A. Selected financial data

The selected financial data set out below as of and for the Fiscal year ended January 3, 2004, the eight-month Transition Period ended December 31, 2002 and for the Fiscal years ended April 30, 2002 and April 30, 2001 has been derived from the audited consolidated financial statements of income of the Company, which appear elsewhere in this Form 20-F. The selected financial data as of and for the Fiscal years ended April 30, 2001, April 29, 2000 and May 1, 1999 has been derived from the audited financial statements of the Company appearing in our historical annual reports as filed with the Securities and Exchange Commission (the “SEC”). The selected financial data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, such consolidated financial statements and Notes thereto and Item 5 – “Operating and Financial Review and Prospects”. The selected financial data does not comprise “statutory accounts” within the meaning of Section 240 of the Companies Act 1985 of England and Wales (the “Companies Act”), but has been based upon the full published accounts of the Company for the Fiscal year ended January 3, 2004, the eight-month period ended December 31, 2002 and the four Fiscal years ended April 30, 2002. The published accounts for the Fiscal year ended January 3, 2004, the eight-month period ended December 31, 2002 and for the four Fiscal years ended April 30, 2002, upon which unqualified auditors’ reports have been given, have each been delivered to the Registrar of Companies in England and Wales with the exception of the accounts for the Fiscal year ended January 3, 2004, which will be delivered prior to the relevant filing deadline of August 3, 2004. The consolidated financial statements of the Company are prepared in accordance with UK GAAP, which differs in certain significant respects from US GAAP. The principal differences between UK GAAP and US GAAP, as they relate to the Company, are presented in Note 26 to the consolidated financial statements.

Consolidated income statement data

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Consolidated income statement data (continued)

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Consolidated balance sheet data

Dividends

The Company has paid cash dividends on its ordinary shares, nominal value 5p per share (“Ordinary Shares”), in respect of every Fiscal year since being first listed on the London Stock Exchange Limited (the “London Stock Exchange”) in 1950.

Dividends are paid to shareholders as of record dates that are fixed after consultation between the Company and the London Stock Exchange. For the year ended January 3, 2004, an interim dividend was declared by the Board of Directors (the “Board”) in August and was paid in November. A final dividend was recommended by the Board following the end of the Fiscal year and is subject to approval by the shareholders at the Company’s annual general meeting. This is due to be paid in June 2004. In normal circumstances we expect dividend payments to follow the same pattern in future years and anticipate the weighting of these payments to be approximately 40 percent for the interim dividend and 60 percent for the final dividend.

The table below sets forth the amounts of interim, final and total dividends paid in respect of each Fiscal year indicated and the Transition Period ending December 31, 2002. The amounts are shown both in pence per Ordinary Share and translated, solely for convenience, into US cents per American Depositary Share (each representing four Ordinary Shares) at the Noon Buying Rate on each of the respective payment dates for such interim and final dividends.

The Company expects to continue to pay dividends in the future. The total amounts of future dividends will be determined by the Board and will depend on the Company’s results of operations, cash flow, financial and economic conditions and other factors.

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Cash dividends are paid by the Company in pounds sterling, and fluctuations in the exchange rate between pounds sterling and US dollars will affect the US dollar amounts received by holders of American Depository Receipts (“ADRs”) upon conversion by The Bank of New York (the “Depositary”) of such dividends. Moreover, fluctuations in the exchange rates between the pound sterling and the US dollar will affect the dollar equivalents of the pound sterling price of the Ordinary Shares on the London Stock Exchange and, as a result, are likely to affect the market prices of the American Depositary Shares (“ADSs”) in the United States. For information regarding the exchange rates for pounds sterling into US dollars for the five most recent Fiscal years, see “Exchange Rates” below. For a discussion of the historic effects of exchange rate fluctuations on the Company’s financial condition and results of operations, see Item 11 “Quantitative and Qualitative Disclosures about Market Risk” and Note 26 to the consolidated financial statements.

Exchange Rates

The following table sets forth, for the Fiscal years indicated, the average, high, low and period end Noon Buying Rates for pounds sterling, expressed in US dollars per £1.00:

The following table sets forth, for the months indicated high and low Noon Buying Rates for pounds sterling, expressed in US dollars per £1.00:

See “Operating results” in Item 5. “Operating and Financial Review and Prospects” concerning the effect of fluctuations in the exchange rate between the pound sterling and the US dollar on the Company’s results of operations.

B. Capitalization and indebtedness

Not applicable.

C. Reasons for the offer and use of proceeds

Not applicable.

D. Risk factors

In addition to the other information contained in this Annual Report, investors in our securities should consider carefully the risks described below. Our financial condition or results of operations could be materially adversely affected by any of these risks. The risks described below are not the only risks facing us. Additional risks not currently known to us, or risks that we currently regard as immaterial could also have a material adverse effect on our financial condition or results of operations.

The following discussion contains a number of forward-looking statements. Please refer to the “Forward-Looking Statements” discussion at the front of this Annual Report for cautionary information.

As a part of the planning, control and performance management framework of the Group, each business considers strategic, operational, commercial and financial risks and identifies risk mitigation actions. The Group has categorized the foregoing risks as those relating to:

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Risk can be considered either as downside risk, the risk that something can go wrong and result in a financial loss or financial exposure for the Group, or volatility risk. Volatility risk is the risk associated with uncertainty, which means there may be an opportunity for financial gain as well as potential for loss.

The risks listed primarily relate to potential downside risks. The nature of the Group’s business means that risks will change as a result of controllable and uncontrollable events occurring in the future.

Risks relating to the markets within which the Group operates

The cyclical nature of automotive production and sales could adversely affect our business.

Approximately a quarter of our net sales are to automotive manufacturers in various parts of the world. Sales and production in the automotive industry are cyclical and depend on general economic conditions and other factors, including consumer spending and preferences. A significant reduction in automotive production and sales by our customers could have an adverse effect on our business, financial condition or results of operations.

The cyclical nature of construction related industries and industrial equipment markets could adversely affect our business.

Approximately 50 percent of our net sales are generated within construction related industries and within industrial equipment markets. Sales and production in these markets are cyclical and depend on general economic conditions and other factors, including consumer spending and preferences. A significant reduction in these markets could have an adverse effect on our business, financial condition or results of operations.

A continuing improvement in vehicle component life could adversely affect our important aftermarket business.

The success of component manufacturers including ourselves in improving product quality and performance and the demand from the automotive original equipment makers for ever greater service life and reliability could lower demand in the aftermarket business segment which could have an adverse effect on our business, financial condition or results of operations.

A potentially changing regulatory environment could limit our business opportunities and profitability.

Changes in existing laws, regulations, licenses, decisions, policies or interpretations thereof by the courts, or by regulators, may have a material adverse impact on our business, financial condition or results of operations.

In particular, the industries in which we operate are subject to a variety of environmental regulations, particularly relating to waste water discharges, air emissions, solid waste management and hazardous chemical disposal. These regulations have generally become stricter in recent years and may continue to become more stringent in the future. Any future changes to existing environmental legislation or regulation could have a material adverse effect on our business, financial condition or results of operations. There is a risk that our activities will not continue to be in substantial compliance in the future with applicable environmental legislation or regulation and we are unable to predict the costs of compliance with changes in legislation or regulation.

In certain countries we are required to secure and maintain operating licenses. If we experience difficulties or delays in obtaining or maintaining licenses in the future or if the cost of such licenses increases significantly, this could adversely affect our business, financial condition or results of operations.

Our operations in foreign and emerging markets expose us to risks associated with conditions in those markets.

We operate principally in the automotive, industrial and construction related markets in a number of geographic regions of the world, including emerging markets. Operations in emerging markets present risks that are not encountered in countries with more developed economic and political systems, including: economic and political instability within these markets; boycotts and embargoes imposed by the international community; significant fluctuations in interest rates and currency exchange rates; the imposition of unexpected taxes or other levies on our revenues in these markets; the inability to expatriate revenues or dividends; limitations on foreign investments and foreign capital participation in certain industries or regions; and the introduction of exchange, customs or trade controls and other restrictions by foreign governments.

In addition, the legal and regulatory systems of foreign and emerging markets identified above are often less formalized and less consistently enforced than in industrialized countries. Therefore, our ability to protect our intellectual property and our contractual and other legal rights in those regions could be limited. Changes in demand in any of these markets may have an adverse affect on our business, financial condition or results of operations.

Risks relating to the competitive position of the Group and its businesses

Industry consolidation could result in more powerful competitors and fewer customers.

Our customers and competitors in some of our markets, especially in the automotive aftermarket, and to a lesser extent in the markets of the Air Systems Components group, are consolidating to achieve greater scale or market share. Such changes could affect our customers and their relationship with us. If one of our competitors acquires any of our customers, we may lose its business. Additionally, as our customers become larger and more concentrated, they could exert pricing pressure on all suppliers, including ourselves.

Some of our customers are experiencing lower levels of business.

Lower levels of economic activity have resulted in a number of our customers reducing demand compared to past years levels for some of our products and some rescheduling of orders. Lower levels of demand resulting from lower levels of business that may be experienced by our customers could have an adverse effect on our business, financial condition or results of operations.

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Our automotive customers may seek to obtain price reductions from their suppliers and we may be unable to achieve corresponding reductions in costs.

Approximately a quarter of our sales are to automotive manufacturers. It is normal practice for such customers to seek reductions in their costs from their suppliers over the duration of any committed supply arrangement. To meet any such requests for price reductions whilst maintaining our profit margins, we would have to achieve corresponding cost savings in our business by strategic sourcing of raw materials and by improving production and manufacturing efficiencies. The failure to achieve future cost savings to meet the committed price reductions could adversely affect our business, financial condition or results of operations.

Reliance on certain raw materials and suppliers for key components could destabilize our productivity levels.

To the extent not reflected in prices for our products, an unexpected increase in the cost of certain raw materials, especially polymers, steel, aluminum and chemical resins, could lead to lower profit margins. The failure of our key suppliers to maintain and increase production levels could result in our inability to fulfill orders, which could damage relationships with current and prospective customers and have an adverse effect on our business, financial condition or results of operations.

Our business could be adversely affected if we are unable to obtain adequate supplies or equipment in a timely manner from our current suppliers or any alternative supplier, or if there were significant increases in the costs of such equipment.

We are dependent upon our strong relationships with manufacturers’ representatives, distributors and wholesalers.

Many of our businesses have strong established relationships with manufacturers’ representatives, distributors and wholesalers and these relationships are an important ingredient of our strong competitive positions in a number of our markets. Deterioration in these relationships, or a change in our product’s route to market, could have an adverse effect on our business, financial condition or results from operations.

Product liability claims may arise due to the nature of our products.

We face an inherent business risk of exposure to product liability claims in the event that a failure of a product results in, or is alleged to result in, bodily injury, property damage or result in consequential losses as a result of a product recall. Any material product liability losses in the future or costs to defend any alleged failures of our products may have a material adverse effect on our business, financial condition or results of operations.

If we are unable to implement our strategic initiatives successfully, our ability to achieve optimal market performance may be impaired.

We are pursuing a number of strategic initiatives aimed to ensure that we continue to focus on value creating areas, provide the appropriate value offerings to our customers, achieve superior execution of business processes and maintain a low cost position. A number of initiatives are also in place to achieve future growth by developing relationships with global customers, investing in product innovation, expanding into new geographic regions and product adjacent markets. The success of the strategic initiatives depends in part on the changing competitive dynamics of the markets in which we operate and management can provide no assurance that each of the strategic initiatives will be successful in achieving improvement in our financial performance.

If we experience difficulty in implementing our strategic initiatives it may have an adverse effect on our business, financial condition or results from operations.

We operate in very competitive markets and could be adversely affected if we fail to keep pace with technological changes.

We operate in very competitive environments in several geographical markets and product areas. The markets for our products and services are characterized by evolving industry standards, rapidly changing technology and increased competition. The continual development of advanced technologies for new products and product enhancements is an important way in which we maintain acceptable pricing levels. If we fail to keep pace with technological changes in the industrial sectors that we serve, we may experience price erosion and lower margins.

Our success is dependent in large part on our ability to:

Many of our competitors are sophisticated companies with many resources that may develop products and services that are superior to our products and services or may adapt more quickly than we do to new technologies, industry changes or evolving customer requirements. Our failure to anticipate or respond adequately to technological developments or customer requirements, and any delay in accomplishing these goals, could adversely affect our business, financial condition or results of operations.

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We are dependent on the continued operation of our manufacturing facilities.

Our manufacturing facilities are based principally in the United States and Europe. A major disruption of our critical manufacturing facilities could result in significant interruption of our business and potential loss of customers and sales, which could have an adverse effect on our business, financial condition or results of operations.

Our ability to operate successfully is based on the capacity, reliability and security of our computer hardware, software and telecommunications infrastructure. We currently secure our networks by means of back up, hardware, virus protection and other measures, but any systems interruption could lead to a reduction in performance or loss of services. We might not be able to provide effectively a backup to our systems. Our systems are vulnerable to damage or interruption caused by human error, network failure, natural disasters, sabotage, computer viruses and similar disruptive events. A breach of network security could result in reduced revenues and could have an adverse effect on our businesses, financial condition or results from operations.

If we are unable to protect our intellectual property rights, the future success of our business could suffer.

Our proprietary technology is protected by patents and trade secrets which could be at risk if:

From time to time we may need to litigate in order to enforce our patents, copyrights or other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against significant claims of infringement. Any such litigation, the outcome of which will be uncertain, or its threat, could result in costs and a diversion of our resources.

We have a number of businesses in the various regions of the world, which provide additional management challenges.

We operate in many countries around the world, which requires us to take account of cultural and language differences and to assimilate different business practices. Failure to effectively manage our geographically diverse operations could have an adverse effect on our operations, financial condition or results from operations.

We have a number of employees who are members of trade unions or other employment organizations.

Some of our employees are members of trade unions and over many years we have been able to maintain successful relationships with the unions and employment organizations. A deterioration of these relationships in the future may have an adverse effect on our business, financial condition or results from operations.

Risks relating to the financial position and results of operations of the Group

Tomkins plc is a holding company that is dependent upon cash flow from its subsidiaries to meet its obligations.

Tomkins plc is a holding company with no independent operations or significant assets other than investments in, and advances to, subsidiaries. Accordingly, it depends upon the receipt of sufficient funds from its subsidiaries to meet its obligations, including its ability to repay any amounts it borrows under its Medium Term Note program or to pay its dividends. The ability of Tomkins plc to access that cash flow may be limited in some circumstances. For instance, the terms of existing and future indebtedness of its subsidiaries and the laws and jurisdictions under which those subsidiaries are organized may limit the payment of dividends, loan repayments and other distributions to Tomkins plc.

Approximately 25 percent of our total revenues are generated from 10 major customers.

Approximately 25 percent of our total revenues come from the top ten customers of our Industrial & Automotive business. The loss of, or a significant decrease in demand from, one or more of these customers could result in an adverse effect on our business, financial condition or results of operations.

We operate pension plans throughout the world, covering the majority of our employees, which expose us to the risk of fluctuations in the world’s financial markets.

We operate both defined benefit and defined contribution pension plans, the majority of which are in the United States of America and the United Kingdom. The schemes were in deficit by £148.2 million as of January 3, 2004 as detailed in Note 23 to the consolidated financial statements. Deterioration in asset prices or changes to long term interest rates could lead to an increase in the deficit or give rise to an additional funding requirement, which could have an adverse effect on our financial condition or results of operations.

The rising costs of providing health care and workers compensation may erode margins.

Healthcare is provided by certain US subsidiaries to current and former employees. We strive to cover increases in this expense and in the cost of workers compensation by reducing overheads in other areas. If the cost of heath care and workers compensation increases, to the extent that we are unable to achieve adequate savings in other areas of our business, operating margins may be eroded.

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Deferred consideration in respect of disposals may not be repaid in accordance with original terms.

In May 2001, we disposed of Smith & Wesson Corp. through a stock purchase agreement, which contains deferred terms in respect of $30 million of the proceeds from disposal. Of the $30 million, $3 million was paid in Fiscal 2003 and the balance will be repaid over the seven years commencing in May 2004. If the purchaser is unable to fulfill its payment obligations in the future, a provision against the deferred consideration receivable would be charged to the income statement of the Company.

Our tax provisions may not be sufficient to cover our future tax liabilities

Tomkins operates within multiple tax jurisdictions and is subject to audit in those jurisdictions. These audits can involve complex issues, which may require an extended time period of time for resolution. Although we believe that adequate provision has been made for such issues, there is a possibility that the ultimate resolution of such issues could have an effect on the earnings of the Company.

We may not be able to raise sufficient additional capital necessary to fund our growth.

We may require significant amounts of capital to expand our business, implement our strategic initiatives and remain competitive. At present, our established sources of funding are through equity, corporate bond markets (through the Medium Term Note program) bank debt and cash flow from operations. We believe that the sources of funding currently available will be sufficient to fund our operations. If our plans or assumptions regarding our funding requirements change, however, we may need to seek other sources of financing, such as additional lines of credit with commercial banks or vendors or public financing, or to renegotiate existing bank facilities. There is a risk that we will not be able to obtain financing from these or other sources, or renegotiate our existing financing on a timely basis, on acceptable terms, or at all. If we are unable to obtain financing from these sources, or unable to renegotiate our existing financing on a timely basis or on acceptable terms, we may have to delay or abandon some of our development plans or strategic initiatives. Any or all of these developments could have an adverse affect on our business, financial condition or results of operations.

Our Bondholders have the right to require us to redeem our outstanding bonds in certain circumstances.

Our bondholders have the right to require us to redeem our outstanding bonds at par, in the event of a change of control of Tomkins plc and also in the event that our credit rating falls below investment grade as a result of us making either acquisitions or disposals that comprise more than 25% of the group’s operating profits in a twelve calendar month period.

If our bondholders were to exercise this redemption right in such circumstances, there is a risk that we would not be able to obtain replacement financing from other sources on reasonable terms or at all. The extent to which we would be able to obtain replacement financing would determine our ability to meet the ongoing financing needs of the business.

Our international operations expose us to the risk of fluctuations in currency exchange rates.

We have manufacturing facilities in, and sell products to, many countries worldwide. Consequently, our results can be affected by changes in the currency exchange rates. The principal currencies in which we trade are US dollars, Canadian dollars, Euros and pounds sterling. Currency exchange movements can give rise to the following risks:

Transaction risk – this arises where sales or purchases are denominated in foreign currencies and exchange rates can change between entering into a purchase or sale commitment and completing the transaction;

Translation risk – this arises where the currency in which the results of an entity are reported differs from the underlying currency in which business is transacted; and

Economic risk – this arises where the manufacturing cost base of a business is denominated in a currency different from the currency of the market into which the products are sold.

Short-term volatility and long-term realignments of currency exchange rates may have an adverse affect on our business, financial condition or results of operations.

Risks related to the securities market and ownership of ADSs and registered shares

Holders of ADSs may be restricted in their ability to exercise voting rights.

Holders of ADSs will generally have the right under the deposit agreement to instruct the Depositary to exercise their voting rights for the registered shares represented by ADSs.

At our request, the Depositary will mail to holders of ADSs any notice of any shareholders’ meeting received from us together with information explaining how to instruct the Depositary to exercise the voting rights of the securities represented by ADSs. If the Depositary receives voting instructions for a holder of ADSs on a timely basis, it is obligated to endeavor to vote the securities representing the holder’s ADSs in accordance with those voting instructions. The ability of the Depositary to carry out voting instructions, however, may be limited by practical limitations, such as time zone differences and delays in mailing.

ADS holders may be unable to participate in rights offerings and similar transactions in the future.

US securities laws may restrict the ability of US persons who hold ADSs to participate in certain rights offerings or share or warrant dividend alternatives which we may undertake in the future in the event we are unable to, or choose not to, register those securities under the US securities laws and are unable to rely on an exemption from registration under these laws. If we issue any securities of this nature in the future, we may issue such securities to the Depositary for the ADSs, which may sell those securities for the benefit of the holders of the ADSs. We cannot offer any assurance as to the value, if any, the Depositary would receive upon the sale of those securities.

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