Smiths Group Plc

Offering Circular

Smiths Group plc

(incorporated in England with limited liability under registered number 137013) (formerly Smiths Industries plc)

£150,000,000 7.875 per cent. Bonds due 2010 and €300,000,000 6.375 per cent. Bonds due 2005

Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services Act 1986 (the "UK Listing Authority") for the £150,000,000 7.875 per cent. Bonds due 2010 (the "Sterling Bonds") and the €300,000,000 6.375 per cent. Bonds due 2005 (the "Euro Bonds" and, together with the Sterling Bonds, the "Bonds") to be admitted to the official list of the UK Listing Authority (the "Official List") and to the London Stock Exchange plc (the "London Stock Exchange") for such Bonds to be admitted to trading on the London Stock Exchange's market for listed securities. Admission to the Official List together with admission to trading on the London Stock Exchange's market for listed securities constitute official listing on the London Stock Exchange. Copies of this document, which comprises listing particulars given in compliance with the listing rules made under Section 142 of the Financial Services Act 1986 by the UK Listing Authority for the purpose of giving information with regard to Smiths Group plc (formerly Smiths Industries plc) (the "Issuer" or the "Company"), the Issuer and its subsidiaries taken as a whole (the "Smiths Group") and the Bonds, have been delivered to the Registrar of Companies in England and Wales as required by Section 149 of the Financial Services Act 1986. The Sterling Bonds were initially issued by TI Group plc ("TI Group") pursuant to a trust deed dated 7 July 2000 (the "Sterling Trust Deed"). The Euro Bonds were initially issued by TI Group pursuant to a trust deed dated 18 July 2000 (the "Euro Trust Deed" and, together with the Sterling Trust Deed, the "Trust Deeds"). Both the Sterling Bonds and the Euro Bonds have been admitted to the official list of the UK Listing Authority and admitted to trading on the London Stock Exchange's market for listed securities since the date of the Sterling Trust Deed and of the Euro Trust Deed, respectively. HSBC Trustee (C.I.) Limited as trustee under the Trust Deeds (the "Trustee") has approved the substitution of TI Group by the Company as issuer of the Bonds in accordance with two first supplemental trust deeds dated on or about 14 November 2001 (together, the "First Supplemental Trust Deeds") between the Company, TI Group and the Trustee relating to each of the Sterling Trust Deed and the Euro Trust Deed. Pursuant to the First Supplemental Trust Deeds, the Company will be bound by the provisions of the Trust Deeds as if it had been named as principal debtor under the Bonds in the Trust Deeds. Interest on the Bonds is payable annually in arrear on 12 July in each year. Payments on the Bonds will be made without deduction for or on account of taxes of the United Kingdom to the extent described under "Terms and Conditions of the Sterling Bonds ― Taxation" and "Terms and Conditions of the Euro Bonds ― Taxation". The Sterling Bonds mature on 12 July 2010 and the Euro Bonds mature on 18 July 2005, and may not be redeemed prior thereto, except as mentioned below. The Bonds are subject to redemption in whole but not in part, at the option of the Issuer, at any time at a price which shall be the higher of their principal amount and an amount calculated by reference to the yield on the relevant United Kingdom government reference stock, together, in each case, with accrued interest. The Bonds are also subject to redemption in whole but not in part, at their principal amount, together with accrued interest, at the option of the Issuer at any time in the event of certain changes affecting taxes of the United Kingdom. See "Terms and Conditions of the Sterling Bonds ― Redemption and Purchase" and "Terms and Conditions of the Euro Bonds ― Redemption and Purchase". The Sterling Bonds are represented by a global Sterling Bond (the "Sterling Global Bond"), without interest coupons (the "Coupons"), deposited with a common depositary on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear system ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream Luxembourg"). The Sterling Global Bond is exchangeable for definitive Sterling Bonds in bearer form, with Coupons, in the denominations of £1,000, £10,000 and £100,000 not less than 60 days following the request of the Issuer or the holder in the limited circumstances set out in it. The Euro Bonds are represented by a Global Euro Bond (the "Euro Global Bond" and, together with the Sterling Global Bond, the "Global Bonds"), without Coupons, deposited with a common depositary on behalf of Euroclear and Clearstream Luxembourg. The Euro Global Bond is exchangeable for definitive Euro Bonds in bearer form, with Coupons, in the denominations of €1,000, €10,000 and €100,000 not less than 60 days following the request of the Issuer or the holder in the limited circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form". The Issuer accepts responsibility for the information contained in this document. To the best of the knowledge and belief of the Issuer (which has taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer to inform themselves about and to observe any such restrictions. No person is authorised to give any information or to make any representation not contained in this Offering Circular and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer. The delivery of this Offering Circular at any time does not imply that the information contained in it is correct as at any time subsequent to its date. The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, the Bonds may not be offered, sold or delivered within the United States or to U.S. persons. The Bonds are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder. Unless otherwise specified or the context requires, references to "euro" are to the currency of the member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union and as amended by the Treaty of Amsterdam, references to "pounds", "sterling" and "£" are to the lawful currency of the United Kingdom, references to "US$" are to the lawful currency of the United States of America and references to "DEM" are to the national currency unit of Germany (being a non-decimal denomination of the euro). Table of Contents

Terms and Conditions of the Sterling Bonds 4 Terms and Conditions of the Euro Bonds 17 Use of Proceeds 29 Summary of Provisions relating to the Bonds while in Global Form 30 Business Description of Smiths Group plc 32 Capitalisation and Indebtedness of Smiths Group plc 36 United Kingdom Taxation in respect of the Sterling Bonds 37 United Kingdom Taxation in respect of the Euro Bonds 39 General Information 41

Terms and Conditions of the Sterling Bonds The following are the terms and conditions substantially in the form in which (subject to modification and save for the paragraphs in italics) they will be endorsed on the Sterling Bonds in definitive form (if issued):― The issue of the £150,000,000 7.875 per cent. Bonds due 2010 (the "Bonds") was authorised by a resolution of a Committee of the Board of Directors of TI Group plc ("TI Group") on 6 July 2000 and by a resolution of the Board of Directors of TI Group on 10 May 2000. The substitution of Smiths Group plc (the "Company" or the "Issuer") in place of TI Group as issuer of the Bonds was authorised by a resolution of the Board of Directors of the Company and of TI Group on 10 July 2001 and 30 October 2001 respectively. The Bonds are constituted by a principal trust deed (the "Principal Trust Deed") dated 12 July 2000 between TI Group and HSBC Trustee (C.I.) Limited (the "Trustee" which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds (the "Bondholders") as supplemented by a first supplemental trust deed dated on or about 14 November 2001 between the Company, TI Group and the Trustee (the "First Supplemental Trust Deed" and, together with the Principal Trust Deed, the "Trust Deed"). These terms and conditions of the Bonds (the "Conditions") include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bonds and the interest coupons relating to them (the "Coupons"). Copies of the Trust Deed, and of the paying agency agreement (the "Paying Agency Agreement") dated 12 July 2000 between TI Group, the Trustee and the initial principal paying agent and paying agents named in it, are available for inspection during usual business hours at the registered office of the Trustee (presently at P.O. Box 88, 1 Grenville Street, St. Helier, Jersey JE4 9PF) and at the specified offices of the principal paying agent for the time being (the "Principal Paying Agent") and the paying agents for the time being (the "Paying Agents", which expression shall include the Principal Paying Agent). The Bondholders and the holders of the Coupons (whether or not attached to the relevant Bonds) (the "Couponholders") are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions of the Paying Agency Agreement which are applicable to them.

1. FORM, DENOMINATION AND TITLE (a) Form and denomination: The Bonds are serially numbered and in bearer form in the denominations of £1,000, £10,000 and £100,000 each with Coupons attached on issue. Bonds of one denomination may not be exchanged for Bonds of the other denomination. (b) Title: Title to the Bonds and Coupons passes by delivery. The holder of any Bond or Coupon will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder.

If definitive Bonds are to be issued, as provided in the Global Bond, where the number of Coupons to be attached to each definitive Bond represents an amount greater than the principal amount of such Bond, the Trustee may agree with the Issuer such changes to the terms and conditions of the Bonds and the Global Bond so as to provide for the issue of definitive Bonds with a lesser number of Coupons, together with a talon for further Coupons, in order to ensure that the amount represented by the Coupons to be attached to each definitive Bond is not greater than the principal amount of such Bonds.

2. STATUS The Bonds and Coupons constitute (subject to Condition 3) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds and Coupons shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 3, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.

3. COVENANTS (a) Negative Pledge: So long as any of the Bonds remains outstanding (as defined in the Trust Deed) the Issuer undertakes that it will not, and it will procure that none of its Principal Subsidiaries (as defined in Condition 8) will, create or have outstanding any mortgage, charge, pledge, lien (other than a lien arising solely by operation of law) or other security interest (each a "Security Interest") (other than a Security Interest outstanding on 12 July 2000) upon the whole or any part of its undertaking, assets or revenues (including any uncalled capital), present or future, in order to secure any Relevant Indebtedness (as defined below) or to secure any guarantee or indemnity in respect of any Relevant Indebtedness unless (a) all amounts payable by the Issuer under the Bonds and the Coupons are equally and rateably secured therewith by such Security Interest to the satisfaction of the Trustee or (b) such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) is provided either (A) as the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Bondholders or (B) as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders save that any such Principal Subsidiary may create or have outstanding a Security Interest in respect of Relevant Indebtedness and/or a guarantee or indemnity in respect of Relevant Indebtedness (without the obligation to provide a Security Interest or other arrangement in respect of the Bonds and the Coupons as aforesaid) where such Principal Subsidiary becomes a Principal Subsidiary of the Issuer after 12 July 2000 and where such Security Interest exists at the time it becomes a Principal Subsidiary of the Issuer (provided such Security Interest was not created in contemplation of such company becoming a Principal Subsidiary of the Issuer) or any Security Interest thereafter created in substitution for such original Security Interest, by the same grantor of such original Security Interest, which is created over or secured on assets whose value immediately prior to such substitution, in the opinion of the Trustee, does not materially exceed the then current value of the assets subject to such original Security Interest. For the purposes of these Conditions: "Relevant Indebtedness" means any present or future indebtedness for borrowed money in the form of, or represented or evidenced by, bonds, debentures, notes or other securities which are or, with the agreement of the issuer thereof, are intended to be, quoted, listed, dealt in or traded on any stock exchange or other recognised securities market other than such indebtedness which by its terms will mature within a period of one year. For the avoidance of doubt "Relevant Indebtedness" shall exclude tradable bank debt. (b) Interest Cover: The Issuer shall procure that, for so long as any Bond is outstanding, as at the end of each of its financial years ending after the Closing Date, the ratio of Profit Before Interest for its financial year then ended to Net Borrowing Costs for its financial year then ended shall not be less than 3 to 1. For the purposes of these Conditions: "Net Borrowing Costs" means, in respect of any financial year of the Issuer, all continuing, regular or periodic costs, charges and expenses (including, but not limited to, interest) shown in the relevant Accounts (as defined in Condition 8) for such financial year as interest payable by any member of the Group (as defined in Condition 8) plus any interest arising in such financial year which is capitalised by any member of the Group less all income shown in the relevant Accounts for such financial year as interest receivable by any member of the Group, all as calculated in accordance with the Accounts; and "Profit Before Interest" means, in respect of any financial year of the Issuer, the consolidated profits on ordinary activities before taxation of the Group (before taking into account any exceptional or extraordinary items) as shown in the Accounts for such financial year, adjusted by adding back Net Borrowing Costs and any goodwill amortised during such financial year, all as calculated in accordance with the Accounts. The Issuer has undertaken in the Trust Deed to provide a certificate, signed by any two of its Directors, to the Trustee within 14 days of the Accounts being made available to its members, stating the ratio of Profit Before Interest to Net Borrowing Costs, in each case for the financial year ended immediately prior to the date of such certificate. (c) Information Covenant: For so long as any Bond is outstanding, the Issuer shall, subject to any applicable legal, regulatory or listing constraints: (i) make copies of the most recent Accounts available to Bondholders during normal business hours at the specified offices of each of the Paying Agents within 14 days of them being made available to shareholders of the Issuer; and (ii) if so requested in writing by the holders of more than 30 per cent. in principal amount of the Bonds then outstanding, invite the Bondholders to, and hold for their benefit, a meeting at which senior management of the Issuer will be present to respond to questions from Bondholders or their duly authorised representatives, provided that the Issuer shall not be required to hold such a meeting more than once in any period of 12 months.

In the First Supplemental Trust Deed the Company has covenanted that it shall procure that TI Group does not incur or permit to subsist any Financial Indebtedness or any guarantee of any Financial Indebtedness in excess of £10,000,000 (including accrued interest) so long as any Bonds are outstanding. For the avoidance of doubt, this covenant does not apply to any Subsidiary of TI Group. "Financial Indebtedness" means any indebtedness for or in respect of:

(a) moneys borrowed; (b) any amount raised by acceptance under any acceptance credit facility; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debtedness, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with generally accepted accounting principles, standards and practices in the United Kingdom, be treated as a finance or capital lease; (e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); (f) any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account); (h) shares which are expressed to be redeemable; (i) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and (j) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

For the avoidance of doubt, any breach of this covenant shall constitute a breach of obligation for the purposes of Condition 8(b).

4. INTEREST The Bonds bear interest from 12 July 2000 (the "Closing Date") at the rate of 7.875 per cent. per annum, payable annually in arrear on 12 July in each year. Each Bond will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder, and (b) the day seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions). If interest is required to be calculated for a period of less than one year, it will be calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.

5. REDEMPTION AND PURCHASE (a) Final redemption: Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on 12 July 2010. The Bonds may not be redeemed at the option of the Issuer other than in accordance with this Condition. (b) Redemption for taxation reasons: The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days' notice to the Bondholders (which notice shall be irrevocable), at their principal amount (together with interest accrued to but excluding the date fixed for redemption), if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that it has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after 7 July 2000, and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Bonds then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee a certificate signed by two Directors of the Issuer stating that the obligation referred to in (i) above cannot be avoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled to accept and rely on such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above in which event it shall be conclusive and binding on the Bondholders and the Couponholders. (c) Redemption at the option of the Issuer: The Issuer may, at any time, having given not less than 30 nor more than 60 days' notice to the Bondholders in accordance with Condition 15, redeem all, but not some only, of the Bonds prior to 12 July 2010 at a price (the "Redemption Price") which shall be the higher of the following (together with interest accrued to but excluding the date of redemption): (i) its principal amount; and (ii) that price, expressed as a percentage (rounded to three decimal places, 0.0005 being rounded upwards), at which the Gross Redemption Yield (as defined below) on the Bonds, if they were to be purchased at such price on the third dealing day prior to the due date for redemption, would be equal to the Gross Redemption Yield on such dealing day of 5.75 per cent. Treasury Stock 2009 or, if such stock is no longer in issue, of such other United Kingdom government stock as the Trustee may, with the advice of three brokers or market-makers operating in the gilt-edged market as the Trustee may approve, agree with the Issuer, or, failing such agreement, decide, from time to time, to be appropriate (the "Reference Stock"), on the basis of the middle market price of the Reference Stock prevailing at 11.00 a.m. on such dealing day as determined by UBS AG acting through its financial services group UBS Warburg, and HSBC Bank plc acting jointly (or such other person as the Trustee may approve). Any reference in these Conditions to principal shall be deemed to include any sum payable as the Redemption Price. The notice of redemption will specify the date fixed for redemption and the method of calculating the applicable Redemption Price in accordance with this Condition. Upon the expiry of the notice of redemption the Issuer shall be bound to redeem the Bonds called for redemption at the applicable Redemption Price. The "Gross Redemption Yield" on the Bonds and on the Reference Stock will be expressed as a percentage and will be calculated on the basis indicated by the Joint Index and Classification Committee of the Institute and Faculty of Actuaries as reported in the Journal of the Institute of Actuaries, Vol. 105, Part 1, 1978, page 18. (d) Notice of redemption: All Bonds in respect of which any notice of redemption is given under this Condition shall be redeemed on the date specified in such notice in accordance with this Condition. (e) Redemption at the option of the Bondholders: If during the period from the Closing Date to 12 July 2010 there occurs a Restructuring Event and within the Restructuring Period either (i) (if at the time that Restructuring Event occurs there are Rated Securities) a Rating Downgrade in respect of that Restructuring Event occurs or (ii) (if at such time there are no Rated Securities) a Negative Rating Event in respect of that Restructuring Event occurs (that Restructuring Event and Rating Downgrade or, as the case may be, Negative Rating Event occurring within the Restructuring Period together called a "Put Event"), the holder of each Bond will have the option (unless, prior to the giving of the Put Event Notice referred to below, the Issuer gives notice of redemption of the Bonds under either Condition 5(b) or 5(c)) to require the Issuer to redeem or, at the Issuer's option, purchase (or procure the purchase of) that Bond on the Put Date (as defined below) at its principal amount together with (or, where purchased, together with an amount equal to) accrued interest to the Put Date. Promptly upon the Issuer becoming aware that a Put Event has occurred, the Issuer shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution of the Bondholders, the Trustee shall, give notice (a "Put Event Notice") to the Bondholders in accordance with Condition 15 specifying the nature of the Put Event and the procedure for exercising the option contained in this Condition 5(e). To exercise the option to require redemption or purchase of a Bond under this Condition 5(e) the holder of the Bond must deliver such Bond accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a "Put Notice") and in which the holder may specify a sterling account maintained with a bank in London to which payment is to be made under this Condition 5(e), to the specified office of any Paying Agent on any business day (as defined in Condition 6(d)) falling within the period (the "Put Period") of 45 days after a Put Event Notice is given. The Bond should be delivered together with all Coupons appertaining thereto maturing after the date (the "Put Date") falling seven days after the expiry of the Put Period, failing which the amount of any such missing Coupon will be deducted from the sum due for payment. Any amount so deducted will be paid in the manner provided in Condition 6 against presentation and surrender of the relevant missing Coupon not later than five years after the Relevant Date (as defined in Condition 7) for such Coupon. The Paying Agent to which such Bond and Put Notice are delivered will issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any Bond so delivered will be made, if the holder duly specifies in the Put Notice a bank account to which payment is to be made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date in the manner provided in Condition 6 against presentation and surrender (or, in the case of part payment, endorsement) of such receipt at the specified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of the Conditions and the Trust Deed, receipts issued pursuant to this Condition 5(e) shall be treated as if they were Bonds. The Issuer shall redeem or, at the option of the Issuer, purchase (or procure the purchase of) the relevant Bonds on the Put Date unless previously redeemed or purchased. For the purpose of these Conditions: A "Negative Rating Event" shall be deemed to have occurred if either (i) the Issuer does not, either prior to or not later than 21 days after the relevant Restructuring Event, seek, and thereupon use all reasonable endeavours to obtain, a rating of the Bonds or any other unsecured and unsubordinated debt of the Issuer (or of any Subsidiary (as defined in Condition 8) of the Issuer which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more ("Rateable Debt") from a Rating Agency or (ii) if the Issuer does so seek and use such endeavours, it is unable, as a result of such Restructuring Event, to obtain such a rating of at least investment grade (BBB― or Baa3 or their respective equivalents as lowest investment grades for the time being), provided that a Negative Rating Event shall not be deemed to have occurred in respect of a particular Restructuring Event if the Rating Agency declining to assign a rating of at least investment grade (as defined above) does not announce or publicly confirm or inform the Trustee in writing at its request that its declining to assign a rating of at least investment grade was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable Restructuring Event (whether or not the Restructuring Event shall have occurred at the time such investment grade rating is declined); "Rated Securities" means the Bonds, if and for so long as they shall have an effective rating from a Rating Agency and otherwise any Rateable Debt which is rated by a Rating Agency; provided that if there shall be no such Rateable Debt prior to the maturity of the Bonds, the holders of not less than one-quarter of the principal amount of outstanding Bonds may require the Issuer to obtain and thereafter update on an annual basis a rating of the Bonds from a Rating Agency. In addition, the Issuer may at any time obtain and thereafter update on an annual basis a rating of the Bonds from a Rating Agency, provided that, except as provided above, the Issuer shall not have any obligation to obtain such a rating of the Bonds; "Rating Agency" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors or Moody's Investors Service, Inc. and its successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee (such approval not to be unreasonably withheld or delayed); A "Rating Downgrade" shall be deemed to have occurred in respect of a Restructuring Event if the then current rating whether provided by a Rating Agency at the invitation of the Issuer or by its own volition assigned to the Rated Securities by any Rating Agency is withdrawn or reduced from an investment grade rating (BBB― or Baa3 or their respective equivalents as lowest investment grades for the time being) or a better rating to a non-investment grade rating (BB+ or Ba 1 or their respective equivalents for the time being) or a worse rating; provided that a Rating Downgrade otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Restructuring Event if the Rating Agency making the withdrawal of rating or the reduction in rating to which this definition would otherwise apply does not announce or publicly confirm or inform the Trustee in writing at its request that the withdrawal or reduction was the result, in whole or part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable Restructuring Event (whether or not the applicable Restructuring Event shall have occurred at the time of the Rating Downgrade); A "Restructuring Event" shall be deemed to have occurred at each time (whether or not approved by the Board of Directors of the Issuer) that: (a) (other than in the case of a Holding Company (as defined in the Trust Deed) of the Issuer) any person or persons acting in concert (as defined in the City Code on Takeovers and Mergers) or any person or persons acting on behalf of any such person(s), become(s) interested (within the meaning of Part VI of the Companies Act 1985) in (i) more than 50 per cent. of the issued or allotted ordinary share capital of the Issuer or (ii) such number of shares in the capital of the Issuer carrying more than 50 per cent. of the voting rights normally exercisable at a general meeting of the Issuer; or (b) any member of the Group sells, transfers, leases or otherwise disposes of, or is dispossessed by any means of, other than to a wholly owned Subsidiary of the Issuer or to the Issuer, (i) any Subsidiary, or (ii) any of its undertaking, or (iii) (except in the ordinary course of business of the Group) any of its property or assets, whether by a single transaction or by a number of transactions whether related or not occurring within any period of 12 calendar months (a "Relevant Period"), where the Turnover (as defined in Condition 8) of such Subsidiary or the portion of the Turnover of the Group attributable to such undertaking or such property or assets (in each case the "Relevant Turnover"), when taken together with the Relevant Turnover in respect of all other such disposals or dispossessions during the Relevant Period, is greater than 30 per cent. of the Turnover of the Group. The Issuer has undertaken in the Trust Deed: (i) to provide a certificate, signed by any two of its Directors, to the Trustee within 14 days of the Accounts being made available to its members, stating (A) the Relevant Turnover in respect of any such disposals or dispossessions occurring during that immediately preceding financial year and (B) the Turnover of the Group for such preceding financial year; and (ii) to provide a certificate signed by any two of its Directors, to the Trustee within 28 days of a request by the Trustee, stating the Relevant Turnover in respect of any such disposals or dispossessions occurring during the 12 calendar months preceding the date of such request; and "Restructuring Period" means the period ending 90 days after the public announcement of the Restructuring Event having occurred (or such longer period in which the Rated Securities or Rateable Debt, as the case may be, is or are under consideration (announced publicly within the first mentioned period) for rating review or, as the case may be, rating by a Rating Agency). (f) Purchase: The Issuer and any of its Subsidiaries may at any time purchase Bonds in the open market or otherwise at any price, which Bonds may be held, resold or, at the option of the Issuer, surrendered to any Paying Agent for cancellation (provided that, if they are to be cancelled, they are purchased together with all unmatured Coupons relating to them). The Bonds so purchased, while held by or on behalf of the Issuer or any such Subsidiary, shall not entitle the holder to vote at any meetings of the Bondholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Bondholders or for the purposes of Condition 11(a). (g) Cancellation: All Bonds redeemed and any unmatured Coupons attached to or surrendered with them will be cancelled. All Bonds so cancelled and any Bonds cancelled pursuant to paragraph (f) above (together with all unmatured Coupons cancelled therewith) may not be re-issued or resold.

6. PAYMENTS (a) Method of Payment: Payments of principal, premium (if any) and interest will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Bonds or the appropriate Coupons (as the case may be) at the specified office of any Paying Agent by sterling cheque drawn on, or by transfer to a sterling account maintained by the payee with, a bank in London. Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Bond. (b) Payments subject to fiscal laws: All payments are subject in all cases to any applicable fiscal or other laws and regulations but without prejudice to the provisions of Condition 7. No commissions or expenses shall be charged to the Bondholders or Couponholders in respect of such payments. (c) Surrender of unmatured Coupons: Each Bond should be presented for redemption together with all unmatured Coupons relating to it, failing which the amount of any such missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon which the sum of principal so paid bears to the total principal amount due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relevant missing Coupon not later than 10 years after the Relevant Date (as defined in Condition 7) for the relevant payment of principal. (d) Payments on business days: A Bond or Coupon may be presented for payment only on a day which is a business day in the place of presentation (and, in the case of payment by transfer to a sterling account, in London). No further interest or other payment will be made as a consequence of the day on which the relevant Bond or Coupon may be presented for payment under this paragraph falling after the due date. In this Condition "business day" means a day on which commercial banks and foreign exchange markets are open in the city in which payment will be made. (e) Paying Agents: The initial Paying Agents and their initial specified offices are listed below. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it will maintain (i) a Principal Paying Agent and (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee (including London, so long as the Bonds are admitted to the official list maintained by the Financial Services Authority in its capacity as UK Listing Authority, and, in the event that the European Commission adopt any form of taxation on savings, a European city in a country which is not a member of the European Union). Notice of any change in the Paying Agents or their specified offices will promptly be given by the Issuer to the Bondholders.

(i) by, or on behalf of, a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his having some connection with the United Kingdom otherwise than merely by the holding of such Bond or Coupon; or (ii) by, or on behalf of, a holder who would be able to avoid such withholding or deduction by making a declaration of non-residence or similar claim for exemption, but fails to do so; or (iii) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days, assuming, whether or not it is in fact the case, such last day to be a business day; or (iv) in the United Kingdom.

For the purposes of these Conditions, the "Relevant Date" means the date on which the payment first becomes due and payable, but if the full amount of the money payable has not been received in London by the Principal Paying Agent or the Trustee on or prior to such due date, the "Relevant Date" means the date on which, the full amount of such money having been so received, notice to that effect shall have been duly published in accordance with Condition 15. Any reference in these Conditions to principal or interest shall be deemed also to refer to any additional amounts which may be payable under the foregoing provisions or any undertakings given in addition thereto, or in substitution therefor, pursuant to the Trust Deed.

8. EVENTS OF DEFAULT If any of the following events (provided that in the case of any such event, other than those described in paragraphs (a) and (g) (in the case of winding up, dissolution or administration of the Issuer) below, the Trustee shall have certified that in its opinion such event is materially prejudicial to the interests of the Bondholders), (each an "Event of Default"), occurs and is continuing the Trustee at its discretion may, and if so requested by holders of at least one-fifth in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall in each case, if indemnified to its satisfaction, give notice to the Issuer that the Bonds are, and they shall immediately become, due and payable at their principal amount together with accrued interest:

(a) Non-Payment: the Issuer fails to pay the principal of or any interest on any of the Bonds when due and such failure continues for a period of five London Business Days (in the case of principal) and 10 London Business Days (in the case of interest); or (b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its other obligations under the Bonds or the Trust Deed and, if in the opinion of the Trustee such default is capable of remedy, it is not in the opinion of the Trustee remedied within 30 days after notice of such default shall have been given to the Issuer by the Trustee; or (c) Cross-Default: (i) any other present or future indebtedness for borrowed money of the Issuer or any of its Principal Subsidiaries (other than indebtedness for borrowed money owed by a member of the Group to another member of the Group) becomes due and repayable prior to its stated maturity by reason of default or (ii) any such indebtedness is not paid when due or, as the case may be, within any applicable grace period (as originally provided) or (iii) the Issuer or any of its Principal Subsidiaries fails to pay when due or, as the case may be, within any applicable grace period (as originally provided) any amount payable by it under any present or future guarantee for, or indemnity in respect of, any such indebtedness, provided that the aggregate amount of such indebtedness in respect of which any one or more of the events mentioned above in this paragraph (c) has or have occurred and is still outstanding equals or exceeds 2 per cent. of the Issuer's Consolidated Capital and Reserves or, if greater, £15,000,000 (or its equivalent in any other currency of the relevant indebtedness); or (d) Enforcement Proceedings: a distress, attachment, sequestration or execution is levied, enforced or sued out on or against any material part ("material part" being regarded as 15 per cent. or more of the whole for this purpose) of the property, assets or revenues of the Issuer or any of its Principal Subsidiaries and is not discharged or stayed within 30 days; or (e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance (excluding title retention), present or future, created or assumed by the Issuer or any of its Principal Subsidiaries in respect of indebtedness for borrowed money (other than indebtedness for borrowed money owed by a member of the Group to another member of the Group) which equals or exceeds 2 per cent. of the Issuer's Consolidated Capital and Reserves or, if greater, £15,000,000 (or its equivalent in any other currency of the relevant indebtedness) becomes enforceable and any formal step is taken to enforce it (including the taking of possession or the appointment of a receiver, administrative receiver, manager or other similar person); or (f) Insolvency: the Issuer or any of its Principal Subsidiaries is insolvent or unable to pay its debts (within the meaning of Sections 123(1)(b), (c), (d), (e) or (2) of the Insolvency Act 1986), stops or suspends payment of all or substantially all of its debts, or makes any agreement for the deferral, rescheduling or other readjustment of its debts which it would otherwise be unable to pay when due, makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or substantially all of the debts of the Issuer or any of its Principal Subsidiaries; or (g) Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution or administration of the Issuer or any of its Principal Subsidiaries, or the Group ceases to carry on all or substantially all of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms previously approved in writing by the Trustee or by an Extraordinary Resolution of the Bondholders, or (ii) in the case of a Principal Subsidiary, whereby all or substantially all of the undertaking and assets of the Principal Subsidiary are transferred to or otherwise vested in the Issuer or another of the Issuer's Subsidiaries; or (h) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of paragraphs (d) to (g).

For the purposes of these Conditions: "Accounts" means the annual audited consolidated accounts of the Issuer prepared in accordance with UK GAAP; "Group" means the Issuer and its Subsidiaries; "Issuer's Consolidated Capital and Reserves" means the aggregate of:

(a) the amount paid up or credited as paid up on the share capital of the Issuer; and (b) the total of the capital, revaluation and revenue reserves of the Group, including any share premium account, capital redemption reserve and credit balance on the profit and loss account, but excluding sums set aside for taxation and amounts attributable to minority interests and deducting any debit balance on the profit and loss account, all as shown in the most recent Accounts, but adjusted as may be necessary in respect of any variation in the paid up share capital or share premium account of the Issuer since the date of the most recent Accounts. A report by the Auditors (as defined in the Trust Deed) as to the amount of the Issuer's Consolidated Capital and Reserves at any given time shall, in the absence of manifest error, be conclusive and binding on all parties; "London Business Day" means a day on which commercial banks and foreign exchange markets are open in London; "Measuring Assets" means:

(a) in relation to the Group, the aggregate of the Group's fixed tangible assets, trade debtors and stocks, as shown in the most recent Accounts; or (b) in relation to any Subsidiary of the Issuer, the aggregate of that Subsidiary's fixed tangible assets, trade debtors other than from members of the Group and stocks, as shown in the Subsidiary's Accounts;

"Principal Subsidiary" at any time shall mean, in relation to the Issuer, TI Group (irrespective of any of the criteria set out below), save that TI Group shall cease to be a Principal Subsidiary upon an order being made or effective resolution being passed for the solvent winding-up or dissolution or administration of TI Group, provided that all net proceeds of any such winding-up or dissolution or administration are distributed to the Issuer and/or any of its Subsidiaries and any entity:

(a) which has been a Subsidiary of the Issuer for more than 120 days; and (b) (i) which has Measuring Assets exceeding 2.5 per cent. of the Measuring Assets of the Group (or, in the case of a Recently-Acquired Subsidiary, 2.5 per cent. of the aggregate of the Measuring Assets of the Group and of that Recently-Acquired Subsidiary); or (ii) the Turnover of which exceeds 2.5 per cent. of the Turnover of the Group (or, in the case of a Recently-Acquired Subsidiary, 2.5 per cent. of the aggregate of the Turnover of the Group and the Turnover of that Recently-Acquired Subsidiary), provided that if any Principal Subsidiary (the "Transferor") shall at any time transfer all or substantially all of its business (by reference to its Turnover) or Measuring Assets to one or more other Subsidiaries of the Issuer (each a "Transferee") then upon such transfer taking place, the Transferor shall cease to be a Principal Subsidiary and each Transferee shall (if it is not already a Principal Subsidiary) thereupon become a Principal Subsidiary. Any Subsidiary which is or becomes a Principal Subsidiary by virtue of the foregoing provisions of this definition shall continue to be a Principal Subsidiary until the earlier of (i) the date of delivery to the Trustee of the first Accounts of the Issuer prepared as at a date later than the date of the relevant transfer from which it can be determined that the Measuring Assets of such Subsidiary and the Turnover of such Subsidiary are equal to or less than 2.5 per cent. of the Measuring Assets of the Group or the Turnover of the Group, respectively, and (ii) the date that any such Subsidiary transfers all or substantially all of its business (by reference to its Turnover) or Measuring Assets to one or more other members of the Group. A report by the Auditors that in their opinion a Subsidiary is or is not or was or was not at any particular time or throughout any specified period a Principal Subsidiary may be relied upon by the Trustee without further enquiry or evidence and, if relied upon by the Trustee, shall, in the absence of manifest error, be conclusive and binding on all parties; "Subsidiary" means:

(a) a subsidiary within the meaning of section 736 of the Companies Act 1985; and (b) unless the context otherwise requires, a subsidiary undertaking within the meaning of section 258 of the Companies Act 1985;

"Subsidiary's Accounts" means, in relation to any Subsidiary of the Issuer:

(a) the most recent annual audited unconsolidated accounts of such Subsidiary prepared in accordance with UK GAAP and used in the preparation of the most recent Accounts; or (b) in the case of an entity which becomes a Subsidiary of the Issuer as a result of an acquisition after the date of the most recent Accounts (a "Recently-Acquired Subsidiary"), the most recent annual audited unconsolidated accounts of that Recently- Acquired Subsidiary (whether or not prepared in accordance with UK GAAP);

"substantially all" means 85 per cent. or more of the whole; "Turnover" means:

(a) in relation to the Group, the turnover of the Group (excluding sales between members of the Group), for its most recent financial year, as determined by reference to the most recent Accounts, and (b) in relation to any Subsidiary of the Issuer, the turnover of that Subsidiary (excluding sales between members of the Group) for its most recent financial year, as determined by reference to the Subsidiary's Accounts; and

"UK GAAP" means accounting principles or standards generally accepted in the United Kingdom.

9. PRESCRIPTION Claims in respect of principal and interest will become void unless presentation for payment is made as required by Condition 6 within a period of 10 years in the case of principal and five years in the case of interest from the appropriate Relevant Date.

10. REPLACEMENT OF BONDS AND COUPONS If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Principal Paying Agent subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued. 11. MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION (a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed. Such a meeting may be convened by Bondholders holding not less than 10 per cent. in principal amount of the Bonds for the time being outstanding. The quorum for any meeting convened to consider an Extraordinary Resolution will be one or more persons holding or representing a clear majority in principal amount of the Bonds for the time being outstanding, or at any adjourned meeting one or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the maturity of the Bonds or the dates on which interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds or the Coupons, or (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum will be one or more persons holding or representing not less than 75 per cent., or at any adjourned meeting not less than 25 per cent., in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Bondholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders. (b) Modification and Waiver: The Trustee may agree, without the consent of the Bondholders or Couponholders, to (i) any modification of any of the provisions of the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error, and (ii) any other modification, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. Any such modification, authorisation or waiver shall be binding on the Bondholders and the Couponholders and, if the Trustee so requires, such modification shall be notified to the Bondholders as soon as practicable. (c) Substitution: The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer to the substitution in place of the Issuer (or of any previous substitute or substitutes under this Condition) as the principal debtor under the Bonds, the Coupons and the Trust Deed of (i) a Successor in Business (as defined in the Trust Deed) to the Issuer or (ii) a Holding Company of the Issuer or (iii) a Subsidiary of the Issuer subject to (a) the Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution and (b) certain other conditions set out in the Trust Deed being complied with, including the irrevocable and unconditional guarantee in respect of the Bonds by the Issuer. (d) Entitlement of the Trustee: In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders or Couponholders.

12. ENFORCEMENT At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the terms of the Trust Deed, the Bonds and the Coupons, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least one-fifth in principal amount of the Bonds outstanding, and (b) it shall have been indemnified to its satisfaction. No Bondholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.

13. THE TRUSTEE The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer and any entity related to the Issuer without accounting for any profit. The Trustee shall be entitled to rely on reports of the Auditors notwithstanding that the Auditors' liability in respect thereof may be limited (by reference to a monetary cap or otherwise).

14. FURTHER ISSUES The Issuer may from time to time without the consent of the Bondholders or Couponholders create and issue further securities either having the same terms and conditions as the Bonds in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding securities of any series (including the Bonds) or upon such terms as the Issuer may determine at the time of their issue. References in these Conditions to the Bonds include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Bonds. Any further securities forming a single series with the outstanding securities of any series (including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other securities may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of securities of other series where the Trustee so decides.

15. NOTICES Notices to Bondholders will be valid if published in a leading newspaper having general circulation in London (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publication shall not be practicable, in an English language newspaper of general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which publication is made. Couponholders will be deemed for all purposes to have notice of the contents of any notice given to the Bondholders in accordance with this Condition.

16. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.

17. GOVERNING LAW The Trust Deed, the Bonds and the Coupons are governed by, and shall be construed in accordance with, English law. Terms and Conditions of the Euro Bonds The following are the terms and conditions substantially in the form in which (subject to modification and save for the paragraphs in italics) they will be endorsed on the Bonds in definitive form (if issued):― The issue of the €300,000,000 6.375 per cent. Bonds due 2005 (the "Bonds") was authorised by a resolution of a Committee of the Board of Directors of TI Group plc ("TI Group") on 13 July 2000 and by a resolution of the Board of Directors of TI Group on 10 May 2000. The substitution of Smiths Group plc (the "Company" or the "Issuer") in place of TI Group as issuer of the Bonds was authorised by a resolution of the Board of Directors of the Company and of TI Group on 10 July 2001 and 30 October 2001 respectively. The Bonds are constituted by a principal trust deed (the "Principal Trust Deed") dated 18 July 2000 between TI Group and HSBC Trustee (C.I.) Limited (the "Trustee" which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds (the "Bondholders") as supplemented by a first supplemental trust deed dated on or about 14 November 2001 (the "First Supplemental Trust Deed" and, together with the Principal Trust Deed, the "Trust Deed") between the Company, TI Group and the Trustee. These terms and conditions of the Bonds (the "Conditions") include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bonds and the interest coupons relating to them (the "Coupons"). Copies of the Trust Deed, and of the paying agency agreement (the "Paying Agency Agreement") dated 18 July 2000 between the Issuer, the Trustee and the initial principal paying agent and paying agents named in it, are available for inspection during usual business hours at the registered office of the Trustee (presently at P.O. Box 88, 1 Grenville Street, St. Helier, Jersey JE4 9PF) and at the specified offices of the principal paying agent for the time being (the "Principal Paying Agent") and the paying agents for the time being (the "Paying Agents", which expression shall include the Principal Paying Agent). The Bondholders and the holders of the Coupons (whether or not attached to the relevant Bonds) (the "Couponholders") are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions of the Paying Agency Agreement which are applicable to them.

1. FORM, DENOMINATION AND TITLE (a) Form and denomination: The Bonds are serially numbered and in bearer form in the denominations of €1,000, €10,000 and €100,000 each with Coupons attached on issue. Bonds of one denomination may not be exchanged for Bonds of the other denomination. (b) Title: Title to the Bonds and Coupons passes by delivery. The holder of any Bond or Coupon will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder.

3. COVENANTS (a) Negative Pledge: So long as any of the Bonds remains outstanding (as defined in the Trust Deed) the Issuer undertakes that it will not, and it will procure that none of its Principal Subsidiaries (as defined in Condition 8) will, create or have outstanding any mortgage, charge, pledge, lien (other than a lien arising solely by operation of law) or other security interest (each a "Security Interest") (other than a Security Interest outstanding on 18 July 2000) upon the whole or any part of its undertaking, assets or revenues (including any uncalled capital), present or future, in order to secure any Relevant Indebtedness (as defined below) or to secure any guarantee or indemnity in respect of any Relevant Indebtedness unless (a) all amounts payable by the Issuer under the Bonds and the Coupons are equally and rateably secured therewith by such Security Interest to the satisfaction of the Trustee or (b) such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) is provided either (A) as the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Bondholders or (B) as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders save that any such Principal Subsidiary may create or have outstanding a Security Interest in respect of Relevant Indebtedness and/or a guarantee or indemnity in respect of Relevant Indebtedness (without the obligation to provide a Security Interest or other arrangement in respect of the Bonds and the Coupons as aforesaid) where such Principal Subsidiary becomes a Principal Subsidiary of the Issuer after 18 July 2000 and where such Security Interest exists at the time it becomes a Principal Subsidiary of the Issuer (provided such Security Interest was not created in contemplation of such company becoming a Principal Subsidiary of the Issuer) or any Security Interest thereafter created in substitution for such original Security Interest, by the same grantor of such original Security Interest, which is created over or secured on assets whose value immediately prior to such substitution, in the opinion of the Trustee, does not materially exceed the then current value of the assets subject to such original Security Interest. For the purposes of these Conditions: "Relevant Indebtedness" means any present or future indebtedness for borrowed money in the form of, or represented or evidenced by, bonds, debentures, notes or other securities which are or, with the agreement of the issuer thereof, are intended to be, quoted, listed, dealt in or traded on any stock exchange or other recognised securities market other than such indebtedness which by its terms will mature within a period of one year. For the avoidance of doubt "Relevant Indebtedness" shall exclude tradable bank debt. (b) Interest Cover: The Issuer shall procure that, for so long as any Bond is outstanding, as at the end of each of its financial years ending after the Closing Date, the ratio of Profit Before Interest for its financial year then ended to Net Borrowing Costs for its financial year then ended shall not be less than 3 to 1. For the purposes of these Conditions: "Net Borrowing Costs" means, in respect of any financial year of the Issuer, all continuing, regular or periodic costs, charges and expenses (including, but not limited to, interest) shown in the relevant Accounts (as defined in Condition 8) for such financial year as interest payable by any member of the Group (as defined in Condition 8) plus any interest arising in such financial year which is capitalised by any member of the Group less all income shown in the relevant Accounts for such financial year as interest receivable by any member of the Group, all as calculated in accordance with the Accounts; and "Profit Before Interest" means, in respect of any financial year of the Issuer, the consolidated profits on ordinary activities before taxation of the Group (before taking into account any exceptional or extraordinary items) as shown in the Accounts for such financial year, adjusted by adding back Net Borrowing Costs and any goodwill amortised during such financial year, all as calculated in accordance with the Accounts. The Issuer has undertaken in the Trust Deed to provide a certificate, signed by any two of its Directors, to the Trustee within 14 days of the Accounts being made available to its members, stating the ratio of Profit Before Interest to Net Borrowing Costs, in each case for the financial year ended immediately prior to the date of such certificate. (c) Information Covenant: For so long as any Bond is outstanding, the Issuer shall, subject to any applicable legal, regulatory or listing constraints: (i) make copies of the most recent Accounts available to Bondholders during normal business hours at the specified offices of each of the Paying Agents within 14 days of them being made available to shareholders of the Issuer; and (ii) if so requested in writing by the holders of more than 30 per cent. in principal amount of the Bonds then outstanding, invite the Bondholders to, and hold for their benefit, a meeting at which senior management of the Issuer will be present to respond to questions from Bondholders, or their duly authorised representatives provided that the Issuer shall not be required to hold such a meeting more than once in any period of 12 months.

For the avoidance of doubt, any breach of this covenant shall constitute a breach of obligation for the purposes of Condition 8(b).

4. INTEREST The Bonds bear interest from 18 July 2000 (the "Closing Date") at the rate of 6.375 per cent. per annum, payable annually in arrear on 18 July in each year. Each Bond will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder, and (b) the day seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions). If interest is required to be calculated for a period of less than one year, it will be calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.

5. REDEMPTION AND PURCHASE (a) Final redemption: Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on 18 July 2005. The Bonds may not be redeemed at the option of the Issuer other than in accordance with this Condition. (b) Redemption for taxation reasons: The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days' notice to the Bondholders (which notice shall be irrevocable), at their principal amount (together with interest accrued to but excluding the date fixed for redemption), if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that it has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of the United Kingdom or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after 18 July 2000, and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Bonds then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee a certificate signed by two Directors of the Issuer stating that the obligation referred to in (i) above cannot be avoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled to accept and rely on such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above in which event it shall be conclusive and binding on the Bondholders and the Couponholders. (c) Notice of redemption: All Bonds in respect of which any notice of redemption is given under this Condition shall be redeemed on the date specified in such notice in accordance with this Condition. (d) Redemption at the option of the Bondholders: If during the period from the Closing Date to 18 July 2005 there occurs a Restructuring Event and within the Restructuring Period either (i) (if at the time that Restructuring Event occurs there are Rated Securities) a Rating Downgrade in respect of that Restructuring Event occurs or (ii) (if at such time there are no Rated Securities) a Negative Rating Event in respect of that Restructuring Event occurs (that Restructuring Event and Rating Downgrade or, as the case may be, Negative Rating Event occurring within the Restructuring Period together called a "Put Event"), the holder of each Bond will have the option (unless, prior to the giving of the Put Event Notice referred to below, the Issuer gives notice of redemption of the Bonds under Condition 5(b)) to require the Issuer to redeem or, at the Issuer's option, purchase (or procure the purchase of) that Bond on the Put Date (as defined below) at its principal amount together with (or, where purchased, together with an amount equal to) accrued interest to the Put Date. Promptly upon the Issuer becoming aware that a Put Event has occurred, the Issuer shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution of the Bondholders, the Trustee shall, give notice (a "Put Event Notice") to the Bondholders in accordance with Condition 15 specifying the nature of the Put Event and the procedure for exercising the option contained in this Condition 5(d). To exercise the option to require redemption or purchase of a Bond under this Condition 5(d) the holder of the Bond must deliver such Bond accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a "Put Notice") and in which the holder may specify a euro account (or any other account to which euro may be credited or transferred) to which payment is to be made under this Condition 5(d), to the specified office of any Paying Agent on any business day (as defined in Condition 6(d)) falling within the period (the "Put Period") of 45 days after a Put Event Notice is given. The Bond should be delivered together with all Coupons appertaining thereto maturing after the date (the "Put Date") falling seven days after the expiry of the Put Period, failing which the amount of any such missing Coupon will be deducted from the sum due for payment. Any amount so deducted will be paid in the manner provided in Condition 6 against presentation and surrender of the relevant missing Coupon not later than five years after the Relevant Date (as defined in Condition 7) for such Coupon. The Paying Agent to which such Bond and Put Notice are delivered will issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any Bond so delivered will be made, if the holder duly specifies in the Put Notice a bank account to which payment is to be made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date in the manner provided in Condition 6 against presentation and surrender (or, in the case of part payment, endorsement) of such receipt at the specified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of the Conditions and the Trust Deed, receipts issued pursuant to this Condition 5(d) shall be treated as if they were Bonds. The Issuer shall redeem or, at the option of the Issuer, purchase (or procure the purchase of) the relevant Bonds on the Put Date unless previously redeemed or purchased. For the purpose of these Conditions: A "Negative Rating Event" shall be deemed to have occurred if either (i) the Issuer does not, either prior to or not later than 21 days after the relevant Restructuring Event, seek, and thereupon use all reasonable endeavours to obtain, a rating of the Bonds or any other unsecured and unsubordinated debt of the Issuer (or of any Subsidiary (as defined in Condition 8) of the Issuer which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more ("Rateable Debt") from a Rating Agency or (ii) if the Issuer does so seek and use such endeavours, it is unable, as a result of such Restructuring Event, to obtain such a rating of at least investment grade (BBB― or Baa3 or their respective equivalents as lowest investment grades for the time being), provided that a Negative Rating Event shall not be deemed to have occurred in respect of a particular Restructuring Event if the Rating Agency declining to assign a rating of at least investment grade (as defined above) does not announce or publicly confirm or inform the Trustee in writing at its request that its declining to assign a rating of at least investment grade was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable Restructuring Event (whether or not the Restructuring Event shall have occurred at the time such investment grade rating is declined); "Rated Securities" means the Bonds, if and for so long as they shall have an effective rating from a Rating Agency and otherwise any Rateable Debt which is rated by a Rating Agency; provided that if there shall be no such Rateable Debt prior to the maturity of the Bonds, the holders of not less than one-quarter of the principal amount of outstanding Bonds may require the Issuer to obtain and thereafter update on an annual basis a rating of the Bonds from a Rating Agency. In addition, the Issuer may at any time obtain and thereafter update on an annual basis a rating of the Bonds from a Rating Agency, provided that, except as provided above, the Issuer shall not have any obligation to obtain such a rating of the Bonds; "Rating Agency" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors or Moody's Investors Service, Inc. and its successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee (such approval not to be unreasonably withheld or delayed); A "Rating Downgrade" shall be deemed to have occurred in respect of a Restructuring Event if the then current rating whether provided by a Rating Agency at the invitation of the Issuer or by its own volition assigned to the Rated Securities by any Rating Agency is withdrawn or reduced from an investment grade rating (BBB― or Baa3 or their respective equivalents as lowest investment grades for the time being) or a better rating to a non-investment grade rating (BB+ or Ba1 or their respective equivalents for the time being) or a worse rating; provided that a Rating Downgrade otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Restructuring Event if the Rating Agency making the withdrawal of rating or the reduction in rating to which this definition would otherwise apply does not announce or publicly confirm or inform the Trustee in writing at its request that the withdrawal or reduction was the result, in whole or part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable Restructuring Event (whether or not the applicable Restructuring Event shall have occurred at the time of the Rating Downgrade); A "Restructuring Event" shall be deemed to have occurred at each time (whether or not approved by the Board of Directors of the Issuer) that: (a) (other than in the case of a Holding Company (as defined in the Trust Deed) of the Issuer) any person or persons acting in concert (as defined in the City Code on Takeovers and Mergers) or any person or persons acting on behalf of any such person(s), become(s) interested (within the meaning of Part VI of the Companies Act 1985) in (i) more than 50 per cent. of the issued or allotted ordinary share capital of the Issuer or (ii) such number of shares in the capital of the Issuer carrying more than 50 per cent. of the voting rights normally exercisable at a general meeting of the Issuer; or (b) any member of the Group sells, transfers, leases or otherwise disposes of, or is dispossessed by any means of, other than to a wholly owned Subsidiary of the Issuer or to the Issuer, (i) any Subsidiary, or (ii) any of its undertaking, or (iii) (except in the ordinary course of business of the Group) any of its property or assets, whether by a single transaction or by a number of transactions whether related or not occurring within any period of 12 calendar months (a "Relevant Period"), where the Turnover (as defined in Condition 8) of such Subsidiary or the portion of the Turnover of the Group attributable to such undertaking or such property or assets (in each case the "Relevant Turnover"), when taken together with the Relevant Turnover in respect of all other such disposals or dispossessions during the Relevant Period, is greater than 30 per cent. of the Turnover of the Group. The Issuer has undertaken in the Trust Deed: (i) to provide a certificate, signed by any two of its Directors, to the Trustee within 14 days of the Accounts being made available to its members, stating (A) the Relevant Turnover in respect of any such disposals or dispossessions occurring during that immediately preceding financial year and (B) the Turnover of the Group for such preceding financial year; and (ii) to provide a certificate signed by any two of its Directors, to the Trustee within 28 days of a request by the Trustee, stating the Relevant Turnover in respect of any such disposals or dispossessions occurring during the 12 calendar months preceding the date of such request; and "Restructuring Period" means the period ending 90 days after the public announcement of the Restructuring Event having occurred (or such longer period in which the Rated Securities or Rateable Debt, as the case may be, is or are under consideration (announced publicly within the first mentioned period) for rating review or, as the case may be, rating by a Rating Agency). (e) Purchase: The Issuer and any of its Subsidiaries may at any time purchase Bonds in the open market or otherwise at any price, which Bonds may be held, resold or, at the option of the Issuer, surrendered to any Paying Agent for cancellation (provided that, if they are to be cancelled, they are purchased together with all unmatured Coupons relating to them). The Bonds so purchased, while held by or on behalf of the Issuer or any such Subsidiary, shall not entitle the holder to vote at any meetings of the Bondholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Bondholders or for the purposes of Condition 11(a). (f) Cancellation: All Bonds redeemed and any unmatured Coupons attached to or surrendered with them will be cancelled. All Bonds so cancelled and any Bonds cancelled pursuant to paragraph (e) above (together with all unmatured Coupons cancelled therewith) may not be re-issued or resold.

6. PAYMENTS (a) Method of Payment: Payments of principal, premium (if any) and interest will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Bonds or the appropriate Coupons (as the case may be) at the specified office of any Paying Agent by cheque drawn on, or by transfer to a euro account (or any other account to which euro may be credited or transferred) maintained by the payee. Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Bond. (b) Payments subject to fiscal laws: All payments are subject in all cases to any applicable fiscal or other laws and regulations but without prejudice to the provisions of Condition 7. No commissions or expenses shall be charged to the Bondholders or Couponholders in respect of such payments. (c) Surrender of unmatured Coupons: Each Bond should be presented for redemption together with all unmatured Coupons relating to it, failing which the amount of any such missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon which the sum of principal so paid bears to the total principal amount due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relevant missing Coupon not later than 10 years after the Relevant Date (as defined in Condition 7) for the relevant payment of principal. (d) Payments on business days: A Bond or Coupon may be presented for payment only on a day which is a business day in the place of presentation. No further interest or other payment will be made as a consequence of the day on which the relevant Bond or Coupon may be presented for payment under this paragraph falling after the due date. In this Condition "business day" means a day on which commercial banks and foreign exchange markets are open in the city in which payment will be made. (e) Paying Agents: The initial Paying Agents and their initial specified offices are listed below. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it will maintain (i) a Principal Paying Agent and (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee (including London, so long as the Bonds are admitted to the official list maintained by the Financial Services Authority in its capacity as UK Listing Authority). Notice of any change in the Paying Agents or their specified offices will promptly be given by the Issuer to the Bondholders.

7. TAXATION All payments of principal, premium (if any) and interest in respect of the Bonds and the Coupons shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the United Kingdom or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event the Issuer shall pay such additional amounts as may be necessary in order that the net amounts receivable by the holders of the Bonds and Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would have been receivable in respect of the Bonds or, as the case may be, Coupons in the absence of such withholding or deduction except that no such additional amount shall be payable with respect to any payment in respect of any Bond or Coupon presented for payment: (i) by, or on behalf of, a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his having some connection with the United Kingdom otherwise than merely by the holding of such Bond or Coupon; or (ii) by, or on behalf of, a holder who would be able to avoid such withholding or deduction by making a declaration of non-residence or similar claim for exemption, but fails to do so; or (iii) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days, assuming, whether or not it is in fact the case, such last day to be a business day; or (iv) in the United Kingdom.

For the purposes of these Conditions, the "Relevant Date" means the date on which the payment first becomes due and payable, but if the full amount of the money payable has not been received in Brussels by the Principal Paying Agent or the Trustee on or prior to such due date, the "Relevant Date" means the date on which, the full amount of such money having been so received, notice to that effect shall have been duly published in accordance with Condition 15. Any reference in these Conditions to principal or interest shall be deemed also to refer to any additional amounts which may be payable under the foregoing provisions or any undertakings given in addition thereto, or in substitution therefor, pursuant to the Trust Deed.

(a) which has been a Subsidiary of the Issuer for more than 120 days; and (b) (i) which has Measuring Assets exceeding 2.5 per cent. of the Measuring Assets of the Group (or, in the case of a Recently-Acquired Subsidiary, 2.5 per cent. of the aggregate of the Measuring Assets of the Group and of that Recently- Acquired Subsidiary); or (ii) the Turnover of which exceeds 2.5 per cent. of the Turnover of the Group (or, in the case of a Recently-Acquired Subsidiary, 2.5 per cent. of the aggregate of the Turnover of the Group and the Turnover of that Recently-Acquired Subsidiary), provided that if any Principal Subsidiary (the "Transferor") shall at any time transfer all or substantially all of its business (by reference to its Turnover) or Measuring Assets to one or more other Subsidiaries of the Issuer (each a "Transferee") then upon such transfer taking place, the Transferor shall cease to be a Principal Subsidiary and each Transferee shall (if it is not already a Principal Subsidiary) thereupon become a Principal Subsidiary. Any Subsidiary which is or becomes a Principal Subsidiary by virtue of the foregoing provisions of this definition shall continue to be a Principal Subsidiary until the earlier of (i) the date of delivery to the Trustee of the first Accounts of the Issuer prepared as at a date later than the date of the relevant transfer from which it can be determined that the Measuring Assets of such Subsidiary and the Turnover of such Subsidiary are equal to or less than 2.5 per cent. of the Measuring Assets of the Group or the Turnover of the Group, respectively, and (ii) the date that any such Subsidiary transfers all or substantially all of its business (by reference to its Turnover) or Measuring Assets to one or more other members of the Group. A report by the Auditors that in their opinion a Subsidiary is or is not or was or was not at any particular time or throughout any specified period a Principal Subsidiary may be relied upon by the Trustee without further enquiry or evidence and, if relied upon by the Trustee, shall, in the absence of manifest error, be conclusive and binding on all parties; "Subsidiary" means:

"Subsidiary's Accounts" means, in relation to any Subsidiary of the Issuer:

"substantially all" means 85 per cent. or more of the whole; "Turnover" means:

"UK GAAP" means accounting principles or standards generally accepted in the United Kingdom.

11. MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION (a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed. Such a meeting may be convened by Bondholders holding not less than 10 per cent. in principal amount of the Bonds for the time being outstanding. The quorum for any meeting convened to consider an Extraordinary Resolution will be one or more persons holding or representing a clear majority in principal amount of the Bonds for the time being outstanding, or at any adjourned meeting one or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the maturity of the Bonds or the dates on which interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds or the Coupons, or (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum will be one or more persons holding or representing not less than 75 per cent., or at any adjourned meeting not less than 25 per cent., in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Bondholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders. (b) Modification and Waiver: The Trustee may agree, without the consent of the Bondholders or Couponholders, to (i) any modification of any of the provisions of the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error, and (ii) any other modification, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. Any such modification, authorisation or waiver shall be binding on the Bondholders and the Couponholders and, if the Trustee so requires, such modification shall be notified to the Bondholders as soon as practicable. (c) Substitution: The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer to the substitution in place of the Issuer (or of any previous substitute or substitutes under this Condition) as the principal debtor under the Bonds, the Coupons and the Trust Deed of (i) a Successor in Business (as defined in the Trust Deed) to the Issuer or (ii) a Holding Company of the Issuer or (iii) a Subsidiary of the Issuer subject to (a) the Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution and (b) certain other conditions set out in the Trust Deed being complied with, including the irrevocable and unconditional guarantee in respect of the Bonds by the Issuer. (d) Entitlement of the Trustee: In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders or Couponholders.

16. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.

17. GOVERNING LAW The Trust Deed, the Bonds and the Coupons are governed by, and shall be construed in accordance with, English law. Use of Proceeds The net proceeds of the issue of the Bonds (approximately £148,175,000 and €297,290,035 in the case of the Sterling Bonds and Euro Bonds respectively) have been used for the general corporate purposes of the Smiths Group. Summary of Provisions relating to the Bonds while in Global Form The Global Bonds contain provisions which apply to the Bonds while they are in global form, some of which modify the effect of the terms and conditions of the Bonds (the "Conditions") set out in this document. The following is a summary of certain of those provisions:

1. EXCHANGE Each Global Bond is exchangeable in whole but not in part (free of charge to the holder) for the Definitive Bonds described below (i) upon the happening of an Event of Default (as defined in Condition 8), (ii) if the Global Bond is held on behalf of a clearing system and such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so or (iii) at any time at the discretion of the Issuer. Thereupon (in the case of (i) and (ii) above) the holder may give notice to the Trustee and the Issuer or the Trustee may give notice to the Issuer, and (in the case of (iii) above) the Issuer may give notice to the Trustee and the Bondholders, of its intention to exchange the Global Bond for Definitive Bonds on or after the Exchange Date specified in the notice. On or after the Exchange Date (as defined below) the holder of each Global Bond may surrender the Global Bond to or to the order of the Principal Paying Agent. In exchange for the Global Bond the Issuer will deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated definitive Sterling Bonds (in the case of the Sterling Global Bond) or Euro Bonds (in the case of the Euro Global Bond) (the "Definitive Bonds") (having attached to them all Coupons in respect of interest which has not already been paid on the relevant Global Bond), security printed in accordance with any applicable legal, listing authority and stock exchange requirements and in or substantially in the form set out in Schedule 1 to the Trust Deed. On exchange of a Global Bond, the Issuer will procure that it is cancelled. "Exchange Date" means a day falling not less than 60 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Principal Paying Agent is located and, except in the case of exchange pursuant to (ii) above, in the cities in which the relevant clearing system is located.

2. PAYMENTS Payments of principal, premium and interest in respect of Bonds represented by the Global Bonds will be made against presentation for endorsement and, if no further payment falls to be made in respect of the Bonds, surrender of the relevant Global Bond to or to the order of the Principal Paying Agent or such other Paying Agent as shall have been notified to the Bondholders for such purpose. A record of each payment so made will be endorsed in the appropriate schedule to the relevant Global Bond, which endorsement will be prima facie evidence that such payment has been made in respect of the Bonds.

3. NOTICES So long as the Bonds are represented by the Global Bonds and the Global Bonds are held on behalf of a clearing system, notices to Bondholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for publication as required by the Conditions.

4. PRESCRIPTION Claims against the Issuer in respect of principal, premium and interest on the Bonds while the Bonds are represented by the Global Bonds will become void unless the relevant Global Bond is presented for payment within a period of 10 years (in the case of principal and premium) and five years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 7).

5. MEETINGS The holder of each Global Bonds will be treated at any meeting of Bondholders as having one vote in respect of each £1,000 (in the case of the Sterling Global Bond) and €1,000 (in the case of the Euro Global Bond) in principal amount of Bonds for which the Global Bond may be exchanged.

6. PURCHASE AND CANCELLATION Cancellation of any Bond required by the Conditions to be cancelled following its purchase will be effected by reduction in the principal amount of the relevant Global Bond. 7. TRUSTEE'S POWERS In considering the interests of Bondholders while the Global Bonds are held on behalf of a clearing system the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Bonds and may consider such interests as if such accountholders were the holder of the Global Bonds. Business Description of Smiths Group

INTRODUCTION Smiths Group is a leading UK company focused on specialist engineering and manufacturing in four distinct sectors: advanced aerospace electronics and equipment, medical systems, sealing solutions and specialised industrial products. It has achieved a strong record of growth through investment in research and development, new manufacturing technology and closely focused marketing. Smiths Group builds significant relationships with top-name customers by developing highly innovative, added-value solutions for very specialised needs. While generating a healthy cash flow, converting operating profit into operating cash after capital expenditure at an average rate of above 80 per cent., for the five-year period to July 2001, Smiths Group has continued to grow the existing business and make complementary acquisitions. Smiths Group operates worldwide and the principal areas of operation, in terms of proportion of sales by destination, (excluding the Automotive businesses) for the year ended 31 July 2001 were as follows:

North America 46 per cent. United Kingdom 16 per cent. Europe (Other than UK) 21 per cent. Rest of World 17 per cent.

The parent company was formed on 4 December 2000 as a result of the merger of Smiths Industries plc and TI Group which effectively doubled the size of the business. Since this merger was completed, Smiths Group's credit rating has been reaffirmed at A― by Standard & Poor's and established at A3 by Moody's.

BUSINESS STRATEGY Smiths Group's strategy is to be an international engineering group concentrating on specialised niches on a global basis with a position of sustainable technological and market share leadership.

DESCRIPTION OF THE BUSINESS Smiths Group is a leader in the following divisions: Aerospace Smiths Aerospace is one of the leading manufacturers of advanced avionics and equipment to the UK and US armed forces and all major civil and defence platform manufacturers. Other activities include Customer Service providing spares, repairs and overhaul services for its airline and airforce customers, chemical/ biological agent detection and naval and marine systems. Products include information management systems, display and control systems, sensors and components. The combination of Smiths Group and Dowty puts the enlarged business in a stronger position among avionics and equipment suppliers, with higher shipset value on the most successful commercial and military platforms. The combined resources will in future enable the company to submit bids and proposals for more highly integrated systems on new aircraft programmes such as the A380. Doubling in size will also enable Smiths Group to retain its first-tier status among the diminishing number of suppliers directly contracted by the prime manufacturers. The former Dowty businesses are world leaders in the design, development and manufacture of specialised systems for the aerospace industry, including hydraulics and actuation systems, turbine engine components, propellers, aerostructures and tubular systems. Medical Smiths Medical is a leading supplier of devices and equipment used during critical and intensive care procedures, and for continuing care during post-operative recovery. Products include single-use disposable equipment and devices such as vital signs monitoring equipment. Manufacturing is concentrated in the UK and US, with a large proportion of UK production being exported. Smiths single-use devices are mainly used for anaesthesia and respiratory care sold under the Portex trade name. Another major product area is infusion therapy, a fast growing high-margin field. Smiths products are used in hospitals and in longer-term care for patients outside the hospital environment. Infusion pumps are sold under the Deltec and Graseby trade names. Industrial Smiths produces specialised engineering products to meet customers' requirements for high levels of systems performance. The industrial division subdivides into Interconnect and Air Movement. Interconnect products include electrical/electronic connectors and cable management systems used in hazardous and safety-critical environments and in protecting installations against the effects of lightning strikes. Air-movement systems, sold under the Vent-Axia and Flex-Tek trade names, include fans, ducting and hosing for commercial and domestic applications. Smiths products are generally market leaders with exclusive technologies suited to niches in growing application areas. Sealing Solutions Sealing Solutions combines the former TI mechanical seals (trading as John Crane) and polymer seals businesses. John Crane is a world leader in the design, manufacture and distribution of engineered sealing systems and related products. It supplies a range of customers in the process, marine, automotive and general industrial sections. Speciality Polymer Products is among the leaders in the design, manufacture and distribution of speciality polymer seals and bearings and high performance elastomer seals. It operates principally under the brand names of Forsheda and Busak+Shamban and supplies customers in the industrial, automotive and aerospace sectors.

CURRENT TRADING Speaking at the AGM held on 13 November 2001, Keith Orrell-Jones, Chairman of Smiths Group said: "We announced our preliminary results only two weeks after September 11 during a time of great economic uncertainty. Now, two months after those events, some of the effects have become more evident. But there remains a lack of clear visibility about the future. "Our experience has been that, in addition to the well-publicised consequences for the aerospace sector, the last eight weeks have seen a noticeable reduction in orders for a wide range of other products and services. This has been felt by parts of our Industrial and Sealing businesses, some of which have seen a 15 per cent. fall in orders on a year-on-year basis for that period. "We indicated at the preliminary results meeting that the slowdown in civil aerospace would be sharper and deeper as a consequence of September 11. The aircraft manufacturers have kept us closely informed of their planned build rates, but uncertainty will persist until airline revenues and profitability regain some stability. As stated in the results presentation, our civil aerospace sales, representing less than 20 per cent. of group sales, will progressively decline through the current financial period and could drop by up to 40 per cent. in a full year. "The company took a £72m exceptional charge in July 2001 for merger-related reorganisations now under way in Aerospace and Sealing Solutions. These involve a net reduction of 1,600 jobs and the transfer of 500 jobs from the US and the UK to lower cost countries. These and other predicted savings are on target. Following the recent changes to the business outlook, we shall be further downsizing, mainly in Aerospace, and an exceptional charge in the range of £40-50m will be incurred in the current year. "Based on current expectations, we expect that the factors referred to above will result in first half operating profits in our continuing businesses showing a year-on-year decline of approximately 15 per cent. It is early days to comment on the outlook for the full year. But we do not expect to recover fully in the second half from the first half shortfall. "However, the company's medical, defence and detection/protection businesses will continue to perform strongly in the present environment, and the restructuring measures we are taking are already having a significant impact on the cost base, the benefit from which will increase as the year progresses."

PROFIT FORECAST Smiths Group stated in its AGM statement reproduced in full above that "based on current expectations, we expect that the factors referred to above will result in first half operating profits in our continuing businesses showing a year-on-year decline of approximately 15 per cent. It is early days to comment on the outlook for the full year. But we do not expect to recover fully in the second half from the first half shortfall." Smiths Group reports operating profit both before and after goodwill amortisation. The AGM statement related to the operating profit before goodwill amortisation for the continuing businesses. Bases of preparation and principal assumptions

(1) Assumptions for factors outside the influence of the Directors of Smiths Group: ● there will be no significant changes to economic conditions ● there will be no significant changes to relevant legislation, including taxation legislation ● there will be no material changes in foreign currency exchange rates ● there will be no loss of major customers or suppliers ● there will be no material change in competitor activity ● there will be no significant legal or other claims against the Smiths Group ● trading results will not be affected by industrial disputes or other plant shut downs in the Smiths Group's factories or those of its principal suppliers and customers ● recent uncertainty caused by the international tension is assumed to gradually return to normal (2) Assumptions for factors under the influence of the Directors of Smiths Group: ● there will be no changes in existing senior management, management policies or accounting policies ● the Smiths Group will make no significant acquisitions and disposals, other than those already publicly disclosed ● there will be no significant changes in the Smiths Group's legal structure

BOARD OF DIRECTORS As at the date of this document, the Directors of the Issuer and their functions are as follows:

Executive Directors Position Other directorships Keith Butler-Wheelhouse Chief Executive Non-executive Director of Delta Motor Corporation and J. Sainsbury plc Dr John Ferrie Group Managing Director, Aerospace Lawrence Kinet Group Managing Director, Medical John Langston Group Managing Director, Sealing Solutions David P Lillycrop Director & General Counsel Einar Lindh Group Managing Director, Non-Executive Director of Spirax Industrial Sarco Engineering plc Alan Thomson Financial Director Non-executive Directors Keith Orrell-Jones Chairman Non-executive Chairman of FKI plc Sir Nigel Broomfield Director of the Ditchley Foundation Foreign & Colonial German Investment Trust plc Sir Colin Chandler Chairman of Vickers Defence Systems Robert O'Leary Thermo Electron Corporation Julian Horn-Smith Executive Director of Vodafone Group plc John Hignett Schroder Income Growth Fund plc

The business address of each of the Directors of the Issuer is the registered office of the Issuer.

SUBSIDIARIES As at the date of this document, the principal subsidiaries of the Issuer and their regions of incorporation were as follows:

England Americas Smiths Aerospace Ltd* Smiths Group North America Inc* Graseby Dynamics Ltd* Smiths Aerospace Inc. Portex Limited* Smiths Industries Actuation Sys Inc Graseby Medical Limited Smiths Industries Actuation Sys Yakima Pneupac Limited Smiths Industries Industrial Group Limited* Portex Inc Air Movement (Holdings) Limited* Deltec, Inc John Crane UK Ltd BCI Inc Deep Sea Seals Ltd Level 1 Inc Flexibox Ltd Flexible Technologies, Inc Hick Hargreaves Ltd Tutco Inc Busak+Shamban Ltd Hypertronics Corporation AB Precision (Poole) Ltd Icore International Inc Aero and Industrial Technology Ltd Transtector System, Inc Aeronautical & General Instruments Ltd EMC Technology Inc Aerostructures Hamble Ltd Sabritec Inc C&F Millier Ltd Florida RF Labs, Inc Beagle Aircraft Ltd Fairchild Defense, Inc. Davall Gear Company Ltd Barringer Instruments Inc Smiths Aerospace Gloucester Ltd John Crane Inc Smiths Wolverhampton Ltd Stokes Vacuum Inc Horstman Defence Systems Ltd Hibon Inc Reynolds Rings Ltd John Crane Canada Inc Smiths Pensions Ltd Industrias John Crane de Mexico SA de CV TI Corporate Services Ltd John Crane Venezuela CA TI Group Insurance Ltd Busak+Shamban Inc TI International Holdings Ltd Dowty O Rings North America Inc TISPP UK Ltd Forsheda Palmer-Chenard Inc Dowty Group Plc Forsheda Pipe Seal Corp TI Group plc Dowty Decoto Inc EIS Group plc Hydraulic Units Inc Kelvin Hughes Ltd King Fifth Wheel Co Lewis & Saunders Inc Asia Pacific and Africa Titeflex Corp Japan Medico Co Limited (62%) Tri-Industries Inc John Crane Australia Pty Ltd Smiths Medical Canada Ltd Japan Marine Technologies Ltd (93%) John Crane Pty Ltd Busak+Shamban KK Smiths Medical Australia Pty Ltd Smiths Medical (S.Africa) Pty Ltd Europe Smiths Medical Sverige AB Smiths Medical France SA John Crane Lips Norway AS Smiths Medical Netherlands BV John Crane Sverige AB Smiths Medical Belgium NV Smiths Medical Deutschland GmbH SIMS Deltec Graseby Vertriebs GmbH Forsheda SA FRB Connectron SA Busak+Shamban Beteiligungs-GmbH Interconnectron GmbH Forsheda GmbH John Crane Ireland Ltd Forsheda Engineered Seals GmbH Safematic Oy Forsheda Polypac SpA Cyclam SA Forsheda (Malta) Ltd Hibon SAS Forsheda BV John Crane France SA Forsheda AB John Crane GmbH Skega Seals Ab John Crane Italia SpA Titeflex Europe SA John Crane Holland BV IIoman Engineering Ltd Lips United BV TI Holdings (Netherlands) Bvc John Crane Iberica SA SI BV

All subsidiaries marked* are 100 per cent. owned by the Issuer directly. The others are 100 per cent. owned through intermediate holding companies, with the exception of Japan Medico, and Japan Marine Technologies which are 62 per cent. and 93 per cent. owned respectively by the Issuer. Shareholdings are of ordinary shares, ordinary stock units or common stock. All subsidiaries operate in their country of incorporation. Capitalisation and Indebtedness of Smiths Group plc The following tables set out the audited capital and consolidated reserves and consolidated indebtedness of the Issuer as at 31 July 2001 and the unaudited capital and consolidated reserves and consolidated indebtedness of the Issuer as at 31 January 2001:

CAPITAL AND CONSOLIDATED RESERVES As at 31 July As at 31 January 2001(2) 2001(1) (Audited) (Unaudited) £ million £ million Called up share capital (fully paid) 139 138 Share Premium account 146 139 Revaluation reserves 3 3 Profit and Loss account 578 463 866 743

INDEBTEDNESS As at 31 July As at 31 January 2001 2001 (Audited) (Unaudited) £ million £ million Unsecured borrowings: Due within one year 341 359 Due after more than one year 891 1,450 Secured borrowings: Due within one year 2 3 Due after more than one year 3 6 1,237 1,818

Notes:

(1) These figures are extracted from the unaudited interim accounts for the six months ended 31 January 2001. (2) These figures are extracted from the audited accounts for the year ended 31 July 2001. (3) The authorised share capital of the Issuer as at 31 July 2001 was 800 million ordinary shares with a par value of 25 pence each. (4) None of the indebtedness of the Issuer is guaranteed. (5) Since 31 July 2001 there has been no material change in the issued share capital of the Issuer or in the indebtedness of the Group save for the disposal of two business at a cost of £20 million which was used to repay short term borrowings of the Group. (6) As at the date of this offering Circular, the Group does not have outstanding any material contingent liabilities or any material liabilities in respect of guarantees, save that the Issuer has guaranteed US$100,000,000 8.34 per cent. Senior Notes due 2002 and US$40,000,000 8.53 per cent. Senior Notes due 2003, both privately placed by a subsidiary.

United Kingdom Taxation in respect of the Sterling Bonds The comments below are of a general nature based on current United Kingdom law and practice. They do not necessarily apply where the interest on the Bonds is deemed for tax purposes to be the income of any person other than the holder of the Bond or Coupon. They relate only to the position of persons who are the absolute beneficial owners of their Bonds and Coupons and may not apply to certain classes of persons such as dealers. The following is a general guide relating to certain aspects of United Kingdom taxation and should be treated with appropriate caution. Any Bondholders who are in doubt as to their personal tax position or who may be subject to tax in a jurisdiction other than the United Kingdom should consult their professional advisers.

INTEREST 1. United Kingdom withholding tax (including such withholding or deduction for or on account of tax by issuers, paying agents and collecting agents) was abolished in relation to interest payments made (or, in the case of collecting agents, received) on or after 1 April 2001 in respect of securities listed on a "recognised stock exchange", as defined in section 841 of the Income and Corporation Taxes Act 1988 (the "Act") (the London Stock Exchange is such a recognised exchange). Provided, therefore, that the Notes remain so listed, interest on the Notes will be payable without withholding or deduction on account of United Kingdom tax. Interest on the Notes may also be paid without withholding or deduction on account of United Kingdom tax where interest on the Notes is paid to a person who belongs in the United Kingdom and the Issuer reasonably believes (and any person by or through whom interest on the Notes is paid reasonably believes) that the beneficial owner is within the charge to United Kingdom corporation tax as regards the payment of interest at the time the payment is made, provided that the Inland Revenue has not given a direction that it has reasonable grounds to believe that it is likely that the beneficial owner is not within the charge to United Kingdom corporation tax in respect of such payment of interest at the time the payment is made. In all other cases interest will be paid under deduction of United Kingdom income tax at the lower rate (currently 20 per cent.) subject to any direction to the contrary from the Inland Revenue in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty. 2. Noteholders who are individuals may wish to note that the Inland Revenue has power to obtain information (including the name and address of the beneficial owner of the interest) from any person in the United Kingdom who either pays interest to or receives interest for the benefit of an individual. Such information may, in certain circumstances, be exchanged by the Inland Revenue with the tax authorities of other jurisdictions. 3. The interest on the Bonds has a United Kingdom source and accordingly may be chargeable to United Kingdom tax by direct assessment. Where the interest is paid without withholding or deduction on account of United Kingdom tax, the interest will not be assessed to United Kingdom tax in the hands of Bondholders (other than certain trustees) who are not resident for tax purposes in the United Kingdom, except where such persons carry on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Bonds are attributable, in which case (subject to exceptions for interest received by certain categories of agent) tax may be levied on the United Kingdom branch or agency. Where interest has been paid under deduction of United Kingdom income tax, Bondholders who are not resident in the United Kingdom may be able to recover all or part of the tax deducted if there is an appropriate provision in an applicable double taxation treaty. Bondholders should note that the provisions relating to additional amounts referred to in "Terms and Conditions of the Bonds ― Taxation" above would not apply if the Inland Revenue sought to assess directly the person entitled to the relevant interest to United Kingdom tax. However, exemption from, or reduction of, such United Kingdom tax liability might be available under an applicable double taxation treaty. 4. DISPOSAL (INCLUDING REDEMPTION) (a) Corporate Bondholders Bondholders which are companies and are either resident in the United Kingdom for tax purposes or hold the Bonds for the purpose of a trade carried on in the United Kingdom through a branch or agency in the United Kingdom will, subject to such relief as may be available under the terms of any applicable double tax treaty, be within the charge to United Kingdom corporation tax in respect of the Bonds. Such Bondholders will generally be subject to tax as income on profits and gains (including interest and fluctuations in value, whether attributable to currency fluctuations or otherwise) arising from the Bonds, broadly in accordance with their statutory accounting treatment. Other Bondholders (b) Taxation of Chargeable Gains The Bonds will constitute "qualifying corporate bonds" within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992 with the result that on a disposal or a redemption of the Bonds neither a chargeable gain nor an allowable loss will arise for the purposes of UK taxation of chargeable gains. (c) Accrued Income Scheme A transfer of a Bond by a holder who is not within the charge to United Kingdom corporation tax and is resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the Bond is attributable may give rise to a charge to tax on income in respect of an amount representing interest on the Bond which has accrued since the preceding interest payment date. 5. UNITED KINGDOM STAMP DUTY AND STAMP DUTY RESERVE TAX No United Kingdom Stamp Duty or Stamp Duty Reserve Tax is payable on the issue or transfer by delivery of a Bond or on its redemption. 6. PROPOSED EUROPEAN DIRECTIVE ON THE TAXATION OF SAVINGS The European Union is currently considering proposals for a new directive regarding the taxation of savings income. It is proposed that, subject to a number of important conditions being met, Member States will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State, subject to the right of certain Member States (not including the United Kingdom) to opt instead for a withholding system for a transitional period in relation to such payments and subject to the proposals not being required to be applied to tranches of Notes issued before 1 March 2002 and fungible with Notes issued before 1 March 2001 or where the original prospectus was certificate before that date. The proposals, however, are not yet final, and they may be subject to further amendment and/or clarification. 7. SUBSTITUTION OF ISSUER The substitution of the Company for TI Group as the Issuer in respect of the Bonds constitutes a novation of the Bonds which may be treated as being a disposal for the purposes of UK taxation. The tax consequences of a disposal of the Bonds for Bondholders are set out in paragraph 4 above. Paragraphs 1 to 6 above apply to the successor Bonds.

United Kingdom Taxation in respect of the Euro Bonds The comments below are of a general nature based on current United Kingdom law and practice. They do not necessarily apply where the interest on the Bonds is deemed for tax purposes to be the income of any person other than the holder of the Bond or Coupon. They relate only to the position of persons who are the absolute beneficial owners of their Bonds and Coupons and may not apply to certain classes of persons such as dealers. The following is a general guide relating to certain aspects of United Kingdom taxation and should be treated with appropriate caution. Any Bondholders who are in doubt as to their personal tax position or who may be subject to tax in a jurisdiction other than the United Kingdom should consult their professional advisers.

INTEREST 1. United Kingdom withholding tax (including such withholding or deduction for or on account of tax by issuers, paying agents and collecting agents) as abolished in relation to interest payments made (or, in the case of collecting agents, received) on or after 1 April 2001 in respect of securities listed on a "recognised stock exchange", as defined in section 841 of the Income and Corporation Taxes Act 1988 (the "Act") (the London Stock Exchange is such a recognised exchange). Provided, therefore, that the Notes remain so listed, interest on the Notes will be payable without withholding or deduction on account of United Kingdom tax. Interest on the Notes may also be paid without withholding or deduction on account of United Kingdom tax where interest on the Notes is paid to a person who belongs in the United Kingdom and the Issuer reasonably believes (and any person by or through whom interest on the Notes is paid reasonably believes) that the beneficial owner is within the charge to United Kingdom corporation tax as regards the payment of interest at the time the payment is made, provided that the Inland Revenue has not given a direction that it has reasonable grounds to believe that it is likely that the beneficial owner is not within the charge to United Kingdom corporation tax in respect of such payment of interest at the time the payment is made. In all other cases interest will be paid under deduction of income tax at the lower rate (currently 20 per cent.) subject to any direction to the contrary from the Inland Revenue in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty. 2. Noteholders who are individuals may wish to note that the Inland Revenue has power to obtain information (including the name and address of the beneficial owner of the interest) from any person in the United Kingdom who either pays interest to or receives interest for the benefit of an individual. Such information may, in certain circumstances, be exchanged by the Inland Revenue with the tax authorities of other jurisdictions. 3. The interest on the Bonds has a United Kingdom source and accordingly may be chargeable to United Kingdom tax by direct assessment. Where the interest is paid without withholding or deduction, on account of United Kingdom tax, the interest will not be assessed to United Kingdom tax in the hands of Bondholders (other than certain trustees) who are not resident for tax purposes in the United Kingdom, except where such persons carry on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Bonds are attributable, in which case (subject to exceptions for interest received by certain categories of agent) tax may be levied on the United Kingdom branch or agency. Where interest has been paid under deduction of United Kingdom income tax, Bondholders who are not resident in the United Kingdom may be able to recover all or part of the tax deducted if there is an appropriate provision in an applicable double taxation treaty. Bondholders should note that the provisions relating to additional amounts referred to in "Terms and Conditions of the Bonds ― Taxation" above would not apply if the Inland Revenue sought to assess directly the person entitled to the relevant interest to United Kingdom tax. However, exemption from, or reduction of, such United Kingdom tax liability might be available under an applicable double taxation treaty. 4. DISPOSAL (INCLUDING REDEMPTION) (a) Corporate Bondholders Bondholders which are companies and are either resident in the United Kingdom for tax purposes or hold the Bonds for the purpose of a trade carried on in the United Kingdom through a branch or agency in the United Kingdom will, subject to such relief as may be available under the terms of any applicable double tax treaty, be within the charge to United Kingdom corporation tax in respect of the Bonds. Such Bondholders will generally be subject to tax as income on profits and gains (including interest) arising from the Bonds, broadly in accordance with their statutory accounting treatment. Fluctuations in value relating to foreign exchange gains and losses in respect of the Bonds will be brought into account as income. Other Bondholders (b) Taxation of Chargeable Gains A disposal of a Bond by a Bondholder resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Bond is attributable may give rise to a chargeable gain or allowable loss for the purposes of taxation of capital gains. In calculating any gain or loss on disposal of a Bond, sterling values are compared at acquisition and transfer. Accordingly, a taxable profit can arise even where the foreign currency amount received on a disposal is less than or the same as the amount paid for the Bond. (c) Accrued Income Scheme A transfer of a Bond by a holder who is not within the charge to United Kingdom corporation tax and is resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the Bond is attributable may give rise to a charge to tax on income in respect of an amount representing interest on the Bond which has accrued since the preceding interest payment date. The amount will be taken into account in determining any capital gain or loss arising on disposal of the Bond. 5. UNITED KINGDOM STAMP DUTY AND STAMP DUTY RESERVE TAX No United Kingdom Stamp Duty or Stamp Duty Reserve Tax is payable on the issue or transfer by delivery of a Bond or on its redemption. 6. PROPOSED EUROPEAN DIRECTIVE ON THE TAXATION OF SAVINGS The European Union is currently considering proposals for a new directive regarding the taxation of savings income. It is proposed that, subject to a number of important conditions being met, Member States will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State, subject to the right of certain Member States (not including the United Kingdom) to opt instead for a withholding system for a transitional period in relation to such payments and subject to the proposals not being required to be applied to tranches of Notes issued before 1 March 2002 and fungible with Notes issued before 1 March 2001 or where the original prospectus was certified before that date. The proposals, however, are not yet final, and they may be subject to further amendment and/or clarification. 7. SUBSTITUTION OF ISSUER The substitution of the Company for TI Group as the Issuer in respect of the Bonds constitutes a novation of the Bonds which may be treated as being a disposal for the purposes of UK taxation. The tax consequences of a disposal of the Bonds for Bondholders are set out in paragraph 4 above. The UK Inland Revenue has a practice under which certain substitutions are not regarded as giving rise to a disposal for the purposes of taxation of chargeable gains. The UK Inland Revenue has declined to confirm that this practice will apply to the Bonds and the successor Bonds. Paragraphs 1 to 6 above apply to the successor Bonds.

General Information

1. The Sterling Bonds have been accepted for clearance through Clearstream, Luxembourg and Euroclear with a Common Code of 11372163. The International Securities Identification Number for the Sterling Bonds is XS0113721632. The Euro Bonds have been accepted for clearance through Clearstream, Luxembourg and Euroclear with a Common Code of 011404294. The International Securities Identification Number for the Euro Bonds is XS0114042947. 2. The listing of the Bonds on the Official List will be expressed as a percentage of their principal amount (exclusive of accrued interest). It is expected that listing of the Bonds on the Official List and admission of the Bonds to trading on the London Stock Exchange will be granted on or before 27 November 2001. 3. The Issuer has obtained all necessary consents, approvals and authorisations in and in connection with the issue and performance of the Bonds. The substitution of the Company for TI Group in respect of the Bonds was authorised by a resolution of the Board of Directors of TI Group passed on 30 October 2001 and by a resolution of the Board of Directors of the Issuer passed on 10 July 2001. 4. Except as disclosed on page 33 of this document there has been no significant change in the financial or trading position of the Issuer or of the Smiths Group since 31 July 2001. 5. There are no, nor have there been any, legal or arbitration proceedings (including any which are pending or threatened of which the Issuer is aware involving any member of the Smiths Group) which may have, or have had during the 12 months preceding the date of this document, a significant effect on the financial position of the Smiths Group. 6. The Bonds and Coupons will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code". 7. The financial statements of the Issuer for the three financial years ended 31 July 2001, 31 July 2000 and 31 July 1999 were audited by PricewaterhouseCoopers, Chartered Accountants, 1 Embankment Place, London WC2N 6NN. Under their standard terms of engagement in connection with the provision of reports under the Trust Deed in respect of the definitions of "Issuer's Consolidated Capital and Reserves" and "Principal Subsidiary", the Auditors have indicated that there will be certain limitations on their liability. 8. The financial information on page 33 of this document does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 (the "Companies Act"). Statutory accounts relating to each financial period or year to which such financial information relates have been delivered to the Registrar of Companies in England and Wales. The Issuer's auditors have made reports under Section 235 of the Companies Act on such statutory accounts which were not qualified within the meaning of Section 262 of the Companies Act and did not contain any statements made under Section 237(2) or (3) of the Companies Act. 9. Copies of the following documents may be inspected at the offices of Allen & Overy, One New Change, London EC4M 9QQ during usual business hours on any weekday (Saturdays and public holidays excepted) for 14 days from the date of this document: (i) the Memorandum and Articles of Association of the Issuer; (ii) the annual report and accounts of the Smiths Group for the two years ended 31 July 2001; and (iii) the Trust Deeds, the First Supplemental Trust Deeds and of the Paying Agency Agreements. WORLD OPERATING HEADQUARTERS AND REGISTERED OFFICE OF THE ISSUER

Smiths Group plc 765 Finchley Road London NW11 8DS

AUDITORS OF THE ISSUER PricewaterhouseCoopers 1 Embankment Place London WC2N 6NN

TRUSTEE

HSBC Trustee (C.I.) Limited P.O. Box 88 1 Grenville Street St Helier Jersey JE4 9PF

PRINCIPAL PAYING AGENT HSBC Bank plc Mariner House Pepys Street London EC3N 4DA

PAYING AGENT UBS AG Bahnhofstrasse 45 CH-8098 Zurich

LEGAL ADVISERS To the Issuer as to English law To the Trustee as to English law Allen & Overy Linklaters One New Change Linklaters & Alliance London EC4M 9QQ One Silk Street London EC2Y 8HQ

LISTING AGENT Cazenove & Co. Ltd 12 Tokenhouse Yard London EC2R 7AN

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