CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)

YEAR ENDED DECEMBER 31,                                                                              2001         2000         1999
OPERATING ACTIVITIES:
Net income (loss)                                                                                 $   (54)     $   373      $   371
Adjustments to reconcile net income (loss) to cash provided by operating activities:
   Gain on sale of equity investments                                                                 (11)         (14)
   Depreciation and amortization                                                                      232          181          178
   Deferred income taxes                                                                                8            2          (29)
   Noncash special credits                                                                                                       (5)
   Purchased research and development                                                                 282
   Tax benefit relating to stock option and employee stock purchase plans                               8            5           49
   Increase (decrease) in cash flows from operating assets and liabilities:
     Trade accounts receivable                                                                         (6)          78           82
     Inventories                                                                                       53           15           68
     Prepaid expenses and other current assets                                                         (9)         (24)           8
     Accounts payable and accrued expenses                                                             28          (27)          38
     Accrual for restructuring and merger-related charges                                             (31)          45          (45)
     Other liabilities                                                                                (22)          91           58
   OTHER, NET                                                                                          12           14            3
                                                                                                   -------      -------      -------
Cash provided by operating activities                                                                 490          739          776

INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                                                        (121)         (76)         (80)
   Proceeds from sales of property, plant and equipment                                                 5            4           21
   Sales of available-for-sale securities                                                              20           15            5
   Acquisitions of businesses, net of cash acquired                                                  (620)
   Payments related to 1998 acquisition                                                                                        (128)
   PAYMENTS FOR ACQUISITIONS OF AND/OR INVESTMENTS IN CERTAIN TECHNOLOGIES, NET                       (84)         (50)          (3)
                                                                                                   -------      -------      -------
Cash used for investing activities                                                                   (800)        (107)        (185)

FINANCING ACTIVITIES:
   Net increase (decrease) in commercial paper                                                         43         (221)      (1,539)
   Net proceeds from (payments on) borrowings on revolving credit facilities                          360         (234)         421
   Proceeds from notes payable and long-term borrowings                                                 4           22            8
   Payments on notes payable, capital leases and long-term borrowings                                 (12)         (14)         (10)
   Proceeds from issuances of shares of common stock                                                   42           29          655
   Acquisitions of treasury stock                                                                                 (222)        (127)
   OTHER, NET                                                                                                        2           (1)
                                                                                                   -------      -------      -------
Cash provided by (used for) financing activities                                                      437         (638)        (593)
EFFECT OF FOREIGN EXCHANGE RATES ON CASH                                                               (1)          (4)          (4)
                                                                                                   -------      -------      -------
Net increase (decrease) in cash and cash equivalents                                                  126          (10)          (6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                         54           64           70
                                                                                                   -------      -------      -------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                                          $   180      $    54      $    64
                                                                                                   =======      =======      =======
(see notes to consolidated financial statements)



                                       17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Boston Scientific Corporation (Boston Scientific or the Company) and
its subsidiaries, substantially all of which are wholly owned. Investments in
companies, representing 20 percent to 50 percent of their ownership, are
primarily accounted for under the equity method, including the Company's 22
percent ownership in Medinol Ltd. (Medinol). Income recorded in connection with
these investments did not have a material impact on the Company's operating
results during the periods presented. Investments in companies, representing
less than 20 percent of their ownership, are accounted for under the cost
method.

ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States (U.S.) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

TRANSLATION OF FOREIGN CURRENCY: All assets and liabilities of foreign
subsidiaries are translated at the rate of exchange at year end while sales and
expenses are translated at the average rates in effect during the year. The net
effect of these translation adjustments is shown in the accompanying financial
statements as a component of stockholders' equity.

CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.

SHORT-TERM INVESTMENTS: Short-term investments are recorded at fair value, which
approximates cost.

CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of temporary cash
and cash equivalents, marketable securities, derivative instrument contracts and
accounts receivable. The Company invests its excess cash primarily in
high-quality securities and limits the amount of credit exposure to any one
financial institution. The Company's investment policy limits exposure to
concentrations of credit risk and changes in market conditions. Counterparties
to financial instruments expose the Company to credit-related losses in the
event of nonperformance. The Company transacts derivative instrument contracts
with major financial institutions to limit its credit exposure.

The Company provides credit, in the normal course of business, primarily to
hospitals, private and governmental institutions and health care agencies,
clinics and doctors' offices. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses.

INVENTORIES: Inventories are stated at the lower of first-in, first-out cost or
market. Generally, write-downs of consignment inventory are charged to selling,
general and administrative expenses.


PROPERTY, PLANT AND EQUIPMENT: Property, plant, equipment and leaseholds are
stated at historical cost. Expenditures for maintenance and repairs are charged
to expense; betterments are capitalized. The Company provides for depreciation
and amortization by the straight-line method at rates that are intended to
depreciate and amortize the cost of these assets over their estimated useful
lives. Buildings and improvements are depreciated over a 15 to 40 year life;
equipment, furniture and fixtures are depreciated over a 2 to 12 year life.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the useful life of the improvement or the term of the lease.

The Company receives grant money equal to a percentage of expenditures on
eligible capital equipment, which is recorded as deferred income and recognized
ratably over the life of the underlying assets. The grant money would be
repayable, in whole or in part, should the Company fail to meet certain
employment goals.

INTANGIBLE ASSETS: Intangible assets are recorded at historical cost and
amortized using the straight-line method over the following lives: patents and
trademarks, 3 to 20 years; licenses, 2 to 20 years; core and developed
technology, 3 to 25 years; excess of cost over net assets acquired, 8 to 40
years; other intangibles, various.

The Company regularly reviews its excess of cost over net assets acquired and
other intangible assets to determine if

                                       18

any adverse conditions exist that would indicate impairment. Conditions that
would trigger an impairment assessment include, but are not limited to, a
significant adverse change in legal factors or business climate that could
affect the value of an asset or an adverse action or assessment by a regulator.
If the carrying amount of an asset exceeds the sum of its undiscounted cash
flows, the carrying value is written down to fair value in the period
identified. Fair value is calculated as the present value of estimated future
cash flows using a risk-adjusted discount rate commensurate with the Company's
weighted-average cost of capital.

INCOME TAXES: The Company utilizes the asset and liability method for accounting
for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities. Deferred tax assets and liabilities are measured using
the enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

Income taxes are provided on unremitted earnings of subsidiaries outside the
U.S. if such earnings are expected to be repatriated. The Company determines
annually the amount of unremitted earnings of non-U.S. subsidiaries to invest
indefinitely in its non-U.S. operations. It is not practical to estimate the
amount of taxes payable on earnings determined to be invested indefinitely in
non-U.S. operations. At December 31, 2001, unremitted earnings of non-U.S.
subsidiaries were $906 million.

REVENUE RECOGNITION: The Company recognizes revenue from the sale of its
products when the products are shipped to its customers unless a consignment
arrangement exists. Revenue from consignment customers is recognized based on
notification from the customer of usage indicating sales are complete. The
Company allows its customers to return certain products for credit. The Company
also allows customers to return defective or damaged products for credit or
replacement. Accruals are made and evaluated for adequacy for all returns.

LEGAL COSTS: The Company accrues costs of settlement, damages and, under certain
conditions, costs of defense when such costs are probable and estimable.
Otherwise, such costs are expensed as incurred.

RESEARCH AND DEVELOPMENT: Research and development costs are expensed as incurred.

STOCK COMPENSATION ARRANGEMENTS: The Company accounts for its stock compensation
arrangements under the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees, " and Financial Accounting
Standards Board (FASB) Interpretation (FIN) 44, "Accounting for Certain
Transactions involving Stock Compensation, " and intends to continue to do so.
The Company has adopted the disclosure-only provisions of FASB Statement No.
123," Accounting for Stock-Based Compensation. " Any compensation cost on fixed
awards with pro rata vesting is recognized on a straight-line basis over the
award's vesting period.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: The Company recognizes all
derivative financial instruments in the consolidated financial statements at
fair value, regardless of the purpose or intent for holding the instrument, in
accordance with Statement No. 133. Changes in the fair value of derivative
financial instruments are either recognized periodically in earnings or in
stockholders' equity as a component of comprehensive income depending on whether
the derivative financial instrument qualifies for hedge accounting. Changes in
fair values of derivatives not qualifying for hedge accounting are reported in
earnings.

NEW ACCOUNTING STANDARDS: In July 2001, the FASB issued Statement No. 141,
"Business Combinations, " and Statement No. 142, "Goodwill and Other Intangible
Assets, " which were effective July 1, 2001 and January 1, 2002, respectively,
for the Company. The Company has adopted Statement No. 141, which requires that
the purchase method of accounting be used for all business combinations
subsequent to June 30, 2001 and specifies criteria for recognizing intangible
assets acquired in a business combination. Statement No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized upon adoption of this standard, but instead be tested for impairment
at least annually. In addition, goodwill and intangible assets with indefinite
useful lives recorded as a result of business combinations completed during the
six-month period ending December 31, 2001 will not be amortized. Intangible
assets with definite useful lives will continue to be amortized over their
estimated useful lives. The Company anticipates approximately $35 million of
annual amortization reductions in 2002 relative to 2001 as a result of adoption
of Statement No. 142, partially offset by the effect of a full year or
amortization


                                       19

of intangible assets related to businesses acquired in 2001. The Company is in
the process of determining whether any impairment will be recognized upon the
adoption of Statement No. 142, but does not believe any significant impairment
will be recognized.

In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets, " which is effective for fiscal
years beginning after December 15, 2001. Statement No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets. It
supersedes, with exceptions, Statement No. 121, " Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. " The Company
is in the process of determining the effect of adoption of this statement on its
consolidated financial statements and related disclosures.

SHIPPING AND HANDLING COSTS: The Company does not generally recognize revenue
from shipping and handling of its products. Shipping and handling costs are
recorded as selling, general and administrative expenses.

NET INCOME PER COMMON SHARE: Net income (loss) per common share is based upon
the weighted-average number of common shares and common share equivalents
outstanding each year.

RECLASSIFICATIONS: Certain prior years' amounts have been reclassified to
conform to the current year's presentation.

NOTE B - OTHER BALANCE SHEET INFORMATION

Components of selected captions in the Consolidated Balance Sheets at December
31 consisted of:

(in millions)                                                  2001        2000
                                                              ------      ------
TRADE ACCOUNTS RECEIVABLE
Accounts receivable                                           $  432      $  428
Less allowances                                                   62          67
                                                              ------      ------
                                                              $  370      $  361
                                                              ======      ======
INVENTORIES
Finished goods                                                $  146      $  172
Work-in-process                                                   69          59
Raw materials                                                     88         123
                                                              ------      ------
                                                              $  303      $  354
                                                              ======      ======
PROPERTY, PLANT AND EQUIPMENT
Land                                                          $   59      $   56
Buildings and improvements                                       392         365
Equipment, furniture and fixtures                                594         521
                                                              ------      ------
                                                               1,045         942
Less accumulated depreciation and amortization                   453         375
                                                              ------      ------
                                                              $  592      $  567
                                                              ======      ======
EXCESS OF COST OVER NET ASSETS ACQUIRED
Excess of cost over net assets acquired                       $1,016      $  879
Less accumulated amortization                                    100          58
                                                              ------      ------
                                                              $  916      $  821
                                                              ======      ======
TECHNOLOGY - CORE AND DEVELOPED
Core technology                                               $  612      $  421
Developed technology                                             317         220
                                                              ------      ------
                                                                 929         641
Less accumulated amortization                                    167         134
                                                              ------      ------
                                                              $  762      $  507
                                                              ======      ======
PATENTS, TRADEMARKS AND OTHER
Patents and trademarks                                        $  372      $  296
Licenses                                                          99         102
Other                                                             82          77
                                                              ------      ------
                                                                 553         475
Less accumulated amortization                                    167         132
                                                              ------      ------
                                                              $  386      $  343
                                                              ======      ======
ACCRUED EXPENSES
Payroll and related liabilities                               $  146      $  112
Other                                                            275         240
                                                              ------      ------
                                                              $  421      $  352
                                                              ======      ======

During the second quarter of 2001, the Company recorded a provision of $49 million ($34 million, net of tax) for excess NIR(R) coronary stent inventory. The Company had approximately $34 million of net NIR(R) stent inventory on hand as of December 31, 2001. Worldwide NIR(R) coronary stent sales were approximately 11 percent of 2001 worldwide sales.

                                                 GROSS        GROSS
                                        FAIR   UNREALIZED  UNREALIZED  AMORTIZED
(in millions)                           VALUE    GAINS       LOSSES      COST
                                        ----      ---          --        ----
DECEMBER 31, 2001
AVAILABLE-FOR-SALE:

Cash and money market accounts          $180                             $180
Equity securities (with a readily
   determinable fair value)               52      $40          $1          13
                                        ----      ---          --        ----
                                        $232      $40          $1        $193
                                        ----      ---          --        ----
DECEMBER 31, 2000
AVAILABLE-FOR-SALE:

Cash and money market accounts          $ 54                             $ 54
Equity securities (with a readily
   determinable fair value)               42      $28          $1          15
                                        ----      ---          --        ----
                                        $ 96      $28          $1        $ 69
                                        ----      ---          --        ----

The Company has no trading securities. Unrealized gains and temporary losses for available-for-sale securities are excluded from earnings and are reported, net of tax, as a separate component of stockholders' equity until realized. The cost of available-for-sale securities is based on the specific identification method.

At December 31, 2001 and 2000, the Company had investments, including its investment in Medinol, totaling $107 million and $63 million, respectively, in which the fair value was not readily determinable. The Company received no cash dividends from Medinol during 2001, compared to dividends of approximately $25 million, net of tax, during 2000.

(in millions)                                                2001           2000
                                                             ----           ----
Commercial paper                                             $ 99           $ 56
Bank obligations - short-term                                 132            204
Long-term debt - fixed rate                                   492            562
Long-term debt - floating rate                                471
Capital leases (see note E)                                    10             12
                                                             ----           ----

The Company had approximately $99 million and $56 million of commercial paper outstanding at December 31, 2001 and 2000, respectively, at weighted-average interest rates of 2.33 percent and 8.00 percent, respectively. In addition, the Company had approximately $547 million and $187 million in revolving credit facility borrowings outstanding at December 31, 2001 and 2000, respectively, at weighted-average interest rates of 1.95 percent and 4.54 percent, respectively. At December 31, 2001, the revolving credit facilities were approximately $1.6 billion, consisting of a $1 billion credit facility that terminates in June 2002 and a $600 million credit facility that terminates in August 2006. The revolving credit facilities also support the Company's commercial paper borrowings. Use of the borrowings is unrestricted and the borrowings are unsecured. The revolving credit facilities require the Company to maintain a specific ratio of consolidated total debt (as defined) to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (as defined) of less than or equal to 3.5 to 1. The ratio was approximately 1.9 to 1 at December 31, 2001. In addition, the revolving credit facilities require the Company to maintain a specific ratio of consolidated EBITDA (as defined) to consolidated interest expense (as defined) of greater than or equal to 3.5 to 1. The ratio was approximately 10.4 to 1 at December 31, 2001. The Company intends to refinance its $1 billion credit facility terminating in June 2002 with a new credit facility of up to $1 billion having similar terms and conditions.

The Company has the ability to refinance a portion of its short-term debt on a long-term basis through its revolving credit facilities. The Company expects a minimum of $471 million of its short-term borrowings will remain outstanding beyond the next twelve months and, accordingly, has classified this portion as long-term borrowings at December 31, 2001, compared to no such classification at December 31, 2000.

The Company had $500 million of senior notes (the Notes) outstanding at December 31, 2001. The Notes mature in March 2005, bear a semi-annual coupon of 6.625 percent, and are not redeemable prior to maturity or subject to any sinking fund requirements. During 2001, the Company entered into a fixed to floating interest rate swap to hedge changes in the fair value of the Notes. In accordance with Statement No. 133, the Company has recorded changes in the fair value of the Notes since the inception of the

interest rate swap (see Note K for further discussion). The carrying amount of the Notes at December 31, 2001 was approximately $485 million.

The Company had 6 billion Japanese yen (translated to approximately $46 million and $53 million at December 31, 2001 and 2000, respectively) of borrowings outstanding with a syndicate of Japanese banks. The interest rate on the borrowings is 2.37 percent and the borrowings are payable in 2002. In addition, the Company had approximately 1 billion Japanese yen (translated to approximately $7 million) and 1.1 billion Japanese yen (translated to approximately $9 million) of borrowings outstanding from a Japanese bank used to finance a facility construction project at December 31, 2001 and 2000, respectively. The interest rate on the borrowings is 2.1 percent and semi-annual principal payments are due through 2012.

The Company has uncommitted Japanese credit facilities with several Japanese banks, which provided for borrowings and promissory notes discounting of up to 15 billion Japanese yen (translated to approximately $115 million and $131 million) at December 31, 2001 and 2000, respectively. There were $8 million in borrowings outstanding under the Japanese credit facilities at an interest rate of 1.38 percent at December 31, 2001, compared to $12 million in borrowings at an interest rate of 1.5 percent at December 31, 2000. At December 31, 2001, approximately $88 million of notes receivable were discounted at average interest rates of approximately 1.38 percent compared to $108 million of discounted notes receivable at average interest rates of approximately 1.5 percent at December 31, 2000.

In addition, the Company had other outstanding short-term bank obligations of $2 million and $5 million at December 31, 2001 and 2000, respectively.

Interest paid, including interest paid under capital leases and mortgage loans, amounted to $59 million in 2001, $69 million in 2000, and $117 million in 1999.

                                                          CAPITAL   OPERATING
YEAR ENDED DECEMBER 31, (in millions)                      LEASES     LEASES
--------------------------------------                    ------     ------
2002                                                        $ 2        $ 32
2003                                                          2          26
2004                                                          2          14
2005                                                          2          10
2006                                                          2           8
Thereafter                                                    5          47
                                                           ----       -----
TOTAL MINIMUM LEASE PAYMENTS                                 15       $ 137
                                                           ====       =====
Amount representing interest                                  5
----------------------------                                  -
PRESENT VALUE OF MINIMUM LEASE PAYMENTS                    $ 10
                                                           ====

NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

CASH AND CASH EQUIVALENTS: The carrying amounts reported in the balance sheets for cash and cash equivalents are valued at cost, which approximates their fair value.

INVESTMENTS: The fair values for marketable debt and equity securities are based on quoted market prices when readily determinable.

COMMERCIAL PAPER AND BANK OBLIGATIONS: The carrying amounts of the Company's borrowings under its commercial paper program and its financing agreements approximate their fair value.

LONG-TERM DEBT: The fair value of the Company's fixed rate long-term debt is estimated based on quoted market prices. The carrying amounts of the Company's floating rate long-term debt approximate their fair value.

DERIVATIVE INSTRUMENTS: The fair values of derivative instruments are estimated based on the amount that the Company would receive or pay to terminate the agreements at the reporting date. The Company had foreign exchange forward and option contracts and cross-currency interest rate swap contracts outstanding in the notional amounts of $845 million and $452 million as of December 31, 2001 and 2000, respectively. In addition, the Company had interest rate swap contracts outstanding in the notional amounts of $557 million as of December 31, 2001, compared to no such contracts outstanding as of December 31, 2000.

The carrying amounts and fair values of the Company's financial instruments at December 31, 2001 and 2000 are as follows:

                                                   2001                 2000
                                           -----------------     ---------------
                                           CARRYING     FAIR     CARRYING  FAIR
(in millions)                               AMOUNT      VALUE     AMOUNT   VALUE
                                           --------     -----    --------  -----
ASSETS:

   Cash, cash equivalents and
     investments                              $232      $232       $ 96   $ 96
   Foreign exchange contracts                  57         57         37     37
   Cross-currency interest rate
     swap contracts                            19         19

LIABILITIES:

   Commercial paper                          $ 99       $ 99       $ 56   $ 56
   Bank obligations - short-term              132        132        204    204
   Long-term debt - fixed rate                492        496        562    518
   Long-term debt - floating rate             471        471
   Foreign exchange contracts                                         1      1
   Interest rate swap contracts                15         15
                                             ----       ----       ----   -----

YEAR ENDED DECEMBER 31, (in millions)                2001        2000       1999
------------------------------------                -----       -----      -----

Domestic                                            $(226)      $ 272      $ 422
Foreign                                               270         255        140
                                                    -----       -----      -----
                                                    $  44       $ 527      $ 562
                                                    =====       =====      =====

The related provision for income taxes consisted of:

YEAR ENDED DECEMBER 31, (in millions)              2001        2000        1999
------------------------------------              -----       -----      -----

CURRENT:
   Federal                                        $  40       $ 115       $ 164
   State                                              5           8          17
   Foreign                                           45          29          39
                                                  -----       -----       -----
                                                     90         152         220

DEFERRED:
   Federal                                           16          (9)         (8)
   State                                              2          (1)         (1)
   Foreign                                          (10)         12         (20)
                                                  -----       -----       -----
                                                      8           2         (29)
                                                  -----       -----       -----
                                                  $  98       $ 154       $ 191
                                                  =====       =====       =====

The reconciliation of taxes on income at the federal statutory rate to the actual provision for income taxes is:

YEAR ENDED DECEMBER 31, (in millions)                  2001      2000      1999
------------------------------------                   ----      ----      ----
Tax at statutory rate                                  $ 15      $184      $197
State income taxes, net of federal benefit                3         5        11
Effect of foreign taxes                                 (38)      (36)      (20)
Purchased research and development                      111
Other, net                                                7         1         3
                                                       ----      ----      ----
                                                       $ 98      $154      $191
                                                       ====      ====      ====

Significant components of the Company's deferred tax assets and liabilities at December 31 consisted of:

(in millions)                                                2001          2000
                                                            -----         -----
DEFERRED TAX ASSETS:
   Inventory costs, intercompany profit and
     related reserves                                       $ 107         $  92
   Tax benefit of net operating loss and tax credits           85            33
   Reserves and accruals                                       71            38
   Restructuring and merger-related charges,
     including purchased research and development             206           228
   Property, plant and equipment                                6
   Other                                                       16            28
                                                            -----         -----
                                                              491           419
Less valuation allowance on deferred tax assets                37            27
                                                            -----         -----
                                                            $ 454         $ 392
                                                            =====         =====
DEFERRED TAX LIABILITIES:
   Property, plant and equipment                                          $  (4)
   Intangible assets                                        $(195)          (66)
   Unremitted earnings of subsidiaries                        (71)          (58)
   Unrealized gains and losses on
     available-for-sale securities                            (14)          (10)
   Unrealized gains and losses on derivative
     financial instruments                                    (26)          (16)
   Other                                                      (17)          (12)
                                                            -----         -----
                                                             (323)         (166)
                                                            =====         =====
                                                            $ 131         $ 226
                                                            =====         =====

At December 31, 2001, the Company had U.S. tax net operating loss carryforwards and tax credits, the tax effect of which is approximately $70 million. In addition, the Company had foreign tax net operating loss carryforwards, the tax effect of which is approximately $15 million. These carryforwards will expire periodically beginning in the year 2002. The Company established a valuation allowance of $37 million against these carryforwards.The increase in the valuation allowance from 2000 to 2001 is primarily attributable to the limitation on the use of tax credits.

Income taxes paid amounted to $108 million in 2001, $50 million in 2000 and $93 million in 1999. The income tax provision (benefit) of the unrealized gain or loss component of other comprehensive income (loss) was approximately $14 million, $21 million and $4 million, for 2001, 2000 and 1999, respectively.

NOTE H - STOCKHOLDERS' EQUITY

PREFERRED STOCK: The Company is authorized to issue 50 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company's stockholders. At December 31, 2001, the Company had no shares of preferred stock outstanding.

COMMON STOCK: The Company is authorized to issue 600 million shares of common stock, $.01 par value per share. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends when and if declared by the Board of Directors and to share ratably in the assets of the Company legally available for distribution to its stockholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The holders of common stock do not have cumulative voting rights. The holders of a majority of the shares of common stock can elect all of the directors and can control the management and affairs of the Company.

On June 30, 1999, the Company completed a public offering of 14.950 million shares of its common stock at a price of $39.875 per share under a $1.2 billion shelf registration filed with the Securities and Exchange Commission in September 1998. The Company used the net proceeds from the public offering of approximately $578 million to repay borrowings under the revolving credit facilities. Approximately $604 million remain available for the issuance of various debt or equity securities under the shelf registration.

The Company is authorized to purchase on the open market and in private transactions up to approximately 60 million shares of the Company's common stock. Stock repurchased would principally be used to satisfy the Company's obligations pursuant to its equity incentive plans, but may also be used for general corporate purposes, including acquisitions. During 2001, the Company did not repurchase any shares as compared to approximately 12 million shares at an aggregate cost of $222 million repurchased by the Company in 2000. As of December 31, 2001, a total of approximately 38 million shares of the Company's common stock have been repurchased.

NOTE I - STOCK OWNERSHIP PLANS

EMPLOYEE AND DIRECTOR STOCK INCENTIVE PLANS

Boston Scientific's 1992, 1995 and 2000 Long-Term Incentive Plans provide for the issuance of up to 60 million shares of common stock. The terms of these three plans are similar. Together, the plans cover officers of, directors of, employees of and consultants to the Company and provide for the grant of various incentives, including qualified and non-qualified options, stock grants, share appreciation rights and performance awards. Options granted to purchase shares of common stock are either immediately exercisable or exercisable in installments as determined by the Compensation Committee of the Board of Directors, consisting of two or more non-employee directors (the Committee), and expire within ten years from date of grant. In the case of qualified options, if an employee owns more than 10 percent of the voting power of all classes of stock, the option granted will be at 110 percent of the fair market value of the Company's common stock on the date of grant and will expire over a period not to exceed five years.

The Committee may also make stock grants in which shares of common stock may be issued to directors, officers, employees and consultants at a purchase price less than fair market value. The terms and conditions of such issuances, including whether achievement of individual or Company performance targets is required for the retention of such awards, are determined by the Committee. The Committee may also issue shares of common stock and/or authorize cash awards under the incentive plans in recognition of the achievement of long-term performance objectives established by the Committee.

In January 2000, the Company granted under its 1992 and 1995 Long-Term Incentive Plans approximately 1.1 million shares of its common stock to a limited group of employees subject to certain forfeiture restrictions. The purpose of the program was to help retain key employees. The market value of these shares was approximately $26 million on the date of issuance and the vesting period is three years. This amount was recorded as deferred compensation and is shown as a separate component of stockholders' equity. The deferred compensation is being amortized to expense over the vesting period and amounted to approximately $7 million and $8 million for the years ended December 31, 2001 and 2000.

Stock grants for 50,000 shares were issued to employees during 2001; no stock grants were issued in 1999. During the years ended December 31, 2001 and 2000, approximately 91,000 shares and 143,000 shares, respectively, of restricted stock were forfeited. No stock grants were issued in 1999.

Boston Scientific's 1992 Non-Employee Directors' Stock Option Plan provides for the issuance of up to 200,000 shares of common stock and authorizes the automatic grant to outside directors of options to acquire a specified number of shares of common stock generally on the date of each annual meeting of the stockholders of the Company or on the date a non-employee director is first elected to the Board of Directors. Options under this plan are exercisable ratably over a three-year period and expire ten years from the date of grant. This plan expires on March 31, 2002 at which time future shares will be issued under the 2000 Long-Term Incentive Plan, or the then current incentive plan.

Shares reserved for future issuance under all of the Company's incentive plans totaled approximately 50 million at December 31, 2001.

If the Company had elected to recognize compensation expense for the granting of options under stock option plans based on the fair values at the grant dates consistent with the methodology prescribed by Statement No. 123 net income
(loss) and earnings (loss) per share would have been reported as the following pro forma amounts:

YEAR ENDED DECEMBER 31,                          2001         2000        1999
(in millions, except per share data)
                                               --------     --------    --------
Net income (loss)
     As reported                               $    (54)    $    373    $    371
     Pro forma                                      (94)         333         329
                                               --------     --------    --------
Earnings (loss) per common share -
   assuming dilution
     As reported                               $  (0.13) $      0.91 $      0.90
     Pro forma                                    (0.23)        0.83        0.80
                                               --------     --------    --------

The weighted-average grant-date fair value per share of options granted during 2001, 2000 and 1999, calculated using the Black-Scholes options pricing model, is $12.70, $8.67 and $13.81, respectively.

The fair value of the stock options used to calculate the pro forma net income
(loss) and earnings (loss) per share amounts above is estimated using the Black-Scholes options pricing model with the following weighted-average assumptions:

                                       2001             2000             1999
                                    ---------        ---------        ---------
Dividend yield                              0%               0%               0%
Expected volatility                     51.40%           47.20%           48.60%
Risk-free interest rate                  4.86%            6.01%            5.37%
Actual forfeitures                  3,316,000        2,737,000        1,272,000
Expected life                             6.0              4.6              4.2

Information related to stock options at December 31 under stock incentive plans is as follows:

(option amounts in thousands)                               2001                       2000                        1999
                                                  -------------------------     -------------------------    -----------------------
                                                                   WEIGHTED                      WEIGHTED                 WEIGHTED
                                                                   AVERAGE                       AVERAGE                   AVERAGE
                                                                   EXERCISE                      EXERCISE                 EXERCISE
                                                  OPTIONS           PRICE       OPTIONS           PRICE        OPTIONS     PRICE
                                                  -------         ---------     -------         ---------     -------        ------
Outstanding at January 1                           44,573         $   21.36      31,511         $   23.63      32,048     $   20.45
   Granted                                          6,007             21.66      18,441             18.22       6,634         31.57
   Exercised                                       (2,482)            12.13      (1,348)            11.23      (5,195)        12.39
   Canceled                                        (4,121)            25.16      (4,031)            28.18      (1,976)        28.29
                                                  -------         ---------     -------         ---------     -------        ------
OUTSTANDING AT DECEMBER 31                         43,977             21.56      44,573             21.36      31,511         23.63
                                                  =======         =========     =======         =========      ======     =========
EXERCISABLE AT DECEMBER 31                         21,709         $   21.03      16,921         $   19.56      13,346     $   16.22
                                                  =======         =========     =======         =========      ======     =========

Below is additional information related to stock options outstanding and exercisable at December 31, 2001:

(option amounts in thousands)                     STOCK OPTIONS OUTSTANDING               STOCK OPTIONS EXERCISABLE
                                          ------------------------------------------     ----------------------------
                                                          WEIGHTED          WEIGHTED                    WEIGHTED
                                                          AVERAGE           AVERAGE                     AVERAGE
                                                          REMAINING         EXERCISE                    EXERCISE
RANGE OF EXERCISE PRICES                   OPTIONS     CONTRACTUAL LIFE      PRICE       OPTIONS         PRICE
                                          ---------    ----------------     --------     -------    -----------------
 $ 0.00-8.00                                3,205           2.75            $  4.89        2,910         $  5.23
   8.01-16.00                              10,509           7.55              12.89        4,975           13.05
  16.01-24.00                               8,703           7.43              18.62        4,090           19.61
  24.01-32.00                              14,352           7.67              26.00        5,452           25.70
  32.01-40.00                               7,009           6.79              36.08        4,179           36.25
  40.01-48.00                                 199           7.53              44.90          103           44.78
                                          ---------    ----------------     -------      -------         -------
                                           43,977           7.09            $ 21.56       21,709         $ 21.03
                                          =========    ================     =======      =======         =======

STOCK PURCHASE PLAN

Boston Scientific's Global Employee Stock Ownership Plan (Stock Purchase Plan) provides for the granting of options to purchase up to 7.5 million shares of the Company's common stock to all eligible employees. Under the Stock Purchase Plan, each eligible employee is granted, at the beginning of each period designated by the Committee as an offering period, an option to purchase shares of the Company's common stock equal to not more than 10 percent of the employee's eligible compensation. Such options may be exercised generally only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price equal to 85 percent of the fair market value of the Company's common stock at the beginning or end of each offering period, whichever is less.

During 2001, approximately 1,106,000 shares were issued at prices ranging from $11.48 to $11.64 per share. During 2000, approximately 754,000 shares were issued at prices ranging from $18.59 to $18.65 per share, and during 1999, approximately 603,000 shares were issued at prices ranging from $22.47 to $22.79 per share. At December 31, 2001, there were approximately 3.6 million shares available for future issuance.

YEAR ENDED DECEMBER 31,                         2001         2000        1999
(in millions, except share and per share data)
                                              ---------    --------    ---------

BASIC:
   Net income (loss)                          $     (54)   $     373   $     371
                                              =========    =========   =========
   Weighted average shares
     outstanding (in thousands)                 401,389      405,271     404,783
                                              =========    =========   =========
   Net income (loss) per common share         $   (0.13)   $    0.92   $    0.92
                                              =========    =========   =========
ASSUMING DILUTION:
   Net income (loss)                          $     (54)   $     373   $     371
                                              =========    =========   =========
   Weighted average shares outstanding
     (in thousands)                             401,389      405,271     404,783
                                              ---------    ---------   ---------
   Net effect of dilutive stock-based
     compensation (in thousands)                               3,051       6,568
   TOTAL                                        401,389      408,322     411,351
                                              =========    =========   =========
   NET INCOME (LOSS) PER COMMON SHARE         $   (0.13)   $    0.91   $    0.90
                                              =========    =========   =========

During 2001, 2000 and 1999, approximately 24 million, 24 million and 7 million potential common shares, respectively, were not included in the computation of earnings per share, assuming dilution, because exercise prices were greater than the average market price of the common shares. In addition, during 2001, approximately 5 million stock options were not included in the computation of earnings per share, assuming dilution, because they would have been antidilutive.

NOTE K - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, the Company is exposed to market risk from changes in foreign currency exchange rates and interest rates. The Company addresses these risks through a risk management program that includes the use of derivative financial instruments. The program is operated pursuant to documented corporate risk management policies. The Company does not enter into any derivative transactions for speculative purposes.

The Company hedges its net recognized foreign currency transaction exposures with both foreign currency borrowings (primarily Japanese yen) and forward foreign exchange contracts to reduce the risk that the Company's earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These foreign exchange contracts are not designated as cash flow, fair value or net investment hedges under Statement No. 133 and therefore, are marked to market with the change in fair value recorded into income. These derivative instruments do not subject the Company's earnings or cash flows to material risk due to exchange rate movements because gains and losses on these derivatives offset losses and gains on the assets and liabilities being hedged. These foreign exchange contracts are entered into for periods consistent with commitments, generally one to six months.

In addition, the Company hedges a portion of its forecasted intercompany and third-party transactions with foreign exchange forward and option contracts. These contracts are entered into to reduce the risk that the Company's earnings and cash flows resulting from certain forecasted transactions will be adversely affected by changes in foreign currency

exchange rates. However, the Company may be impacted by changes in foreign currency exchange rates related to the unhedged portion. The success of the hedging program depends, in part, on forecasts of transaction activity in various currencies (currently the Japanese yen and the euro). The Company may experience unanticipated foreign currency exchange gains or losses to the extent that there are timing differences between forecasted and actual activity during periods of currency volatility. The effective portion of any changes in the fair value of the derivative instruments, designated as cash flow hedges, is recorded in accumulated other comprehensive income/(loss) (AOCI) until the third-party transaction associated with the hedged forecasted transaction occurs. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the cash flow hedge is reclassified from AOCI to earnings. In the event the hedged forecasted transaction does not occur, or it becomes probable that it will not occur, the effective portion of any gain or loss on the related cash flow hedge would be reclassified from AOCI to earnings at that time. The Company did not recognize material gains or losses resulting from either hedge ineffectiveness or changes in forecast probability during 2001 or 2000. The Company recognized a net gain of approximately $43 million and $8 million in earnings from derivative instruments designated as cash flow hedges of forecasted transactions during 2001 and 2000, respectively. All of the derivative instruments, designated as cash flow hedges, outstanding at December 31, 2001, mature within the subsequent 24-month period. As of December 31, 2001, approximately $44 million of unrealized net gains are recorded in AOCI, net of tax, to recognize the effective portion of any fair value of derivative instruments that are, or previously were, designated as cash flow hedges. Of this amount, a gain of approximately $32 million, net of tax, is expected to be reclassified to earnings within the next twelve months to mitigate foreign exchange risk.

Also, during 2001, the Company hedged a portion of its foreign currency denominated net investments in affiliates with cross-currency interest rate swap contracts. These hedging contracts reduce the risk that the Company's accumulated shareholders' equity will be adversely affected by changes in foreign currency exchange rates (primarily Japanese yen). These derivative instruments are designated as net investment hedges under Statement No. 133. The effective portion of any changes in the fair value of the derivative instruments, designated as net investment hedges, is recorded in AOCI. The ineffective portion of any changes in the fair value is recorded in interest expense. The Company recognized an immaterial amount of hedge ineffectiveness during 2001. As of December 31, 2001, approximately $19 million of unrealized net gains are recorded in AOCI to recognize the effective portion of the fair value of derivative instruments that are designated as net investment hedges. None of this amount is expected to be reclassified to earnings.

The Company's primary interest rate risk exposure results from changes in U.S. and Japanese interest rates related to its debt obligations. In order to manage interest rate exposures, the Company seeks to achieve an acceptable balance between fixed and floating interest rate obligations in these currencies. During 2001, the Company initiated a program to hedge its interest rate risk exposures with interest rate swaps. These hedging contracts are designated as either fair value or cash flow hedges under Statement No.133. Any changes in the fair value of derivative instruments, designated as fair value hedges, is recorded in other income and expense and is offset by changes in the fair value of the hedged debt obligation. Interest expense related to the hedged debt obligation is adjusted to reflect interest payments made or received under the interest rate swap agreements. Any changes in the fair value of derivative instruments, designated as cash flow hedges, is recorded in AOCI, net of tax, and reclassified to interest expense during the hedged interest payment period. The Company recognized an immaterial amount of net interest income related to interest rate swaps during 2001. As of December 31, 2001, approximately $15 million of unrealized net losses are recorded on the balance sheet as other long-term liabilities to recognize the fair value of interest rate swaps that are designated as either fair value or cash flow hedges.

NOTE L - COMMITMENTS AND CONTINGENCIES

The Company is involved in various lawsuits from time to time. In management's opinion, the Company is not currently involved in any legal proceedings other than those specifically identified below which, individually or in the aggregate, could have a material effect on the financial condition, operations or cash flows of the Company. As of December 31, 2001,

the potential exposure for litigation-related accruable costs is estimated to range from $6 million to $13 million. The Company's total accrual for litigation-related reserves as of December 31, 2001 and 2000 was approximately $6 million and $16 million, respectively. As of December 31, 2001, the range of loss for reasonably possible contingencies that can be estimated is $0 to $404 million, plus interest, and additional damages for sales occurring after the date of the December 2000 Johnson & Johnson jury verdict discussed below.

The Company believes that it has meritorious defenses against claims that it has infringed patents of others. However, there can be no assurance that the Company will prevail in any particular case. An adverse outcome in one or more cases in which the Company's products are accused of patent infringement could have a material adverse effect on the Company. Further, product liability claims may be asserted in the future relative to events not known to management at the present time. The Company has insurance coverage, which management believes is adequate to protect against product liability losses as could otherwise materially affect the Company's financial position.

LITIGATION WITH JOHNSON & JOHNSON

On October 22, 1997, Cordis Corporation (Cordis), a subsidiary of Johnson & Johnson, filed a suit for patent infringement against the Company and Scimed Life Systems, Inc. (Scimed), a subsidiary of the Company, alleging that the importation and use of the NIR(R) stent infringes two patents owned by Cordis. On April 13, 1998, Cordis filed a suit for patent infringement against the Company and Scimed alleging that the Company's NIR(R) stent infringes two additional patents owned by Cordis. The suits were filed in the U.S. District Court for the District of Delaware seeking monetary damages, injunctive relief and that the patents be adjudged valid, enforceable and infringed. A trial on both actions was held in late November through early December 2000. A jury found that the NIR(R) stent does not infringe three Cordis patents, but does infringe one claim of one Cordis patent and awarded damages of approximately $324 million to Cordis. A post-trial hearing was held July 26, 2001. Judgment has not yet been entered by the Court.

On March 13, 1997, the Company (through its subsidiaries) filed suits against Johnson & Johnson (through its subsidiaries) in The Netherlands, the United Kingdom and Belgium, and on March 17, 1997 filed suit in France, seeking a declaration of noninfringement for the NIR(R) stent relative to two European patents licensed to Ethicon, Inc. (Ethicon), a Johnson & Johnson subsidiary, as well as a declaration of invalidity with respect to those patents. After a trial on the merits in the United Kingdom during March 1998, the Court ruled on June 26, 1998 that neither of the patents is infringed by the NIR(R) stent, and that both patents are invalid. Ethicon appealed, and on March 20, 2000, the appellate court upheld the trial outcome. On October 28, 1998, the Company's motion for a declaration of noninfringement in France was dismissed for failure to satisfy statutory requirements; the French invalidity suits were not affected. A hearing related to the French invalidity suits was held on November 19, 2001. On January 16, 2002, the Court found one of the patents to be valid and the other to be invalid. A written decision has not yet been rendered.

On March 20, 21 and 22, 1997, the Company (through its subsidiaries) filed additional suits against Johnson & Johnson (through its subsidiaries) in Sweden, Italy and Spain, respectively, seeking a declaration of noninfringement for the NIR(R) stent relative to one of the European patents licensed to Ethicon in Sweden, Italy and Spain and a declaration of invalidity in Italy and Spain. In Italy, a technical expert was appointed by the court and a hearing is scheduled for January 30, 2002. On August 21, 2001, the Company withdrew its noninfringement action in Sweden under an agreement signed by all parties. Ethicon and other Johnson & Johnson subsidiaries filed a cross-border suit in The Netherlands on March 17, 1997, alleging that the NIR(R) stent infringes one of the European patents licensed to Ethicon. In this action, the Johnson & Johnson entities requested relief, including provisional relief (a preliminary injunction), covering Austria, Belgium, France, Greece, Italy, The Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. On April 2, 1997, the Johnson & Johnson entities filed a similar cross-border proceeding in The Netherlands with respect to a second European patent licensed to Ethicon. Johnson & Johnson subsequently withdrew its request for cross-border relief in the United Kingdom. In October 1997, Johnson & Johnson's request for provisional cross-border relief on both patents was denied by the Dutch Court, on the ground that it is "very likely" that the NIR(R) stent will be found not to infringe the patents. Johnson & Johnson appealed this decision with

respect to the second patent; the appeal has been denied on the ground that there is a "ready chance" that the patent will be declared null and void. In January 1999, Johnson & Johnson amended the claims of the second patent, changed the action from a cross-border case to a Dutch national action, and indicated its intent not to pursue its action on the first patent. On June 23, 1999, the Dutch Court affirmed that there were no remaining infringement claims with respect to either patent. In late 1999, Johnson & Johnson appealed this decision. A hearing on the appeal has not yet been scheduled.

On May 6, 1997, Ethicon Endosurgery, Inc., a subsidiary of Johnson & Johnson, sued the Company in Dusseldorf, Germany, alleging that the Company's NIR(R) stent infringes one of Ethicon's patents. On June 23, 1998, the case was stayed following a decision in an unrelated nullity action in which the Ethicon patent was found to be invalid.

On August 22, 1997, Johnson & Johnson filed a suit for patent infringement against the Company alleging that the sale of the NIR(R) stent infringes certain Canadian patents owned by Johnson & Johnson. Suit was filed in the federal court of Canada seeking a declaration of infringement, monetary damages and injunctive relief. The Company has answered, denying the allegations of the complaint. A trial is expected to begin in late 2003.

On June 7, 1999, the Company, Scimed and Medinol filed suit for patent infringement against Johnson & Johnson, Johnson & Johnson Interventional Systems and Cordis, alleging two U.S. patents owned by Medinol and exclusively licensed to the Company are infringed by Cordis' Crown(TM), MiniCrown(TM) and Corinthian(TM) stents. The suit was filed in the U.S. District Court for the District of Minnesota seeking injunctive and monetary relief.

On April 14, 2000, the Company (through its subsidiaries) and Medinol filed suit for patent infringement against Johnson & Johnson, Cordis, and a subsidiary of Cordis alleging that a patent owned by Medinol and exclusively licensed to the Company is infringed by Cordis' BX Velocity(TM) stent delivery system. The complaint was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. The Minnesota action was transferred to the U.S. District Court for the District of Delaware and consolidated with the Delaware action filed by the Company. A trial was held in August 2001 on both actions. On September 7, 2001, a jury found that Cordis' BX Velocity, Crown, and MiniCrown stents do not infringe the patents, and that the asserted claims of those patents are invalid. A hearing on the post-trial motions is scheduled for February 26, 2002. The jury also found that Cordis' Corinthian stent infringes a valid Medinol patent claim and awarded the Company and Medinol $8.3 million in damages. Post-trial briefing motions were filed through December 2001, and on January 25, 2002, the Court entered final judgment on the Corinthian stent in favor of the Company.

On March 24, 2000, the Company (through its subsidiaries) and Medinol filed a cross-border suit against Johnson & Johnson, Cordis and certain of their foreign subsidiaries in The Netherlands alleging Cordis' BX Velocity stent delivery system infringes one of Medinol's European patents. In this action, the Company and Medinol requested monetary and injunctive relief covering The Netherlands, Austria, Belgium, Switzerland, Germany, Denmark, Spain, France, Greece, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, Portugal and Sweden. A hearing was held January 12, 2001. On March 19, 2001, the Company's request for preliminary injunction was denied by the Court. On May 11, 2001, the Company appealed this decision. A hearing on the appeal is expected to be scheduled during the fall of 2002.

On March 30, 2000, the Company (through its subsidiary) filed suit for patent infringement against two subsidiaries of Cordis alleging that Cordis' BX Velocity stent delivery system infringes a published utility model owned by Medinol and exclusively licensed to the Company. The complaint was filed in the District Court of Dusseldorf, Germany seeking monetary and injunctive relief. A hearing was held on March 15, 2001, and on June 6, 2001, the Court issued a written decision that Cordis' BX Velocity stent delivery system infringes the Medinol published utility model. Cordis appealed the decision of the German court. A hearing on the appeal has been scheduled for November 14, 2002.

On March 25, 1996, Cordis filed a suit for patent infringement against Scimed alleging the infringement of five U.S. patents by Scimed's Leap(TM) balloon material used in certain Scimed catheter products, including Scimed's Bandit(TM) and Express Plus(TM) catheters. The suit was filed in the U.S. District Court for the District of Minnesota and seeks monetary and injunctive relief. Scimed has answered, denying the allega-

tions of the complaint. Pursuant to an agreement between the parties, this action has been stayed.

On March 27, 1997, Scimed filed suit for patent infringement against Cordis, alleging willful infringement of several Scimed U.S. patents by Cordis' Trackstar 14,(TM) Trackstar 18,(TM) Olympix,(TM) Powergrip,(TM) Sleek,(TM) Sleuth,(TM) Thor,(TM) Titan(TM) and Valor(TM) catheters. The suit was filed in the U.S. District Court for the District of Minnesota, seeking monetary and injunctive relief. The parties have agreed to add Cordis' Charger(TM) and Helix(TM) catheters to the suit. Cordis has answered, denying the allegations of the complaint. Pursuant to an agreement between the parties, this action has been stayed.

LITIGATION WITH MEDTRONIC, INC.

On March 28, 2000, the Company and certain subsidiaries filed suit for patent infringement against Medtronic AVE, Inc. (Medtronic AVE), a subsidiary of Medtronic, Inc. (Medtronic), alleging that Medtronic AVE's S670(TM) rapid exchange coronary stent system infringes a patent exclusively licensed to the Company. The suit was filed in the U.S. District Court for the Northern District of California seeking monetary and injunctive relief. In July 2000, this matter was sent to arbitration. An arbitration hearing was held in April 2001 to determine whether Medtronic AVE's S670 and S660(TM) rapid exchange coronary stent delivery systems and the R1 rapid exchange catheter are licensed. On July 18, 2001, the arbitration panel determined that the accused Medtronic AVE products sold in the United States willfully infringe the patent exclusively licensed to the Company. The Company was awarded $169 million in damages, as well as costs and attorneys' fees, and a permanent injunction against Medtronic AVE's sales of its S670, S660 and BeStent 2(TM) stent delivery systems and R1S rapid exchange catheter. On September 18, 2001, the U.S. District Court for the Northern District of California confirmed the arbitration decision. On October 17, 2001, Medtronic AVE appealed the confirmation of the award.

On March 10, 1999, the Company (through its subsidiary Schneider (Europe) AG) filed suit against Medtronic AVE alleging that Medtronic AVE's AVE GFX, AVE GFX2, AVE LTX, Calypso Rely,(TM) Pronto Samba(TM) and Samba Rely(TM) rapid exchange catheters and stent delivery systems infringe one of the Company's German patents. The suit was filed in the District Court of Dusseldorf, Germany seeking injunctive and monetary relief. A hearing was held on January 27, 2000. The Court has delayed its decision pending expert advice and on May 15, 2000, the Court appointed a technical expert. The expert's report was submitted to the Court on November 6, 2001. A hearing is scheduled for May 2, 2002.

On July 7, 1999, Medtronic filed suit against the Company and Scimed, alleging that Scimed's Radius(TM) stent infringes two patents owned by Medtronic. The suit was filed in the U.S. District Court for the Fourth District Court of Minnesota seeking injunctive and monetary relief. The Company has answered, denying allegations of the complaint. A trial date has not been set.

On August 13, 1998, Medtronic AVE (formerly Arterial Vascular Engineering, Inc.), filed a suit for patent infringement against the Company and Scimed alleging that the Company's NIR(R) stent infringes two patents owned by Medtronic AVE. The suit was filed in the U.S. District Court for the District of Delaware seeking injunctive and monetary relief. On May 25, 2000, Medtronic AVE amended the complaint to include a third patent. The Company and Scimed have answered, denying the allegations of the complaint. The parties have filed a stipulation requesting the Court stay the case until the third quarter of 2002.

On April 6, 1999, Medtronic AVE filed suit against Scimed and another subsidiary of the Company alleging that the Company's NIR(R) stent infringes one of Medtronic AVE's European patents. The suit was filed in the District Court of Dusseldorf, Germany seeking injunctive and monetary relief. A hearing was held in Germany on September 23, 1999, and on November 4, 1999, the Court dismissed the complaint. On December 21, 1999, Medtronic AVE appealed the dismissal. The appeal is stayed pending the outcome of a related nullity action.

LITIGATION WITH COOK, INC.

On September 10, 2001, the Company delivered a Notice of Dispute to Cook, Inc.
(Cook) asserting that Cook breached the terms of a certain License Agreement among Angio-tech Pharmaceuticals, Inc., Cook and the Company (the Agreement). On October 10, 2001, pursuant to the terms of the Agreement, the Company filed a demand for arbitration with the American Arbitration Association. On October 11, 2001, Guidant and its subsidiary, Advanced Cardiovascular Systems, Inc. (ACS), and Cook filed suit

against the Company relating to the Agreement. The suit was filed in the U.S. District Court for the Southern District of Indiana and sought declaratory and injunctive relief. The parties subsequently negotiated an agreement under which the dispute would be litigated on an expedited basis in the Northern District of Illinois without Guidant or ACS as parties. On December 13, 2001, the Indiana case was dismissed and Cook filed a similar suit in the U.S. District Court for the Northern District of Illinois seeking declaratory and injunctive relief. The Company answered the complaint on December 26, 2001, denying the allegations and filed counterclaims seeking declaratory and injunctive relief. A trial date has not yet been set.

On March 18, 1999, Cook filed suit against the Company and Scimed, alleging that Scimed's Radius(TM) coronary stent infringes a certain U.S. patent owned by Cook. The suit was filed in the U.S. District Court for the Southern District of Indiana seeking monetary damages and injunctive relief. On July 14, 1999, Cook filed an amended complaint adding Meadox Medicals, Inc. (Meadox), a wholly owned subsidiary of the Company, as a party to the suit, and adding a breach of contract claim. The Company, Scimed and Meadox have answered, denying the allegations of the complaint. A trial date has not yet been set.

On May 23, 2001, Cook filed suit against the Company alleging that the Company's VortX(R) embolization coils infringe a patent owned by Cook. The suit was filed in the U.S. District Court for the Southern District of Indiana seeking monetary damages and injunctive relief. On July 27, 2001, the Company answered, denying the allegations of the complaint and countersued Cook alleging that certain Cook products infringe a patent owned by the Company. On November 14, 2001, the Company amended its complaint against Cook to include two additional patents exclusively licensed to the Company. Cook answered and denied the allegations of the counterclaim. A trial date has not yet been set.

On March 7, 1996, Cook filed suit in the Regional Court, Munich Division for Patent Disputes, in Munich, Germany against MinTec, Inc. Minimally Invasive Technologies, alleging that the Cragg EndoPro(TM) System I and Stentor(TM) endovascular device infringe a certain Cook patent. Following the purchase of the assets of the Endotech/MinTec companies by the Company, the Company assumed control of the litigation. A final hearing was held on May 12, 1999, and the court held no infringement of the Cook patents. The case was dismissed in June 1999. Cook has appealed the decision. On July 27, 2000, the Court stayed the action pending the outcome of a nullity action filed by the Company against the patent.

On June 30, 1998, Cook filed suit in the Regional Court, Dusseldorf Division for Patent Disputes, in Dusseldorf, Germany against the Company alleging that the Company's Passager(TM) peripheral vascular stent graft and Vanguard(TM) endovascular aortic graft products infringe the same Cook patent. A hearing was held on July 22, 1999, and a decision was received in September 1999 finding that the Company's products infringe the Cook patent. The Company appealed the decision. A hearing originally scheduled for August 2001 has been postponed pending the outcome of a nullity action filed by the Company against the patent.

OTHER PATENT LITIGATION

On July 28, 2000, Dr. Tassilo Bonzel filed a complaint naming certain of the Company's Schneider Worldwide subsidiaries and Pfizer Inc. (Pfizer) and certain of its affiliates as defendants, alleging that Pfizer failed to pay Dr. Bonzel amounts owed under a license agreement involving Dr. Bonzel's patented Monorail(TM) technology. The suit was filed in the District Court for the State of Minnesota seeking monetary relief. On September 26, 2001, Dr. Bonzel and the Company reached a contingent settlement involving all but one claim asserted in the complaint. On December 17, 2001, the remaining claim was dismissed without prejudice with leave to refile the suit in Germany.

On August 13, 2001, Joseph Grayzel filed suit against the Company in the U.S. District Court of New Jersey alleging that the Company's Cutting Balloon(R) catheter infringes a patent owned by him. The suit requests monetary and injunctive relief. The Company has answered, denying the allegations of the complaint.

On August 27, 2001, RITA Medical Systems (RITA) filed suit against RadioTherapeutics Corporation (RTC) alleging that RTC's LeVeen(TM) radiofrequency ablation devices infringe six patents owned by RITA. The suit was filed in the U.S. District Court for the Northern District of California seeking monetary damages and injunctive relief. RTC has answered, denying

the allegations of the complaint. On December 11, 2001, the Company acquired RTC and assumed defense of the litigation.

OTHER PROCEEDINGS

On April 5, 2001, Medinol filed a complaint against the Company and certain of its current and former employees alleging breaches of contract, fraud and other claims. Medinol supplies NIR(R) stents exclusively to the Company. The suit was filed in the U.S. District Court for the Southern District of New York seeking monetary and injunctive relief. On April 26, 2001, Medinol amended its complaint to add claims alleging misappropriation of trade secrets in relation to the Company's Express(TM) stent development program. Medinol seeks monetary and injunctive relief, as well as an end to the Company's right to distribute Medinol stents and to gain access to certain Company intellectual property. On April 30, 2001, the Company answered and countersued Medinol and its principals, charging them with fraud, multiple breaches of contract, unfair and deceptive practices and defamation. The Company seeks monetary and injunctive relief. During the last quarter of 2001, the Court dismissed several of the individuals and claims from the case. A trial date has not yet been set.

On June 11, 2001, the Company filed suit in the Jerusalem District Court in Israel against Medinol and its controlling shareholders, alleging among other things, loss of faith among Medinol's shareholders, breach of duty by Medinol management and misappropriation of corporate opportunities, including trade secrets and intellectual property. The suit seeks, among other things, monetary relief and costs. Preliminary motions were heard on October 29, 2001. Decisions on the motions have not yet been entered.

The Company is aware that the U.S. Department of Justice is conducting an investigation of matters that include the Company's NIR ON(R) Ranger(TM) with Sox(TM) coronary stent delivery system, which was voluntarily recalled by the Company in October 1998 following reports of balloon leaks. The Company is cooperating fully in the investigation.

Beginning November 4, 1998, a number of shareholders of the Company, on behalf of themselves and all others similarly situated, filed purported stockholders' class action suits in the U.S. District Court for the District of Massachusetts alleging that the Company and certain of its officers violated certain sections of the Securities Exchange Act of 1934. The complaints principally alleged that as a result of certain accounting irregularities involving the improper recognition of revenue by the Company's subsidiary in Japan, the Company's previously issued financial statements were materially false and misleading. In August 1999, lead plaintiffs and lead counsel filed a purported consolidated class action complaint adding allegations that the Company issued false and misleading statements with respect to the launch of its NIR ON(R) Ranger with Sox coronary stent delivery system and the system's subsequent recall. Following a hearing on a motion by the Company and its officers, the Court dismissed the case without prejudice on August 16, 2001. On October 12, 2001, the plaintiffs notified the Court that they would not amend their complaint, and the Court administratively closed the case.

On January 10, 2002 and January 15, 2002, Alan Schuster and Antoinette Loeffler, respectively, putatively initiated shareholder derivative lawsuits for and on behalf of the Company in the U.S. District Court for the Southern District of New York against the Company's current directors and the Company as a nominal defendant. Both complaints allege, among other things, that with regard to the Company's relationship with Medinol, the defendants breached their fiduciary duties to the Company and its shareholders in the management and affairs of the Company, and in the use and preservation of the Company's assets. The suits seek a declaration of the directors' alleged breach, damages sustained by the Company as a result of the alleged breach and monetary and injunctive relief. The Company and members of the Board have not yet answered the complaints.

On October 31, 2000, the Federal Trade Commission (FTC) filed suit against the Company for alleged violations of a Consent Order dated May 5, 1995, pursuant to which the Company had licensed certain intravascular ultrasound technology to Hewlett-Packard Company (HP). The suit was filed in the U.S. District Court for the District of Massachusetts seeking civil penalties and injunctive relief. The Company filed a motion to dismiss the complaint and the FTC filed a motion for summary judgment. On October 5, 2001, the Court dismissed three of the five claims against the Company and granted summary judgment of liability in favor of the FTC on the two remaining claims. A hearing on damages has been scheduled for August 5, 2002.

NOTE M - BUSINESS COMBINATIONS

On February 27, 2001, the Company completed its acquisition of 100 percent of the outstanding shares of Embolic Protection, Inc. (EPI) for approximately $70 million in cash plus contingent payments. EPI develops embolic protection filters for use in interventional cardiovascular procedures and also develops carotid endovascular therapies for the prevention of stroke. The acquisition is intended to accelerate the Company's entry into the embolic protection market.

On March 5, 2001, the Company completed its acquisition of 100 percent of the outstanding shares of Catheter Innovations, Inc. (CI) for approximately $20 million in cash plus contingent payments. CI develops and manufactures catheter-based venous access products used by clinicians to treat critically ill patients through the delivery of chemotherapy drugs, antibiotics and nutritional support. The acquisition is intended to expand the Company's technology portfolio in the venous access market.

On March 30, 2001, the Company completed its acquisition of 100 percent of the outstanding shares of Quanam Medical Corporation (Quanam) through the issuance of approximately 1 million shares of Company common stock valued at approximately $15 million plus contingent payments. Quanam develops medical devices using novel polymer technology, with a concentration on drug-delivery stent systems for use in cardiovascular applications. The acquisition is intended to broaden the Company's drug-delivery portfolio.

On April 2, 2001, the Company completed its acquisition of 100 percent of the outstanding shares of Interventional Technologies, Inc. (IVT). During 2001, the Company paid $430 million in cash in connection with its acquisition of IVT; in addition, other contingent payments remain outstanding related to IVT. IVT develops, manufactures and markets less-invasive devices for use in interventional cardiology, including the Cutting Balloon(R) catheter and the Infiltrator(R) transluminal drug-delivery catheter. The acquisition is intended to strengthen the Company's market leadership position in interventional cardiology.

On August 9, 2001, the Company completed its acquisition of 100 percent of the outstanding shares of Cardiac Pathways Corporation (CPC) in an all cash transaction for approximately $115 million. CPC designs and markets less-invasive systems to diagnose and treat cardiac tachyarrhythmias (abnormally rapid heart rhythms). The acquisition is intended to strengthen and broaden the Company's product offerings in the field of electrophysiology.

On December 11, 2001, the Company completed its acquisition of the remaining 72 percent of the outstanding shares of RadioTherapeutics Corporation (RTC) through the issuance of approximately 900,000 shares of Company common stock valued at approximately $25 million plus contingent payments. RTC develops and manufactures proprietary radiofrequency-based therapeutic devices in the field of interventional oncology for the ablation (destruction) of various forms of soft tissue lesions (tumors). The acquisition is intended to expand the Company's oncology technology portfolio.

The Company's acquisitions were accounted for using the purchase method of accounting. The consolidated financial statements include the operating results for each acquired entity from its respective date of acquisition. Pro forma information is not presented, as the acquired companies' results of operations prior to their date of acquisition are not material, individually or in the aggregate, to the Company. The EPI, CI, Quanam, IVT and RTC acquisitions involve potential earn-out payments based on the acquired companies reaching certain performance and other milestones. These payments, some of which may be made in the Company's common stock, would be allocated to specific intangible asset categories with the remainder assigned to excess of cost over net assets acquired on the basis that the consideration had been paid as of the date of acquisition. In aggregate through 2006, the Company anticipates it will make approximately $400 million in contingent payments in connection with the acquisitions consummated in 2001.

As of December 31, 2001, the Company had recorded $4 million for trademarks and approximately $50 million for goodwill acquired in connection with the Company's acquisitions of CPC and RTC, which are not subject to amortization in accordance with FASB Statement No. 142. The goodwill acquired in connection with CPC and RTC is not deductible for tax purposes.

The aggregate purchase price for each acquisition has been allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The estimated excess of purchase price over the fair value of the net tangible assets acquired was allocated to identifiable intangible assets, as valued by an independent appraiser using information and

assumptions provided by management. Based upon these valuations, the Company recorded charges of $282 million to account for purchased research and development related to businesses acquired during 2001. The valuation of purchased research and development, for which management is primarily responsible, represents the estimated fair value at the date of acquisition related to in-process projects. As of the date of acquisition, the in-process projects had not yet reached technological feasibility and had no alternative future uses. The primary basis for determining the technological feasibility of these projects is obtaining regulatory approval. Accordingly, the value attributable to these projects, which had not yet obtained regulatory approval, was expensed in conjunction with the acquisition. If the projects are not successful or completed in a timely manner, the Company may not realize the financial benefits expected for these projects. Other intangible assets subject to amortization recorded in connection with these acquisitions are being amortized on a straight-line basis ranging from 9 to 25 years.

The income approach was used to establish the fair values of purchased research and development. This approach established the fair value of an asset by estimating the after-tax cash flows attributable to the in-process project over its useful life and then discounting these after-tax cash flows back to a present value. Revenue estimates were based on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected product introductions by competitors. In arriving at the value of the in-process research and development projects, the Company considered, among other factors, the in-process project's stage of completion, the complexity of the work completed as of the acquisition date, the costs already incurred, the projected costs to complete, the contribution of core technologies and other acquired assets, the expected introduction date and the estimated useful life of the technology. The discount rate used to arrive at a present value as of the date of acquisition was based on the time value of money and medical technology investment risk factors. For the purchased research and development programs, risk-adjusted discount rates ranging from 16 percent to 28 percent were utilized to discount the projected cash flows. The Company believes that the estimated purchased research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the projects.

The most significant projects, relative to the purchased research and development charge recorded in connection with the acquisitions consummated in 2001, are the next-generation Cutting Balloon(R) catheter, the next-generation Infiltrator(R) transluminal drug-delivery catheter and next-generation embolic protection devices, which collectively represent approximately 63 percent of the in-process value. The Cutting Balloon is a novel balloon angioplasty device with mounted scalpels that relieve stress in the artery, reducing the force necessary to expand the vessel. This contributes to less inadvertent arterial trauma and injury as compared to standard balloon angioplasty. The Infiltrator transluminal drug-delivery catheter is designed to directly deliver therapeutic agents into the wall of the artery with high levels of efficiency. The embolic protection devices are filters that are mounted on a guidewire and are used to capture embolic material that is dislodged during cardiovascular interventions. As of the date of acquisition, the projects were expected to be completed and the products to be commercially available on a worldwide basis within one to four years, with an estimated cost to complete of approximately $30 million to $45 million.

NOTE N - RESTRUCTURING AND MERGER-RELATED CHARGES

At December 31, 2001, the Company had accruals for restructuring and merger-related charges comprised of $35 million of accrued severance and related costs associated with the Company's 2000 plant optimization initiative and $21 million for costs accrued in connection with the 2001 acquisitions (primarily costs for canceling contractual commitments and for severance and related costs).

During 2001, the Company established an accrual of $9 million for severance and related costs associated with the 2001 acquisitions. The approximately 60 affected employees include executive management and other employees of the acquired companies, the majority of whom were terminated as of December 31, 2001. The $9 million accrual was capitalized as part of the purchase prices of the respective acquisitions, and approximately $4 million had been charged to the accrual as of December 31, 2001. The Company also established an accrual of $18 million for estimated costs to cancel contractual commitments, primarily with distributors, in conjunction with the 2001 acquisitions. The $18 million

accrual was capitalized as part of the purchase prices of the respective acquisitions, and approximately $2 million had been charged to the accrual as of December 31, 2001.

During 2000, the Company approved and committed to a global operations plan consisting of a series of strategic initiatives designed to increase productivity and enhance innovation. The plan includes manufacturing process and supply chain programs and a plant optimization initiative. The intent of the plant optimization initiative is to better allocate the Company's resources by creating a more effective network of manufacturing and research and development facilities. The Company's plan includes the discontinuation of manufacturing activities at three facilities in the U.S., and includes the planned displacement of approximately 1,800 manufacturing, manufacturing support and management employees. The Company recorded a pre-tax special charge of approximately $58 million associated with the plant optimization initiative during 2000. As of December 31, 2001, approximately $23 million had been charged against the restructuring accrual for the approximately 1,000 employees terminated pursuant to the plan. The Company expects that the plan will be substantially completed during the first half of 2002. The extension in the Company's estimated timing for completion of the plan results primarily from delays in the movement of certain product lines to the Company's facility in Miami.

The activity impacting the accrual for restructuring and merger-related charges is summarized in the table below.

                                               CHARGES            BALANCE         PURCHASE         CHARGES      BALANCE
                                            TO OPERATIONS       AT DECEMBER    PRICE ADJUSTMENT    UTILIZED    AT DECEMBER
(in millions)                                  IN 2000            31, 2000        IN 2001           IN 2001      31, 2001
                                            -------------       -----------    ----------------    --------    ------------
2000 RESTRUCTURING INITIATIVE:
   Workforce reductions                          $ 58              $ 58                              $(23)         $ 35
                                                 ====              ====             ====             ====          ====
2001 PURCHASE PRICE ADJUSTMENTS:
   Workforce reductions                                                             $  9             $ (4)         $  5
   Contractual commitments                                                            18               (2)           16
                                                 ----              ----             ----             ----          ----
                                                                                    $ 27             $ (6)         $ 21
                                                 ====              ====             ====             ====          ====
TOTAL:
   Workforce reductions                          $ 58              $ 58             $  9             $(27)         $ 40
   Contractual commitments                                                            18               (2)           16
                                                 ----              ----             ----             ----          ----
                                                 $ 58              $ 58             $ 27             $(29)         $ 56
                                                 ====              ====             ====             ====          ====

NOTE O - SEGMENT REPORTING

Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices for less-invasive procedures. The Company has four reportable operating segments based on geographic regions: the United States, Europe, Japan and Inter-Continental. Each of the Company's reportable segments generates revenues from the sale of less-invasive medical devices. The reportable segments represent an aggregate of operating divisions.

Sales and operating results of reportable segments are based on internally derived standard foreign exchange rates, which may differ from year to year and do not include inter-segment profits. The segment information for 2000 and 1999 sales and operating results has been restated based on the Company's standard foreign exchange rates used for 2001. Because of the interdependence of the reportable segments, the operating profit as presented may not be representative of the geographic distribution that would occur if the segments were

not interdependent. Total assets and purchases of property, plant and equipment are based on foreign exchange rates used in the Company's consolidated financial statements.

                                   UNITED                      INTER-
(in millions)                      STATES   EUROPE   JAPAN  CONTINENTAL  TOTAL
                                   ------   ------   ------ -----------  ------

2001:
Net sales                          $1,598   $  369   $  575   $  200    $2,742
Depreciation and amortization          64       17        4        3        88
Operating income excluding
   special charges                    570      107      354       26     1,057
Total assets                        1,338      472      194      104     2,108
Purchases of property, plant and
   equipment                           82       31        5        3       121
                                   ------   ------   ------   ------    ------

2000:

Net sales                          $1,577   $  353   $  545   $  166    $2,641
Depreciation and amortization          63       17        4        3        87
Operating income excluding
   special charges                    592       96      342        8     1,038
Total assets                        1,251      391      201      101     1,944
Purchases of property, plant and
   equipment                           51       16        5        4        76
                                   ------   ------   ------   ------    ------

1999:

Net sales                          $1,741   $  367   $  518   $  161    $2,787
Depreciation and amortization          60       15        3        3        81
Operating income excluding
   special charges                    662       95      315       20     1,092
Total assets                        1,257      458      215      101     2,031
Purchases of property, plant and
   equipment                           50       21        6        3        80
                                   ------   ------   ------   ------    ------

A reconciliation of the totals reported for the reportable segments to the applicable line items in the consolidated financial statements is as follows:

YEAR ENDED DECEMBER 31, (in millions)              2001       2000       1999
                                                  -------    -------    -------
NET SALES:
   Total net sales for reportable segments        $ 2,742    $ 2,641    $ 2,787
   Foreign exchange                                   (69)        23         55
                                                  -------    -------    -------
                                                  $ 2,673    $ 2,664    $ 2,842
                                                  =======    =======    =======
DEPRECIATION AND AMORTIZATION:
   Total depreciation and amortization
     allocated to reportable segments             $    88    $    87    $    81
   Corporate expenses and foreign exchange            144         94         97
                                                  -------    -------    -------
                                                  $   232    $   181    $   178
                                                  =======    =======    =======

INCOME (LOSS) BEFORE INCOME TAXES:
   Total operating income excluding special
     charges for reportable segments              $ 1,057    $ 1,038    $ 1,092
   Manufacturing operations                          (105)      (100)      (184)
   Corporate expenses and foreign exchange           (570)      (300)      (229)
   Purchased research and development                (282)
   Restructuring and merger-related
     (charges) credits                                           (58)        10
                                                  -------    -------    -------
                                                      100        580        689
   Other income (expense)                             (56)       (53)      (127)
                                                  -------    -------    -------
                                                  $    44    $   527    $   562
                                                  =======    =======    =======

TOTAL ASSETS:
   Total assets for reportable segments           $ 2,108    $ 1,944    $ 2,031
   Corporate assets                                 1,866      1,483      1,541
                                                  -------    -------    -------
                                                  $ 3,974    $ 3,427    $ 3,572
                                                  =======    =======    =======

ENTERPRISE-WIDE INFORMATION

(in millions)                                      2001       2000       1999
                                                  -------    -------    -------
NET SALES:

   Cardiovascular                                 $ 1,841    $ 1,893    $ 2,309
   Endosurgery                                        832        771        533
                                                  -------    -------    -------
                                                  $ 2,673    $ 2,664    $ 2,842
                                                  =======    =======    =======
LONG-LIVED ASSETS:

   United States                                  $   439    $   422    $   446
   Ireland                                            111        103        110
   Other foreign countries                             42         42         48
                                                  -------    -------    -------
                                                  $   592    $   567    $   604
                                                  =======    =======    =======

/s/ Ernst & Young LLP

Boston, Massachusetts
January 29, 2002

YEAR ENDED DECEMBER 31,                                                2001         2000         1999         1998         1997
                                                                    ---------    ---------    ---------    ---------    ---------
OPERATING DATA:
   Net sales                                                        $   2,673    $   2,664    $   2,842    $   2,234    $   1,831
   Gross profit                                                         1,754        1,832        1,856        1,499        1,285
   Selling, general and administrative expenses                           926          867          842          755          663
   Amortization expense                                                   136           91           92           53           33
   Royalties                                                               35           37           46           31           22
   Research and development expenses                                      275          199          197          200          167
   Purchased research and development                                     282                                    682           29
   Restructuring and merger-related charges (credits)                                   58          (10)         (15)         146
   Total operating expenses                                             1,654        1,252        1,167        1,706        1,060
   Operating income (loss)                                                100          580          689         (207)         225
   Income (loss) before cumulative effect of change
     in accounting                                                        (54)         373          371         (264)         131
   Cumulative effect of change in accounting (net of tax)                                                                     (21)
                                                                    ---------    ---------    ---------    ---------    ---------
NET INCOME (LOSS)                                                   $     (54)   $     373    $     371    $    (264)   $     110
                                                                    =========    =========    =========    =========    =========
Income (loss) per common share before cumulative effect of
   change in accounting:
   Basic                                                            $   (0.13)   $    0.92    $    0.92    $   (0.68)   $    0.34
   Assuming dilution                                                $   (0.13)   $    0.91    $    0.90    $   (0.68)   $    0.33

Net income (loss) per common share:
   Basic                                                            $   (0.13)   $    0.92    $    0.92    $   (0.68)   $    0.28

   Assuming dilution                                                $   (0.13)   $    0.91    $    0.90    $   (0.68)   $    0.28

Weighted-average shares outstanding - assuming
       dilution (in thousands)                                        401,389      408,322      411,351      390,836      399,776

YEAR ENDED DECEMBER 31,                                                2001         2000         1999         1998         1997
                                                                    ---------    ---------    ---------    ---------    ---------
BALANCE SHEET DATA:
   Working capital                                                  $     275    $     173                 $    (353)   $     227
   Total assets                                                         3,974        3,427      $ 3,572        3,893        1,924
   Commercial paper                                                        99           56          277        1,016          423
   Bank obligations - short-term                                          132          204          323           11           24
   Long-term debt, net of current portion                                 973          574          688        1,377           56
   Stockholders' equity                                                 2,015        1,935        1,724          821          957
   Book value per common share                                      $    4.97    $    4.84    $    4.21    $    2.08    $    2.47
                                                                    ---------    ---------    ---------    ---------    ---------

THREE MONTHS ENDED                                  MARCH 31,    JUNE 30,    SEPTEMBER 30,   DECEMBER 31,
                                                    ---------    ---------   -------------   ------------
YEAR ENDED DECEMBER 31, 2001
Net sales                                             $ 654       $ 672          $ 670           $ 677
Gross profit                                            432         404            456             462
Operating income (loss)                                  40        (150)           102             108
Net income (loss)                                        (5)       (172)            58              65
Net income per common share - basic                   $(0.01)     $(0.43)        $0.14           $0.16
Net income per common share - assuming dilution       $(0.01)     $(0.43)        $0.14           $0.16
                                                      ------      ------         -----           -----
YEAR ENDED DECEMBER 31, 2000
Net sales                                             $ 679       $ 695          $ 652           $ 638
Gross profit                                            466         478            452             436
Operating income                                        169         182            132              97
Net income                                              106         122             85              60
Net income per common share - basic                   $0.26       $0.30          $0.21           $0.15
Net income per common share - assuming dilution       $0.26       $0.30          $0.21           $0.15
                                                      ------      ------         -----           -----

2001                 HIGH        LOW
----                 ----        ---
First Quarter      $ 20.79    $ 13.25
Second Quarter       20.50      14.50
Third Quarter        21.00      16.99
Fourth Quarter       27.89      20.30

2000                 HIGH        LOW
----                 ----        ---
First Quarter      $ 25.88    $ 17.63
Second Quarter       29.19      19.38
Third Quarter        26.81      15.50
Fourth Quarter       16.88      12.19