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AUTHORITY

1. The Ethics & Compliance Committee shall, subject to the Articles of Association of Smith & Nephew plc, have and may exercise in full all powers and authority of the Board of Directors of the Company on ethical and compliance matters.

CONSTITUTION/MEMBERSHIP

2. The members of the Ethics & Compliance Committee (the “Committee”) shall be independent Non-Executive Directors appointed by the Board on the recommendation of the Nominations Committee.

3. The minimum number of members shall be three.

4. Two members of the Committee shall constitute a quorum and an affirmation vote of the majority of members present shall be required for the transaction of business.

5. The Chairman of the Committee shall be appointed by the Board, who shall along with the other members of the Committee serve at the pleasure of the Board.

6. Alternate members may be appointed either by a member of the Committee or by the Board.

7. The Company Secretary shall be the Secretary to the Committee and will prepare and circulate minutes of the meetings of the Committee.

ATTENDANCE AT MEETINGS

8. The Committee may invite other directors and members of management or third parties to attend the meetings when appropriate.

FREQUENCY OF MEETINGS

9. Meetings shall be held not less than four times a year.  Meetings may be held in person or by telephone.  Ad-hoc meetings may be held at any time when appropriate.

10. An agenda of items to be discussed along with supporting papers shall be sent to members and the attendees as appropriate, in sufficient time prior to each meeting to enable consideration of the items.

DUTIES

11. In carrying out its powers and authorities the Ethics & Compliance Committee will:

• Review and approve Group policies as they relate to ethical and compliance matters;

• Receive reports and review activities from executive and specialist groups managing ethical and compliance matters across the Group’s operations;

• Review and approve implementation of ethical and compliance programmes;

• Receive and review reports of audits and monitoring of ethical & compliance procedures and processes;

• Review ethical and compliance best practice and continuous improvement programmes by reference to appropriate external reports and benchmarking;

• Review, where appropriate, the Group’s internal communications and training in relation to ethical and compliance policies and procedures;

• Review Group’s external communication and reporting in respect of ethical and compliance programmes and the operation of the Committee

• Review the integration of ethical and compliance procedures with the business risk management programme;

• Review and approve ethical and compliance strategy and plans

• Perform any other activities consistent with these Terms of Reference or the Company’s articles of association as the Board or this Committee may deem necessary, advisable or appropriate for the Committee to perform.

REPORTING PROCEDURES

12. The Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.

13. The Secretary shall circulate the minutes of the meetings of the Committee to all members of the Board.

14. The Committee shall, once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and consider changes where appropriate and report to the Board accordingly.

15. The Committee shall have access to sufficient resources in order to carry out its duties.

INFORMATION & EXTERNAL ADVICE

16. The Committee may obtain outside legal or other independent professional advice and invite third parties with relevant experience and expertise to attend its meetings.  The fees of any such advisers shall be paid by the Company.

AMENDMENTS

17. Any amendments to the Terms of Reference must be approved by the Board.

July 2008