foundation through fiscal year 2002. In
fiscal 2001, the Company partially funded this commitment through the donation
of equity securities with a fair value of $8.1. Commitments to the Foundation
are expensed when authorized.

In October 1997, Cordis Corporation ("Cordis"), a subsidiary of Johnson &
Johnson, filed suit in federal court in the District of Delaware against AVE,
which was acquired by the Company in January 1999. The suit alledged that AVE's
modular stents infringe certain patents now owned by Cordis. Boston Scientific
Corporation is also a defendant in this suit. The complaint seeks injunctive
relief and damages from all defendants. In November 2000, a Delaware jury
rendered a verdict that the previously marketed MicroStent and GFX stents
infringe valid claims of two patents. Thereafter the jury




                                       45
<PAGE>

awarded damages to Cordis totaling approximately $270.0. In February 2001, the
court heard evidence on the affirmative defense of inequitable conduct and will
consider that evidence along with other post-trial motions. The jury verdict
does not address products that are currently marketed by AVE.

In September 2000, Cordis filed an additional suit against AVE in the District
Court of Delaware alleging that AVE's S670, S660 and S540 stents infringe the
patents asserted in the above case.

In December 1999, Advanced Cardiovascular Systems, Inc. ("ACS"), a subsidiary of
Guidant Corporation (Guidant), sued Medtronic and AVE in federal court in the
Northern District Court of California alleging that the S670 rapid exchange
perfusion stent delivery system infringes a patent held by ACS. The complaint
seeks injunctive relief and monetary damages. ACS filed a demand for arbitration
with the American Arbitration Association in Chicago simultaneously with the
lawsuit. AVE has filed a counterclaim denying infringement based on its license
to the patent for perfusion catheters as part of the assets acquired from C.R.
Bard in 1998 and has asserted that the license agreement requires disputes to be
resolved through arbitration. The parties have agreed to arbitrate all claims
against AVE. Litigation against Medtronic has been stayed pending the
arbitration decision. Arbitration hearings were held in February, but the
arbitrators were unable to reach a decision. AVE has filed a new demand for
arbitration.

In December 1997, ACS sued AVE in federal court in the Northern District of
California alleging that AVE's modular stents infringe certain patents held by
ACS and is seeking injunctive relief and monetary damages. AVE denied
infringement and in February 1998 AVE sued ACS in federal court in the District
Court of Delaware alleging infringement of certain of its stent patents, for
which AVE is seeking injunctive relief and monetary damages. The cases have been
consolidated in Delaware and an order has been entered staying the proceedings
until September 2002.

In June 2000, Medtronic filed suit in U.S. District Court in Minnesota against
Guidant seeking a declaration that Medtronic's Jewel AF device does not infringe
certain patents held by Guidant and/or that such patents were invalid.
Thereafter Guidant filed a counterclaim alleging that the Jewel AF and the GEM
III AT infringe certain patents relating to atrial fibrillation. The case is in
the early stages of discovery.

The Company believes that it has meritorious defenses against the above
infringement claims and intends to vigorously contest them. While it is not
possible to predict the outcome of these actions, the Company believes that
costs associated with them will not have a material adverse impact on the
Company's financial position or liquidity, but may be material to the
consolidated results of operations of any one period.

In 1997 and 1999, the Company sued Guidant Corporation and Boston Scientific
Corp., respectively, in U.S. District Court in Minneapolis claiming that
Guidant's ACS RX Multi-Link(R) coronary stent and Boston Scientific's Nir(R)
stent infringed the Company's




                                       46
<PAGE>

Wiktor(R) stent patent. Following a patent claims construction ruling in late
1999 in favor of Guidant and Boston Scientific, the Company consented to entry
of judgment and filed an appeal with the Court of Appeals for the Federal
Circuit ("CAFC") in Washington, D.C. In April 2001, the CAFC affirmed the
judgment of the District Court.

Beginning in 1994, Sofamor Danek was named as a defendant in approximately 3,200
product liability lawsuits brought in various federal and state courts around
the country. The lawsuits alleged the plaintiffs were injured by spinal implants
manufactured by Sofamor Danek and other manufacturers. All efforts to obtain
class certification were denied or subsequently withdrawn. In essence, the
plaintiffs claim that they have suffered a variety of injuries resulting from
use of a spinal system for pedicle fixation and that the Company and other
manufacturers have conspired to promote such implant systems in violation of
law. As of July 2001, virtually all of the suits have been dismissed or resolved
in favor of the Company.

In 1996, two former shareholders of Endovascular Support Systems, Inc. ("ESS")
filed a lawsuit in Dallas District Court for the State of Texas against AVE and
several former officers, directors and shareholders of AVE. The lawsuit alleges
that AVE's acquisition of ESS assets was based on fraud and breach of fiduciary
duty and that plaintiffs were given insufficient value when they exchanged their
stock in ESS for AVE stock in several transactions that occurred from 1993 to
1995. AVE has asserted counterclaims including breach of contract, breach of
covenant of good faith and fair dealing, business disparagement and fraud, and
has agreed to indemnify the individual defendants. The Court has ruled that the
defendants owed a fiduciary duty to plaintiffs. The Company believes the
defendants have meritorious defenses and counterclaims against the plaintiffs
and will continue to defend the actions vigorously. A trial is scheduled to
commence in October 2001.

NOTE 13--QUARTERLY FINANCIAL DATA (UNAUDITED, IN
MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                               First       Second        Third         Fourth       Fiscal
                                              Quarter      Quarter      Quarter       Quarter        Year
- ---------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>          <C>           <C>            <C>
NET SALES
  2001                                      $ 1,310.4  $ 1,361.9    $ 1,361.6     $ 1,517.9      $ 5,551.8
  2000                                        1,133.5    1,190.6      1,259.3       1,432.9        5,016.3
GROSS PROFIT
  2001                                          993.8    1,010.7      1,016.2       1,120.5        4,141.2
  2000                                          859.7      889.3        934.5       1,067.0        3,750.5
NET EARNINGS
  2001 - Before charges                         295.5      309.1        313.9         363.6        1,282.1
       - After charges                          284.1      309.1        302.8         150.0        1,046.0
  2000 - Before charges                         249.7      257.4        271.6         317.0        1,095.7
       - After charges                          249.7      257.4        259.5         317.6        1,084.2


                                       47
<PAGE>


DILUTED EARNINGS PER SHARE
  2001 - Before charges                          0.24       0.25         0.26          0.30           1.05
       - After charges                           0.23       0.25         0.25          0.12           0.85
  2000 - Before charges                          0.20       0.21         0.22          0.26           0.90
       - After charges                           0.20       0.21         0.21          0.26           0.89

</TABLE>

NOTE 14--SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates its business in four operating segments, which are
aggregated into one reportable segment - the manufacture and sale of
technology-based medical therapies. Each of the Company's operating segments has
similar economic characteristics, technology, manufacturing processes,
customers, distribution and marketing strategies, regulatory environments and
shared infrastructures. Net sales by operating segment were as follows:

<TABLE>
<CAPTION>

Year ended                          APRIL 27,   April 30,     April 30,
                                      2001        2000          1999
- --------------------------------------------------------------------------------
<S>                                 <C>         <C>         <C>
Cardiac Rhythm Management           2,656.8     $2,504.7    $ 2,121.6
Neurological, Spinal and ENT        1,478.9      1,252.4        998.0
Vascular                              928.6        792.5        718.9
Cardiac Surgery                       487.5        466.7        394.0
- --------------------------------------------------------------------------------
                                   $5,551.8     $5,016.3     $4,232.5
================================================================================
</TABLE>

GEOGRAPHIC INFORMATION

Net sales and long-lived assets by major geographical area are summarized below:

<TABLE>
<CAPTION>
                          UNITED                   ASIA       OTHER        ELIMI-      CONSOLI-
                          STATES      EUROPE     PACIFIC     FOREIGN      NATIONS        DATED
- ------------------------------------------------------------------------------------------------
<S>                      <C>         <C>         <C>         <C>         <C>            <C>
2001
Revenues from
   external customers    $3,704.9    $1,055.9    $  617.9    $  173.1    $      -       $5,551.8
Intergeographic sales       784.6       225.1          .1        45.3     (1,055.1)           -
- ------------------------------------------------------------------------------------------------
Total sales              $4,489.5    $1,281.0    $  618.0    $  218.4    $(1,055.1)     $5,551.8
- ------------------------------------------------------------------------------------------------
Long-lived assets        $3,021.9    $  195.0    $   48.2    $   17.0    $      -       $3,282.1
- ------------------------------------------------------------------------------------------------

2000
Revenues from
   external customers    $3,278.4    $1,051.9    $  521.2    $  164.8    $      -       $5,016.3
Intergeographic sales       736.8       159.1          .1        17.4       (913.4)           -
- ------------------------------------------------------------------------------------------------
Total sales              $4,015.2    $1,211.0    $  521.3    $  182.2     $ (913.4)     $5,016.3
- ------------------------------------------------------------------------------------------------
Long-lived assets        $2,387.7    $  206.2    $   46.8    $   17.1     $     -       $2,657.8
- ------------------------------------------------------------------------------------------------


                                       48
<PAGE>


1999
Revenues from
   external customers    $2,750.0    $  940.1    $  408.3    $  134.1     $     -       $4,232.5
Intergeographic sales       511.8        96.7          -         11.4       (619.9)           -
- ------------------------------------------------------------------------------------------------
Total sales              $3,261.8    $1,036.8    $  408.3    $  145.5     $ (619.9)     $4,232.5
- ------------------------------------------------------------------------------------------------
Long-lived assets        $2,280.7    $  220.1    $   45.5    $   19.9     $     -       $2,566.2
- ------------------------------------------------------------------------------------------------
</TABLE>

Sales between geographic areas are made at prices that would approximate
transfers to unaffiliated distributors. No single customer represents over 10%
of the Company's consolidated sales.

NOTE 15--SUBSEQUENT EVENTS
On May 30, 2001, the Company announced that it had signed an agreement to
acquire MiniMed, Inc., the market leader in the design, development, manufacture
and marketing of advanced medical systems for the treatment of diabetes.
Medtronic also announced that it would acquire Medical Research Group, Inc., a
company that designs and develops technologies related to implantable pumps and
sensors used in the treatment of diabetes. These acquisitions, valued at
approximately $3,700.0, are expected to be completed during the second quarter
of fiscal 2002.

In 1993, AcroMed Corporation commenced a patent infringement lawsuit against
Sofamor Danek, which was acquired by the Company in January 1999, in the U.S.
District Court in Cleveland, Ohio. Sofamor Danek obtained summary judgment as to
two of four patents and tried claims with respect to the remaining two patents
in May 1999. The jury found that certain Sofamor Danek spinal fixation products
infringed these two patents and an injunction was issued by the court in
December 1999. The court also imposed damages, including pre-judgment interest,
in the amount of $48.0. The Company appealed the judgment to the Court of
Appeals for the Federal Circuit, Washington, D.C., and in June 2001 that court
affirmed the District Court decision. The amount of the judgment, with
post-judgment interest, is $52.1. This amount has been reflected in the
Company's fiscal 2001 results.

In March 2000, Boston Scientific sued AVE in federal court in the Northern
District of California alleging that certain rapid exchange perfusion delivery
systems infringed a patent held by Boston Scientific. The complaint sought
injunctive relief and monetary damages. AVE filed a counterclaim denying
infringement based on its license to the patent for perfusion catheters as part
of the assets acquired from C.R. Bard, Inc. in 1998 and asserted that the
license agreement required disputes to be resolved through arbitration. The
court issued an order to arbitrate the dispute under the terms of the license
agreement. In July 2001, an arbitration panel found in favor of Boston
Scientific and awarded approximately $169.0 in damages, plus legal costs. The
arbitration panel also allowed for an injunction on future U.S. sales of these
delivery systems. In connection with this award, the Company wrote off $8.4 of
excess rapid exchange perfusion inventory and $58.2 of goodwill and other
intangible assets. These charges have been reflected in fiscal 2001 results.



                                       49
<PAGE>

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
(in millions of dollars, except per share and employee data)
- ---------------------------------------------------------------------------------------------------------------------------------
                                                         2001            2000            1999              1998            1997
                                                     ----------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>             <C>
OPERATING RESULTS FOR THE YEAR:
Net sales                                            $  5,551.8      $  5,016.3      $  4,232.5      $    3,423.1    $    3,010.3
Cost of products sold                                   1,410.6         1,265.8         1,105.3             873.2           762.6
Gross margin percentage                                    74.6%           74.8%           73.9%             74.5%           74.7%
Research and development expense                          577.6           488.2           441.6             378.3           329.2
Selling, general and administrative expense             2,024.0*        1,592.6*        1,850.3*          1,299.0*        1,066.7*
Other (income)/expense                                     64.4            70.6            33.2             (19.5)          (13.4)
Interest (income)/expense                                 (74.2)          (15.7)          (23.0)            (12.4)          (21.2)
                                                     ----------------------------------------------------------------------------
Earnings before income taxes                            1,549.4         1,614.8           825.1             904.5           886.4
Provision for income taxes                                503.4           530.6           358.4             316.8           304.4
                                                     ----------------------------------------------------------------------------
Net earnings                                         $  1,046.0      $  1,084.2      $    466.7             587.7    $      582.0
                                                     ----------------------------------------------------------------------------
Per share of common stock:
  Basic earnings per share                                 0.87            0.91            0.40              0.51            0.50
  Diluted earnings per share                               0.85            0.89            0.39              0.50            0.49
  Cash dividends declared                                  0.20            0.16            0.13              0.11            0.10
                                                     ----------------------------------------------------------------------------

FINANCIAL POSITION AT END OF FISCAL YEAR:
Working capital                                      $  2,397.5      $  2,041.9      $  1,456.3      $    1,408.0    $      939.9
Current ratio                                             2.8:1           3.1:1           2.4:1             2.8:1           2.4:1
Total assets                                            7,038.9         5,694.1         5,030.3           3,754.4         3,082.1
Long-term debt                                             13.3            14.9            25.3              62.0            51.4
Shareholders' equity                                    5,509.5         4,512.5         3,789.2           2,746.5         2,167.0
Shareholders' equity per common share                      4.56            3.77            3.18              2.36            1.88

ADDITIONAL INFORMATION:
Full-time employees at year-end                          23,290          21,585          20,133            17,050          14,729
Full-time equivalent employees at year-end               26,050          24,985          22,593            18,538          16,726
                                                     ----------------------------------------------------------------------------
</TABLE>

*Certain costs separately disclosed on the statement of consolidated earnings
are included in selling, general and administrative expense.

Note: Results include the impact of $347.2, $13.8, $554.1, $205.3 and $55.5
million pre-tax non-recurring charges taken during fiscal 2001, 2000, 1999, 1998
and 1997 (See Note 3).



                                       50
<PAGE>


PRICE RANGE OF MEDTRONIC STOCK
- --------------------------------------------------------------------------------
 Fiscal Qtr.                           1st Qtr.   2nd Qtr.   3rd Qtr.   4th Qtr.
- --------------------------------------------------------------------------------
 2001 High                              $57.00     $56.25     $61.00     $54.60
 2001 Low                                47.00      47.50      48.00      40.71
 2000 High                               39.41      40.72      46.25      57.19
 2000 Low                                31.31      32.25      33.56      45.00

Prices are closing quotations. On July 20, 2001 there were approximately 45,500
holders of record of the Company's common stock. The regular quarterly cash
dividend was 5.0 cents per share for fiscal 2001 and 4.0 cents per share for
fiscal 2000.


                                       51
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>medtronic012520_ex21.txt
<DESCRIPTION>EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
<TEXT>

                                                                      EXHIBIT 21


                        MEDTRONIC, INC. AND SUBSIDIARIES
                        --------------------------------

NAME OF COMPANY                                               JURISDICTION OF
- ---------------                                               ---------------
                                                              INCORPORATION
                                                              -------------
Arterial Vascular Engineering B.V.                            Netherlands
Arterial Vascular Engineering Canada, Inc.                    Canada
Arterial Vascular Engineering Espana, S.L.                    Spain
Arterial Vascular Engineering GmbH                            Germany
Arterial Vascular Engineering Italia, S.r.l.                  Italy
Arterial Vascular Engineering Netherlands Holding B.V.        Netherlands
Arterial Vascular Engineering Portugal S.A.                   Portugal
Arterial Vascular Engineering UK Limited                      United Kingdom
AVE Connaught                                                 Ireland
AVE Galway Ltd.                                               Ireland
AVE Ireland Holdings ULC                                      Ireland
AVE Ireland Limited                                           Ireland
AVE Manufacturing, Inc.                                       California
AVECOR Cardiovascular Limited                                 United Kingdom
Bakken Research Center, B.V.                                  Netherlands
Bard Japan Limited                                            Japan
B.V. Medtronic FSC                                            Netherlands
Cardiotron Medizintechnik G.m.b.H.                            Germany
Danek Capital Corporation                                     Delaware
Danek Medical, Inc.                                           Tennessee
Dantec Elettronica Srl                                        Italy
India Biomedical Investment Limited                           Minnesota
India Medtronic Private Limited                               India
INFIN (International Finance) C.V.                            Netherlands
InStent Europe B.V.                                           Netherlands
IntellX, L.L.C.                                               Delaware
Kobayashi Sofamor Danek K.K.                                  Japan
Medical Education K.K.                                        Japan
Med Rel, Inc.                                                 Minnesota
Medtronic AB                                                  Sweden
Medtronic (Africa) (Proprietary) Limited                      South Africa
Medtronic Asia, Ltd.                                          Minnesota
Medtronic Asset Managment, Inc.                               Minnesota
Medtronic Australasia Pty. Limited                            Australia
Medtronic AVE, Inc.                                           Delaware
Medtronic AVECOR Cardiovascular, Inc.                         Minnesota
Medtronic B.V.                                                Netherlands
Medtronic Belgium, S.A.                                       Belgium
Medtronic Bio-Medicus, Inc.                                   Minnesota
Medtronic of Canada, Ltd.                                     Canada


<PAGE>


Medtronic China, Ltd.                                         Minnesota
Medtronic Comercial Ltda.                                     Brazil
Medtronic de Venezuela S.A.                                   Venezuela
Medtronic Dominicana, C. por A.                               Dominican Republic
Medtronic Europe Capital Corp.                                Cayman Islands
Medtronic Europe N.V.                                         Belgium
Medtronic Europe S.A.                                         Switzerland
Medtronic Foundation (non-profit corporation)                 Minnesota
Medtronic France S.A.S.                                       France
Medtronic Functional Diagnostics A/S                          Denmark
Medtronic Functional Diagnostics Asia Limited                 Hong Kong
Medtronic Functional Diagnostics SA/NV                        Belgium
Medtronic Functional Diagnostics Zinetics, Inc.               Utah
Medtronic Functional Diagnostics, Inc.                        New Jersey
Medtronic G.m.b.H.                                            Germany
Medtronic Hellas Medical Device Commercial S.A.               Greece
Medtronic Iberica, S.A.                                       Spain
Medtronic InStent (Israel) Ltd.                               Israel
Medtronic International, Ltd.                                 Delaware
Medtronic International Technology, Inc.                      Minnesota
Medtronic Interventional Vascular, Inc.                       Massachusetts
Medtronic Ireland Limited                                     Ireland
Medtronic Ireland Manufacturing Limited                       Ireland
Medtronic Italia S.p.A.                                       Italy
Medtronic Japan Capital Corp.                                 Cayman Islands
Medtronic Japan Co., Ltd.                                     Japan
Medtronic Korea Co., Ltd.                                     Korea
Medtronic Latin America, Inc.                                 Minnesota
Medtronic Limited                                             United Kingdom
Medtronic Medical Appliance Technology and Service
  (Shanghai) Ltd.                                             China
Medtronic Mediterranean SAL                                   Lebanon
Medtronic Mexico S. de. R.L. de C.V.                          Mexico
Medtronic Micro Interventional Systems, Inc.                  Minnesota
Medtronic Micro Motion Sciences, Inc.                         Delaware
Medtronic Oesterreich Ges.m.b.H.                              Austria
Medtronic OY                                                  Finland
Medtronic PercuSurge, Inc.                                    Delaware
Medtronic Physio-Control B.V.                                 Netherlands
Medtronic Physio-Control Corp.                                Washington
Medtronic Physio-Control International, Inc.                  Washington
Medtronic Physio-Control Limited                              United Kingdom
Medtronic Physio-Control Manufacturing Corp.                  Washington
Medtronic Portugal - Comercio e Distribuiacao de Aparelhos
  Medicos Lda                                                 Portugal


<PAGE>


Medtronic PS Medical, Inc.                                    California
Medtronic Puerto Rico, Inc.                                   Minnesota
Medtronic S. de R.L. de C.V.                                  Mexico
Medtronic S.A.I.C.                                            Argentina
Medtronic (Schweiz) A.G.                                      Switzerland
Medtronic (Shanghai) Ltd.                                     China
Medtronic Sofamor Danek Deggendorf GmbH                       Germany
Medtronic Sofamor Danek France SAS                            France
Medtronic Sofamor Danek GmbH                                  Germany
Medtronic Sofamor Danek, Inc.                                 Indiana
Medtronic Sofamor Danek USA, Inc.                             Tennessee
Medtronic Synectics A.B.                                      Sweden
Medtronic Technologies Holland, B.V.                          Netherlands
Medtronic Technologies, Inc.                                  Minnesota
Medtronic (Thailand) Limited                                  Thailand
Medtronic Treasury International, Inc.                        Minnesota
Medtronic Treasury Management, Inc.                           Minnesota
Medtronic U.K. Capital Corp.                                  Cayman Islands
Medtronic USA, Inc.                                           Minnesota
Medtronic PS Medical, Inc.                                    California
Medtronic World Trade Corporation (Israel)                    Minnesota
Medtronic Xomed France SAS                                    France
Medtronic Xomed, Inc.                                         Delaware
Medtronic Xomed U.K. Ltd.                                     England
Medtronic-Mediland (Taiwan) Ltd.                              Taiwan
Medtronic-Vicare AS                                           Denmark
Medtronic-Vingmed AS                                          Norway
Milu S.A.                                                     Luxembourg
PercuSurge, S.A.                                              France
Physio-Control GmbH                                           Germany
Physio-Control Hungaria Kereskedelmi Kft.                     Hungary
Physio-Control Italia s.r.l.                                  Italy
Physio-Control Medizintechnik                                 Austria
Physio-Control Poland Sp. zo.o                                Poland
Proprietary Extrusion Technologies, Inc.                      California
QRS Limited                                                   United Kingdom
SDGI Holdings, Inc.                                           Delaware
Sofamor Danek (UK) Limited                                    England
Sofamor Danek Asia Pacific Limited                            Hong Kong
Sofamor Danek Australia Pty. Ltd.                             Australia
Sofamor Danek China Limited                                   China
Sofamor Danek Holdings, Inc.                                  Delaware


<PAGE>


Sofamor Danek Iberica S.A.                                    Spain
Sofamor Danek Italia S.r.l.                                   Italy
Sofamor Danek N.V.                                            Belgium
Sofamor Danek Nederland B.V.                                  Netherlands
Sofamor Danek Properties, Inc.                                Delaware
Sofamor Danek Singapore PTE, Ltd.                             Singapore
Sofamor Danek South Africa (Proprietary) Limited              South Africa
Sofamor S.N.C.                                                France
Surgical Navigation Technologies, Inc.                        Delaware
Synectics Medical Ltd                                         United Kingdom
Synectics Medical Poland Spolka z.oo.                         Poland
Telecardiocontrol, C.A.                                       Venezuela
Vitafin N.V.                                                  Netherlands
Vitatron AG                                                   Switzerland
Vitatron Beheersmaatschappij B.V.                             Netherlands
Vitatron Belgium N.V.                                         Belgium
Vitatron Denmark A/S                                          Denmark
Vitatron GmbH                                                 Austria
Vitatron GmbH                                                 Germany
Vitatron (Israel) Limited                                     Israel
Vitatron Japan Co., Ltd.                                      Japan
Vitatron Medical B.V.                                         Netherlands
Vitatron Medical Espana S.A.                                  Spain
Vitatron Medical Italia S.r.l.                                Italy
Vitatron Nederland B.V.                                       Netherlands
Vitatron N.V.                                                 Netherlands
Vitatron S.A.R.L.                                             France
Vitatron Sweden Aktiebolag                                    Sweden
Vitatron U.K. Limited                                         United Kingdom
Warsaw Orthopedic, Inc.                                       Indiana
World Medical Manufacturing Corporation                       Florida
X-Trode S.r.l.                                                Italy
Xomed France Holdings I, LLC                                  Delaware
Xomed France Holdings II, LLC                                 Delaware
Xomed France Holdings, SNC                                    France
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>8
<FILENAME>medtronic012520_ex24.txt
<DESCRIPTION>EXHIBIT 24 POWER OF ATTORNEY
<TEXT>

                                                                      EXHIBIT 24


                               POWERS OF ATTORNEY


      Each of the undersigned directors of Medtronic, Inc., a Minnesota
corporation, hereby constitute and appoint each of ARTHUR D. COLLINS, JR. and
DAVID J. SCOTT, acting individually or jointly, their true and lawful
attorney-in-fact and agent, with full power to act for them and in their name,
place and stead, in any and all capacities, to do any and all acts and things
and execute any and all instruments which either said attorney and agent may
deem necessary or desirable to enable Medtronic, Inc. to comply with the
Securities Exchange Act of 1934, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing with said Commission of its annual report on Form
10-K for the fiscal year ended April 27, 2001, including specifically, but
without limiting the generality of the foregoing, power and authority to sign
the names of the undersigned directors to the Form 10-K and to any instruments
and documents filed as part of or in connection with said Form 10-K or
amendments thereto; and the undersigned hereby ratify and confirm all that each
said attorney and agent shall do or cause to be done by virtue hereof.

      The undersigned have set their hands this 19th day of June, 2001.


      /s/ Michael R. Bonsignore                     /s/ Bernadine P. Healy
      -------------------------                     ----------------------------
      Michael R. Bonsignore                         Bernadine P. Healy, M.D.


      /s/ William R. Brody                          /s/ Glen D. Nelson
      ---------------------------------             ------------------------
      William R. Brody, M.D., Ph.D.                 Glen D. Nelson, M.D.


      /s/ Paul W. Chellgren                         /s/ Denise M. O'Leary
      ---------------------                         ---------------------
      Paul W. Chellgren                             Denise M. O'Leary


      /s/ Arthur D. Collins, Jr.                    /s/ Jean-Pierre Rosso
      --------------------------                    ---------------------
      Arthur D. Collins, Jr.                        Jean-Pierre Rosso


                                                    /s/ Jack W. Schuler
      -----------------------------                 -------------------
      Frank L. Douglas, M.D., Ph.D.                 Jack W. Schuler


      /s/ Antonio M. Gotto                          /s/ Gordon M. Sprenger
      -----------------------------------------     ----------------------
      Antonio M. Gotto, Jr., M.D., D. Phil.         Gordon M. Sprenger


      /s/ William W. George
      ---------------------
      William W. George
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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