** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

**FORM 10-Q**

(MarkOne)

x  QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended**September 30, 2005**

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from                   to                   

Commission File No. 0-7955

**MENTOR CORPORATION**(Exact Name of Registrant asSpecified in its Charter)

| Minnesota                                                       |  | 41-0950791                        |
|-----------------------------------------------------------------|--|-----------------------------------|
| (State or other jurisdiction of  incorporation or organization) |  | (IRS Employer Identification No.) |

**201 Mentor Drive, Santa  Barbara, California 93111**(Address of Principal Executive Offices) (Zip Code)**(805) 879-6000**(Registrant's telephone number including area code)

Indicate by check mark whether the Registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or such shorterperiod that the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes x    No o

Indicate by check mark whether the Registrant isan accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes x    No o

Indicate by check markwhether the Registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes x    No o

As of November 2, 2005there were approximately 43,779,969 Common Shares, $.10 par value per share,outstanding. 

----

**MENTOR CORPORATION**

**INDEX**

| Part I. Financial Information |
|-------------------------------|
| Item 1.                       | Financial Statements: |
|                               | Consolidated Balance Sheets  (unaudited) - September 30, 2005 and March 31,   2005 |
|                               | Consolidated Statements of  Income (unaudited) - Three Months Ended September 30, 2005 and 2004 |
|                               | Consolidated Statements of  Income (unaudited) - Six Months Ended September 30, 2005 and 2004 |
|                               | Consolidated Statements of  Cash Flows (unaudited) - Six Months Ended September 30, 2005 and 2004 |
|                               | Notes to Consolidated  Financial Statements - September 30,   2005 |
| Item 2.                       | Management's Discussion and  Analysis of Financial Condition and Results of Operations |
| Item 3.                       | Quantitative and  Qualitative Disclosures About Market Risk |
| Item 4.                       | Controls and Procedures |
| Part II. Other  Information   |
| Item 1.                       | Legal Proceedings |
| Item 2.                       | Unregistered Sales of  Equity Securities and Use of Proceeds |
| Item 3.                       | Defaults upon Senior  Securities |
| Item 4.                       | Submission of Matters to a  Vote of Security Holders |
| Item 5.                       | Other Information |
| Item 6.                       | Exhibits |

| 2 |
|---|

----

**PART I - FINANCIAL INFORMATION**

**Item 1.  ConsolidatedFinancial Statements**

| Mentor Corporation                               |
|--------------------------------------------------|
| Consolidated Balance Sheets                      |
| (Unaudited)                                      |
|                                                  |  |
|                                                  | **September 30,** | March 31, |
| (in thousands)                                   | **2005** | 2005 |
| **Assets**                                       | ** ** |  |
| Current assets:                                  | ** ** |  |
|  Cash and cash equivalents                  | ** $** | **67,981 ** |  $ | 76,666  |
|  Marketable securities                      | **112,109** | 36,228  |
|  Accounts receivable, net                   | **99,800** | 110,749  |
|  Inventories                                | **75,458** | 74,679  |
|  Deferred income taxes                      | **24,396** | 23,976  |
|  Prepaid income taxes                       | **8,872** | 1,500  |
|  Prepaid expenses and  other                | **18,919** | 15,074  |
| Total current assets                             | **407,535** | 338,872  |
|                                                  | ** ** |  |
| Property and equipment, net                      | **67,614** | 72,287  |
| Intangible assets, net                           | **30,000** | 32,155  |
| Goodwill, net                                    | **23,263** | 24,080  |
| Other assets                                     | **10,441 ** | 10,207  |
|                                                  | ** $** | **538,853 ** |  $ | 477,601  |
| See notes to consolidated  financial statements. | ** ** |  |

 
3

Mentor Corporation

Consolidated Balance Sheets

(Unaudited)

**September 30,**

March 31,

(in thousands)

**2005**

2005

**Liabilities and  shareholders' equity**

** **

Current liabilities:

** **

  Accounts payable

** $**

**32,769 **

 $

31,290 

  Accrued  compensation

**22,350 **

28,680 

  Warranty and  related reserves

**27,151 **

25,728 

  Short-term bank  borrowings

**9 **

3,182 

  Sales returns

**11,898 **

13,612 

  Deferred revenue

**10,877 **

10,111 

  Income taxes  payable

**2,087 **

2,917 

  Current portion  of purchase price related to acquired

**1,117 **

1,812 

      technologies  and acquisitions

  Interest  payable

**1,084 **

1,083 

  Dividends  payable

**7,821 **

6,927 

  Other

**16,336 **

16,517 

Total current liabilities

**133,499 **

141,859 

** **

Long-term accrued  liabilities

**9,668 **

10,587 

Convertible subordinated  notes 

**150,000 **

150,000 

** **

Shareholders' equity:

** **

  Common Stock,  $.10 par value:

** **

    Authorized  - 150,000,000 shares; issued and outstanding

** **

    43,451,420  shares at September 30, 2005;

** **

    40,745,626  shares at March 31, 2005;

**4,345 **

4,075 

  Capital in  excess of par value

**67,974 **

8,419 

  Accumulated other  comprehensive income

**16,408 **

25,162 

  Retained earnings

**156,959 **

137,499 

**245,686 **

175,155 

** $**

**538,853 **

 $

477,601 

See notes to consolidated  financial statements.

** **

 
4

Mentor Corporation

Consolidated Statements of Income

Three Months Ended September 30, 2005 and 2004

(Unaudited)

(in thousands, except per  share data)

**2005**

2004

** **

Net sales

** $**

**114,287 **

 $

108,779 

Cost of sales

**40,557 **

40,638 

Gross profit

**73,730 **

68,141 

** **

Selling, general and  administrative expense

**45,358 **

40,568 

Research and development  expense

**9,146 **

8,553 

**54,504 **

49,121 

** **

Operating income

**19,226 **

19,020 

  Interest expense

**(1,470)**

(1,228)

  Interest income

**881 **

533 

  Other income  (expense), net

**3 **

5 

Income before income taxes

**18,640 **

18,330 

Income taxes

**6,522 **

5,796 

Net income

** $**

**12,118 **

 $

12,534 

** **

Basic earnings per share

** $**

**0.28 **

 $

0.29 

Diluted earnings per share1

** $**

**0.25 **

 $

0.26 

Dividends per share

** $**

**0.18 **

 $

0.17 

** **

Weighted average shares  outstanding

** **

Basic

**43,253 **

42,548 

Diluted1

**51,515 **

50,362 

** **

See notes to consolidated  financial statements.

** **

** **

1 We  adopted the provisions of EITF 04-8 in December 2004, which requires that the  dilutive impact of contingently issuable shares from our $150 million of  convertible subordinated notes be included in the diluted earnings per share  calculation, on a retrospective basis.  

 
5

Mentor Corporation

Consolidated Statements of Income

Six Months Ended September 30, 2005 and 2004

(Unaudited)

(in thousands, except per  share data)

**2005**

2004

** **

Net sales

** $**

**249,598 **

 $

231,211 

Cost of sales

**86,347 **

84,613 

Gross profit

**163,251 **

146,598 

** **

Selling, general and  administrative expense

**92,977 **

83,820 

Research and development  expense

**17,183 **

16,583 

**110,160 **

100,403 

** **

Operating income

**53,091 **

46,195 

  Interest expense

**(2,886)**

(2,636)

  Interest income

**1,619 **

948 

  Other income  (expense), net

**49 **

(183)

Income before income taxes

**51,873 **

44,324 

Income taxes

**17,280 **

14,136 

Net income

** $**

**34,593 **

 $

30,188 

** **

Basic earnings per share

** $**

**0.81 **

 $

0.71 

Diluted earnings per share1

** $**

**0.72 **

 $

0.63 

Dividends per share

** $**

**0.35 **

 $

0.32 

** **

Weighted average shares  outstanding

** **

Basic

**42,748 **

42,356 

Diluted1

**50,477 **

50,260 

** **

See notes to consolidated  financial statements.

** **

** **

1 We  adopted the provisions of EITF 04-8 in December 2004, which requires that the  dilutive impact of contingently issuable shares from our $150 million of  convertible subordinated notes be included in the diluted earnings per share  calculation, on a retrospective basis.  

 
6

Mentor Corporation

Consolidated Statements of Cash Flows

Six Months Ended September 30, 2005 and 2004

(Unaudited)

(in thousands)

**2005**

2004

**Operating Activities:**

** **

Net income

** $**

**34,593 **

 $

30,188 

Adjustments to derive cash  flows from operating activities:

** **

  Depreciation 

**7,416 **

7,289 

  Amortization

**2,124 **

2,368 

  Deferred income  taxes 

**(550)**

(1,631)

  Tax benefit  from exercise of stock options

**22,497 **

3,223 

  (Gain) loss on  sale of assets

**36 **

1,436 

  Imputed  interest on long-term liabilities

**- **

15 

  (Gain) loss on long-term  marketable securities

**3 **

- 

Changes in operating assets  and liabilities:

** **

  Accounts  receivable

**7,884 **

3,918 

  Inventories

**(3,969)**

(4,836)

  Prepaid income  taxes and other current assets

**(13,420)**

(3,533)

  Accounts payable  and accrued liabilities

**(2,196)**

7,364 

  Income taxes  payable

**898 **

(267)

Net cash provided by  operating activities

**55,316 **

45,534 

** **

**Investing Activities:**

** **

Purchases of property and  equipment

**(5,385)**

(4,829)

Purchases of intangibles

**(272)**

(1,500)

Purchases of marketable  securities

**(221,610)**

(69,028)

Sales of marketable  securities

**145,974 **

41,854 

Net cash provided by (used)  for investing activities

**(81,293)**

(33,503)

** **

**Financing Activities:**

** **

Proceeds from exercise of  stock options

**37,327 **

9,628 

Dividends paid

**(15,280)**

(13,637)

Borrowings (repayments)  under line of credit agreements, net

**(3,043)**

632 

Net cash (used) provided by  financing activities

**19,004 **

(3,377)

Effect of currency exchange  rates on cash and cash equivalents

**(1,712)**

310 

Increase (decrease) in cash  and cash equivalents

**(8,685)**

8,964 

Cash and cash equivalents  at beginning of year

**76,666 **

118,225 

Cash and cash equivalents  at end of period

** $**

**67,981 **

 $

127,189 

** **

See notes to consolidated  financial statements.

** **

 
7

**MENTOR CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2005**

**NoteA - Business Activity**

Mentor Corporation wasincorporated in April 1969.  Unless the context indicates otherwise, whenwe refer to "Mentor," "we," "us,""our," or the "Company" in this Form 10-Q, we are referringto Mentor Corporation and its subsidiaries on a consolidated basis.  Wedevelop, manufacture and market a broad range of products serving the medicalspecialties market.  Our products are utilized by three primary segments:aesthetic and general surgery (plastic and reconstructive surgery), surgicalurology, and clinical and consumer healthcare.  Aesthetic and generalsurgery products include surgically implantable prostheses for plastic andreconstructive surgery, capital equipment and consumables used for soft tissueaspiration or body contouring (liposuction), and the recently introducednon-animal based, hyaluronic acid dermal filler.  Surgical urologyproducts include surgically implantable prostheses for the treatment ofimpotence, surgically implantable incontinence products, urinary care productsand brachytherapy seeds for the treatment of prostate cancer.  Clinicaland consumer healthcare products include catheters and other products for the managementof urinary incontinence and retention. 

**NoteB - Summary of Significant Accounting Policies**

The consolidated financialstatements include the accounts of the Company and all of its subsidiaries inwhich a controlling interest is maintained.  For those subsidiaries wherethe Company owns less than 100%, the outside shareholders' interests aretreated as minority interests.  All inter-company accounts andtransactions have been eliminated.  Certain prior year amounts inpreviously issued financial statements have been reclassified or restated toconform to the current year presentation.  

**Basis of Presentation**

The financial information forthe three and six months ended September 30, 2005 and 2004 is unaudited, butincludes all adjustments (consisting only of normally recurring accruals,unless otherwise indicated) that the Company considers necessary for a fairpresentation of the results of operations for these periods.  Interimresults are not necessarily indicative of results for the full fiscal year. ** **

**Use of Estimates**

Financial statements preparedin accordance with accounting principles generally accepted in the United Statesrequire management to make estimates and judgments that affect amounts anddisclosures reported in the financial statements.  Actual results coulddiffer from those estimates.  A discussion of the Company's significantaccounting policies is described in the "Application of Critical AccountingPolicies" section of "Management's Discussion and Analysis ofFinancial Condition and Results of Operations."

8

**Effects of Recent Accounting Pronouncements**

In May 2005, the Financial AccountingStandards Board ("FASB") issued Statement of Financial AccountingStandards ("SFAS") No. 154, Accounting Changes and Error Corrections, which replaces Accounting PrinciplesBoard ("APB") Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting AccountingChanges in Interim Financial Statements.  This pronouncement applies to allvoluntary changes in accounting principle, and revises the requirements foraccounting for, and reporting a change in, accounting principle.  SFAS No. 154requires retrospective application to prior periods' financial statements of avoluntary change in accounting principle, unless it is impracticable to do so.  Thispronouncement also requires that a change in the method of depreciation,amortization, or depletion for long-lived, non-financial assets be accountedfor as a change in accounting estimate that is affected by a change inaccounting principle.  SFAS No. 154 retains many provisions of APB Opinion 20without change, including those related to reporting a change in accountingestimate, a change in the reporting entity, and correction of an error.  Thepronouncement also carries forward the provisions of SFAS No. 3, which governreporting accounting changes in interim financial statements.  SFAS No. 154 iseffective for accounting changes and corrections of errors made in fiscal yearsbeginning after December 15, 2005.  The Statement does not change the transitionprovisions of any existing accounting pronouncements, including those that arein a transition phase as of the effective date of SFAS No. 154.  The Companyintends to apply the provisions of this statement effective April 1, 2006.

In December 2004, the FASBissued FASB Staff Position ("FSP") No. 109-1, Application of SFAS No. 109, Accounting forIncome Taxes, to the Tax Deduction on Qualified Production Activities Providedby the American Jobs Creation Act of 2004.  The FSP provides that the deductionon qualified production activities will be treated as a "specialdeduction" as described in SFAS No. 109, Accounting for IncomeTaxes.  Accordingly, the tax effect of this deduction will be reported asa component of the Company's tax provision and will not have an effect ondeferred tax assets and liabilities.  The Company anticipates that theDepartment of Treasury may issue clarifying guidance with respect to the deductionon qualified production activities.  The adoption of FSP No. 109-1 is notexpected to have a material effect on the Company's consolidated financialstatements; however, the Company will continue to evaluate the tax effect ofthe special deduction as further guidance is issued by the Department ofTreasury. 

In December 2004, the FASBissued SFASNo. 123 (revised 2004), "Share-Based Payment," ("SFAS123(R)").  SFAS 123(R) replaces FASB Statement No. 123, Accounting forStock-Based Compensation, and supersedes APBOpinion No. 25, Accounting forStock Issued to Employees.  SFAS 123(R) covers a wide range of share-basedcompensation arrangements and requires that the compensation cost related tothese types of payment transactions be recognized in financialstatements.  Cost will be measured based on the fair value of the equityor liability instruments issued.

In March 2005, the Securitiesand Exchange Commission ("SEC") issued Staff AccountingBulletin ("SAB") No. 107, which provides guidance regarding the application ofSFAS 123(R).  SAB 107 expresses views of the Staff regarding theinteraction between SFAS No. 123(R), Share-Based Payment, and certain SEC rulesand regulations, and provides the Staff's views regarding the valuation ofshare-based payment arrangements for public companies.  In particular, SAB107 provides guidance related to share-based payment transactions withnonemployees, the transition from nonpublic to public entity status, valuationmethods (including assumptions such as expected volatility and expected term),the accounting for certain redeemable financial instruments issued under share-basedpayment arrangements, the classification of compensation expense, non-GAAPfinancial measures, first-time adoption of SFAS 123(R) in an interim period,capitalization of compensation cost related to share-based paymentarrangements, the accounting for income tax effects of share-based paymentarrangements upon adoption of SFAS 123(R), the modification of employee shareoptions prior to adoption of SFAS 123(R), and disclosures in Management'sDiscussion and Analysis subsequent to adoption of SFAS 123(R).

On April 14, 2005, the SECapproved a new rule that delays the effective date for SFAS 123(R) to fiscal,years beginning after June 15, 2005, thereby rendering it effective as to the Company on April 1, 2006. The adoption of SFAS 123(R) on April 1, 2006 is expected to have a materialimpact on the Company's consolidated net income and earnings per share. The Company has not completed its analysis of the impact of the adoptionof 123(R); however, the effect of the adoption is estimated to approximate thatshown in Note K, "Stock Options" in the Notes to ConsolidatedFinancial Statements.

9

In November 2004, the FASBissued Statement No. 151, Inventory Costs, which amends the guidance in ARB No.43, Chapter 4, Inventory Pricing.  This amendment clarifies the accountingfor abnormal amounts of idle facility expense, freight, handling costs andwasted material (spoilage).  This Statement requires that those items berecognized as current-period charges, regardless of whether they meet thecriteria specified in ARB 43 of "so abnormal".  In addition,this Statement requires that allocation of fixed production overheads to thecosts of conversion be based on normal capacity of the productionfacilities.  This Statement is effective for financial statements forfiscal years beginning after June 15, 2005.  The impact upon adoption ofSFAS No. 151 is not expected to have a material impact on the results ofoperations or the financial position of the Company. 

In September 2004, the FASBconfirmed Emerging Issues Task Force ("EITF") Issue No. 04-8,"The Effect of Contingently Convertible Debt on Diluted Earnings perShare," with an effective date of December 15, 2004. The EITF reflects the Task Force's conclusion that contingentlyconvertible debt should be included in diluted earnings per share calculations,regardless of whether or not the trigger price has been reached.  TheCompany adopted EITF 04-8 in the quarter ended December 31, 2004 andretroactively applied its provisions to the interim periods ending June 30 and September 30, 2004due to the Company's December 2003 issuance of convertible subordinatednotes.  The impact of the EITF changed the diluted earnings per sharecalculation by increasing net income used in the numerator by the after-taxamount of interest expense related to the convertible notes (approximately$802,000 per quarter), and by increasing weighted average shares outstandingused in the denominator by approximately 5.1 million shares, the number ofshares to be issued upon full conversion of the convertible notes.  Theeffect of the restatement was a decrease in diluted earnings per share ofapproximately $0.02 per share for the interim periods ending June 30 and September 30, 2004.

**Note C - Interim Reporting**

The Company's three quarterlyinterim reporting periods are each thirteen-week periods ending on the Fridaynearest the end of the third calendar month of each calendar quarter.  Thefiscal year end remains March 31st.  To facilitate ease ofpresentation, each interim period is shown as if it ended on the last day ofthe appropriate calendar month.  The actual dates for each of the threeinterim quarters-ends are shown below:

Fiscal 2006

Fiscal 2005

First Quarter

July 1, 2005

July 2, 2004

Second Quarter

September 30, 2005

October 1, 2004

Third Quarter

December 30, 2005

December 31, 2004

The accompanying unauditedconsolidated financial statements for the three-month and six-month periodsended September 30, 2005 and 2004 have been prepared in accordance withaccounting principles generally accepted in the United States for interimfinancial information and with instructions to Form 10-Q and Article 10 ofRegulation S-X.  Accordingly, they do not include all of the informationand footnotes required by accounting principles generally accepted in the United Statesfor complete financial statements.  In the opinion of management, alladjustments (consisting only of normally recurring accruals, unless otherwiseindicated) considered necessary for a fair presentation of the results of operationsfor the indicated periods have been included.  Certain amounts recorded inprevious periods have been reclassified or restated to conform to the currentperiod presentation.  Operating results for the three-month and six-month periodsended September 30, 2005 are not necessarily indicative of the results for thefull fiscal year. 

The balance sheet at March 31, 2005 hasbeen derived from the audited financial statements as of that date, but doesnot include all of the information and footnotes required by accountingprinciples generally accepted in the United  States for complete financialstatements.

The consolidated financialstatements should be read in conjunction with the Company's Annual Report onForm 10-K for the year ended March 31, 2005.** **

10

**Note D - Cash Equivalents,Marketable Securities, and Long-Term Marketable Securities and Investments**

All highly liquid investmentswith maturities of three months or less at the date of purchase are consideredto be cash equivalents.

The Company considers itsmarketable securities available-for-sale as defined in SFAS No. 115, "Accounting forCertain Investments in Debt and Equity Securities."  Realized gainsand losses, and declines in value considered to be other than temporary, areincluded in income.  The cost of securities sold is based on the specificidentification method.  Available-for-sale securities are reported at fairmarket value.  Unrealized gains and losses are excluded from income, but,instead are reported as a net amount in Accumulated Other Comprehensive Incomein Shareholders' Equity.  The Company's short-term marketable securitiesconsist primarily of state and municipal government and government agencyobligations, Federal Home Loan Bank and Mortgage Association bonds, andinvestment grade corporate obligations, including commercial paper. 

**Available-for-saleinvestments at September 30, 2005 were as follows**:

** **

** **

**Gross**

**Gross**

**Estimated**

** **

**Adjusted**

**Unrealized**

**Unrealized**

**Fair**

**(in thousands)**

**Cost**

**Gains**

**Losses**

**Value**

**Cash balances**

** $**

**66,967 **

** $**

**- **

** $**

**- **

** $**

**66,967 **

**Money market mutual  funds**

**1,014 **

**- **

**- **

**1,014 **

**State and Municipal  agency obligations**

**71,803 **

**6 **

**(34)**

**71,775 **

**Mortgage-backed  securities**

**40,389 **

**41 **

**(276)**

**40,154 **

**Corporate debt  securities**

**181 **

**- **

**(1)**

**180 **

**  Total  available-for-sale investments**

** $**

**180,354 **

** $**

**47 **

** $**

**(311)**

** $**

**180,090 **

** **

** **

** **

** **

** **

**Included in cash and  cash equivalents**

** $**

**67,981 **

** $**

**- **

** $**

**- **

** $**

**67,981 **

**Included in current  marketable securities**

**112,373 **

**47 **

**(311)**

**112,109 **

**  Total  available-for-sale investments**

** $**

**180,354 **

** $**

**47 **

** $**

**(311)**

** $**

**180,090 **

Available-for-saleinvestments at March 31, 2005 were as follows:

Gross

Gross

Estimated

Adjusted

Unrealized

Unrealized

Fair

(in thousands)

Cost

Gains

Losses

Value

Cash balances

 $

68,598 

 $

- 

 $

- 

 $

68,598 

Money market mutual funds

8,068 

- 

- 

8,068 

Marketable equity  securities

161 

- 

(18)

143 

U.S., State and Municipal agency obligations

36,149 

- 

(342)

35,807 

Corporate debt securities

278 

- 

- 

278 

  Total  available-for-sale investments

 $

113,254 

 $

- 

 $

(360)

 $

112,894 

Included in cash and cash  equivalents

 $

76,666 

 $

- 

 $

- 

 $

76,666 

Included in current  marketable securities

36,588 

- 

(360)

36,228 

  Total  available-for-sale investments

 $

113,254 

 $

- 

 $

(360)

 $

112,894 

** **

11

**NoteE - Inventories**

Inventories are stated at thelower of cost or market, cost determined by the first-in, first-out (FIFO)method.  The Company writes down its inventory for estimated obsolescenceor unmarketable inventory equal to the difference between the cost of inventoryand the estimated market value based upon assumptions about future demand andmarket conditions.

Inventoriesat September 30, 2005 and March 31, 2005 consisted of:

(in  thousands)

**September 30,**

March 31,

Raw  materials

** $**

**15,353 **

 $

14,155 

Work  in process

**11,080**

12,055 

Finished  goods

**49,025**

48,469 

** $**

**75,458 **

 $

74,679 

 **NoteF - Property and Equipment**

Property and equipment isstated at cost.  Depreciation is based on the useful lives of theproperties and computed using the straight-line method.  Buildings aredepreciated over 30 years, furniture and equipment over 3 to 10 years andleasehold improvements over the shorter of their estimated remaining lives orlease terms.  Significant improvements and betterments are capitalized, whilemaintenance and repairs are charged to operations as incurred.

Propertyand equipment at September 30, 2005 and March 31, 2005 consisted of:

(in  thousands)

**September 30,**

March 31,

Land

** $**

**559 **

 $

574 

Buildings

**23,938 **

24,758 

Leasehold  improvements

**27,617 **

25,371 

Furniture,  fixtures and equipment

**109,043 **

109,325 

Construction  in progress

**3,910 **

4,562 

**165,067 **

164,590 

Less  accumulated depreciation

**(97,453)**

(92,303)

** $**

**67,614 **

 $

72,287 

**NoteG - Warranties**

The Company provides anaccrual for the estimated cost of product warranties and product liabilityclaims at the time revenue is recognized.  The Company offers productreplacement and certain financial assistance for surgical procedures that fall withinthe limited warranty and coverage period of implantation on its breast implantproducts.  Such accruals are based on estimates, taking into considerationrelevant factors such as historical experience, warranty period, estimatedcosts, existence and levels of insurance and insurance retentions, identifiedproduct quality issues, if any, and, to a limited extent, information developedby the insurance company using actuarial techniques.  The Company assessesthe adequacy of these accruals periodically and adjusts the amounts as necessarybased on actual experience and changes in future expectations.  In the firstquarter of fiscal 2006, the Company expanded its limited warranty programs toprovide certain financial assistance for surgical procedures within ten yearsof implantation (increased from five years) and expanded the program coverageto include breast implant sales in European and certain other countries, in addition to the United States. 

12

Informationon changes in the Company's accrued warranties and related reserves are asfollows:

Six Months Ended

September 30,

(in  thousands)

**2005**

2004

Beginning  warranty and related reserves

** $**

**25,728 **

 $

23,396 

Costs  of warranty claims

**(2,141)**

(2,122)

Accruals  for product warranties

**3,564 **

3,298 

Ending  warranty and related reserves

** $**

**27,151 **

 $

24,572 

**NoteH - Comprehensive Income**

Comprehensive income is netincome adjusted for changes in the value of derivative financial instruments,unrealized gains and losses on marketable securities and foreign currencytranslation.  

Comprehensiveincome for the three and six-month periods was:

Three Months Ended

Six Months Ended

September 30,

September 30,

(in thousands)

**2005**

2004

**2005**

2004

Net income

** $**

**12,118 **

 $

12,534 

** $**

**34,593 **

 $

30,188 

Foreign currency  translation adjustment

**(781)**

1,613 

**(8,757)**

1,571 

Unrealized (gains) losses  on marketable

** **

** **

  securities and investment  activities, net

**383 **

117 

**2 **

(44)

Comprehensive income

** $**

**11,720 **

 $

14,264 

** $**

**25,838 **

 $

31,715 

**NoteI - Income Taxes**

Generally, the Company doesnot provide for U.S. income taxes on undistributed earnings of our foreigncorporations that are intended to be invested indefinitely outside the UnitedStates; however, on October 22, 2004, the President of the United States signedthe American Jobs Creation Act of 2004 (AJCA).  The AJCA created atemporary incentive for U.S. corporations to repatriate accumulated income earnedabroad by providing an 85 percent dividends received deduction for certaindividends from controlled foreign corporations.  In the second fiscalquarter of 2006, the Company decided to repatriate up to $25.0 million inforeign profits, and estimates the tax liability on the repatriation would beapproximately $1.5 million.

The effective rate ofcorporate income taxes for the three months ended September 30, 2005 was 35.0%, ascompared to 31.6% for the same period in the prior year.  The effectiverate of corporate income taxes was 33.3% and 31.9% for the six-month periodsended September 30, 2005 and 2004, respectively.  The increases in the effectivetax rates during these three and six-months periods reflect the impact of the repatriationnoted above, and we expect this higher rate to continue for the remainder ofthe fiscal year.

Our income taxreturns are routinely audited by federal and various state and foreign taxauthorities.  Disputes can arise with these tax authoritiesinvolving matters of the timing and amount of deductions, and allocations ofincome among various tax jurisdictions because of differing interpretations of taxlaws and regulations.  We periodically evaluate our exposures associated withtax filing positions. While we believe our positions comply with applicablelaws, we record liabilities based upon estimates of the ultimate outcomes ofthese matters.  While it is not possible to accurately predict the eventualoutcome of these matters, we do not believe any such items will have a materialadverse effect on our annual Consolidated Financial Statements, although anadverse resolution in any quarterly reporting period of one or more of theseitems could have a material impact on the results of operations for thatperiod.  

13

**Note J - Earnings perShare**

Basic earnings per share iscomputed by dividing net income available to common shareholders by theweighted average number of shares of the Company's common shares outstandingduring the period. Diluted earnings per share is calculated in the same manneras basic earnings per share except that when the effect is dilutive, net incomeis increased by the after-tax interest expense on the Company's convertiblesubordinated notes, and the number of shares outstanding is increased bypotentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable under the termsof employee stock options, warrants, and the 23⁄4% convertible subordinatednotes.  A reconciliation of net income for basic earnings per share to netincome for diluted earnings per share and weighted average shares outstanding,used to calculate basic earnings per share, to weighted average sharesoutstanding assuming dilution, used to calculate diluted earnings per share,follows:

Three Months Ended

Six Months Ended

September 30,

September 30,

(in thousands)

**2005**

2004

**2005**

2004

Net income: as reported1

** $**

**12,118 **

 $

12,534 

** $**

**34,593 **

 $

30,188 

Add back after-tax interest  expense on convertible notes

**802 **

802 

**1,604 **

1,604 

Net income for numerator of  diluted earnings per share

** $**

**12,920 **

 $

13,336 

** $**

**36,197 **

 $

31,792 

1 Net income as reported  includes no compensation expense associated with stock options.

 
Three Months Ended

Six Months Ended

September 30,

September 30,

(in thousands, except per  share data)

**2005**

2004

**2005**

2004

Weighted average  outstanding shares:  basic

**43,253 **

42,548 

**42,748 **

42,356 

Shares issuable through  exercise of stock options

**2,057 **

2,690 

**2,060 **

2,782 

Shares issuable through  convertible notes

**5,136 **

5,124 

**5,135 **

5,122 

Shares issuable through  warrants

**1,069 **

- 

**534 **

- 

Weighted average  outstanding shares:  diluted2

**51,515 **

50,362 

**50,477 **

50,260 

** **

** **

Basic earnings per share

** $**

**0.28 **

 $

0.29 

** $**

**0.81 **

 $

0.71 

Diluted earnings per share2

** $**

**0.25 **

 $

0.26 

** $**

**0.72 **

 $

0.63 

2 The Company adopted the  provisions of EITF 04-8 in December 2004, which requires that the dilutive  impact of contingently issuable shares from the Company's $150 million of  convertible subordinated notes be included in the diluted earnings per share  calculation, on a retrospective basis.

 
14

Shares issuable through stockoptions are determined using the treasury stock method.  Sharespotentially issuable upon the conversion of the Company's 23⁄4% convertiblesubordinated notes are included in the calculation when the effect of theconversion would be dilutive on diluted earnings per share.  Thisinclusion of potentially issuable shares is required even when the notes arenot actually subject to conversion because the required conditions forconversion (described in Note O - "Long-Term Debt" below) have not beensatisfied.  The Company purchased a note hedge and sold warrants which, incombination, have the effect of reducing the dilutive impact of the convertiblenotes by effectively increasing the conversion price of the notes to thewarrant strike price of $39.3141 per share.  The convertible note hedge isalways excluded from the calculation of diluted earnings per share because itsimpact will always be anti-dilutive.  However, SFAS 128 requires that thedilutive impact of the warrants be included in diluted earnings per share usingthe treasury stock method whenever the average price of the Company's commonshares exceeds the strike price of the warrants.  For example, using thetreasury stock method, if the average price of our stock during the periodended September 30, 2005 had been $38.00, $43.00 or $49.00, the shares fromthe warrants to be included in diluted earnings per share would have been zero,440,000 and 1,015,000 shares, respectively.  The total number of sharesthat could potentially be included under the warrants is 5.1 million.  Theaverage share price of our stock during the quarter ended September 30, 2005exceeded the $39.3141 conversion price of the warrants; the impact of thesewarrants was that 1.1 million shares were added to the diluted shares and dilutedearnings per share calculation during that period.  The Company adoptedthe provisions of EITF 04-8, "The Effect of Contingently Convertible Debton Diluted Earnings per Share," in December 2004.  The EITF requiredthe inclusion of contingently issuable shares in the calculation of dilutedearnings per share when the effect would be dilutive even if none of therequired conditions for conversion were satisfied. In addition, the EITFrequired application on retrospective basis for all periods presented. Accordingly, the diluted earnings per share for the three- and six-monthperiods ended September 30, 2004 were restated from the originally reportedamounts of $0.28 and $0.67 per share to $0.26 and $0.63 per share, respectively.

**NoteK - Stock Options**

The Company has grantedoptions to key employees and non-employee directors under its Amended 2000Long-Term Incentive Plan and 1991 Plan.  Options granted under both plansvest in four equal annual installments beginning one year from the date of grant,and expire ten years from the date of grant.

In September 2005, theCompany's shareholders approved an amended and restated version of theCompany's Amended 2000 Long-Term Incentive Plan, which is now referred to as theMentor Corporation 2005 Long-Term Incentive Plan (the "2005 Plan").  The 2005Plan reflects, among other things, amendments to the plan to: (i) provide theCompany with flexibility to grant awards other than stock options, includingbut not limited to restricted stock, stock bonuses, stock units and dividendequivalents; (ii) allow the Company to grant awards intended to qualify asperformance-based compensation within the meaning of Section 162(m) of the U.S.Internal Revenue Code; and (iii) extend the term of the plan to July 24,2015.  The 2005 Plan does not reflect an increase in the number of sharesof the Company's common stock available for award grants under the plan.

Persons eligible to receiveawards under the 2005 Plan include directors, officers or employees of theCompany, and certain of its consultants and advisors.  The types of awards thatmay be granted under the 2005 Plan include stock options, restricted stock,stock bonuses, stock units and dividend equivalents, and other forms of awardsgranted or denominated in the Company's common stock or units of the Company'scommon stock, as well as certain cash bonus awards.

The maximum number of sharesof the Company's common stock that may be issued or transferred pursuant toawards under the 2005 Plan remains at 6.0 million shares (inclusive ofapproximately 4.6 million options previously granted under the Amended 2000Long-Term Incentive Plan). 

In September 2005, theCompany's shareholders approved an Employee Stock Purchase Plan ("ESPP"), whichassists eligible employees in acquiring a stock ownership interest the Company,at a favorable price and upon favorable terms, pursuant to a plan which isintended to qualify as an ESPP under Section 423 of the Code.  The initial offering periodcommences in November 2005. 

15

On October 5, 2005 (the"Award Date"), the Compensation Committee of the Board of Directorsof the Company, granted awards in the aggregate amount of 298,999 restrictedshares of Company common stock (the "Restricted Stock") to the Company'sExecutive Officers and other Company Officers, and to members of the Board ofDirectors of the Company.  The Restricted Stock vests, and restrictions lapse,with respect to one-fifth of the total number of shares of Restricted Stock oneach of the first, second, third, fourth and fifth anniversaries of the AwardDate.  The vesting schedule requires continued employment or servicethrough each applicable vesting date as a condition to the vesting of theapplicable installment of the Restricted Stock, and carries specific shareholding requirements during such employment or service.

Exercise prices for stockoptions are set at fair market value, as determined by the closing price of theCompany's common stock on the New York Stock Exchange on the date of grant, andthe related number of shares granted is fixed at that point in time. Therefore, under the principles of APB Opinion 25, the Company does notrecognize compensation expense associated with the grant of stockoptions.  SFAS 123 "Accounting for Stock-Based Compensation" requires the useof an option valuation model to provide supplemental information regardingoptions granted after fiscal 1995.  Pro forma information regarding netincome and earnings per share shown below were determined as if the Company hadaccounted for its employee stock options under the fair value method of thatstatement.  For purposes of pro forma disclosure, the estimated fair valueof the options is amortized ratably over the options' vesting period. 

The pro forma effect on netincome may not be representative of the pro forma effect on net income in futureyears because compensation expense in future years will reflect theamortization of a different number of stock options granted in succeedingyears, at different fair values.  The Company's pro forma information isas follows:
	 
Three Months Ended

Six Months Ended

September 30,

September 30,

(in thousands except per  share data)

**2005**

2004

**2005**

2004

Net income: as reported1

** $**

**12,118 **

 $

12,534 

** $**

**34,593 **

 $

30,188 

Deduct: compensation  expense fair value method

**(1,222)**

(1,787)

**(2,668)**

(3,555)

Net income:  pro forma

** $**

**10,896 **

 $

10,747 

** $**

**31,925 **

 $

26,633 

** **

** **

Basic earnings per  share:  as reported

** $**

**0.28 **

 $

0.29 

** $**

**0.81 **

 $

0.71 

Basic earnings per  share:  pro forma 

** $**

**0.25 **

 $

0.25 

** $**

**0.75 **

 $

0.63 

** **

** **

Net income: as  reported1

** $**

**12,118 **

 $

12,534 

** $**

**34,593 **

 $

30,188 

Add back after-tax interest  expense on convertible notes

**802 **

802 

**1,604 **

1,604 

Net income: diluted  earnings per share2  

**12,920 **

13,336 

**36,197 **

31,792 

Deduct: compensation  expense fair value method

**(1,222)**

(1,787)

**(2,668)**

(3,555)

Net income: diluted  earnings per share pro forma

** $**

**11,698 **

 $

11,549 

** $**

**33,529 **

 $

28,237 

** **

** **

Diluted earnings per  share:  as reported2

** $**

**0.25 **

 $

0.26 

** $**

**0.72 **

 $

0.63 

Diluted earnings per  share:  pro forma2

** $**

**0.23 **

 $

0.23 

** $**

**0.66 **

 $

0.56 

** **

** **

** **

** **

1 Net income as reported  includes no compensation expense associated with stock options.

2 The Company adopted the  provisions of EITF 04-8 in December 2004, which requires that the dilutive  impact of contingently issuable shares from the Company' $150 million of  convertible subordinated notes be included in the diluted earnings per share  calculation, on a retrospective basis.

 

16

In December 2004, the Financial AccountingStandards Board issued SFAS No. 123(R), "Share-Based Payment".  SFAS No. 123(R)will require the Company to account for its stock options using afair-value-based method as described in such statement and recognize theresulting compensation expense in the Company's financial statements. SFAS 123(R) will alsorequire the benefits of tax deductions in excess of recognized compensation costto be reported as a financing cash flow, rather than as an operating cash flowas required under current literature. This requirement will reduce net operatingcash flows and increase net financing cash flows in periods after adoption. The Company currently accounts for itsemployee stock options using the intrinsic value method under APB OpinionNo. 25, "Accounting for Stock Issued to Employees" and related interpretations,which generally results in no employee stock option expense.  The Company plansto adopt SFAS No. 123(R) on April 1, 2006, as required.

**Note L - Share RepurchaseProgram**

The Company has a sharerepurchase program to provide liquidity to the market and to reduce the overallnumber of shares outstanding, which has helped offset the dilutive effect of theCompany's long-term incentive programs and the dilutive effect of EITF IssueNo. 04-8 related to the inclusion of contingently convertible debt in fullydiluted earnings per share calculations.  All shares repurchased under theprogram are retired and are no longer deemed to be outstanding.  Duringfiscal 2005, 2.3 million shares were repurchased for a total of $79.8 million,and 1.3 million shares remained authorized for repurchase as of March 31, 2005 and September 30, 2005. The timing of repurchases is subject to market conditions, cash availability,and blackout periods during which the Company is restricted from repurchasingshares.  There is no guarantee that the remaining shares authorized forrepurchase by the Board will ultimately be repurchased.  The Companyentered into a Credit Agreement on May 26, 2005,which provides for certain limitations regarding future sharerepurchases.  See Note P - "Credit Agreement" for additionalinformation on the Credit Agreement.

**Note M - Acquisitions**

**South Bay Medical LLC**

On January 19, 2001, the Companypurchased the assets of South Bay Medical LLC (South Bay), acompany focused on the development of a new computer-based workstation andautomated cartridge-based needle loading system for use in brachytherapyprocedures.  The acquisition was accounted for as a purchase with theresults of operations included in the Company's financial statements from thedate of acquisition.  The Company paid $2.0 million in cash and issuedrestricted common stock valued at $4.0 million on the date of purchase. Additional purchase price payments will be made to South Bay over thenext few years as workstation sales are made.  The net present value ofthese amounts is recorded at September 30, 2005, in current accrued liabilities($0.1 million) and in long-term accrued liabilities ($0.7 million), as theCompany believes it is probable these payments will be made.  

**Prosurg, Inc.**

In December 2001, the Companyentered into several agreements with Prosurg, Inc., to acquire certain patentrights and obtain a source of supply of a bio-absorbable co-polymer for $2.0million in cash and up to an additional $2.0 million upon the achievement ofcertain milestones.  The purchase price was allocated to intangibleassets, and the net present value in the amount of $1.0 million is recorded at September 30, 2005,in accrued liabilities, as the Company believes it is probable this paymentwill be made.

**Note N - Goodwill &Intangible Assets**

Goodwill and intangibleassets have been recorded at either incurred or allocated cost.  Goodwill is notamortized, but its value is tested for impairment annually, and intangibleassets are amortized over their useful lives ranging from 3-20 years on astraight line basis.  Allocated costs were based on respective fair valuesat the date of acquisition.  

17

All goodwill amounts havebeen assigned to reporting units, based upon specific identification, forimpairment testing.  The impairment tests involve the use of bothestimates of fair value for the Company's reporting units as well as discountedcash flow assumptions.  Impairment tests are performed in the fourthquarter of each fiscal year.  No potential impairment issues were notedfor the quarter ended September 30, 2005. 

As of September 30, 2005 and March 31, 2005,accumulated amortization of intangible assets was $14.4 million and $12.7million, respectively. 

**Note O - Long-Term Debt**

On December 22, 2003, the Companycompleted an offering of $150 million of convertible subordinated notes due January 1, 2024pursuant to Rule 144A under the Securities Act of 1933.  The notes bearinterest at 23⁄4% per annum and are convertible into shares of the Company'scommon stock at a conversion price of $29.2048 per share and are subordinatedto all existing and future senior debt. 

Holders of the notes mayconvert their notes only if any one of the following conditions is satisfied:
- during any fiscal quarter     prior to January 1, 2019, if the closing price of the Company's common     stock for at least 20 trading days in the 30 consecutive trading day     period ending on the first trading day of such fiscal quarter is more than     120% of the conversion price per share of the Company's common stock on     such trading day;  
- any business day on or     after January 1, 2019, if the closing price of the Company's common stock     on the immediately preceding trading day is more than 120% of the     conversion price per share of the Company's common stock on such trading     day;  
- during the five business     day period after any five consecutive trading day period if the average of     the trading prices of the notes for such five consecutive trading day     period is less than 98% of the average of the conversion values of the     notes during such period, subject to certain limitations;  
- if the Company calls the notes     for redemption; or  
- if the Company makes     certain significant distributions to holders of its common stock or the     Company enters into specified corporate transactions.  

At an initial conversionprice of $29.289, each $1,000 principle amount of notes will be convertibleinto 34.1425 shares of common stock.  As a result of the Company'sdividend payments, the conversion price has been adjusted to $29.2048, and each$1,000 principle amount will be convertible into 34.2409 shares of commonstock.

Concurrent with the issuanceof the convertible subordinated notes, the Company entered into a convertiblenote hedge and a warrants transaction with respect to its common stock, theexposure for which is held by Credit Suisse First Boston LLC.  Both thenote hedge and the warrants transaction may be settled at the Company's optioneither in cash or shares and expire January 1, 2009. The convertible note hedge and warrants transactions combined are intended toreduce the potential dilution from conversion of the notes by effectivelyincreasing the conversion price per share to approximately $39.3141.  Thecost of the note hedge and the proceeds from the sale of warrants have beenincluded in shareholders' equity in accordance with the guidance in EITF No.00-19, "Accounting for Derivative Financial Instruments Indexed to andPotentially Settled in a Company's own Stock."  Any proceeds receivedor payments made upon termination of these instruments will be recorded inshareholders' equity.  

During the quarter ending September 30, 2005,one of the conditions required for conversion of the notes was satisfied and,accordingly, the holders of notes have the option to convert the notes intocommon shares at the aforementioned adjusted conversion price per share. 

18

**Note P - Credit Agreement**

On May 26, 2005, the Companyentered into a Credit Agreement (the "Credit Agreement") thatprovides a $200 million senior revolving credit facility, subject to a $20million sublimit for the issuance of standby and commercial letters of credit,a $10 million sublimit for swing line loans and a $50 million alternativecurrency sublimit.  The Credit Agreement expires on September 30, 2008. At the election of the Company, the amount available for borrowings under theCredit Agreement may be increased by an additional $50 million.  Fundsunder the Credit Agreement are available to the Company to finance permittedacquisitions, for stock repurchases up to certain dollar limitations, and for othergeneral corporate purposes.  

Interest on borrowings (otherthan swing line loans) under the Credit Agreement is at a variable rate that iscalculated, at the Company's option, at either prime rate or LIBOR, plus anadditional percentage that varies depending on the Company's senior leverageratio (as defined in the Credit Agreement) at the time of the borrowing. Swing line loans bear interest at the prime rate plus additional basis points,depending on the Company's senior leverage ratio at the time of the loan. In addition, the Company paid certain fees to the lenders to initiate theCredit Agreement and will pay an unused commitment fee based on the Company'ssenior leverage ratio and unborrowed lender commitments.

Borrowings under the CreditAgreement are guaranteed by two of the Company's domestic subsidiaries and arealso secured by a pledge of 100% of the outstanding capital stock of two otherdomestic subsidiaries and by 65% of the outstanding capital stock of our Frenchsubsidiary.  In addition, if the ratio of total funded debt to adjustedEBITDA exceeds 2.50 to 1.00, the Company is obligated to grant to the lenders afirst priority perfected security interest in essentially all of its domesticassets.

The Credit Agreement imposescertain financial and operational restrictions on the Company and itssubsidiaries, including financial covenants that require the Company tomaintain a maximum consolidated funded debt leverage ratio of not greater than4.00 to 1.00, a senior funded debt ratio of not greater than 2.50 to 1.00,minimum quarterly EBITDA and a minimum fixed charge ratio of greater than 1.25to 1.00. The covenants also restrict the Company's ability, among other things,to make certain investments, incur certain types of indebtedness or liens, makeacquisitions in excess of $20 million except in compliance with certaincriteria, and repurchase shares of common stock, pay dividends or dispose ofassets above specified thresholds.  The Credit Agreement also containscustomary events of default, including payment defaults, material inaccuraciesin its representations and warranties, covenant defaults, bankruptcy andinvoluntary proceedings, monetary judgment defaults in excess of specifiedamounts, cross-defaults to certain other agreements, change of control, andERISA defaults.  If an event of default occurs and is continuing, thecommitments under the Credit Agreement may be terminated and the principalamount and all accrued but unpaid interest and other amounts owed thereundermay be declared immediately due and payable.  As of September 30, 2005,all covenants and restrictions had been satisfied, and there were no borrowingsoutstanding under the Credit Agreement.

**Note Q - Business SegmentInformation**

The Company's operations areprincipally managed and reported on a product basis.  There are threereportable segments:  aesthetic and general surgery, surgical urology, andclinical and consumer healthcare.  The accounting policies of thereportable segments are the same as those described in the summary ofsignificant accounting policies except that certain expenses such as interestand certain corporate expenses are not allocated to the segments.

19

The aesthetic and generalsurgery products segment consists primarily of breast implants, tissueexpanders, body contouring (liposuction) equipment and disposables, and therecently introduced facial aesthetic products.  The surgical urologysegment includes erectile dysfunction products, brachytherapy seeds for cancertreatment, women's health products and disposable urinary care products. The clinical and consumer healthcare segment includes catheters and otherdisposable products for the management of urinary incontinence and retention.

Selected financialinformation for the Company's reportable segments for the three-month and six-month periods ended September 30, 2005 and 2004 is as follows:

Three Months Ended

Six Months Ended

September 30,

September 30,
(in thousands)
**2005**

2004

**2005**

2004
**Net sales**
** **

** **
Aesthetic and General  Surgery** $**
**58,672 **
 $
54,322 
** $**
**132,798 **
 $
119,866 
Surgical Urology
**29,860 **

30,374 

**64,079 **

62,286 
Clinical and Consumer  Healthcare 
**25,755 **

24,083 

**52,721 **

49,059 
  Total  consolidated revenues** $**
**114,287 **
 $
108,779 
** $**
**249,598 **
 $
231,211 

** **

** **

Three Months Ended

Six Months Ended

September 30,

September 30,
(in thousands)
**2005**

2004

**2005**

2004
**Operating profit**
** **

** **
Aesthetic and General  Surgery** $**
**16,997 **
 $
18,390 
** $**
**46,263 **
 $
43,936 
Surgical Urology
**2,051 **

1,168 

**6,053 **

3,446 
Clinical and Consumer  Healthcare
**3,899 **

2,645 

**8,368 **

5,658 
  Total  reportable segments** $**
**22,947 **
 $
22,203 
** $**
**60,684 **
 $
53,040 

Three Months Ended

Six Months Ended

September 30,

September 30,
(in thousands)
**2005**

2004

**2005**

2004
**Operating income**
** **

** **
Reportable segments** $**
**22,947 **
 $
22,203 
** $**
**60,684 **
 $
53,040 
Corporate operating  expenses
**(3,721)**

(3,183)

**(7,593)**

(6,845)
Interest expense
**(1,470)**

(1,228)

**(2,886)**

(2,636)
Interest income
**881 **

533 

**1,619 **

948 
Other income (expense)
**3 **

5 

**49 **

(183)
Income before income taxes** $**
**18,640 **
 $
18,330 
** $**
**51,873 **
 $
44,324 

** **

** **

As of

** **

**September 30,**

March 31,

** **
(in thousands)
**2005**

2005

** **
**Identifiable assets**
** **

** **
Aesthetic and General  Surgery** $**
**163,303 **
 $
161,207 

** **
Surgical Urology
**98,867 **

111,989 

** **
Clinical and Consumer  Healthcare
**57,754 **

53,767 

** **
  Total  reportable segments** $**
**319,924 **
 $
326,963 

** **
 
 
   
20
**Note R - Subsequent Event**

On October 4, 2005, Mentor MedicalSystems B.V., ("Mentor BV"), a wholly-owned subsidiary of Mentor Corporationentered into a Loan and Overdraft Facility (the "Facility") with Cooperative RaboBankLeiden, Leiderdorp en Oestgstgeest U.A. ("RaboBank").

The Facility provides Mentor BV with an initial€15 million loan and overdraft facility, which decreases by €375,000 quarterlystarting in September 2006.  Under the Facility, Mentor BV may borrow up to€12.5 million in fixed amount advances, with terms of three to six months, and afurther sublimit of up to €5 million of loans in fixed amount advances with aterm of up to 5 years.  Up to €10 million of the Facility may be drawn inthe form of U.S. Dollars.  Funds under the Facility are available to MentorBV to finance certain dividend payments to Mentor and for other normal businesspurposes.  As of November 7, 2005, there were noborrowings outstanding under the Facility.

Interest on borrowings underthe Facility is at a rate equal to 0.55% over the RaboBank base lending rate,Euribor, or LIBOR depending upon the currency and term of each borrowing. Interest rates on borrowings other than overdrafts, are fixed for the term ofthe advance.

Borrowings by Mentor BVunder the Facility are guaranteed by Mentor's wholly-owned subsidiary, Mentor Medical SystemsC.V., through a Joint and Several Debtorship agreement.  In addition,borrowings under the Facility are secured by a mortgage on certain real estateowned by Mentor BV.

The Facility imposes certainfinancial and operational restrictions on Mentor BV, including financialcovenants that require Mentor BV and Mentor Medical Systems CV to maintain aminimum combined defined solvency ratio, a maximum combined debt leverage ratioof not greater than 4 to 1, a senior funded debt ratio of not greater than 2.5to 1, minimum quarterly operational results, and a minimum interest coverageratio of greater than 5 to 1.  The Facility also contains customary eventsof default, including cross default and material or adverse changeprovisions.  If an event of default occurs, the commitments under theFacility may be terminated and the principal amount and all accrued but unpaidinterest and other amounts owed thereunder may be declared immediately due andpayable.  

Mentor BV paid €15,000 in certain fees to the RaboBank uponentry into the Facility, and Mentor BV will be obligated to pay, over the 10 year term ofthe Facility, a commitment fee of 0.25% of the committed and unborrowedbalances.  Fees are payable quarterly in arrears.

**Item 2.  Management'sDiscussion and Analysis of Financial Condition and Results of Operations**

*CautionaryStatement:*

*Thefollowing discussion and analysis should be read in conjunction with ourUnaudited Consolidated Financial Statements and related Notes thereto containedelsewhere in this Report.  The information contained in this QuarterlyReport on Form 10-Q is not a complete description of our business or therisks associated with an investment in our securities.  We urge you tocarefully review and consider the various disclosures made by us in this Reportand in our other reports filed with the Securities and Exchange Commission("SEC"), including our Annual Report on Form 10-K for the year endedMarch 31, 2005, and subsequent reports on Forms 8‐K and 10-Q, whichdiscuss our business in greater detail.*

*The section entitled"Risk Factors" set forth below, and similar discussions in our otherSEC filings, discuss some of the important risk factors that may affect ourbusiness, results of operations and financial condition.  These risks, inaddition to the other information in this Report and in our other filings withthe SEC, should be carefully considered before deciding to purchase, hold orsell our securities.*

 21

*All statements included inthis Report, other than statements or characterizations of historical fact, areforward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995.  Examples of forward-looking statementsinclude, but are not limited to, statements concerning:*

•     *our announced focus on aesthetic medicineand consideration of strategic alternatives for our urology business;*

•     *our ability to satisfy the conditions setforth in the approvable letter we received on July 28, 2005 regarding oursilicone gel-filled breast implants and the outcome of the FDA's review anddetermination regarding our PMA application;*

•     *the future impact on our operating resultsof patient delays in having breast augmentation due to a potential approval bythe FDA of our silicone gel-filled breast implants;*

•     *the impact of currency exchange rates onour net sales;*

•     *the sufficiency of our cash balances andaccess to credit to meet our existing and future needs;*

•     *the impact of seasonality on demand for ourproducts;*

•     *the impact of our warranty policies on ourresults of operations;*

•     *our intention to introduce or seekregulatory approval for new products;*

•     *our ability to continue to meet FDA andother regulatory requirements;*

•     *our anticipated outcomes of litigation andregulatory reviews;*

•     *our ability to replace sources of supplywithout disruption or regulatory delay;*

•     *our ability to continue to implement ourenterprise resource planning system successfully;*

•     *our accounting estimates, assumptions andjudgments, the market acceptance and performance of our products, thecompetitive nature of and anticipated growth in our markets;*

•     *our ability to consummate acquisitions andintegrate their operations successfully; and*

•     *our anticipated sales, expenses, taxes andearnings per share for fiscal 2006.*

*These forward-looking statementsare based on our current expectations, estimates and projections about ourindustry, management's beliefs, and certain assumptions made by us. Forward-looking statements can often be identified by words such as"anticipates," "expects," "intends,""plans," "predicts," "projects,""believes," "seeks," "estimates,""may," "will," "should," "would,""could," "potential," "continue," "ongoing", "guidance," and similar expressions, andvariations or negatives of these words.  In addition, any statements thatrefer to expectations, projections, forecasts or other characterizations offuture events or circumstances, including any underlying assumptions, areforward-looking statements.  These forward-looking statements speak onlyas of the date of this Report and are based upon the information available tous at this time.  Such information is subject to change, and we will notnecessarily inform you of such changes.  These statements are notguarantees of future results and are subject to risks, uncertainties andassumptions that are difficult to predict.  Therefore, our actual resultscould differ materially and adversely from those expressed in anyforward-looking statement as a result of various factors, some of which arelisted under the section "Risk Factors" below.  We undertake noobligation to revise or update publicly any forward-looking statement for anyreason.*

CompanyOverview

Founded in 1969, MentorCorporation is a leading supplier of medical products for the global healthcare market.  We develop, manufacture and market a broad range of productsserving the medical specialties market.  Our products are utilized bythree primary segments: aesthetic and general surgery (plastic andreconstructive surgery), surgical urology, and clinical and consumerhealthcare.

22

Our aesthetic and generalsurgery products include surgically implantable prostheses for plastic andreconstructive surgery and our recently introduced facial aesthetic products,as well as capital equipment and consumables used for body contouring(traditional and ultrasonic liposuction).  Our surgical urology productsinclude surgically implantable prostheses for the treatment of impotence,surgically implantable incontinence products, urinary care products andbrachytherapy seeds for the treatment of prostate cancer.  Our clinicaland consumer healthcare products include catheters and other products for themanagement of urinary incontinence and retention. 

We employ approximately 2,000people around the world and are headquartered in Santa Barbara, California,with manufacturing and research operations in the United States,France,The Netherlands and United Kingdom.  We also purchase finished products and certainraw material components from third party manufacturers and suppliers.  Thecost of goods sold represents raw materials, labor and overhead, and the costof third party finished products.  Gross margins may fluctuate from periodto period due to changes in the selling prices of our products, the mix ofproducts sold, changes in the cost of third party finished products, rawmaterials, labor and overhead, and changes in manufacturing processes andyields. 

In addition to our strongdomestic presence, we export most of our product lines, principally to Canada, Western Europe,Central and South America, and the Pacific Rim.  Products are sold through ourdirect international sales offices in Canada, United Kingdom, Germany, France, Japan, Benelux, Australia, Spain, Portugal and Italy, as well as through independent distributors in othercountries.

We employ specializeddomestic sales forces for our aesthetic surgery, body contouring, and urologicspecialties, which includes our women's health, erectile dysfunction, prostatebrachytherapy and clinical and consumer healthcare product lines.  Eachsales force provides product information or specific data support and relatedservices to physicians, nurses and other health care professionals.  Wealso market certain products, particularly our disposable incontinenceproducts, through a domestic network of independent hospital supply dealers andhealthcare distributors, as well as through retail pharmacies.

Our selling, general andadministrative expense incorporates the expenses of our sales and marketingorganization and the general and administrative expenses necessary to supportthe global organization. Our sales and marketing expenses consist primarily ofsalaries, commissions, and marketing program costs.  General andadministrative expenses incorporate the costs of finance, human resources,information services, legal and insurance costs.

Our research and developmentexpenses are comprised of the following types of costs incurred in performingclinical development and research and development activities: salaries andbenefits, allocated overhead, clinical trial and related clinical manufacturingcosts, regulatory costs, intellectual property procurement, contract services,and other outside costs.  We also conduct research on materialstechnology, product design and product improvement.

Recent Events

We have begun the Phase 2dose-finding study of our proprietary botulinum toxin type A product, focusedon the cosmetic indications in the United States, and all patients in the Phase2 study have been enrolled.

On October 18, 2005, we announcedour strategy to increase our focus on aesthetic medicine, and that as a result,we are evaluating strategic alternatives for our urology business that we believewould both enhance shareholder value and enable us to focus more fully on ouraesthetics business.  Our urology business, which includes our Surgical Urologyand Clinical and Consumer Healthcare segments, currently contributesapproximately 48% of our consolidated net sales and approximately 26% of ouroperating profit, and comprises approximately 50% of identifiable segmentassets. 

23

In October 2005, AndresGarcia, an international television and movie star, signed an exclusiveendorsement agreement to serve as the spokesperson for our Titan®Inflatable Penile Prosthesis (IPP).  In connection with Mr. Garcia's signing,we have launched a direct-to-consumer educational campaign in key Latin marketsacross the United States, featuring Andres Garcia and designed to increaseawareness of treatment options for erectile dysfunction.

On September 7, 2005, we launchedour new Moderate Plus Profile saline-filled breast implant product line in the United States. The Moderate Plus Profile Saline fits dimensionally between our moderate andhigh profile saline implants and has been approved by the Food and DrugAdministration ("FDA") for use in breast augmentation and reconstructionsurgeries. 

On August 24, 2005, we launchedour new Self-Cath® HydrogelTM intermittent urinary catheter for the management ofbladder control and urinary retention, whichfeatures a proprietary micro-bead lubricant coating that reduces urethralfriction, while the introducer tip is designed to reduce the risk of urinarytract infections.

On July 28, 2005, we received an"approvable letter" with conditions from the FDA on our Pre-MarketApproval ("PMA") application for our silicone gel-filled breastimplants.  The approvable letter stipulates a number of conditions whichwe must satisfy in order to receive FDA approval to market and sell siliconegel-filled breast implants in the United States.  These conditions were generally consistentwith those conditions that the advisory panel, composed of outside expertsselected by the FDA, had recommended in their April 2005 review of our PMAapplication.  In April 2005, the advisory panel had met to considerquestions presented to it by the FDA regarding our PMA application and to makea recommendation to the FDA regarding whether the PMA application should beapproved.  In a majority 7-to-2 vote, the panel recommended approval, withconditions, of our PMA application.  We are currently engaged indiscussions with the FDA to address the conditions stated in the approvableletter and cannot guarantee that the FDA will provide final approval, nor canwe determine when the FDA's decision regarding approval will be made. 

**APPLICATION OF CRITICALACCOUNTING POLICIES**

Management's Discussion andAnalysis of Financial Condition and Results of Operations addresses ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States.  Thepreparation of these financial statements requires us to make estimates andassumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the financialstatements, and the reported amounts of revenues and expenses during thereporting period.  On an ongoing basis, we evaluate our estimates andjudgments.  We base our estimates and judgments on historical experienceand on various other factors that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparentfrom other sources.  Actual results may differ from these estimates underdifferent assumptions or conditions.  

Management has identified thecritical accounting policies to be those related to revenue recognition,accounts receivable, inventories, warranties and related reserves, and goodwilland intangible asset impairment.  These accounting polices are discussedin the "Management's Discussion and Analysis of Financial Condition andResults of Operations" and notes to the consolidated financial statementsincluded in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2005.

24

**RESULTS OF OPERATIONS**

Our quarterly results reflectslight seasonality, as the fiscal quarter ending September 30 tends to have thelowest revenue of all of the quarters.  This is primarily due to lowerlevels of sales of breast implants for augmentation, an elective procedure, aspatients' vacation schedules, particularly in Europe, interfere withscheduling surgery during this quarter.  The adverse weather conditions domesticallyalso contributed to slower domestic sales growth, as surgical schedules andpatient consultations were impacted.  In addition, we believe domesticsales of our breast aesthetics products were negatively impacted by womendelaying breast augmentation in advance of the potential U.S. approvalof our silicone gel-filled breast implant products.  

The following table setsforth certain data from the Consolidated Statements of Income expressed as apercentage of net sales for the periods indicated:

Three Months Ended

Six Months Ended

September 30,

September 30,

**2005**

2004

**2005**

2004

** **

** **

Net sales

**100.0%**    

100.0%

**100.0%**

100.0%  

  Cost of sales

**35.5 **

37.4 

**34.6 **

36.6 

Gross profit

**64.5 **

62.6 

**65.4 **

63.4 

  Selling, general and  administrative expense

**39.7 **

37.3 

**37.2 **

36.3 

  Research and  development expense

**8.0 **

7.9 

**6.9 **

7.2 

Operating income

**16.8 **

17.4 

**21.3 **

19.9 

   Interest  expense

**(1.3)**

(1.3)

**(1.1)**

(1.1)

   Interest income

**0.8 **

0.7 

**0.6 **

0.4 

  Other income  (expense), net

**0.0 **

0.0 

**0.0 **

(0.1)

Income before income taxes

**16.3 **

16.8 

**20.8 **

19.1 

Income taxes

**5.7 **

5.3 

**6.9 **

6.1 

Net income

**10.6%** 

11.5%

**13.9%**

13.0%  

 

 

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**For the three-month period ended September 30, 2005 compared to the three-monthperiod ended September 30, 2004:**

**Net Sales**

Net sales for the three-monthperiod ended September 30, 2005 increased 5.1% to $114.3 million, from $108.8 millionfor the same period in the prior year.  Positive foreign currency exchangeeffects, principally the stronger Euro, over the same quarter in the prioryear, had a favorable year-to-year impact on sales of $0.6 million. However, foreign exchange rates have recently been volatile, and should thedollar to Euro exchange rate remain at the current level or fall further, weexpect that there would be a negative impact on sales in the remainder of thefiscal year when compared to the prior year.  We continue to expect totalfiscal 2006 sales to grow at a low double-digit rate over sales in fiscal 2005.

Sales by Principal Product  Line

Three Months Ended

September 30,

(in thousands)

**2005**

2004

Percent Change

Aesthetic and General  Surgery Products

** $**

**58,672 **

 $

54,322 

8.0 %

Surgical Urology Products

**29,860 **

30,374 

(1.7)%

Clinical & Consumer  Healthcare Products

**25,755 **

24,083 

6.9 %

** $**

**114,287 **

 $

108,779 

5.1 %

Net sales of aesthetic andgeneral surgery products increased 8.0% to $58.7 million for the quarter ended September 30, 2005,from $54.3 million for the same period in the prior year.  We believe domesticsales were negatively impacted by women delaying primary breast augmentation in advanceof the potential U.S. approval of our silicone gel-filled breast implantproducts, following our July 28th announcement that we received anFDA approvable letter.  The adverse weather conditions domestically alsocontributed to slower domestic sales growth, as surgical schedules and patientconsultations were affected.  Approximately $0.3 million of this sales increaseis attributable to positive foreign currency exchange effects, and the balanceis primarily attributable to growth of our silicone gel-filled breast implantsand other products associated with breast reconstruction surgeries.  Totalnet sales of breast implant products increased 8% to $50.5 million for thequarter from $46.9 million for the same period in the prior year.  Increasednet sales were primarily driven by growth in the reconstruction market bothdomestically and internationally.  We continue to see competitive pricepressure in both the domestic and international markets.  Net sales of bodycontouring products increased 6% to $4.1 million for the quarter, from $3.9million for the same period in the prior year.  Liposuction continues tobe the leading surgical cosmetic procedure in the United States,and sales of our capital equipment and associated disposable products were theleading contributors to body contouring sales growth for the quarter ended September 30, 2005. Other aesthetic products sales increased 13% to $4.0 million for the quarterfrom $3.6 million in the same period in the prior year, primarily as a resultof increased international sales of our aesthetic facial product, which waslaunched in a variety of international markets in May 2005. 

26

Net sales of surgical urologyproducts decreased 1.7% to $29.9 million for the quarter ended September 30, 2005, from$30.4 million for the same period in the prior year.  We believe that theadverse weather conditions domestically contributed to slower domestic salesgrowth, as surgical schedules and patient consultations were affected.  Netsales of penile implants increased 6% to $6.6 million, from $6.2 million in thesame period in the prior year, due to continued market acceptance of our Titan®penile implant device, a reduction in the trend of patients samplingcompetitive drug therapies for erectile dysfunction, which had negativelyimpacted prior year sales, and the recent release of GenesisTM, ourcoated malleable penile implant.  Brachytherapy products net sales increased by9% to $4.1 million for the quarter ended September 30, 2005,from $3.8 million for the same period in the prior year, primarily as a resultof higher unit sales.  Net sales of our disposable urinary care products decreased3.4% to $14.2 million for the quarter ended September 30, 2005,compared to $14.7 million for the same period in the prior year, primarily as aresult of decreasing sales of non-core OEM products to a contracted internationalcustomer.  Net sales of women's health products decreased 12% to $5.0 millionfor the three months ended September 30, 2005, compared to $5.7 million for the sameperiod in prior year.  This decrease was due to a decline in sales of ObTape® and tissue based sling products, as surgeonstransitioned to other newer competitive offerings, including our ArisTMproduct.  The decrease in OpTape® sales waspartially offset by increased sales of our ArisTM product and licensing revenues from our trans-obturator methodpatent.   The favorable impact of foreign exchange ratevariations for the surgical urology product segment, which primarily benefitsour disposable urinary care products, was $0.2 million for the quarter ended September 30, 2005.

Net sales of clinical andconsumer healthcare products increased 6.9% to $25.7 million for the quarterended September 30, 2005, from $24.1 million for the same period in the prior year. Net sales growth was generally aided by the effect of the stronger Euro, asnearly half of these product sales are invoiced in currencies other than theU.S. Dollar; this foreign currency exchange had a positive effect on thequarter of approximately $0.1 million for the segment.  The remainder ofthe growth is primarily attributable to an overall increase in unit sales inour international markets.

**Gross Profit**

Gross profit increased to 64.5%of net sales for the quarter ended September 30, 2005,compared to 62.6% for the same period in the prior year, primarily due to ashift in product sales towards our higher margin breast aesthetics products,improved manufacturing efficiencies, and lower material costs.  Grossprofit for aesthetic and general surgery products improved to 76.1% of netsales, or $44.7 million, for the quarter ended September 30, 2005, up from 74.1%of net sales, or $40.2 million, for the same period in the prior year. This increase in gross profit as a percentage of net sales is primarily attributable to favorable pricing on raw materialsand overall increased manufacturing efficiencies at our Texas and Netherlandsfacilities.  Gross profit for surgical urology products improved to 55.5%of net sales, or $16.6 million, for the quarter ended September 30, 2005, up from 53.9%of net sales, or $16.4 million, for the same period in the prior year. This improvement is primarily due to a shift to higher margin products,licensing revenue from our trans-obturator method patent, and improvedmanufacturing efficiencies.  Gross profit for healthcare productsincreased to 48.5% of net sales, or $12.5 million, for the quarter ended September 30, 2005,compared to 47.9% of net sales, or $11.5 million, for the same period in theprior year.  This slight increase is primarily due to a shift to highermargin products.

**Selling, General andAdministrative**

Selling, general andadministrative expenses were $45.4 million, or 39.7% of net sales for thequarter ended September 30, 2005, compared to $40.6 million or 37.3% in the sameperiod in the prior year.  The increased dollar amount for the period isprimarily due to expenses of approximately $0.5 million due to increased patientand physician education programs, approximately $0.5 million in additional baddebt expense associated with customers whose businesses were significantlyimpacted by hurricane Katrina, an increase of approximately $0.4 million in costsassociated with our facial aesthetics marketing efforts in support of ourhyaluronic acid-based dermal filler product, PuragenTM, approximately $0.4 millionrelated to our direct-to-consumer advertising programs, and, to a lesserextent, additional costs associated withour expanded breast implant warranty program launched during the first quarterof fiscal 2006, initial costs incurred in connection with the recentannouncement to focus on our aesthetics business and explore strategicalternatives for our urology business, increased costs associated withSarbanes-Oxley and related compliance efforts, and the effect of foreigncurrency fluctuations on expenses incurred at our foreign operations.  Theseincreases in selling, general and administrative expense were partially offsetby improved general and administrative efficiencies at our manufacturingfacilities.
27

**Research andDevelopment**

Research and developmentexpense was $9.1 million, or 8.0% of net sales for the quarter ended September 30, 2005,compared to $8.6 million or 7.9% in the same period in the prior year for thequarters ended September 30, 2005 and 2004.  Increased research and development spending forthe quarter ended September 30, 2005 was primarily related to supporting our siliconegel-filled breast implant regulatory submissions in the United Statesand Canada, our botulinum toxin project, U.S. clinical studies for our hyaluronic acid-based dermalfiller product, Puragen PlusTM, and the continued development of automatedmanufacturing technologies.  The slight increase in research anddevelopment expenses as a percentage of net sales is primarily the result oftiming of research and development expenditures, as certain milestones relatedto our botulinum toxin project were reached during the quarter, triggeringcontractual payments to several key individuals. 

**Interest and OtherIncome and Expense**

Interest expense was $1.5million for the quarter ended September 30, 2005, compared to $1.2 million in thesame period in the prior year.  These costs include interest on our $150million convertible subordinated notes at 2 3/4% issued in December 2003, interestexpense on balances outstanding under our foreign lines of credit, andcommitment fees on our credit facilities.  The increase in interestexpense is primarily attributable to higher commitment fees and amortization ofissuance costs, and was partially offset by lower borrowings at ourinternational facilities.  Interest income increased to $0.9 million for thequarter ended September 30, 2005, from $0.5 million for the same period in the prioryear, as a result of generally higher rates of interest and higher levels ofcash and cash equivalents balances.

**Income Taxes**

The effective rate ofcorporate income taxes for the three months ended September 30, 2005 was 35.0% ascompared to 31.6% for the same period in the prior year.  In the secondfiscal quarter of 2006, we decided to repatriate up to $25.0 million in foreignprofits during the balance of fiscal year 2006.  The increase in theeffective tax rate for the quarter reflects the impact of such repatriation. We expect to provide for a slightly higher tax rate for the remainder of thefiscal year as a result of the repatriation.

**Net Income and EarningsPer Share**

Net income for the quarterended September 30, 2005 decreased 3% to $12.1 million, from $12.5 million inthe same period in the prior year.  Diluted earnings per share decreased 4%to $0.25 for the quarter, compared to a restated $0.26 for the same period inthe prior year.  We adopted the provisions of EITF 04-8 in December 2004,which requires that the diluted impact of contingently issuable shares from our$150 million of convertible notes be included in the diluted earnings per sharecalculation on a retrospective basis.  Our weighted average shares outstandingfor the three-months ending September 30, 2005 increased to 51.5 million from50.5 million in the same period in prior year, due to the dilutive impact ofour warrants as a result of our higher average share price during the quarter.

28

**For the six-month period ended September 30, 2005 compared to the six-month periodended September 30, 2004:**

**Net Sales**

Net sales increased 8.0%, or $18.4 million to $249.6 millionfor the six months ended September 30, 2005, compared to$231.2 million for the same period in the prior year.  Foreign exchange ratemovements, primarily the strengthening of the Euro, had a favorableyear-to-year impact on international net sales of $2.4 million for the six-monthperiod.  We believe that theadverse weather conditions domestically contributed to slower sales growth, assurgical schedules and patient consultations were impacted, although this had asmaller effect in the six-month period as compared to the three-month periodending September 30, 2005.  In addition,we believe domestic sales of our breast aesthetics products were negativelyimpacted by women delaying breast augmentation in advance of a potential U.S. approval of our silicone gel-filled breast implantproducts.   

Sales by	Principal Product Line

Six Months Ended   September 30,

(in thousands)

**2005**

  2004

Percent  Change

Aesthetic & General  Surgery Products

** $**

**132,798 **

 $

119,866 

10.8%

Surgical Urology Products

**64,079 **

62,286 

2.9%

Clinical & Consumer  Healthcare Products

**52,721 **

49,059 

7.5%

** **

** $**

**249,598 **

 $

231,211 

8.0%

Net sales of aesthetic and general surgery productsincreased 10.8%, or $12.9 million, to $132.8 million for the six-month periodended September 30, 2005, compared to $119.9 million for thesame period in the prior year.  Approximately $0.9 million of the increase isattributable to the favorable impact of foreign exchange rates, and the balanceis due to growth in the reconstruction market both domestically andinternationally.  Net sales of breast implants increased $11.0 million, or 11%,to $115.3 million for the six-months ended September 30, 2005, compared to $104.3 million for thesame period in the prior year.  Body contouring product net sales increased 5%to $9.1 million for the six-month period ended September 30, 2005, from $8.6 million for the comparable period in theprior year.  The increase in body contouring product net sales is primarilyattributable to increased liposuction procedure volume as awareness andacceptance of this procedure increases.  Other product net sales increased by 21%to $8.4 million for the six-months ended September 30, 2005, compared to $6.9million the same period in the prior year, primarily as a result of increasedrevenue from international sales of our aesthetic facial product, which was launchedin a variety of international markets in May 2005, and from physicianparticipation in our "Extreme Mentor" direct-to-consumer television advertisingprogram, which was initiated in September 2004 and completed itsinitially-scheduled airings in September 2005.

Net sales of surgical urology products increased 2.9%, or$1.8 million, to $64.1 million for the six-month period ended September 30, 2005, compared to $62.3 million for thesame period in the prior year.  The increase in net sales was primarilyattributable to a $0.9 million increase in net sales of penile implants due to increased market acceptanceof our Titan® penile device, which carries a higher average sellingprice than its predecessor product, the Alpha I, both domestically and in Europe,and a reduction in the trend of patients sampling competitive drug therapiesfor erectile dysfunction, which had negatively impacted prior year sales.  Netsales of our disposable urinary care products increased 2.4% to $31.2 millionfrom $30.5 million in the prior year.  The majority of this increase wasattributable to favorable exchange rate movements related to sales at our international branches.  Brachytherapy product net sales increased 6% to $8.1million for the six months ended September 30, 2005, compared to $7.6 million for the same period in the prioryear as a result of higher unit sales.  Net sales of our women's healthproducts decreased 2% to $11.4 million for the six months ended September 30, 2005, compared to $11.6 million for thesame period in the prior year as a result of decreased sales of ObTape® and tissue based sling products as surgeonstransitioned to other newer competitive offerings, including our ArisTM product.  The decrease in OpTape® sales was partially offset byincreased sales of our ArisTM product and licensing revenues from our trans-obturator method patent.  Foreign exchange ratefluctuations favorably impacted surgical urology product sales by $0.8 millionfor the six-month period ending September 30, 2005.  

29

Net sales of clinical and consumer healthcare productsincreased by 7.5%, or $3.7 million, to $52.7 million for the six-month periodended September 30, 2005, compared to $49.1 million for the same period in theprior year.  Net sales of our catheter products increased $1.2 million, or 4%,to $28.0 million for the six-month period ended September 30, 2005, from $26.8 million for the same period of the prioryear.  Net sales of other disposable homecare and ostomy products increased 11%to $24.7 million for the six-month period ended September 30, 2005, from $22.2 million in the comparable period of theprior year.  This increase resulted from a shift to our premium productcategories, which have higher pricing, as well as a favorable impact of foreignexchange rate variations of $0.6 million for this segment.

**Gross Profit**

Gross profit for the six-months ended September 30, 2005, improved to 65.4% of net salesfrom 63.4% for the same period in the prior year, primarily due to lowermanufacturing costs and a shift in product mix towards our higher marginproducts.  Gross profit for aesthetic and general surgery products improved to76.6% of net sales, or $101.7 million, for the six-month period ending September 30, 2005, up from $89.3 million, or 74.5% ofnet sales, in the comparable six-month period in the prior year.  This increasein gross profit as a percentage of net sales is primarily attributable tofavorable pricing on raw materials and manufacturing efficiencies at our Texas and Netherlands facilities.  Gross profit for surgical urology products forthe six-month period ended September 30, 2005 improved to 55.8% of net sales,or $35.8 million, compared to 53.9% of net sales, or $33.5 million, for thesame period in the prior year.  The improvement in the gross profit percentageis primarily due to improved manufacturing efficiencies and licensing revenue fromour trans-obturator method patent.  Gross profit for clinical and consumerhealthcare products for the six-month period ended September 30, 2005 increasedto 48.8% of net sales, or $25.7 million, compared to 48.4% of net sales, or$23.8 million in the prior year.  This slight increase is due to a shift tohigher margin products within the segment.

**Selling, General and Administrative**

Selling, general and administrative expense increased to 37.2%of net sales, or $93.0 million for the six-month period ended September 30, 2005, compared to 36.3% or $83.8 millionfor the same period of the prior year.  This increase is due to severalitems, including an increase of approximately $1.6 million in our direct-to-consumeradvertising programs, an increase of approximately $0.8 million in costsassociated with our facial aesthetics marketing efforts in support of ourhyaluronic acid-based dermal filler product, PuragenTM, increased patient andphysician education programs of approximately $0.6 million, approximately $0.5million in additional bad debt expense associated with customers whosebusinesses were significantly impacted by hurricane Katrina, and additionalcosts associated with our expanded breast implant warranty program, which waslaunched during the first quarter of fiscal 2006.  To a lesser extent, initialcosts incurred in connection with our recent announcement to focus on ouraesthetics business and explore strategic alternatives forour urology business, increased costs associated with Sarbanes-Oxley and relatedcompliance efforts, increased personnel costs in support of sales and marketing, andthe effect of foreign currency fluctuations on expenses incurred at our foreignoperations contributed to the year over year increase.  The increase in generaland administrative expense was partially offset by lower general andadministrative costs at our manufacturing facilities. 

30

**Research and Development**

Research and development expense for the six-month periodended September 30, 2005 was $17.2 million,or 6.9% of net sales, compared to $16.6 million, or 7.2% of net sales, for thecomparable period in the prior year.  Increased research and development spendingprimarily supports key strategic product development programs, including oursilicone gel-filled breast implant regulatory submissions in the United Statesand Canada, our botulinum toxin project, U.S. clinical studies for our hyaluronic acid-baseddermal filler product, PuragenTM, and the continued development of automatedmanufacturing technologies.  During the first quarter of fiscal 2005, werecorded a $0.8 million charge related to the termination of a brachytherapydevelopment project and related automated manufacturing equipment.

**Interest and Other Income and Expense**

Interest expense for the six-monthperiod ended September 30, 2005 increased to $2.9, from $2.6 million in thecomparable period in the prior year.  These costs include interest on our $150million convertible subordinated notes at 2 3/4% issued in December 2003, interestexpense on balances outstanding under our foreign lines of credit andcommitment fees on our credit facilities.  The increase in interest expense isprimarily attributable to higher commitment fees and amortization of issuancecosts, and was partially offset by lower borrowings on our internationalfacilities.  Interest income increased $0.7 million to $1.6 million for the six-monthperiod ended September 30, 2005, from $0.9 million for the same period in the prioryear, as a result of generally higher rates of interest and higher balances ofcash and cash equivalents.

**Income Taxes**

The effective rate of corporate income taxes for the six-monthsended September 30, 2005 was 33.3%,compared to 31.9% for the comparable period in the prior year.  In the secondfiscal quarter of 2006, we decided to repatriate up to $25.0 million in foreignprofits, and estimate the tax liability on the repatriation will beapproximately $1.5 million.  The increase in the effective tax rate reflectsthe impact of such repatriation.  We expect to provide for a slightly highertax rate for the remainder of the fiscal year as a result of the intendedrepatriation.  

**Net Income and Earnings Per Share**

Net income for the six-month period ended September 30, 2005 increased 14.6% to $34.6 million,from $30.2 million in the comparable period in the prior year.  Dilutedearnings per share increased 14.3% to $0.72 for the six-month period, comparedto a restated $0.63 for the comparable period in the prior year.  Asrequired by EITF 04-8, we have retroactively restated all diluted earnings pershare figures from December 2003, the date of issuance of our convertiblesubordinated notes.

**FINANCIAL CONDITION,LIQUIDITY AND CAPITAL RESOURCES**

We believe that existingfunds, cash generated from operations, and existing sources of and access tofinancing are adequate to satisfy our working capital, capital expenditure, anddebt service requirements for the foreseeable future.  As of September 30, 2005, wehad cash, cash equivalents and short-term marketable securities of $180.1million, an increase of $67.2 million or 60%, compared to $112.9 million as of March 31, 2005.  Theprincipal components of the increase in cash, cash equivalents and marketablesecurities were cash generated from operating activities of $55.2 million andproceeds of $37.3 million from the exercise of employee stock options, offsetby $15.3 million in dividends paid, $5.7 million used for net capitalexpenditures, and $3.5 million for repayment of debt on our foreign lines ofcredit.

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We invest excess cash inmarketable securities that are highly liquid, of high-quality investment grade,and which have varying maturities.  Our short-term marketable securitiesconsist primarily of state and municipal government and government agencyobligations, Federal Home Loan Bank and Mortgage Association bonds, andinvestment grade corporate obligations, including commercial paper. 

As of
(in thousands)
**September 30,**

March 31,

**2005**

2005

** **
Cash and cash equivalents** $**
**67,981 **

 $

76,666 
Marketable debt securities
**112,109 **

36,228 
Total cash, cash  equivalents and marketable debt securities** $**
**180,090 **
 $
112,894 
Percentage of total assets
**33%**

24%

**Cash Flow Changes**

The following tablesummarizes our cash flow activity:

Six Months Ended

September 30,

(in thousands)

**2005**

2004

** **

Net cash provided by  operating activities

** $**

**55,316 **

 $

45,534 

Net cash provided (used) by  investing activities

**(81,293)**

(33,503)

Net cash provided (used) in  financing activities

**19,004 **

(3,377)

Effect of currency exchange  rates on cash and cash equivalents

**(1,712)**

310 

Increase (decrease) in cash  and cash equivalents

** $**

**(8,685)**

 $

8,964 

*Operating*

Cash provided by operatingactivities of $55.3 million and $45.5 million for the six-month periods endedSeptember 30, 2005 and 2004, respectively, was greater than net income for thesame six-month periods in both 2005 and 2004, due to the net impact of non-cashadjustments to income.  Non-cash adjustments include tax benefits from theexercise of employee stock options, depreciation and amortization, deferredincome taxes and loss on the disposal of assets.  For the six-month periodended September 30, 2005, operating cash flows were negatively impacted in theamount of $10.8 million by changes in working capital balances.  For the six-monthperiod ended September 30, 2004, operating cash flows were positively impacted in theamount of $2.6 million by changes in working capital balances.

Our working capital was $274.0million at September 30, 2005, and $197.0 million at March 31, 2005.  Cashprovided by operating activities has been our primary recurring source of funds.

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*Investing*

Cash provided by (used in)investing activities was primarily attributable to purchases and sales ofmarketable debt and equity securities, as well as capital expenditures onproperty and equipment and intangibles.  For the six-month period ended September 30, 2005,total cash used in investing activities was $81.3 million.  Our net purchasesof marketable securities totaled $75.6 million, and our capital expenditurestotaled $5.7 million.  We anticipate our capital expenditures to total approximately$15.00 million in fiscal 2006, as we will continue to invest in facilityimprovements, software to support our manufacturing processes, and production equipment. For the six-month period ended September 30, 2004, total cash used in investingactivities was $33.5 million.  This amount in 2004 was comprised of investmentsof $27.2 million in marketable securities and $6.3 million in capitalexpenditures.   

*Financing*

Net cash from financingactivities is primarily related to: dividends, employee stock option exercises,debt financing activities and our share repurchases.

We have a share repurchaseprogram primarily to offset the dilutive effect of our employee stock optionprogram, to provide liquidity to the market, and to reduce the overall numberof shares outstanding.  All shares repurchased under the program are retiredand are no longer deemed to be outstanding.  There were no sharerepurchases during the six-month period ended September 30, 2005.  At September 30, 2005, 1.3million shares remained authorized for repurchase.  The timing of ourrepurchases is subject to market conditions, cash availability, and blackoutperiods during which we are restricted from repurchasing shares.  There isno guarantee that shares authorized for repurchase by the Board will ultimatelybe repurchased.  Our Credit Agreement limits the amount that can be usedto repurchase shares to net income from the previous four quarters lessdividends, although this limitation does not apply to any repurchase of the 1.3million shares currently authorized for repurchase.

In September 2005, the Boardof Directors increased the quarterly dividend rate from $0.17 per share to $0.18per share.  At the rate of $0.18 per share, the aggregate dividend for thequarter is approximately $7.8 million.  Future payment of dividends will be subjectto, among other things, Board approval, cash availability, debt restrictionsand alternative cash needs.  We receive cash from the exercise of employeestock options.  Employee stock option exercises provided $37.3 million and$9.6 million of cash in the six-month periods ending September 30, 2005and 2004, respectively.  Proceeds from the exercise of employee stockoptions vary from period to period based upon, among other factors,fluctuations in the market value of our common stock relative to the exerciseprice of such options.

**Financing Arrangements**

*Senior Credit Facility*

On May 26, 2005, weentered into a three-year Credit Agreement ("Credit Agreement") thatprovides us with a $200 million senior revolving credit facility.  At ourelection and subject to lender approval, the amount available for borrowingsunder the Credit Agreement may be increased by an additional $50 million. Funds are available under the Credit Agreement to finance permittedacquisitions, share repurchases up to certain dollar limitations, and for othergeneral corporate purposes.  The Company has three standby letters ofcredit totaling $2 million outstanding which are secured by the CreditAgreement.  Accordingly, although there were no borrowings outstanding underthe Credit Agreement at September 30, 2005, only $198 million was availablefor borrowings.  

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Interest on borrowings underthe Credit Agreement is at a variable rate that is calculated, at our option,at the prime rate, or LIBOR, plus an additional percentage that varies between1% and 1.65%, depending on our senior leverage ratio at the time of theborrowing.  We paid certain fees to the lenders to initiate the CreditAgreement and will pay an unused commitment fee based on our senior leverageratio and unborrowed lender commitments.

Borrowings under the CreditAgreement are guaranteed by certain of our subsidiaries or secured by theircapital stock.  In addition, if the ratio of total funded debt to adjustedearnings before interest, taxes, depreciation and amortization (or"adjusted EBITDA"), exceeds 2.50 to 1.00, then we are obligated togrant to the lenders a first priority perfected security interest inessentially all of our domestic assets. 

The Credit Agreement imposescertain financial and operational restrictions regarding certain liquidity andearnings ratios, as well as certain investments, types of indebtedness orliens, and acquisitions, repurchases of shares of common stock, and payment ofdividends or disposition of assets above specified thresholds.

*Other Financing*

In fiscal 2001, we establishedseveral lines of credit with local foreign lenders to facilitate operating cashflow needs at our foreign subsidiaries.  These unsecured lines are atmarket rates of interest, are guaranteed by the Company, and total $9.9million.  There were no borrowings under these lines of credit as of September 30, 2005.

The total amount ofborrowings available to us under all lines of credit was $208 million at September 30, 2005.

On October 4, 2005,Mentor Medical Systems B.V., ("Mentor BV"), a wholly-owned subsidiary of Mentor Corporationentered into a Loan and Overdraft Facility (the "Facility") with CooperativeRaboBank Leiden, Leiderdorp en Oestgstgeest U.A. ("RaboBank").  The Facilityprovides Mentor BV with an initial €15 million loan and overdraftfacility, which decreases by €375,000 quarterly starting in September 2006. Under the Facility, Mentor BV may borrow up to €12.5 million in fixed amountadvances, with terms of three to six months, and a further sublimit of up to €5million of loans in fixed amount advances with a term of up to 5 years.  Up to€10 million of the Facility may be drawn in the form of U.S. Dollars.  Fundsunder the Facility are available to Mentor  BV to finance certain dividend paymentsto Mentor and for other normal business purposes.  As of November 7, 2005, therewere no borrowings outstanding under the Facility.  Interest on borrowingsunder the Facility is at a rate equal to 0.55% over the RaboBank base lendingrate, Euribor, or LIBOR depending upon the currency and term of eachborrowing.  Interest rates on borrowings other than overdrafts, are fixedfor the term of the advance.  Borrowings by Mentor  BV under the Facility are guaranteed byMentor'swholly-owned subsidiary, Mentor Medical Systems C.V., through a Joint andSeveral Debtorship agreement.  In addition, borrowings under the Facilityare secured by a mortgage on certain real estate owned by Mentor BV.

*ConvertibleSubordinated Notes*

On December 22, 2003, we completed an offering of$150 million of convertible subordinated notes due January 1, 2024, pursuant toRule 144A under the Securities Act of 1933.  The notes bear interest at 2 3/4%per annum and are convertible into shares of our common stock at a conversionprice of $29.2048 per share and are subordinated to all existing and futuresenior debt.  Concurrent with the issuance of the convertible subordinatednotes, we entered into a convertible bond hedge and warrants transactions withrespect to our common stock, the exposure for which is held by Credit SuisseFirst Boston LLC for a net cash payment of $18.5 million.  Both the bondhedge and the warrants transactions may be settled at our option either in cashor net shares and expire January 1, 2009.  The convertible bond hedge andwarrants transactions combined are intended to reduce the potential dilutionfrom conversion of the notes by effectively increasing the conversion price pershare, from our perspective, to approximately $39.3141.

 34

One of the conditionsrequired for conversion of the notes was satisfied during the quarter ended September 30, 2005,and accordingly, the holders of notes have the option to convert the notes intocommon shares at the aforementioned adjusted conversion price per share. 

We do not have anyoff-balance sheet arrangements that are currently material or reasonable likelyto be material to our financial position of results of operations.

We believe that fundsgenerated from operations, our cash, cash equivalents and marketable securitiesand funds available under our line of credit agreements will be adequate tomeet our working capital needs and capital expenditure investment requirementsand commitments for the foreseeable future.  However, it is possible thatwe may need to raise additional funds to finance certain requirements or toconsummate acquisitions of other businesses, products or technologies throughthe sale of equity or debt securities to the public or to selected investors,or by borrowing money from financial institutions.  In addition, even ifwe do not need additional funds, we may still elect to sell additional equityor debt securities or borrow for other reasons.  There are no assurancesthat we will be able to obtain additional funds on terms that would befavorable to us, or at all.  If funds are raised by issuing additionalequity securities or convertible debt securities, the ownership percentage ofexisting shareholders would be reduced.  In addition, equity or debt securitiesissued by us may have rights, preferences or privileges senior to those of our common stock.

**Risk Factors**

**Forward-LookingInformation Under the Private Securities Litigation Reform Action of 1995**

The Private SecuritiesLitigation Reform Act of 1995 provides a "safe harbor" forforward-looking statements.  The Act was designed to encourage companiesto provide prospective information about them without fear of litigation. The prospective information must be identified as forward-looking and must beaccompanied by meaningful cautionary statements identifying important factorsthat could cause actual results to differ materially from those projected inthe statements.  The statements about our business, plans, strategies,intentions, expectations and prospects contained throughout this document arebased on current expectations.  These statements are forward-looking andactual results may differ materially from those predicted as of the date ofthis report in the forward-looking statements, which involve risks and uncertainties. In addition, past financial performance is not necessarily a reliable indicatorof future performance and investors should not use historical performance toanticipate results or future period trends.  We undertake no obligation torevise or update publicly any forward-looking statements for any reason, evenif new information becomes available or other events occur in the future.

Our business faces manyrisks.  The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think areimmaterial may also impair our business operations.  If any of the eventsor circumstances described in the following risks actually occurs, ourbusiness, financial condition or results of operations could suffer and thetrading price of our common stock or our convertible notes could decline. Youshould consider the following risks before deciding to invest in our commonstock or convertible notes. 

***Significant product liability claims or product recalls may force us topay substantial damage awards and other expenses that could exceed our accrualsand insurance coverages.***

The manufacture and sale ofmedical devices exposes us to significant risk of product liabilityclaims.  In the past, and currently, we have had a number of productliability claims relating to our products, and we may be subject to additionalproduct liability claims in the future, some of which may have a negativeimpact on our business.  If a product liability claim or series of claimsis brought against us for uninsured liabilities or in excess of our insurancecoverage, our business could suffer.  Some manufacturers that sufferedsuch claims in the past have been forced to cease operations or even to declarebankruptcy. 

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Additionally, we offerproduct replacement and certain financial assistance for surgical procedures thatfall within our limited warranty and coverage period of implantation on ourbreast implant products, and we accrue for those limited warranties.  Such accrualsare based on estimates, taking into consideration relevant factors such ashistorical experience, warranty period, estimated costs, existence and levelsof insurance and insurance retentions, identified product quality issues, ifany, and, to a limited extent, information developed by the insurance companyusing actuarial techniques.  We assess the adequacy of these accrualsperiodically and adjust the amounts as necessary based on actual experience andchanges in future expectations.  We also recently expanded our limited warrantyprograms to provide certain financial assistance for surgical procedures withinten years of implantation (increased from five years) and expanded the programcoverage to include breast implant sales in European, and certain other countries, in addition to the United States. Changes to actual warranty claims incurred could have a material impact on theactuarial analysis, which in turn could materially impact our reported expensesand results of operations.

In addition to product liabilityor warranty claims, we could experience a material design or manufacturingfailure, a quality system failure, other safety issues, or heightenedregulatory scrutiny that would warrant a recall with products we manufacture orare manufactured by another company and we distribute. A recall of some of ourproducts could result in exposure to additional product liability claims,significant expense to perform the recall and lost sales. 

***We are subject tosubstantial government regulation, which could have a material adverse affecton our business.***

The production and marketingof our products and our ongoing research and development activities, includingpre-clinical testing and clinical trial activities, are subject to extensiveregulation and review by numerous governmental authorities both in the U.S. andabroad.  Most of the medical devices we develop must undergo rigorouspre-clinical and clinical testing and an extensive regulatory approval processbefore they can be marketed.  Certain of our products are required toundergo review by a panel of outside experts selected by the FDA, which makes arecommendation to the FDA as to whether the product(s) should or should not beapproved.  This process makes it potentially longer, more difficult and/ormore costly to bring our products to market, and we cannot guarantee that anyof our unapproved products will be approved or how long it may take for any oneparticular product to be approved.  The pre-marketing approval process canbe particularly expensive, uncertain and lengthy, and a number of devices forwhich FDA approval has been sought by other companies have never been approvedfor marketing.  In addition to testing and approval procedures, extensiveregulations also govern manufacturing, packaging, labeling, storage,distribution, record-keeping, and advertising and marketing procedures. If we do not comply with applicable regulatory requirements, such violationscould result in non-approval, suspensions of clinical trials, suspension orwithdrawal of regulatory approvals, product recalls, civil penalties andcriminal fines, product seizures, operating restrictions, injunctions, andcriminal prosecution. 

Delays in, withdrawal, orrejection of the FDA or other government entity approval(s) of our products,including a delay in or rejection of the approval of our silicone gel-filledbreast implant PMA, may also adversely affect our business.  Such delays,withdrawals, or rejections may be encountered due to, among other reasons,government or regulatory delays, lack of demonstrated safety or efficacy duringclinical trials, safety issues, manufacturing issues, slower than expected rateof patient recruitment for clinical trials, inability to follow patients aftertreatment in clinical trials, inconsistencies between early clinical trialresults and results obtained in later clinical trials, varying interpretationsof data generated by clinical trials, or changes in regulatory policy orrequirements in the U.S. and abroad.  In the U.S., therehas been a continuing trend toward more stringent FDA requirements in the areasof product approval and enforcement, causing medical device manufacturers toexperience longer research and development timelines, longer approval cycles,greater risk and uncertainty, and higher expenses.  Internationally, there is arisk that we may not be successful in meeting the quality standards or othercertification requirements.  Even if regulatory approval of a product isgranted, such approval may entail limitations on uses for which the product maybe labeled and promoted, stringent post-marketing requirements, or may preventus from broadening the uses of our current products for differentapplications.  In addition, to the extent permissible by law, we may notreceive FDA approval to export our products in the future, and countries towhich products are to be exported may not approve them for import. 

36

Our manufacturing facilitiesalso are subject to continual governmental review and inspection.  The FDAhas stated publicly that compliance with manufacturing regulations will bescrutinized more strictly.  A governmental authority may challenge ourcompliance with applicable federal, state and/or foreign regulations.  Inaddition, any discovery of previously unknown problems with one of our productsor facilities may result in restrictions on the product or the facility,including, but not limited to, product recalls, withdrawal of the product fromthe market or other enforcement actions.

From time to time,legislative or regulatory proposals are introduced that, if implemented, couldalter the review and approval process relating to medical devices, or relatedto the sale of our products.  It is possible that the FDA or othergovernmental authorities will issue additional regulations, which could furtherreduce or restrict the sales of our presently marketed products or productsunder development.  Any change in legislation or regulations that governthe review and approval process relating to our current and/or future products,or that restrict the manner by which we may sell our products, could make itmore difficult and/or costly to obtain approval for new products, and/or toproduce, market, and distribute existing products. 

***If we are unable tocontinue to develop and commercialize new technologies and products, we mayexperience a decrease in demand for our products or our products could becomeobsolete.***

The medical device industryis highly competitive and is subject to significant and rapid technologicalchange.  We believe that our ability to develop or acquire newtechnologies is crucial to our success.  We are continually engaged inproduct research and development, product improvement programs, and requiredclinical studies to develop new technologies and to maintain and improve ourcompetitive position.  Any significant delays in the above or terminationor failure of our clinical trials would materially and adversely affect ourresearch, development and commercialization timelines.  We cannotguarantee that we will be successful in enhancing existing products, or indeveloping or acquiring new products or technologies that will timely achieveregulatory approval or success in the marketplace.  

There is also a risk that ourproducts may not gain market acceptance among physicians, patients and themedical community generally.  The degree of market acceptance of anymedical device or other product that we develop will depend on a number offactors, including demonstrated clinical safety and efficacy,cost-effectiveness, potential advantages over alternative products,user/patient acceptance, and our marketing and distribution capabilities. Physicians will not recommend our products if clinical and/or other data and/orother factors do not demonstrate their safety and efficacy compared to othercompeting products, or if our products do not best meet the particular needs ofthe individual patient.

In December 2003, wecompleted our pre-market approval ("PMA") application to the FDA for oursilicone gel-filled implants for breast augmentation, reconstruction andrevision.  In August 2004, we amended our PMA application based on a reviseddraft guidance released by the FDA in January 2004.  On July 28, 2005, wereceived an "approvable" letter, with conditions, from the FDA on ourPMA application for our silicone gel-filled breast implants.  Theapprovable letter stipulates a number of conditions which we must satisfy inorder to receive FDA approval to market and sell silicone gel-filled breastimplants in the United States.  Despite the approvable letter, the FDA mayultimately decide to not approve our silicone gel-filled breast implants forsale in the United States, and the FDA will most likely recommend additionalpost-approval conditions or requirements, which could impact our sales andearnings, depending on the scope and complexity of the requirements. Further change in FDA regulatory requirements, including those implementedthrough new or revised FDA guidance, (such as that announced on January 8, 2004by the FDA), may delay or may otherwise adversely affect our pending PMAapplication as well as its review or approval by the FDA.  Adelay or denial response by the FDA would have a material adverse effect on ourcommercialization timelines and competitive position, and ultimately ourrevenue and operating results.  If our new products do not achievesignificant market acceptance, or if our current products do not continuecompeting successfully in the changing market, our sales and earnings may notgrow as much as expected, or may even decline.

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We also have two pendingapplications for Medical Device Licenses in Canada for our silicone gel-filled breast implants.  Anexpert advisory panel convened by the Canadian government on March 22, 2005 toreview our pending application for Medical Device Licenses.  A publicforum called by Health Canada on these devices was held September 29, 2005.  Wecannot predict the outcome of these reviews, nor determine when or if Health Canada willapprove our product applications.  In addition, any approval could begranted with stringent post-marketing requirements that may impact our salesand earnings, depending on the scope and complexity of such requirements.

***If we are unable to compete effectively with existing or newcompetitors, we could experience price reductions, reduced demand for ourproducts, reduced margins and loss of market share, and our business, resultsof operations and financial condition would be adversely affected.*****

Our products compete withsimilar or other competitive medical products manufactured by major companies,and may also compete with new products currently under development by others. Competition in our industry occurs on a variety of levels, including but notlimited to:

   **•**      developing andbringing new products to market before others or to provide benefits superiorto those of existing products;

   **•**      developingnew technologies to improve existing products;

   **•**      developing newproducts at a lower cost to provide the same benefits as existing products atthe same or lower           price;

   **•**      creating orentering new markets with existing products;

   **•**      increasingor improving service-related programs; and

   **•**      advertisingin a manner that creates additional awareness and demand.

The competitive environmentrequires an ongoing, extensive search for technological innovations and theability to market products effectively.  Consequently, we must continue toeffectively execute on various competitive levels to properly position ourproducts in the marketplace and maintain our market share, revenue and grossmargins. 

In particular, we facecompetition from Inamed, our only current competitor in the U.S. for ourbreast aesthetics product line.  On September 21, 2005,Inamed announced that it also received an "approvable" letter, with conditions,from the FDA for its silicone gel-filled breast implants.  If Inamed gains FDAapproval to market its silicone gel-filled breast implant products before wedo, our competitive position will likely suffer. 

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***If we suffer negativepublicity concerning the safety of our products, our sales may be harmed and wemay be forced to withdraw products.***

Physicians and potentialpatients may have a number of concerns about the safety of our products,including our breast and other implants, whether or not such concerns have abasis in generally accepted science or peer-reviewed scientific research. Negative publicity, whether accurate or inaccurate concerning our products couldreduce market or governmental acceptance of our products and could result indecreased product demand or product withdrawal.  In addition, significantnegative publicity could result in an increased number of product liabilityclaims, whether or not these claims are supported by applicable law. 

***If changes in theeconomy and consumer spending reduce consumer demand for our products, oursales and profitability could suffer.***

Certain elective procedures,such as breast augmentation, body contouring, and in some cases surgicaltreatment for male impotence are not covered by insurance.  Adversechanges in the economy or other conditions or events may cause consumers toreassess their spending choices and reduce the demand for these surgeries andcould have an adverse effect on consumer spending.  This shift could havean adverse effect on our sales and profitability. 

***If we are unable toimplement new information technology systems, our ability to manufacture andsell products, maintain regulatory compliance and manage and report ourbusiness activities may be impaired, delayed or diminished, which would causesubstantial business interruption and loss of sales, customers and profits.***

In fiscal 2004, weimplemented an enterprise resource planning system at our major locations whichis our primary business management system.  We intend to continue toimplement the system for substantially all of our businesses worldwide. Many other companies have had severe problems with computer systemimplementations of this nature and scope.  We are using a controlledproject plan and we believe we have assigned adequate staffing and otherresources to the projects to ensure its successful implementation; howeverthere is no assurance that the design will meet our current and future businessneeds or that it will operate as designed.  We are heavily dependent onsuch computer systems, and any failure or delay in the system implementationwould cause a substantial interruption to our business, additional expense, andloss of sales, customers, and profits. 

***If we are unable toacquire companies, businesses or technologies as part of our growth strategy orto successfully integrate past acquisitions, our growth, sales andprofitability could suffer.***

A significant portion of ourrecent growth has been the result of acquisitions of other companies,businesses and technologies.  We intend to continue to acquire otherbusinesses and technologies to facilitate our future business strategies. There can be no assurance that we will be able to identify appropriate acquisitioncandidates, consummate transactions or obtain agreements with terms favorableto us.  Further, once a business is acquired, any inability to integratethe business, failure to retain and develop its workforce, or establish andmaintain appropriate communications, performance expectations, regulatorycompliance procedures, accounting controls, and reporting procedures couldadversely affect our future sales and earnings.

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***Any adverse change to ourbusiness as a result of our announced strategy to focus on our aestheticsbusiness and to evaluate our strategic alternatives for our urology business,could cause our sales and profitability to suffer.***

We announced our strategy to focus on our aestheticsbusiness, and that as a result, we are considering strategic alternatives forour urology business.  There can be no assurances that our strategic objectiveswill ultimately be achieved, or that the process of evaluating and executing onour strategic objectives will not disrupt the business.  In addition, thestrategic alternatives for our urology business may include a divestiture ofthe urology business, but there can be no assurance that any such divestiture wouldbe successful.  We continue to be committed to our urology business, but thestrategic evaluation process or any subsequent plans could generate potentialdisruptions to the business, such as negative reactions from our customers, suppliersor employees, which could materially adversely affect our operating results andfinancial position.  Further, there can be no assurance that the evaluation ofany of these strategic objectives will enable us to focus on our aestheticsbusiness, or that any such strategic focus would enable us to maintain orimprove our operating results or financial position in future periods.  Finally,any transaction related to our strategic objectives could divert management'sattention from effectively managing our existing and ongoing business.

***State legislatures andtaxing authorities may create new laws or change their interpretation of existingstate and local tax laws that may affect future product demand or createunforeseen tax liabilities.***

If any state legislature orother government authority creates new laws to assess sales taxes on medicalprocedures determined by them to be cosmetic, our physician and patientcustomers may have to pay more for our products and future demand maydecrease.  In addition, if taxing authorities determine that our productsare cosmetic and thus taxable based on their interpretations of existing tax lawsor that our products are otherwise taxable, they may disallow currentlyavailable exemptions related to medical products and procedures.  Suchtaxing authorities may then determine that we owe additional taxes related toproduct sales from prior periods.  These determinations would have anegative effect on our results of operations.

***If our intellectualproperty rights do not adequately protect our products or technologies, otherscould compete against us more directly, which would hurt our profitability.***

Our success depends in parton our ability to obtain patents or rights to patents, protect trade secrets,operate without infringing upon the proprietary rights of others, and preventothers from infringing on our patents, trademarks and other intellectual propertyrights.  We will be able to protect our intellectual property fromunauthorized use by third parties only to the extent that it is covered byvalid and enforceable patents, trademarks or licenses.  Patent protectiongenerally involves complex legal and factual questions and, therefore,enforceability of patent rights cannot be predicted with certainty; thus, anypatents that we own or license from others may not provide us with adequateprotection against competitors.  Moreover, the laws of certain foreigncountries do not recognize intellectual property rights or protect them to thesame extent as do the laws of the United  States.  

In addition to patents andtrademarks, we rely on trade secrets and proprietary know-how.  We seekprotection of these rights, in part, through confidentiality and proprietaryinformation agreements.  These agreements may not provide sufficientprotection or adequate remedies for violation of our rights in the event ofunauthorized use or disclosure of confidential and proprietaryinformation.  Failure to protect our proprietary rights could seriouslyimpair our competitive position. 

***If third parties claimwe are infringing their intellectual property rights, we could suffersignificant litigation or licensing expenses or be prevented from marketing ourproducts.***

Our commercial successdepends significantly on our ability to operate without infringing the patentsand other proprietary rights of others.  However, regardless of ourintent, our technologies may infringe upon the patents or violate otherproprietary rights of third parties.  In the event of such infringement orviolation, we may face expensive litigation and may be prevented from sellingexisting products and pursuing product development or commercialization. 

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***We depend on single andsole source suppliers for certain raw materials and licensed or manufacturedproducts and the loss of any supplier could adversely affect our ability tomanufacture or sell many of our products.***

We currently rely on singleor sole source suppliers for raw materials used in many of our products,including silicone.  In the event that they cannot meet our requirements,we cannot guarantee that we would be able to obtain a sufficient amount ofquality raw materials in a timely manner.  We also depend on third partymanufacturers for components and licensed products, including our women'shealth products and our palladium brachytherapy seed product.  If there isa disruption in the supply of these products, our sales and profitability wouldbe adversely affected. 

***Our internationalbusiness exposes us to a number of risks.***

More than one-third of oursales are derived from international operations.  Accordingly, anymaterial decrease in foreign sales would have a material adverse effect on ouroverall sales and profitability. Most of our international sales aredenominated in Euros, British Pounds, Canadian Dollars or U.S. Dollars. Depreciation or devaluation of the local currencies of countries where we sellour products may result in our products becoming more expensive in localcurrency terms, thus reducing demand, which could have an adverse effect on ouroperating results.  Our operations and financial results may be adverselyaffected by other international factors, including: 

•    foreigngovernment regulation of medical products; 

•    productliability, intellectual property and other claims; 

•    new exportlicense requirements; 

•    political oreconomic instability in our target markets; 

•    traderestrictions; 

•    changes intax laws and tariffs; 

•    managingforeign distributors and manufacturers; 

•    managingforeign branch offices and staffing; 

•    competition;and 

•    fluctuationsin foreign currency exchange rates.

 

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***Health carereimbursement or reform legislation could materially affect our business.***

If any national health carereform or other legislation or regulations are passed that imposes limits onthe amount of reimbursement for certain types of medical procedures orproducts, or on the number or type of medical procedures that may be performed,or that has the effect of restricting a physician's ability to select specificproducts for use in patient procedures, such changes could have a materialadverse effect on the demand for our products.  Our revenues dependlargely on U.S. and foreign government health care programs andprivate health insurers reimbursing patients' medical expenses. Physicians, hospitals, and other health care providers may not purchase ourproducts if they do not receive satisfactory reimbursement from thesethird-party payers for the cost of procedures using our products.  In the U.S., therehave been, and we expect that there will continue to be, a number of federaland state legislative and regulatory proposals to implement greatergovernmental control over the healthcare industry and its related costs. These proposals create uncertainty as to the future of our industry and mayhave a material adverse effect on our ability to raise capital or to formcollaborations.  In a number of foreign markets, the pricing andprofitability of healthcare products are subject to governmental influence orcontrol.  In addition, legislation or regulations that impose restrictionson the price that may be charged for healthcare products or medical devices mayadversely affect our sales and profitability. 

***If our use of hazardousmaterials results in contamination or injury, we could suffer significantfinancial loss.***

Our manufacturing andresearch activities involve the controlled use of potentially hazardousmaterials.  We cannot eliminate the risk of accidental contamination orinjury from these materials.  In the event of an accident or environmentaldischarge, we may be held liable for any resulting damages, which may exceedour financial resources and any applicable insurance coverage. 

***Future changes infinancial accounting standards may cause adverse unexpected revenue or expensefluctuations and affect our reported results of operations.***

A change in accountingstandards could have a significant effect on our reported results and may evenaffect our reporting of transactions completed before the change iseffective.  New pronouncements and varying interpretations of existingpronouncements have occurred and may occur in the future.  Changes toexisting rules or current practices may adversely affect our reported financialresults and require restatement of previously issued results for retroactiveapplication of the new accounting standard.  This was evidenced by theadoption of EITF 04-8 which was adopted in the quarter ended December 2004,resulting in the restatement of diluted earnings per share and weighted averageshares outstanding, for fiscal year 2004 and the interim periods ending June30, and September 30, 2004. 

***Hedging transactionsand other transactions may affect the value of the notes.***

In connection with theoriginal issuance of our 23⁄4% convertible subordinated notes in December 2003,we entered into convertible note hedge and warrant transactions with respect toour common stock, with Credit Suisse First Boston International, an affiliateof Credit Suisse First Boston LLC, the initial purchaser of the notes, toreduce the potential dilution from conversion of the notes up to a price of ourcommon stock of approximately $39.31 per share.  In connection with thesehedging arrangements, Credit Suisse First Boston International, and/or itsaffiliates, has taken and, we expect, will continue to take positions in ourcommon stock in secondary market transactions and/or will enter into variousderivative transactions.  Such hedging arrangements could adversely affectthe market price of our common stock.  In addition, the existence of thenotes may encourage short selling in our common stock by market participantsbecause the conversion of the notes could depress the price of our commonstock. 

***Litigation may harm ourbusiness or otherwise distract our management.***

Substantial, complex orextended litigation could cause us to incur large expenditures and distract ourmanagement, and could result in significant monetary or equitable judgmentsagainst us.  For example, lawsuits by employees, patients, customers,licensors, licensees, suppliers, business partners, distributors, shareholders,or competitors could be very costly and could substantially disrupt ourbusiness.  Disputes from time to time with such companies or individualsare not uncommon, and we cannot assure that we will always be able to resolvesuch disputes out of court or on terms favorable to us. 

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***Our publicly-filed SECreports are reviewed by the SEC from time to time and any significant changesrequired as a result of any such review may result in material liability to usand have a material adverse impact on the trading price of our common stock.***

The reports of publicly-tradedcompanies are subject to review by the SEC from time to time for the purpose ofassisting companies in complying with applicable disclosure requirements and toenhance the overall effectiveness of companies public filings, andcomprehensive reviews by the SEC of such reports are now required at leastevery three years under the Sarbanes-Oxley Act of 2002.  SEC reviews oftenoccur at the time companies file registration statements such as theregistration statement we filed in connection with our convertible noteoffering, but reviews may also be initiated at any time by the SEC.  Whilewe believe that our previously filed SEC reports comply, and we intend that allfuture reports will comply in all material respects with the published rulesand regulations of the SEC, we could be required to modify or reformulateinformation contained in prior filings as a result of an SEC review.  Anymodification or reformulation of information contained in such reports could besignificant and result in material liability to us and have a material adverseimpact on the trading price of our securities, including our common stock orour convertible notes.

***Our operating resultsmay fluctuate substantially, and could precipitate unexpected movement in theprice of our common stock and convertible notes.*** 

Our common stock trades onthe New York Stock Exchange under the symbol "MNT."  On September 30, 2005,the closing price of our common stock on the New York Stock Exchange was $55.01per share.  On December 22, 2003, we completed an offering of $150 million ofconvertible subordinated notes ("notes") due January 1, 2024pursuant to Rule 144A under the Securities Act of 1933.  The notes bearinterest at 23⁄4% per annum, are convertible into shares of our common stock atan adjusted conversion price of $29.2048 per share and are subordinated to allexisting and future senior debt.  The market prices of our stock andconvertible securities are subject to significant fluctuations in response tothe factors set forth above and other factors, many of which are beyond ourcontrol including such factors as changes in pricing policies by ourcompetitors and the timing of significant orders and shipments.

Such factors, as well asother economic conditions, may adversely affect the market price of oursecurities, including our common stock and convertible notes.  There couldbe periods in which we experience shortfalls in revenue and/or earnings fromlevels expected by securities analysts and investors, which could have animmediate and significant adverse effect on the trading price of oursecurities, including our common stock and our convertible notes.

**Item 3.**    **Quantitative and QualitativeDisclosures about Market Risk**

There have been no materialchanges in our exposure to market risk as reported in Item 7A in our AnnualReport on Form 10-K for the fiscal year ended March 31, 2005.

**Item 4.**    **Controls and Procedures**

Wemaintain disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the"Exchange Act")) that are designed to ensure that informationrequired to be disclosed in our reports filed or submitted under the ExchangeAct, is recorded, processed, summarized and reported within the time periodsspecified in the SEC's rules and forms, and that such information isaccumulated and communicated to our management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure.  In designing and evaluating the disclosurecontrols and procedures, management recognized that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, and managementnecessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

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Wecarried out an evaluation under the supervision and with the participation ofmanagement, including our Chief Executive Officer and Chief Financial Officer,of the effectiveness of the design and operation of our disclosure controls andprocedures as of September 30, 2005, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures were effective atthe reasonable assurance level as of September 30, 2005.

Therehave been no changes in our internal control over financial reporting (asdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during thequarter ended September 30, 2005 that materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

**PART II - OTHERINFORMATION**

**Item1.    Legal Proceedings**

On March 4, 2004, John H. Alico,et. al., d/b/a PTF Royalty Partnership ("PTF") filed a lawsuitagainst us in the Business Litigation Session of the Superior Court ofMassachusetts, Suffolk County in which PTF alleges, among other things, breachof a merger agreement that involved our acquisition of Mentor O&O, Inc.("O&O"), an unrelated entity at that time, which was dated as ofMarch 14, 1990 ("Merger Agreement") (prior to the merger, O&O hadno affiliation with us).  PTF alleges that we breached the terms of theMerger Agreement by failing to exert commercially reasonable and diligentefforts to obtain approval by the FDA for a product used for the treatment ofurinary incontinence and by failing to accurately account for and pay royaltiesdue thereunder.  PTF seeks damages in excess of $18 million, which is themaximum amount of royalties PTF could have received under the MergerAgreement.  After almost ten years, in or about January 2001, we electedto discontinue pursuing FDA approval for the product, given the FDA's repeatedand ongoing concerns regarding the product's use for urinaryincontinence.  We complied with all of our obligations under the MergerAgreement, which specifically provided that we were under no obligation toengage in efforts or expenditures in respect of the product which we in goodfaith deemed to be inadvisable based on various factors.  Accordingly, weintend to vigorously defend the lawsuit.  Dr. Richard Young, a member ofour Board of Directors since March 1990, was a partner of PTF and was a namedplaintiff in the above action.  Dr. Young was a shareholder and principalof O&O prior to the merger and was instrumental in facilitating thetransition after the merger. Pursuant to Dr. Young's request, the PTFPartnership Agreement was amended to permit withdrawal of partners from the PTFRoyalty Partnership upon notice.  On June 3, 2005,Dr. Young submitted his notice of withdrawal to the Partnership, and a jointstipulation removing Dr. Young from the caption of the complaint and as a namedparty to the litigation was entered by the court in June 2005.

In addition, in the ordinarycourse of our business we experience other varied types of claims thatsometimes result in litigation or other legal proceedings.  Although therecan be no certainty, we do not anticipate that any of these proceedings willhave a material adverse effect on us.

**Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds**

None. 

**Item 3.   Defaults Upon Senior Securities**

None. 

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**Item 4.   Submission of Matters to a Vote of Security Holders**

At the Company's 2005 Annual Meeting of Shareholders  held on September 14, 2005, the following proposals were presented: 

(1)   A proposal to approve a decrease in the  authorized number of members of the Board of Directors from eleven to nine.  The proposal received 39,334,304 votes for, and 276,834 against approval.  There were 34,139 abstentions and 1,205 broker non-votes.  

(2)  A proposal to elect the following individuals  to the Board of Directors of the Company to serve until the next annual  meeting, or until their successors are duly elected and qualified, was  approved as follows: 

Name of Director

Votes For

Votes Withheld

Joseph E. Whitters

39,077,012

   569,470

Michael L. Emmons

39,264,104

   382,378

Walter W. Faster

39,114,746

   531,736

Eugene G. Glover

39,030,503

   615,979

Joshua H. Levine

39,115,345

   531,137

Michael Nakonechny

38,925,765

   720,717

Ronald J. Rossi

38,611,605

1,034,877

Jeffrey W. Ubben

38,912,454

   734,028

Dr. Richard W. Young

39,039,992

   606,490
      
(3)  A proposal to approve an amended and restated Long-Term Incentive  Plan.  The proposal received 29,125,273 votes for, and 2,023,184 against approval.   There were 542,694 abstentions and 7,955,331 broker non-votes. 

(4)   A proposal to approve an Employee Stock Purchase Plan.  The proposal received  30,817,533 votes for, and 367,262 against approval.  There were 506,856  abstentions and 7,954,831 broker non-votes. 

(5)   A proposal to approve the amendment of the Company's Bylaws regarding the  determination of the number of directors.  The proposal received 39,060,696  votes for, and 519,956 against approval.  There were 64,624 abstentions and 1,206  broker non-votes. 

(6)   A proposal to ratify the appointment of Ernst & Young LLP to act as  independent public accountants of the Company for the fiscal year ending March 31, 2006 was  approved.  The proposal received 39,524,029 votes for, and 77,094 against  ratification.  There were 44,156 abstentions and 1,203 broker non-votes.

**Item 5.    Other Information**

None

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**Item 6.    Exhibits**
3.1Composite Restated Articles of Incorporation of	the Company dated December 12, 2002 - Incorporated by reference to Exhibit	3.1 of the Registrant's Annual Report on Form 10-K for the year ended March	31, 2003. 3.2Amended and Restated Bylaws of Mentor Corporation	dated September 14, 2005. 4.1Indenture 2 3/4 % Convertible Subordinated Notes	Due 2024, dated December 22, 2003 -  Incorporated by reference to	Exhibit 4.1 of the Registrant's Quarterly Report on Form 10-Q for the	quarter ended December 31, 2003. 10.1*Employment agreement between Mentor Corporation	and Joshua H. Levine dated August 25, 2005. 10.2*Employment agreement between Mentor Corporation	and Loren L. McFarland dated	August 25, 2005. 10.3*Employment agreement between Mentor Corporation	and Kathleen M. Beauchamp	dated August 25, 2005. 10.4*Employment agreement between Mentor Corporation	and David J. Adornetto dated 	August 25, 2005. 10.5*Employment agreement between Mentor Corporation	and A. Christopher Fawzy 	dated August 25, 2005. 10.6*Employment agreement between Mentor Corporation	and Cathy S. Ullery dated August 25, 2005. 10.7*Employment agreement between Mentor Corporation	and Clarke Scherff dated August 25, 2005. 10.8*Mentor Corporation 2005 Long-Term Incentive Plan. 10.9*   Mentor Corporation Employee Stock Purchase Plan. 10.10*   Form of Mentor Corporation	2005 Long-Term Incentive Plan Restricted Stock Award Agreement for Awards	Issued to Company Directors and Officers on October 5, 2005. 10.11English translation of Rabo-Bank Loan and Overdraft Facility dated September 30, 2005 - Incorporated by reference to Exhibit 10.1 of theRegistrant's Current Report on Form 8-K filed on October 11, 2005. 31.1Certification of Principal Executive Officer	Pursuant To	Section 302 of The Sarbanes-Oxley Act of 2002. 31.2Certification of Principal Financial Officer	Pursuant To Section 302 of The Sarbanes-Oxley Act of 2002. 32.1CEO Certification Pursuant To 18 U.S.C. Section 1350,As Adopted Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002. 32.2CFO Certification Pursuant To 18 U.S.C. Section 1350,As Adopted Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002.
* Management contract orcompensatory plan or arrangement.
 
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**SIGNATURES**

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

**MENTOR CORPORATION**

(Registrant)

Date:

November 7, 2005

By:

/s/JOSHUA  H. LEVINE             

Joshua  H. Levine

Chief  Executive Officer

Date:

November 7, 2005

By:

/s/LOREN  L .MCFARLAND       

Loren  L. McFarland

Chief  Financial Officer

 

 

 

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