MEDTRONIC INC, DEF 14A, 1997-07-23

MEDTRONIC INC
DEF 14A, 1997-07-23
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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14a-6(e)(2))

MEDTRONIC, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[LOGO] MEDTRONIC

7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Telephone: 612/514-4000

July 23, 1997

Dear Shareholder:

You are cordially invited to join us for our Annual Meeting of Shareholders to
be held this year on Wednesday, August 27, 1997, at 10:30 a.m. (CDT) at
Medtronic's Corporate Center at its Rice Creek facility, 7000 Central Avenue
N.E., Minneapolis (Fridley), Minnesota.

The Notice of Annual Meeting of Shareholders and the Proxy Statement that follow
describe the business to be conducted at the meeting. We will also report on
matters of current interest to our shareholders.

We will be providing refreshments prior to the meeting, which will be available
beginning at 10:00 a.m. Please also take this opportunity to view Medtronic's
products, which will be on display.

YOUR VOTE IS IMPORTANT. Whether you own a few or many shares of stock, it is
important that your shares be represented. If you cannot personally attend, we
encourage you to make certain that you are represented at the meeting by signing
the accompanying proxy card and promptly returning it in the enclosed envelope.

Sincerely,

/s/ William W. George
William W. George
Chairman of the Board and Chief Executive Officer

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
WEDNESDAY, AUGUST 27, 1997

To Our Shareholders:

The 1997 Annual Meeting of Shareholders of Medtronic, Inc. will be held
Wednesday, August 27, 1997, at the Medtronic, Inc. Corporate Center at its
Rice Creek facility, 7000 Central Avenue N.E., Minneapolis (Fridley),
Minnesota, at 10:30 a.m. (CDT) for the following purposes:

1. To set the size of the Board at 11 directors and to elect four Class
II directors for three-year terms.

2. To approve appointment of Price Waterhouse LLP as the Company's
independent auditors.

3. To take action on any other business that may properly be considered
at the Meeting or any adjournment thereof.

These items are more fully described in the following pages of the Proxy
Statement.

Shareholders of record at the close of business on July 3, 1997 will be entitled
to vote at the Meeting and any adjournments of the Meeting.

By Order of the Board of Directors,

/s/ Ronald E. Lund
Ronald E. Lund
Secretary

Approximate Date of Mailing
Proxy Material: July 23, 1997

YOUR VOTE IS IMPORTANT.

PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.

[LOGO] MEDTRONIC MEDTRONIC, INC.
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 27, 1997

The Board of Directors of Medtronic, Inc. ("Medtronic" or the "Company") is
soliciting the accompanying proxy for the Annual Meeting of Shareholders of
Medtronic to be held on August 27, 1997.

A proxy card is enclosed. In order to register your vote, complete, date and
sign the proxy card and return it in the envelope provided.

When stock is registered in the name of more than one person, each such person
should sign the proxy. If the shareholder is a corporation, the proxy should be
signed in its corporate name by an executive or other authorized officer. If
signed as attorney, executor, administrator, trustee, guardian, custodian or in
any other representative capacity, the signer's full title should be given.

Shareholders are entitled to one vote for each share of Medtronic Common Stock,
$.10 par value, they hold of record as of the close of business on July 3, 1997.
On that date, 234,662,051 shares of Medtronic Common Stock were outstanding. A
quorum (a majority of the outstanding shares) must be represented at the Meeting
in person or by proxy to transact business.

Shares represented by a properly executed proxy received by Medtronic prior to
the Meeting and not revoked will be voted in accordance with the instructions of
the shareholder or, if no instructions are indicated, in accordance with the
recommendations of the Board of Directors. A proxy may be revoked at any time
before it is exercised by written revocation to the Corporate Secretary of
Medtronic or by filing a new written proxy with the Corporate Secretary.

ELECTION OF DIRECTORS

DIRECTORS AND NOMINEES

The Board of Directors is divided into three classes. The members of each class
are elected to serve three-year terms with the terms of office of each class
ending in successive years. William W. George, Bernadine P. Healy, M.D., Richard
L. Schall and Gordon M. Sprenger are the nominees for election to the Board as
Class II directors to serve until the year 2000 annual meeting or until their
successors are elected and qualified. All of the nominees are currently
directors and were elected to the Board of Directors by the shareholders. All of
the nominees have indicated a willingness to serve if elected. However, if any
nominee becomes unable to serve before the election, the shares represented by
the proxy cards may be voted for a substitute designated by the Board, unless an
instruction to the contrary is indicated on the proxy card.

Mr. F. Caleb Blodgett will retire from the Board on August 27, 1997 in
accordance with the Board's mandatory retirement policy. In his 21 years of
dedicated Board service, Mr. Blodgett chaired the Audit Committee,
Compensation Committee, Corporate Governance Committee and Finance Committee.

THE BOARD RECOMMENDS A VOTE FOR ELECTING THE NOMINEES.

DIRECTOR NOMINEES -- CLASS II
(TERM ENDING 2000)

[PHOTO] Medtronic's Chairman and Chief Executive
WILLIAM W. GEORGE, age 54 Officer since August 1996; President and
DIRECTOR SINCE 1989 Chief Executive Officer from May 1991 to
Class II Director August 1996; President and Chief Operating
Term expires 1997 Officer from March 1989 to April 1991.
President, Honeywell Space and Aviation
Systems (products for commercial and
military aviation markets and space and
satellite applications), from December 1987
to March 1989; President, Honeywell
Industrial Automation and Control, from May
1987 to December 1987 and Executive Vice
President of that business from January 1983
to May 1987. Also a director of Dayton
Hudson Corporation, Valspar Corporation,
Allina Health System and Imation Corp.;
Chairman of the Health Industry
Manufacturers Association.

[PHOTO] Dean, College of Medicine and Public
BERNADINE P. HEALY, M.D., age 52 Health, and Professor of Medicine, The
DIRECTOR SINCE 1993 Ohio State University, since October 1995.
(and 1987-1991) Physician and Science Policy Advisor, The
Class II Director Cleveland Clinic Foundation (nonprofit
Term expires 1997 medical research organization), from July
1993 to May 1995; Director of the National
Institutes of Health from April 1991 to June
1993; Chairman of the Research Institute of
The Cleveland Clinic Foundation from
November 1985 to April 1991; President, the
American Heart Association, National Center,
from 1988 to 1989; Deputy Director of Office
of Science and Technology Policy, Executive
Office of the United States President, from
1984 to 1985; Professor of Medicine, The
Johns Hopkins University School of Medicine,
from 1977 to 1984. Also a trustee of
Battelle Memorial Institutes and a director
of National City Corporation, Somatogen,
Inc., Invacare, Inc. and Karrington Health,
Inc.

[PHOTO] Consultant. Retired Vice Chairman and
RICHARD L. SCHALL, age 67 Chief Administrative Officer and director
DIRECTOR SINCE 1971 of Dayton Hudson Corporation as of
Class II Director February 1985. Also a director of EcoLab
Term expires 1997 Inc., First Bank System, Inc., and
Meritex, Inc., and a trustee of Santa
Barbara City College Foundation.

[PHOTO] Executive Officer of Allina Health System
GORDON M. SPRENGER, age 60 (health care delivery) since July 1994;
DIRECTOR SINCE 1991 Chief Executive Officer and director of
Class II Director HealthSpan Health Systems Corporation
Term expires 1997 (health care delivery) from September 1992
to July 1994; President and Chief Executive
Officer of LifeSpan, Inc. (health care
delivery) from 1982 to September 1992; Chief
Executive Officer of Abbott-Northwestern
Hospital from 1982 to September 1992;
President of Abbott-Northwestern Hospital
from 1982 to 1988. Also a member of Board of
Regents, St. Olaf College, and a director of
The St. Paul Companies, Inc., Bush
Foundation and Past Chair of the Board of
the American Hospital Association.

BOARD MEMBERS CONTINUING IN OFFICE -- CLASS III
(TERM ENDING 1998)

[PHOTO] Medtronic's President and Chief Operating
ARTHUR D. COLLINS, JR., age 49 Officer since August 1996; Chief Operating
DIRECTOR SINCE 1994 Officer from January 1994 to August 1996;
Class III Director Executive Vice President of the Company
Term expires 1998 and President of Medtronic International
from June 1992 to January 1994. Corporate
Vice President of Abbott Laboratories
(health care products) from October 1989 to
May 1992 and Divisional Vice President of
that company from May 1984 to October 1989.
Held various management positions both in
the U.S. and Europe during his 14 years with
Abbott. Also a director of First Bank
System, Inc., Tennant Company, GalaGen Inc.
and the National Association of
Manufacturers.

[PHOTO] The Stephen and Suzanne Weiss Dean of the
ANTONIO M. GOTTO, JR., M.D., age 61 Cornell University Medical Center and
DIRECTOR SINCE 1992 Provost for Medical Affairs, Cornell
Class III Director University, since January 1997. Chairman
Term expires 1998 and Professor of the Department of
Medicine at Baylor College of Medicine and
Methodist Hospital from 1977 to 1996 and
former J. S. Abercrombie Chair,
Atherosclerosis and Lipoprotein Research
from 1976 to 1996. Also director and
principal investigator, Specialized Center
of Research in Arteriosclerosis, National
Heart, Lung and Blood Institute; and
President, International Atherosclerosis
Society.

[PHOTO] Professor, Graduate School of Business,
THOMAS E. HOLLORAN, age 67 University of St. Thomas, St. Paul,
DIRECTOR SINCE 1960 Minnesota since June 1985; Chairman,
Class III Director Minneapolis-St. Paul Metropolitan Airports
Term expires 1998 Commission, from February 1989 to January
1991; Chairman of the Board of Directors and
Chief Executive Officer of Interra Financial
Incorporated (holding company for various
financial enterprises) from 1976 to June
1985. Also a director of Flexsteel
Industries, Inc., MTS Systems Corp., ADC
Telecommunications Inc., National City Bank
of Minneapolis, National City Bancorporation
and Meritex, Inc.; Chairman and a director
of Malt-O-Meal Company; and a director of
the Minnesota Center for Corporate
Responsibility and the Bush Foundation.

BOARD MEMBERS CONTINUING IN OFFICE -- CLASS I
(TERM ENDING 1999)

[PHOTO] Vice Chairman of Medtronic since July 1988
GLEN D. NELSON, M.D., age 60 and Executive Vice President from August
DIRECTOR SINCE 1980 1986 to July 1988; Chairman and Chief
Class I Director Executive Officer of American MedCenters,
Term expires 1999 Inc. (HMO management) from July 1984 to
August 1986; Chief Executive Officer,
President and Chairman of the Board of
Trustees of Park Nicollet Medical Center
(medical services) from 1975 to 1986;
Surgeon at Park Nicollet Medical Center from
1969 to 1986. Also a director of ReliaStar
Financial Corp., The St. Paul Companies,
Inc., Carlson Holdings, Inc., and
Communications Holdings, Inc.

[PHOTO] Chairman of the Board of Stericycle, Inc.
JACK W. SCHULER, age 56 (medical waste treatment and recycling)
DIRECTOR SINCE 1990 since 1990 and Chairman of the Board of
Class I Director Ventana Medical Systems, Inc.
Term expires 1999 (immunohistochemistry diagnostic systems)
since February 1996; President and Chief
Operating Officer of Abbott Laboratories
(health care products) from January 1987 to
August 1989; a director of that company from
April 1985 to August 1989 and Executive Vice
President from January 1985 to January 1987.
Also a director of Somatogen, Inc. and
Chiron Corporation.

[PHOTO] Private venture capital investor since
GERALD W. SIMONSON, age 67 June 1978; President and Chief Executive
DIRECTOR SINCE 1962 Officer of Omnetics Connector Corporation
Class I Director (microminiature connectors) since March
Term expires 1999 1991. Also a director of Northwest
Teleproductions, Inc., The Chromaline
Corporation and Fairview Hospital and
Healthcare Services.

[PHOTO] Professor Emeritus since January 1995, and
RICHARD A. SWALIN, PH.D., age 68 Professor from August 1984 to January
DIRECTOR SINCE 1980 1995, Materials Science and Technology
(and 1973-1977) Management, The University of Arizona;
Class I Director consultant in technology management since
Term expires 1999 November 1987; President and Chief
Executive Officer of Arizona Technology
Development Corp. from February 1987 to
November 1987; Dean of the College of
Engineering and Mines at The University of
Arizona from September 1984 to July 1987;
Vice President of Research and Development
at Allied-Signal Corp. from 1977 to 1984.

The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote at the Meeting is necessary to elect
each director nominee. For this purpose, a shareholder voting through a proxy
who abstains with respect to the election of directors is considered to be
present and entitled to vote on the election of directors at the Meeting, and is
in effect a negative vote; but a shareholder (including a broker) who does not
give authority to a proxy to vote, or withholds authority to vote, on the
election of directors shall not be considered present and entitled to vote on
the election of directors.

BOARD AND BOARD COMMITTEE MEETINGS

During fiscal 1997, Medtronic's Board of Directors held a total of seven Board
meetings. Each director attended 75% or more of the total meetings of the Board
of Directors and Board committees on which the director served (held during the
period he or she served as a director) except for Mr. Sprenger, who attended 74%
of such meetings. The standing committees of the Board of Directors include the
Audit Committee, the Compensation Committee, the Finance Committee, the
Corporate Governance Committee and the Technology and Quality Committee.

AUDIT COMMITTEE. The Audit Committee held three meetings in fiscal 1997.
Committee members are Gotto, Holloran, Schall, Schuler and Swalin (Chair). The
committee reviews Medtronic's annual financial statements; makes recommendations
regarding Medtronic's independent auditors and scope of auditor services;
reviews the adequacy of accounting and audit policies, compliance assurance
procedures and internal controls; reviews nonaudit services performed by
auditors to maintain auditors' independence; and reports to the Board of
Directors on disclosure adequacy and adherence to accounting principles.

COMPENSATION COMMITTEE. The Compensation Committee held three meetings in fiscal
1997. Committee members are Blodgett, Healy, Schuler, Simonson (Chair) and
Swalin. The committee reviews compensation philosophy and major compensation and
benefits programs for employees; administers certain stock and benefit plans;
and reviews executive officers' compensation.

FINANCE COMMITTEE. The Finance Committee held three meetings in fiscal 1997.
Committee members are Blodgett, Holloran, Schall, Simonson and Sprenger (Chair).
The committee reviews and makes recommendations regarding financial policies and
performance objectives as developed by management, including review of
Medtronic's annual and long-range operating plans; assists management in
evaluation of major acquisitions and divestitures from a financial perspective;
reviews changes in capital structure; and reviews banking relationships,
insurance coverage on assets, tax strategies, and financial performance and
related matters pertaining to Medtronic's employee pension and supplemental
retirement plans.

CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee held five
meetings in fiscal 1997. Committee members are Blodgett, Gotto, Healy, Holloran,
Schall (Chair), Schuler, Simonson, Sprenger and Swalin. The committee addresses
all matters of corporate governance; evaluates qualifications and candidates for
positions on the Board; evaluates the performance of the chief executive officer
and the Board; reviews major organization changes and senior management
performance; and reviews director compensation philosophy. The Corporate
Governance Committee maintains a Nominating Subcommittee which considers and
recommends to the full Committee criteria for selecting new directors, nominees
for Board membership and the positions of CEO, Chairman and Chair of the
Corporate Governance Committee, and whether a director should be invited to
stand for re-election. The Subcommittee is comprised of the Chair of the
Corporate Governance Committee plus one director selected from each class of
directors. The current Subcommittee held four meetings in fiscal 1997 and
includes Schall (Chair), Blodgett, Healy and Schuler.

The Corporate Governance Committee will consider nominees for Board membership
submitted by shareholders. Nominations by shareholders must be made pursuant to
timely notice in writing to the Corporate Secretary at 7000 Central Avenue N.E.,
Minneapolis, Minnesota 55432. Candidates for director should be persons with
broad training and experience in their chosen fields and who have earned
distinction in their activities. Notice by the shareholder to be timely must be
received not less than 50 nor more than 90 days prior to the meeting or, if less
than 60 days' disclosure of the meeting date is given, not later than the close
of business on the 10th day following the day on which notice of the meeting
date is mailed or public disclosure of such date is made. The notice shall set
forth certain information concerning such shareholder and the nominees,
including their names and addresses, their principal occupation or employment,
the capital stock of the Company which they beneficially own, such other
information as would be required in a proxy statement soliciting proxies for the
election of the nominees and the consent of each nominee to serve as a director
if so elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.

TECHNOLOGY AND QUALITY COMMITTEE. The Technology and Quality Committee held two
meetings in fiscal 1997. Committee members are Gotto (Chair), Healy, Schuler,
Sprenger and Swalin. The committee reviews policies, practices, processes and
quality programs concerning technological and product research; reviews efforts
and investments in developing new products and businesses; evaluates Medtronic's
technological education and recognition programs; and reviews quality process
matters with Medtronic's chief quality officer.

DIRECTOR COMPENSATION

Directors who are not employees of Medtronic receive an annual retainer of
$22,000, $1,100 per Board meeting, $850 per Board committee or subcommittee
meeting, and reimbursement for reasonable expenses of attending meetings. In
addition to these fees, the Chairs of the Audit, Finance and Technology and
Quality Committees each receive an annual retainer of $3,000, the Chair of the
Compensation Committee receives an annual retainer of $5,000 and the Chair of
the Corporate Governance Committee receives an annual retainer of $15,000, all
in addition to the above director fees.

The 1994 Stock Award Plan permits directors to elect to receive all or part of
their annual retainer and chairmanship fees in restricted stock. Restrictions on
the stock lapse upon termination as a director due to death, disability,
retirement, or a material change in full-time position or responsibilities, or
upon termination of service as a director with the consent of the other
directors or upon the occurrence of a "change in control" of the Company as
described under "Executive Compensation -- Employment and Change in Control
Arrangements" below.

Under the Company's 1994 Stock Award Plan, each non-employee director
automatically receives an initial stock option grant for Common Stock on the
date he or she becomes a director and an additional automatic annual stock
option grant on the date of the Annual Meeting of Shareholders. The number of
shares subject to the initial stock option is determined by dividing an amount,
currently equal to $176,126 and increased each year proportionately with any
increase in annual retainer, by the per share closing price of the Company's
Common Stock on the New York Stock Exchange on the date of grant. The number of
shares subject to the annual stock option grant is determined by a formula based
on directors' fees. Each grant includes a related grant of limited stock
appreciation rights ("Limited Rights") which are exercisable upon a "change in
control" of the Company, as described under "Executive Compensation --
Employment and Change in Control Arrangements" below. The stock options become
fully exercisable one year after the date of grant, except that the option
granted to a director upon being elected or appointed by the Board will not
become exercisable until the director has also been elected to the Board by the
shareholders. In addition, the plan provides that non-employee directors who
were formerly employees of the Company will receive annual, but not initial,
option grants.

In fiscal 1997, each non-employee director received an annual grant for 681
shares with an exercise price of $54.875; therefore, non-employee directors as a
group received options for a total of 6,129 shares of the Company's Common
Stock, and related Limited Rights.

Under the Company's retirement plan for directors, each director will receive an
annual benefit, equal to the director's annual retainer in effect when leaving
the Board, following retirement or other cessation of service as a director of
the Company. The annual benefit is payable for a period equal to the years of
service as a director up to a maximum of twenty years. No credit is given for
years of service as a director while an employee of the Company. Each
non-employee director also has group term life insurance in the amount of
$100,000 while a member of the Board.

As part of its overall program to promote charitable giving, the Company's
Foundation matches gifts by directors to qualified educational institutions up
to $4,000 per fiscal year. The Company also has a charitable contribution plan
for all directors of the Company. Upon the death of a director with five or more
years of service, the Company will contribute a total of $1 million to one or
more qualifying charitable institutions recommended by the director and approved
by the Compensation Committee. Directors derive no direct financial benefit from
this program since all charitable deductions accrue to the Company.

CERTAIN TRANSACTIONS

The Company uses Carlson Wagonlit Travel, which was selected through a
competitive bidding process, as its travel agency for Company business. Dr. Glen
Nelson, who is Vice Chairman and a director of the Company, is a director of
Carlson Holdings, Inc., a family-owned business which includes Carlson Wagonlit
Travel. Members of Dr. Nelson's family are owners and officers of Carlson
Holdings, Inc. The Company paid fees totaling approximately $1,237,000 to
Carlson Wagonlit Travel for services in fiscal 1997. Management believes that
these transactions were on terms no less favorable to the Company than if made
with unaffiliated third parties.

SHAREHOLDINGS OF CERTAIN OWNERS AND MANAGEMENT

CERTAIN BENEFICIAL OWNERS. To the best of Medtronic's knowledge, no shareholder
beneficially owned more than 5% of Medtronic's Common Stock as of July 3, 1997.

MANAGEMENT SHAREHOLDINGS. The following table shows the number of shares of
Medtronic Common Stock beneficially owned by Medtronic's directors, executive
officers identified in the Summary Compensation Table below, and all directors
and executive officers as a group as of July 3, 1997.

AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2)
- ------------------------ --------------------------

F. Caleb Blodgett 93,583
Arthur D. Collins, Jr. 249,053
William W. George(3) 893,066
Antonio M. Gotto, Jr., M.D. 16,290
Bobby I. Griffin 268,808
Bernadine P. Healy, M.D. 9,891
Thomas E. Holloran 47,524
Glen D. Nelson, M.D. 656,057
Robert L. Ryan 125,430
Richard L. Schall 115,814
Jack W. Schuler 24,012
Gerald W. Simonson 29,753
Gordon M. Sprenger 18,820
Richard A. Swalin, Ph.D. 21,452
Directors and executive
officers as a group (20 persons)(2)(4) 3,220,877

- ------------------------
(1) No director or executive officer beneficially owns more than 1% of the
shares outstanding. Medtronic's directors and executive officers as a group
beneficially own approximately 1.37% of the shares outstanding.

(2) Includes the following shares not currently outstanding but deemed
beneficially owned because of the right to acquire them pursuant to options
exercisable within 60 days (on or before September 1, 1997) as follows:
F.C. Blodgett, 9,103 shares; A.D. Collins, Jr., 176,370 shares; W.W.
George, 638,802 shares; A.M. Gotto, Jr., 13,559 shares; B.I. Griffin,
106,369 shares; B.P. Healy, 5,391 shares; T.E. Holloran, 19,343 shares;
G.D. Nelson, 253,817 shares; R.L. Ryan, 111,166 shares; R.L. Schall, 24,083
shares; J.W. Schuler, 9,103 shares; G.W. Simonson; 9,103 shares; G.M.
Sprenger, 14,623 shares; R.A. Swalin, 16,383 shares; and all directors and
executive officers as a group, 1,645,421 shares.

(3) W.W. George disclaims beneficial ownership of 47,772 shares included in the
above table, which are held by the George Family Foundation, a charitable
trust of which he is one of the trustees. The above table also includes an
aggregate of 31,193 shares covered by currently exercisable options
transferred by Mr. George to members of his immediate family.

(4) B. K. Johnson, an executive officer of the Company, disclaims beneficial
ownership of 8,487 shares included in the above table, which are held by
the Krisbin Foundation Trust, a charitable trust of which she is one of the
trustees.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's directors and executive
officers to file reports of ownership and changes in ownership of the Company's
Common Stock with the Securities and Exchange Commission and the New York Stock
Exchange, and the Company is required to identify any of those individuals who
failed to file such reports on a timely basis. To the best of the Company's
knowledge, based upon a review of such reports furnished to the Company and
written representations that no other reports were required, there were no late
filings by the Company's directors or executive officers in fiscal 1997.

REPORT OF THE COMPENSATION COMMITTEE ON
FISCAL 1997 EXECUTIVE COMPENSATION

The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policy and administering the
compensation programs of the Company's executive officers. The Committee is
comprised of five independent outside directors. The Committee generally meets
three times a year to review executive compensation policies, design of
compensation programs and individual salaries and awards for the executive
officers. The purpose of this report is to inform shareholders of the Company's
compensation policies for executive officers and the rationale for the
compensation paid to executive officers in fiscal 1997.

COMPENSATION PHILOSOPHY

The Company's compensation program is designed to motivate and reward executives
responsible for attaining the financial and strategic goals essential for the
Company's long-term success and continued growth in shareholder value. The
compensation program has been designed to provide a competitive level of total
compensation and offers incentive and equity ownership opportunities directly
linked to the Company's performance and shareholder return. The Committee
believes it is in the best interests of the shareholders to reward executives
when the Company's performance goals are achieved and to provide significantly
less compensation when these goals are not met. Therefore, a significant portion
of executive compensation is comprised of "at risk" performance- and stock-based
incentives.

Key objectives of the compensation program are to:

* Provide a strong, direct link between the Company's short-and
long-term financial and strategic goals and executive compensation.

* Motivate executives to achieve corporate, business unit and geographic
operating goals through an emphasis on performance-based compensation.

* Align the interests of executives with those of the Company's
shareholders by providing a significant portion of compensation in
Company Common Stock.

* Provide competitive total compensation in order to attract and retain
high caliber key executives critical to the long-term success of the
Company.

To maintain a competitive level of total executive compensation, the Committee
annually evaluates the compensation packages of certain competitor companies.
This group consists of competitors of the Company that derive at least 25% of
their revenues from medical devices or equipment. This analysis provides the
Committee with competitive data on the mix of compensation elements, the balance
of short- and long-term incentives, and overall compensation levels. Differences
in company size are adjusted through statistical analysis. Most of the surveyed
companies are included in the industry group presented in the performance graph
on page 13 of this Proxy Statement. The Committee also uses annual
cross-industry compensation data from a survey of more than 300 U.S.
manufacturing companies, including many Fortune 1,000 companies and industry
competitors. The Committee's goal is to position the target total compensation
for executive officers at the median of the marketplace and the actual total
compensation in excess of the median when the Company outperforms the target
performance goals. In fiscal 1997, due to strong corporate operating performance
and stock appreciation, the actual total compensation of executive officers and
of the chief executive officer was generally above the median of the
above-described peer and cross-industry groups.

EXECUTIVE OFFICER COMPENSATION PROGRAM

The key components of the Company's executive officer compensation program are
base salary, annual incentives and long-term incentives. These elements are
described below. In determining compensation, the Committee considers all
elements of an executive's compensation package.

BASE SALARY. The Committee annually reviews the base salaries of executive
officers. In determining appropriate salary levels, the Committee considers
individual performance, level of responsibility, scope and complexity of the
position, and salary levels for comparable positions at the peer and
cross-industry companies referenced above. In addition, in determining the base
salary for the chief executive officer, the Committee also considers annual
operating performance, strategic planning and succession planning for senior
management. Factors considered in determining base salary are not assigned
pre-determined relative weights.

Effective for fiscal 1997, the Committee approved a merit increase of 7.0% for
Mr. George. In determining the size of the merit increase, the Committee took
into consideration the strong operating performance of the Company, which
significantly exceeded annual financial targets, Mr. George's leadership role in
the continuing development and implementation of the Company's strategic goals
and the compensation levels of the chief executive officer positions in the
surveyed companies referenced above.

ANNUAL INCENTIVE AWARDS. The purpose of the Company's annual incentive plan is
to provide a direct annual financial incentive to executive officers and key
managers who achieve corporate operating, business unit and geographic
performance goals established under the Company's annual operating plan.

For fiscal 1997, executive officers were eligible for target awards under the
annual incentive plan ranging from 50% to 65% of base salary, with 65% in the
case of the chief executive officer. The size of the target award was determined
by the executive officer's position and competitive data for similar positions
at the peer and cross-industry companies referenced above. To ensure that the
level of annual incentives continues to remain competitive and in support of
Company philosophy to emphasize performance-based compensation, the Committee
approved an increase in the target award to 70% of base salary for the chief
executive officer for fiscal 1998. The Company sets aggressive performance goals
and, in keeping with the strong performance-based philosophy, the resulting
awards decrease or increase substantially if actual Company performance fails to
meet or exceeds targeted levels. The awards can range from 0% to 150% of the
target amounts, and a threshold level of performance is required before any
payout occurs. For fiscal 1997, corporate operating performance was assessed
against a target measure of corporate profit after taxes and after-tax return on
net assets, with these measures given respective weights of 60% and 40%.
Business unit and geographic financial performance were assessed against target
measures of earnings before interest and taxes, revenue, after-tax return on net
assets and/or net asset turnover, with these measures assigned respective
weights that vary for each participant. In addition, award payouts to
participants could be increased by up to 5% depending on either corporate or
geographic performance against the Company's long-term strategic revenue growth
goal. In fiscal 1997, all executive officers earned annual incentive
compensation because their respective targeted performance levels were exceeded.

Mr. George's annual incentive compensation is based solely on the corporate
operating performance of the Company. For fiscal 1997, Mr. George earned an
award of 110.6% of the target level because actual corporate profit after taxes
and after-tax return on net assets (weighted at 60% and 40%, respectively)
exceeded the targeted performance levels. Mr. George's award was increased by an
additional .2% because the Company exceeded its long-term strategic goal for
revenue growth.

In keeping with the Company's philosophy of encouraging stock ownership by
executives, the Company offers a program which allows executives to elect to
receive stock options in lieu of some or all of the cash compensation earned
under the annual incentive plan. By foregoing cash compensation for stock
options, the variable "at risk" component of the executive's compensation
package is increased, further motivating executives to perform to increase
shareholder value over the long term and demonstrating the confidence of
participants in the future success of the Company. Currently under the program,
participants can elect to forego earned incentive compensation for non-qualified
stock options on a basis of $4 market value of stock options for $1 of forfeited
compensation. Under the program, the amount of the stock option grant is
determined by the Committee based on consideration of a number of factors,
including a present value estimate of stock option value, the degree of risk
incurred by the executive and the positive economic impact to the Company of
participation in the program.

LONG-TERM INCENTIVE PLANS. Long-term incentives are provided to executive
officers primarily through the Company's performance share and stock option
programs.

The primary purpose of the performance share program is to motivate executive
officers to achieve the long-term performance goals of the Company. These
targets are based on the Company's long-term financial goals, with consideration
given to an historic analysis of the Company and peer group companies'
performance. The target award for each executive officer is also approved by the
Committee based on the scope and complexity of the position and competitive
compensation data.

The program provides the possibility of earning a payout in Company Common Stock
and cash at the end of a three-year performance cycle. As with short-term
incentive compensation, a threshold level of performance is required before
payout occurs. At the end of each three-year cycle, the award earned can range
from 0% to 180% of the initial performance share units awarded. Performance
targets are consistent with the Company's long-term financial goals and were
measured in fiscal 1997 based on three-year cumulative earnings per share and
three-year average after-tax return on net assets, with these two measures given
equal weight in determining performance level. The value of the award is
determined by the average price of the Company's Common Stock for the last 20
trading days of the performance cycle, up to a maximum of three times the grant
price of the performance shares. At least half of the award must be paid in the
Company's stock, with the other half paid in cash or Company Common Stock at the
discretion of the Committee. The plan is thus aligned with both financial
results and shareholder value, as the percentage payout varies with financial
performance, and the value of the performance share units varies with the stock
price.

For the three-year cycle ended in fiscal 1997, the Company achieved cumulative
earnings per share and average after-tax return on net assets significantly in
excess of performance targets. Consequently, the payout for this cycle for all
executive officers, including Mr. George, was 180% of the target award. Because
of the significant appreciation in the Company's stock price during the
performance cycle, the value of the award was limited to the maximum share price
allowed by the program.

The Company's stock option program provides compensation opportunities that
directly link the interests of management and shareholders, and aid in retaining
key executive officers. Executive officers are eligible for annual grants of
stock options. Guideline levels of options are prepared based on competitive
data from the peer and cross-industry companies referenced above. Individual
awards are based on the individual's responsibilities and performance, ability
to impact financial performance and future potential. These factors are not
assigned pre-determined relative weights. All individual stock option grants for
executive officers are reviewed and approved by the Committee. Executive
officers receive gains from exercised stock options only to the extent that the
fair market value of the stock has increased since the date of option grant.

In fiscal 1997, Mr. George was granted an annual stock option to purchase up to
16,454 shares of the Company's Common Stock at an average exercise price of
$68.375 per share.

TOTAL COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. George's total compensation
for fiscal 1997 was designed so that a significant portion of pay was linked to
Company performance. Of his total compensation, 79% was derived from variable
annual and long-term incentive elements. This "at risk" portion of compensation
was heavily weighted with long-term incentives (approximately 64% of Mr.
George's total compensation was derived from stock option and performance share
programs). The emphasis on "at risk" and long-term incentives is intended to
align Mr. George's compensation with the achievement of long-term growth and
performance by the Company.

DEDUCTIBILITY CAP ON EXECUTIVE COMPENSATION

The Internal Revenue Code generally denies the deduction for compensation in
excess of $1,000,000 paid to executive officers named in the Proxy Statement,
subject to an exception for "performance-based" compensation. Performance-based
compensation, as defined in the tax law, is not subject to this limitation on
deductibility provided that certain shareholder approval and other requirements
are met. The Committee has determined that it will make every effort, consistent
with sound executive compensation principles, to ensure that all amounts paid to
the executive officers named in the Proxy Statement are deductible by the
Company. The Committee expects that all performance-based compensation paid
under its 1994 Stock Award Plan and Management Incentive Plan will qualify for
deductibility.

CONCLUSION

The executive officer compensation program administered by the Committee
provides incentive to attain strong financial performance and an alignment with
shareholder interests. The Committee believes that the Company's compensation
program focuses the efforts of the Company's executive officers on the continued
achievement of growth and profitability for the benefit of the Company's
shareholders.

COMPENSATION COMMITTEE:

Gerald W. Simonson, Chair Richard A. Swalin, Ph.D.
Jack W. Schuler Bernadine P. Healy, M.D.
F. Caleb Blodgett

SHAREHOLDER RETURN PERFORMANCE GRAPH

The graph and table below compare the cumulative total shareholder return on the
Company's Common Stock for the last five fiscal years with the cumulative total
return on the S&P 500 Index and the S&P Health Care (Medical Products and
Supplies) Industry Index over the same period. The graph and table assume the
investment of $100 in each of the Company's Common Stock, the S&P 500 Index and
the S&P Health Care (Medical Products and Supplies) Industry Index on May 1,
1992 and that all dividends were reinvested.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG MEDTRONIC,
S&P 500, AND S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDUSTRY INDEX

[PLOT POINTS GRAPH]

April 30,1992 April 30, 1993 April 30, 1994 April 30, 1995 April 30, 1996 April 30, 1997
<S> <C> <C> <C> <C> <C> <C>
MEDTRONIC $100.00 $100.50 $116.76 $232.52 $333.87 $437.93
S&P 500 100.00 109.22 115.03 135.07 175.77 219.91
S&P HEALTH CARE 100.00 79.77 74.81 116.59 157.53 183.24

</TABLE>

EXECUTIVE COMPENSATION

The following table sets forth the cash and non-cash compensation for each of
the last three fiscal years ended April 30, 1997 awarded to or earned by the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#)(2)(3)(4) ($)(5) ($)(6)
- --------------------------- ------ ------ ----- ------------ ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William W. George 1997 $642,000 $464,598 -- -- 16,454 $1,431,161 $43,331
Chairman and Chief 1996 600,000 415,000(3) -- -- 30,763 1,295,977 50,712
Executive Officer 1995 530,007 303,368(4) -- -- 67,228 894,841 41,911

Glen D. Nelson, M.D. 1997 $471,000 0(2) $ 5,694 -- 31,341 996,249 32,097
Vice Chairman 1996 440,000 0(3) 5,266 -- 43,020 899,231 39,210
1995 409,956 0(4) 24,708 -- 65,686 620,896 39,047

Arthur D. Collins, Jr. 1997 $471,000 $214,703(2) -- -- 18,940 933,897 32,110
President and 1996 440,000 343,000(3) 787 -- 17,195 702,011 38,061
Chief Operating Officer 1995 384,313 228,454(4) 2,212 -- 47,616 484,790 29,700

Robert L. Ryan 1997 $352,500 0(2) -- -- 17,195 683,599 22,368
Senior Vice President and 1996 335,500 0(3) -- -- 26,214 648,177 27,234
Chief Financial Officer 1995 316,499 0(4) 391 -- 45,040 -- 23,146

Bobby I. Griffin 1997 350,000 0(2) 1,593 -- 17,425 645,233 24,210
Executive Vice President 1996 325,000 0(3) 1,462 -- 26,967 586,484 30,412
and President, Pacing 1995 298,732 40,307(4) 3,974 -- 36,324 405,136 24,112

</TABLE>
- -----------------------
(1) Amounts payable by the Company in above-market interest under deferred
compensation plan.

(2) "Bonus" column does not include fiscal 1997 cash bonus payments of
$314,703, $100,000, $196,390 and $175,058 which Messrs., Nelson, Collins,
Ryan and Griffin, respectively, elected to forego in order to receive stock
options granted in lieu of part or all of their cash bonus compensation
under the annual incentive plan. These stock options are included in the
"Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 1997 Executive Compensation -- Annual
Incentive Awards" and "Option/SAR Grants in Last Fiscal Year," below.

(3) "Bonus" column does not include fiscal 1996 cash bonus payments of
$200,000, $418,000, $75,000, $268,400 and $260,000 which Messrs. George,
Nelson, Collins, Ryan and Griffin, respectively, elected to forego in order
to receive stock options granted in lieu of part or all of their cash bonus
compensation under the annual incentive plan. These stock options are
included in the "Securities Underlying Options/SARs" column. See "Report of
the Compensation Committee on Fiscal 1997 Executive Compensation -- Annual
Incentive Awards" and "Option/SAR Grants in Last Fiscal Year," below.

(4) "Bonus" column does not include fiscal 1995 cash bonus payments of
$150,000, $323,701, $75,000, $208,256 and $170,000 which Messrs. George,
Nelson, Collins, Ryan and Griffin, respectively, elected to forego in order
to receive stock options granted in lieu of part or all of their cash bonus
compensation under the annual incentive plan. These stock options are
included in the "Securities Underlying Options/SARs" column. See "Report of
the Compensation Committee on Fiscal 1997 Executive Compensation -- Annual
Incentive Awards" and "Option/SAR Grants in Last Fiscal Year," below. That
column also includes stock options granted in fiscal 1995 to replace
certain discontinued non-qualified supplementary retirement benefits.

(5) Includes the value of both cash and stock earned in fiscal 1997 under the
Company's long-term incentive plan described in "Other Long-Term Incentive
Awards" below. The stock for the fiscal 1997 payment was valued at $55.523
per share, the maximum stock price allowed under this plan cycle.

(6) Amounts in this column for fiscal 1997 include the following: the Company
contributed $4,500 in shares of Company stock under the employee stock
ownership plan for each of the named executive officers for fiscal 1997;
the Company contributed $6,254, $5,853, $5,866. $4,009 and $6,183 to
Messrs. George, Nelson, Collins, Ryan and Griffin, respectively, to match
employee contributions under the 401(k) supplemental retirement plan; and
the Company contributed $32,577, $21,744, $21,744, $13,859 and $13,527 to
Messrs. George, Nelson, Collins, Ryan and Griffin, respectively, toward the
right to receive shares of Company stock under the non-qualified
supplemental benefit plan.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth for each of the named executives the stock
options granted by the Company in fiscal 1997 and the potential value of these
stock options determined pursuant to Securities and Exchange Commission
requirements. No stock appreciation rights were granted to the named executives
in fiscal 1997.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------- -------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION 0% 5% 10%
NAME (#) FISCAL YEAR ($/Sh) DATE ($) ($)(3) ($)(3)
- ---- ------------ ----------------- --------- ---------- --- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
W. W. George 16,454(1) 2.3% $68.375 11/20/06 0 $707,533 $1,793,028
G. D. Nelson, M.D. 13,163(1) 1.9 68.375 11/20/06 0 566,018 1,434,400
18,178(2) 2.6 69.250 05/01/07 0 791,669 2,006,245
A. D. Collins, Jr. 13,163(1) 1.9 68.375 11/20/06 0 566,018 1,434,400
5,777(2) 0.8 69.250 05/01/07 0 251,594 637,588
R. L. Ryan 5,851(1) 0.8 68.375 11/20/06 0 251,597 637,596
11,344(2) 1.6 69.250 05/01/07 0 494,042 1,251,999
B. I. Griffin 7,313(1) 1.0 68.375 11/20/06 0 314,464 796,913
10,112(2) 1.4 69.250 05/01/07 0 440,387 1,116,028

</TABLE>
- -----------------------
(1) These stock options granted to the named executive officers have an
exercise price equal to the fair market value on the date of grant and vest
annually in 25% increments.

(2) These stock options were granted in lieu of all or part of the cash
compensation earned for fiscal 1997 under the Company's annual incentive
plan. Because the executives elected to forego cash compensation to receive
the options, which were granted on 5/1/97, the options are 100% vested at
grant. See "Report of the Compensation Committee on Fiscal 1997 Executive
Compensation -- Annual Incentive Awards."

(3) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission, and therefore is not intended to represent either
historical appreciation or anticipated future appreciation of the Company's
Common Stock price.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

The following table sets forth for each of the named executive officers the
value realized from stock options exercised during fiscal 1997 and the number
and value of exercisable and unexercisable stock options and stock appreciation
rights held at April 30, 1997.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
AT FISCAL OPTIONS/SARS AT
YEAR-END(#) FISCAL YEAR-END($)(1)
SHARES VALUE ------------- ---------------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------- ---------------------
<S> <C> <C> <C> <C>
W. W. George(2) 0 0 638,802/157,787 $37,292,285/6,638,812
G. D. Nelson, M.D. 0 0 253,817/45,562 10,670,118/1,211,254
A. D. Collins, Jr. 0 0 176,370/49,653 8,102,478/1,363,026
R. L. Ryan 0 0 111,166/27,267 3,712,932/821,919
B. I. Griffin 0 0 106,369/26,663 3,802,771/711,307

</TABLE>
- -----------------------
(1) Value of unexercised in-the-money options is determined by multiplying the
difference between the exercise price per share and $69.25, the closing
price per share on April 30, 1997, by the number of shares subject to such
options. Amounts include stock options granted on 5/1/97 in lieu of cash
compensation earned for fiscal 1997 under the Company's annual incentive
plan. See "Report of the Compensation Committee on Fiscal 1997 Executive
Compensation -- Annual Incentive Awards."

(2) Includes exercisable options to purchase an aggregate of 31,193 shares
transferred to members of Mr. George's immediate family.

OTHER LONG-TERM INCENTIVE AWARDS

The following table sets forth the number of performance share units granted to
each of the named executives in fiscal 1997 under the Company's 1994 Stock Award
Plan and the performance-based award formula under such plan.

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)

ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE OR UNDER NON-STOCK PRICE
SHARES, UNITS OTHER PERIOD BASED-PLANS
OR OTHER UNTIL ----------------------------------
RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT ($) ($) ($)
- ---- ------------- -------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
W. W. George 5,930 5/1/96-4/30/99 $106,592 $532,959 $959,326
G. D. Nelson, M.D. 3,916 5/1/96-4/30/99 70,390 351,951 633,511
A. D. Collins, Jr. 3,916 5/1/96-4/30/99 70,390 351,951 633,511
R. L. Ryan 2,605 5/1/96-4/30/99 46,825 234,124 421,424
B. I. Griffin 2,587 5/1/96-4/30/99 46,501 232,507 418,512

</TABLE>
- ----------------------
(1) Payout of awards is based on achieving specified levels of designated
performance objectives during a three-year performance cycle. Payout can
range from 0% to 180% of units granted, with 20% and 180% as the threshold
and maximum payouts, respectively. Payout of 100% of the units granted
represents the target payout. Awards are payable at least 50% in Common
Stock, with the remainder paid in cash or Common Stock at the discretion of
the Compensation Committee. The value in dollars is determined when the
award is earned based on the average fair market value per share for the
last 20 trading days of the performance cycle. For illustrative purposes,
the value of estimated future payouts was determined using the closing
price of the Common Stock on July 3, 1997 ($89.875 per share). See "Report
of the Compensation Committee on Fiscal 1997 Executive Compensation --
Long-Term Incentive Plans" above.

PENSION PLAN

The Company's pension plan is a defined benefit, tax qualified retirement plan
covering most U.S. employees and generally provides 40% of the average of the
highest five consecutive years of compensation (including certain incentive
compensation) in the final ten years of service, offset by a Social Security
allowance as published each year by the Internal Revenue Service. The table
below illustrates the annual benefits payable to participants who retire at age
65 with the indicated years of service with Medtronic and with the indicated
five-year highest average annual compensation. The benefits have been calculated
on a 50% joint and survivor annuity basis, before reduction for any amounts that
may be available from Medtronic's former Retirement Account Plan. The
compensation considered in determining the pensions payable to the below-named
executive officers is the compensation shown in the "Salary" and "Bonus" columns
of the Summary Compensation Table on page 14.

FIVE-YEAR
AVERAGE YEARS OF SERVICE WITH THE COMPANY
ANNUAL --------------------------------------------------------
COMPENSATION(1) 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------

$ 200,000 $ 33,552 $ 44,758 $ 55,898 $ 67,104 $ 71,594
400,000 69,472 92,676 115,740 138,944 147,924
600,000 105,392 140,593 175,583 210,784 224,254
800,000 141,312 188,510 235,426 282,624 300,584
1,000,000 177,232 236,427 295,268 354,464 376,914
1,200,000 213,152 284,345 355,111 426,304 453,244
1,400,000 249,072 332,262 414,954 498,144 529,574

- ---------------------
(1) Calculated by considering a participant's compensation levels during the
ten-year period immediately preceding retirement. The credited years of
service (rounded to the nearest whole year) for the executive officers
named in the Summary Compensation Table were as follows at April 30, 1997:
W.W. George, 8 years; G.D. Nelson, 11 years; A.D. Collins, Jr., 5 years;
R.L. Ryan, 4 years; and B.I. Griffin, 24 years.

Certain limitations on the amount of benefits under the Company's tax qualified
retirement plan were imposed by the Employee Retirement Income Security Act of
1974 ("ERISA") and Tax Reform Act of 1986 ("TRA"). The Company's non-qualified
supplemental benefit plan provides for the restoration of benefits to officers
who may be affected by those limitations so that, in general, total benefits
will be equal to the level of benefits which would have been payable under the
Company's retirement plan and employee stock ownership plan but for the ERISA
and TRA limitations or for the fact that the executive has elected to defer
compensation under the Company's deferred compensation programs. The amounts
shown in the pension plan table above reflect the additional retirement benefits
provided under the non-qualified supplemental benefit plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In fiscal 1997, the members of the Compensation Committee were Simonson (Chair),
Blodgett, Healy, Schuler, and Swalin. Mr. Holloran also served on the Committee
until the date of the 1996 Annual Shareholders Meeting. Mr. Holloran was an
officer of the Company from 1961 to 1975, including serving as president from
January 1974 to December 1975. Under Section 162(m) of the Internal Revenue
Code, Mr. Holloran was considered an outside director until the date of such
Annual Meeting, at which time he rotated off the Committee.

EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS

CHANGE IN CONTROL ARRANGEMENTS. The executive officers of the Company, including
those named in the Summary Compensation Table, have change in control agreements
(the "Agreements") with the Company. The Agreements operate only upon the
occurrence of a "change in control" as described below. Absent a "change in
control" the Agreements do not require the Company to retain the executives or
to pay them any specified level of compensation or benefits.

Each Agreement provides that for three years after a "change in control" there
will be no adverse change in the executive's salary, bonus, opportunity,
benefits or location of employment. If during this three-year period the
executive's employment is terminated by the Company other than for cause, or if
the executive terminates his employment for good reason (as defined in the
Agreements, and including compensation reductions, demotions, relocation and
excess travel), or voluntarily during the 30-day period following the first
anniversary of the "change in control," the executive is entitled to receive an
accrued salary and annual incentive payment through the date of termination and,
except in the event of death or disability, a lump sum severance payment ("Lump
Sum Payment") equal to three times (two times in the event of termination by the
executive in the aforementioned 30-day period) the sum of his base salary and
annual bonus (and certain insurance and other welfare plan benefits). Further,
an additional payment ("gross-up") is required in an amount such that after the
payment of all taxes, income and excise, the executive will be in the same
after-tax position as if no excise tax under the Internal Revenue Code had been
imposed.

Generally, and subject to certain exceptions, a "change in control" is deemed to
have occurred if: (a) a majority of Medtronic's Board of Directors becomes
comprised of persons other than persons for whose election proxies have been
solicited by the Board, or who are then serving as directors appointed by the
Board to fill vacancies caused by death or resignation (but not removal) of a
director or to fill newly created directorships; (b) another party becomes the
beneficial owner of at least 30% of Medtronic's outstanding voting stock; or (c)
Medtronic's shareholders approve a definitive agreement or plan to merge or
consolidate Medtronic with another party (other than certain limited types of
mergers), exchange shares of voting stock of Medtronic for shares of another
corporation pursuant to a statutory exchange, sell or otherwise dispose of all
or substantially all of Medtronic's assets, or liquidate or dissolve Medtronic.

If a "change in control" of the Company occurred mid-fiscal 1998 (November 1,
1997) and resulted in the involuntary termination of the named executives at
such time or the termination by such executives for good reason, the Lump Sum
Payment to be made under such Agreements to those executive officers named in
the Summary Compensation Table above would be approximately as follows: W.W.
George, $3,570,000; G.D. Nelson, $2,331,450; A.D. Collins, Jr., $2,598,750; R.L.
Ryan, $1,665,000; and B.I. Griffin, $1,669,500. Such amounts are exclusive of
the additional gross-up payment required under each of the Agreements as a
result of excise taxes.

In addition, events substantially identical to those described above also
constitute a "change in control" under certain of the Company's compensation
plans. The effects of a change in control under these plans with respect to the
compensation of each of the executive officers named in the Summary Compensation
Table are described below.

If a "change in control" of the Company occurs, awards under the Company's
Management Incentive Plan will accelerate and, subject to certain limitations
set forth in the plan, each participant will be entitled to a final award based
on certain assumptions as to target performance and salary. If a "change in
control" of the Company occurred mid-fiscal 1998 (November 1, 1997), the awards
under this plan to be paid to those executive officers named in the Summary
Compensation Table above would be approximately as follows: W.W. George,
$490,000; G.D. Nelson, $306,150; A.D. Collins, Jr., $341,250; R.L. Ryan,
$185,000; and B.I. Griffin, $185,500.

The Company's stock award plans and agreements thereunder provide that in the
event of a "change in control" of the Company, all restrictions under
outstanding restricted stock awards shall immediately lapse and the restricted
stock period with respect to all such shares shall be deemed to have expired,
and performance share awards shall vest immediately in a pro rata amount based
on the portion of the performance period elapsed prior to the "change in
control" and certain assumptions as to the anticipated performance which would
have been achieved during the applicable performance period. If a "change in
control" of the Company occurred mid-fiscal 1998 (November 1, 1997) and further
assuming for this purpose a market price for the Company's Common Stock at such
time of $89.875 (the July 3, 1997 New York Stock Exchange closing price), the
awards to be paid to those executive officers named in the Summary Compensation
Table above would be approximately as follows for the performance share awards:
W.W. George, $1,669,313; G.D. Nelson, $1,103,263; A.D. Collins, Jr., $1,111,403;
R.L. Ryan, $740,742 and B.I. Griffin, $723,869. None of the named executive
officers has outstanding restricted stock awards.

The Company's stock award plans and agreements thereunder also provide for or
permit acceleration of the exercisability of outstanding stock options upon the
occurrence of certain events (such as certain tender offers or exchange offers
for the Company's stock, certain changes in control of the Company, a merger or
consolidation of the Company with another entity, or a sale of substantially all
of the Company's assets or certain plans therefor) or at the discretion of the
Board of Directors.

Limited stock appreciation rights ("Limited Rights") granted under the stock
option plans are exercisable, with certain limitations, at any time within the
thirty-day period following a "change in control" of Medtronic. Upon exercise of
Limited Rights, the holder is entitled to receive an amount in cash for each
share with respect to which the Limited Rights are exercised equal to the
difference between the option exercise price per share of stock covered by the
underlying option and the fair market value per share as of the date of
exercise. If Limited Rights are exercised, the underlying option will no longer
be exercisable to the extent of the number of shares with respect to which the
Limited Rights were exercised.

If a "change in control" occurs, subject to certain limitations, Medtronic's
contributions to the employee stock ownership plan for that year will equal the
greater of Medtronic's target percentage contribution (currently 2.5% of
aggregate covered employee compensation in fiscal 1996) or, if a "change in
control" occurs after the first quarter of a plan year, the percentage
contribution Medtronic would have made upon completion of the plan year based on
performance as most recently projected by Medtronic prior to the "change in
control" and disregarding the effects of the "change in control."

If a "change in control" occurs during a plan year, subject to certain
limitations, Medtronic's matching contribution to the 401(k) supplemental
retirement plan shall equal the greater of Medtronic's target percentage
matching contribution (currently 62.5% of the first 6% of a participant's
contribution in fiscal 1997), or if the "change in control" occurs after the
first quarter of a plan year, the percentage contribution Medtronic would have
made upon completion of the plan year based on performance as most recently
projected by Medtronic prior to the "change in control" and disregarding the
effects of the "change in control."

OTHER EMPLOYMENT ARRANGEMENTS. Under the Company's postretirement survivor
benefit plan, designated beneficiaries or the estate of each executive officer
who retires with the Company (as defined in the Company's tax-qualified employee
retirement plans) shall be entitled to receive following the officer's death a
lump sum payment equal to the annual salary of such officer in effect at the
date of retirement.

APPROVAL OF SELECTION OF AUDITORS

Upon recommendation of its Audit Committee, Medtronic's Board has selected Price
Waterhouse LLP, certified public accountants, as independent auditors for
Medtronic for the fiscal year ending April 30, 1998. That firm has acted as
independent auditors for Medtronic for more than 20 years, and the Board
considers it highly qualified. Although it is not required to do so, the Board
of Directors wishes to submit the selection of Price Waterhouse LLP for
shareholders' approval at the Meeting. If the shareholders do not give approval,
the Board will reconsider its selection.

Representatives of Price Waterhouse LLP will be present at the Meeting, will
have the opportunity to make a statement if they desire and will be available to
respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.

GENERAL

The costs of soliciting proxies will be borne by Medtronic, including the
reimbursement to record holders of their expenses in forwarding proxy materials
to beneficial owners. Directors, officers and regular employees of Medtronic,
without extra compensation, may solicit proxies personally or by mail,
telephone, fax, telex, telegraph or special letter.

Medtronic has retained ChaseMellon Shareholder Services, L.L.C., a firm that
provides professional proxy soliciting services, to aid in the solicitation of
proxies for a fee of $9,500 plus reimbursement for certain out-of-pocket
expenses.

Any shareholder proposals for the Company's 1998 Annual Meeting of Shareholders
(anticipated date August 26, 1998) must be received by the Company by March 27,
1998 in order to be included in the Company's Proxy Statement. The proposals
also must comply with all applicable statutes and regulations.

Medtronic's 1997 Annual Shareholders Report, including financial statements, is
being sent to shareholders of record as of July 3, 1997, together with this
Proxy Statement.

MEDTRONIC WILL FURNISH TO SHAREHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 30, 1997, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED
TO: INVESTOR RELATIONS DEPARTMENT, MEDTRONIC, INC., 7000 CENTRAL AVENUE N.E.,
MINNEAPOLIS, MINNESOTA 55432.

The Board of Directors knows of no other matters to be presented at the Annual
Meeting. If any other business properly comes before the Annual Meeting or any
adjournment thereof, the proxies will vote on that business in accordance with
their best judgment.

By Order of the Board of Directors,

/s/ Ronald E. Lund, Secretary
Ronald E. Lund, Secretary
MEDTRONIC, INC.

MEDTRONIC, INC.
ANNUAL MEETING -- AUGUST 27, 1997

The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1997 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
27, 1997, and at any adjournment thereof.

The Board of Directors recommends votes FOR:

1. Set board size at eleven members and elect four Class II Directors for
three-year terms:

Nominees: WILLIAM W. GEORGE, BERNADINE P. HEALY, M.D., RICHARD L. SCHALL and
GORDON M. SPRENGER

[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote for
(except those whose names have been all nominees listed above
written on the line below)

(To withhold authority to vote for any nominee, write that nominee's name on the
line below.)

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

2. Approve appointment of Price Waterhouse LLP as independent auditors.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)

(CONTINUED FROM OTHER SIDE)

In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS.

Date: ____________________________, 1997

________________________________________

PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if
appropriate, official position or
representative capacity. If stock is
held in joint tenancy, each joint owner
should sign.