Smith & Nephew SNATS (SNN)

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three and nine months ended 26 September 2009 which comprises the Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Condensed Group Cash Flow Statement, Group Statement of Changes in Equity and the related notes 1 to 12. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial statements.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three and six months ended 27 June 2009 which comprises the Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Condensed Group Cash Flow Statement, Group Statement of Changes in Equity and the related notes 1 to 13. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three months ended 28 March 2009 which comprises the Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Condensed Group Cash Flow Statement, Group Statement of Changes in Equity and the related notes 1 to 12. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three and nine months ended 27 September 2008 which comprises the Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 14. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three and six months ended 28 June 2008 which comprises the Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 13. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three months ended 29 March 2008 which comprises the Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 13. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Introduction

The fourth quarter marked a successful completion of 2007 for Smith & Nephew. It has been a very active year across the business.

We had a very successful year in Reconstruction with the BIRMINGHAM HIP^¯ Resurfacing System (“BHR^¯”) in the US, following its launch there last year, and saw our US knee business recover in the fourth quarter. Reconstruction continues to deliver above market growth as it has done for 5 consecutive years. Advanced Wound Management returned to growth after several difficult years and did so while the business was being restructured. Endoscopy earned double digit revenue growth for the first time in five years benefiting from investment in its business outside the US. In Trauma we now have a good product range and the salesforce to deliver continued growth.

We launched the Earnings Improvement Programme (“EIP”) in the first quarter and by the end of the year had improved our trading margin, before the two acquisitions made in the year, by over one per cent. We have made good progress in the operational management of the company. We have centralised functions within and across the four businesses in areas such as IT and procurement and made substantial changes in manufacturing and sales force management.

As we move into 2008, our long term strategy is to concentrate on high growth segments in our four businesses, with emphasis on meeting the needs of our customers and acquiring businesses which fit within this strategy. Our innovative products which enable good outcomes for patients, medical professionals and healthcare providers alike are expected to generate continued growth in 2008 and beyond.

Introduction

We have been engaged by the Company to review the interim financial information in the interim financial report for the three and nine months ended 29 September 2007 which comprises the Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 15. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been instructed by the company to review the financial information for the three months and six months ended 30 June 2007 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 14. We have read the other information contained in the interim report for quarter two and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been instructed by the company to review the financial information for the three months ended 31 March 2007 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 12. We have read the other information contained in the interim report for quarter one and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

All four of our businesses made good progress in the fourth quarter. The US reconstructive market has continued to strengthen driven by increased numbers of procedures. Outside the US the picture has been more mixed as a number of countries continue to take action to constrain healthcare spending. Overall, however, market conditions across our businesses continue to be characterised by strong demand for our innovative products which offer both patient and healthcare system benefits.

The creation of the two separate orthopaedic business units at the start of the 2006 is now proving beneficial for customers as well as strengthening our revenue growth. Endoscopy has enjoyed a stronger year by delivering 9% revenue growth for the year. Advanced Wound Management has completed a positive transitional year with a new management team in place and underlying revenue growth accelerating.

During the year we continued to acquire technologies complementary to our businesses with the licensing agreement by Orthopaedic Trauma and Clinical Therapies of DUROLANE^® joint fluid therapy and the purchase of OsteoBiologics, Inc (“OBI”) by Endoscopy. We continue to see excellent opportunities, of varying sizes, which fit within our strategy of sustained growth both organically and by acquisition.

We have undertaken an assessment of our medium term capital needs both within the business and for acquisitions. Following this assessment we believe that shareholder value and the efficiency of our balance sheet will be enhanced by returning capital to shareholders. In consequence we are announcing today our intention to undertake a share buy back programme of up to $1.5 billion over the next two years, dependent in particular on the acquisition programme.

Introduction

We have been instructed by the company to review the financial information for the three months and nine months ended 30 September 2006 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 12. We have read the other information contained in the interim report for quarter three and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been instructed by the company to review the financial information for the three months and six months ended 1 July 2006 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 10. We have read the other information contained in the interim report for quarter two and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been instructed by the company to review the financial information for the three months ended 1 April 2006 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 10. We have read the other information contained in the interim report for quarter one and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We generated total revenues of £1,407m for the year, an underlying 11% increase over 2004. Orthopaedics achieved 15% revenue growth in the last quarter despite tighter market conditions. Endoscopy and Advanced Wound Management both increased their revenue growth rates on the previous quarter, with the distortions that impacted Advanced Wound Management earlier in the year largely abated. The fourth quarter is our strongest revenue quarter and this came through at the profit line with a further improved margin.

In December 2005 we announced the disposal of our 50% interest in BSN medical, for approximately £330m. Subject to regulatory approvals for this transaction we expect to complete it shortly. The gain on disposal will be around £170m pre-tax and will be accounted for in 2006.

Introduction

We have been instructed by the company to review the financial information for the three months and nine months ended 1 October 2005 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 11. We have read the other information contained in the interim report for quarter three and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been instructed by the company to review the financial information for the three months and six months ended 2 July 2005 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes 1 to 10. We have read the other information contained in the interim report for quarter two and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Introduction

We have been instructed by the company to review the financial information for the three months ended 2 April 2005 which comprises Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet, Condensed Group Cash Flow Statement and the related notes. We have read the other information contained in the interim report for quarter one and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 ‘Review of interim financial information’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.