3 February 2014

Acquisition of ArthroCare Corp.

Forward looking statements

This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith & Nephew, these factors include: economic and financial conditions in the markets we serve, especially those affecting health care providers, payers and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or other government actions; product defects or recalls; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; strategic actions, including acquisitions and dispositions, our success in performing due diligence, valuing and integrating acquired businesses; disruption that may result from transactions or other changes we make in our business plans or organisation to adapt to market developments; and numerous other matters that affect us or our markets, including those of a political, economic, business, competitive or reputational nature. Please refer to the documents that Smith & Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith & Nephew's most recent annual report on Form 20-F, for a discussion of certain of these factors.

Any forward-looking statement is based on information available to Smith & Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith & Nephew are qualified by this caution. Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith & Nephew's expectations.

1

2

Chief Executive Officer

Olivier Bohuon

Highlights

• ArthroCare is an innovative medical devices company whose sports medicine business is highly complementary to Smith & Nephew

• Definitive agreement to acquire for $48.25 per share paid in cash, or approximately $1.7 billion (enterprise value of $1.5 billion)

• Major investment in our sports medicine franchises, an area of higher growth

• Compelling strategic rationale

• Substantial synergies

• Meets our financial returns criteria

• Expected to close by mid-2014, subject to usual regulatory approvals 3

Compelling strategic rationale

• A comprehensive resection & repair portfolio with exciting prospects

– combination of radio frequency & mechanical resection creates fuller offering

– ArthroCare’s shoulder repair innovation strongly complements our knee expertise

• Opportunities to drive greater revenue

– cross-sell combined portfolio

– reach new customers & markets through Smith & Nephew’s global presence

• Ear, Nose & Throat business is a natural adjacency

• Strong product pipeline and R&D

4

Strong financial rationale

• Significant cost & revenue synergies will add $85 million to annual trading profit by 2017

• Meets Smith & Nephew’s investment criteria

– ROCE to exceed the Group’s WACC in 2017

– EPSA accretive from 2015

5

6

President, Advanced Surgical Devices

Mike Frazzette

Overview of ArthroCare

• Leading developer, manufacturer and marketer of Coblation technology used in a variety of minimally-invasive surgical procedures

• ArthroCare’s products are the standard of care for shoulder procedures (sports medicine) and ENT

• Focused and dedicated sales and distribution network

• 1,800 employees

• Global headquarters in Austin, Texas, with operations and offices in strategic locations around the world

7

Coblation technology overview

Plasma-generation process to cut or remove tissue

Ablates tissue structures to remove diseased tissue

Alternative to standard surgical techniques for removing and treating tissue

Standard RF Surgical Products Coblation

Precise, low temperature tissue removal

Gently dissolves tissue structures, preserving healthy surrounding tissues

Proven benefits of Coblation have led to its adoption across a variety of surgical specialties

8

Plasma layer forms

at the tip of a

disposable wand

within milliseconds

and enables precise

tissue removal

A premier sports medicine business

9

ArthroCare Smith & Nephew

Res

ecti

on

• Coblation Technology – Ambient Family of RF Wands

– Topaz RF Wands for extremities

• Atlantech handheld Instruments

• DYONICS◊ Shaver Blades and Burrs for

knee, shoulder, hip and extremities

• ELECTROBLADE◊ – dual function device for

cutting and coagulating

• ACUFEX◊ handheld instruments

Sp

ort

s M

edic

ine

Join

t R

epai

r

• Full spectrum of knotless anchors including

the OPUS AutoCuff System

• PEEK and Titanium anchors for hip and

shoulder labral repair

• Smaller diameter anchors

• Comprehensive Knee Repair portfolio – ENDOBUTTON◊, FASTFIX◊ 360

• OSTEORAPTOR◊ for shoulder Instability

• TWINFIX◊ Suture Anchors for cuff repair

Reaching new customers & markets

• Increases our scale in the fast growing sports medicine segment

• Continued investment in innovative products to drive growth

• US

– cross-sell the combined portfolio

– immediate improvements in case coverage

• International

– opportunities to drive additional revenues from combined Established Market

footprint and channel presence

– ArthroCare currently has minimal penetration in Japan

– leverage Smith & Nephew infrastructure to focus on China and other

Emerging Markets 10

ENT

• Addition of naturally adjacent Ear, Nose & Throat (ENT) business, providing new growth opportunities

• Fully direct in the US

• Smaller penetration in international markets

– in many markets, the sports medicine rep would also call on the ENT specialist

• ENTrigue acquisition provides immediate access to faster growing sinus segment

11

A compelling prospect

• Highly complementary

• Great for customers

• Fast integration

12

13

Chief Financial Officer

Julie Brown

Four key topics

1. ArthroCare’s recent financial performance

2. Financials of the transaction

3. Synergies and integration costs

4. Financing arrangements

14

ArthroCare’s financials

15

2011 2012

$m $m

Revenue 355 368

Growth (YOY) 0% 4%

Gross profit 252 261

SG&A (149) (155)

R&D (29) (32)

Adjusted operating profit1 74 74

1. Operating profit adjusted for investigation, restatement related and exit costs

Transaction financials

• Purchase price – $48.25 per share or $1.7 billion, in cash

– premium of 20% to ArthroCare’s 90-day volume weighted average price per

share

– 15.7x EV/adjusted 2012 EBITDA

• Financing – two year $1.4 billion term loan facility, and

– Group’s existing cash resources and bank facilities

• Returns – return on capital employed will exceed cost of capital in the third full year of

ownership

• EPSA impact – broadly neutral in 2014, accretive thereafter

16

Synergies

• Revenue & cost synergies to add $85 million to trading profit in 2017

• Net revenue synergies of more than $50 million in 2017

• Significant cost synergies

– procurement/supply chain

– commercial

– overlap of back-office duplication

• Tax benefits from manufacturing

17

Additional guidance

• Revenue

– elimination of manufacturing & licensing payments from Smith & Nephew

(2012: $24 million)

• Cost and net revenue synergies drive EPSA growth 2015 onwards

• Tax

– continue to benefit from low tax rates where manufacturing is located

– further benefit from financing the acquisition

• Integration and transaction costs

– estimated $60 million integration costs over the first three full years;

– front end loaded

– approx. $40 million transaction costs, incurred in 2014

18

Financial implications

• Priorities under our Capital Allocation Framework: – invest in organic growth

– deliver a progressive dividend

– make strategic acquisitions and

– return excess cash to shareholders

Underpinned by leverage commensurate with solid investment grade

• Share repurchase programme – $226m completed to 31 December 2013

– share buy-back programme suspended

– kept under review in line with the framework

• Leverage – Group expects to exit 2014 with net debt/EBITDA ratio below 1.5x

19

20

Olivier Bohuon Chief Executive Officer

Summary

• Smith & Nephew has a strong track record in sports medicine

• ArthroCare significantly enhances our product portfolio

• Many exciting opportunity for additional growth

• Platform to create further shareholder value

21

22

Questions