Exhibit
      15.2

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The Company’s responses to the requirements of Form 20-F have been incorporated into this annual report by reference to the Company’s Report on Form 6-K dated December 12, 2005 which contains the Company’s Report and Accounts 2005.  Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, the information incorporated into this annual report by reference to such Form 6-K is attached as an exhibit hereto.

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|The BOC
          Group plcAnnual
    report and accounts 2005
|--------------------------------------------------------------
|                                                              

The Groups objectives
Over a sustained period, consistently to outperform our peers in terms of safety, customer service, revenue growth, earnings and cash generation.

We will be the employer of choice for all existing and future employees.

Who we areBOC
      employs over 30,000 people and earns a living in some 50 countries. Over
      80 per cent of our revenue comes from industrial gases and we serve customers
      in fields as diverse as electronics, chemicals and medical. We are organised
      into three lines of business and a specialist logistics business, Gist.









Report of the directors02
   
   Financial highlights04
   
   Chairmans
      statement06
   
   Chief
      executives review08
   
   Board of directors10
   
   Executive managementboard12
   
   Group five year record14
   
   Group profile22
   
   Strategy23
   
   Employees26
   
   Social, environmental andethical performance36
   
   Research, developmentand informationtechnology38
   
   Risk factors40
   
   Operating review55
   
   Financial review64
   
   Corporate governance72
   
   Report on remuneration




Financial statements84
   
   Responsibility of thedirectors85
   
   Report by theindependent auditors86
   
   Group profit and lossaccount87
   
   Group balance sheet88
   
   Group cash flowstatement89
   
   Total recognised gainsand losses89
   
   Movement inshareholders funds90
   
   Balance sheet ofThe BOC Group plc91
   
   Accounting policies93
   
   Notes to the financialstatements138
   
   Group undertakings




Shareholder information140
   
   Dividends140
   
   Nature of trading market141
   
   Analysis of shareholdings142
   
   Taxation144
   
   Financial calendar144
   
   Key contacts information146
   
   Cross reference toForm 20-F147
   
   Glossary of terms148
   
   Index







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| | 01
| | --
| |   

The BOC Group plc is a public limited company listed on the London and New York Stock Exchanges and registered in England. This is the report and accounts for the year ended 30 September
2005.It complies with UK regulations and incorporates the annual report on Form 20-F for the Securities and Exchange Commission to meet US regulations. An annual review and summary financial
statements for the year ended 30 September 2005 has been issued to all shareholders who have not elected to receive this report and accounts.



















Cautionary Statement
Forward-looking
information, within the meaning of section 27A of the US Securities Act of 1933,
as amended, and section 21E of the US Securities Exchange Act of 1934, as amended,
is
given throughout this annual report and accounts including in the chairmans
statement, the chief executives review, the Group profile, strategy, research,
development and information technology, the operating review and the financial
 review. Such forward-looking statements include, without limitation, those concerning
the companys operations, economic performance and financial condition,
namely (i) the companys strategies, (ii) the companys research and

development and information technology activities, (iii) the companys investments,
(iv) the commencement of operations of new plants and other facilities, (v) the
companys restructuring plans, (vi) efficiencies, including cost savings,

for the company resulting from business reviews and reorganisations, (vii) managements
view of the general development of, and competition in, the economies and markets
in which it does, or plans to do, business, (viii) managements view
of the competitiveness of its products and services, and (ix) the companys
liquidity, capital resources and capital expenditure. Although the company believes
that the expectations reflected in such forward-looking statements are reasonable,
no  assurance can be given that such expectations will prove to have been correct.
By their nature, forward-looking statements involve risks and uncertainties because
they relate to events and depend on circumstances that will or may occur in the

future. Accordingly, actual results could differ materially from those set out
in the forward-looking statements, as a result of a variety of factors, including
changes in economic conditions, changes in the level of capital investment by
the  semiconductor industry, success of business and operating initiatives and
restructuring objectives, customers strategies and stability, changes in
the regulatory environment, fluctuations in interest and exchange rates, the
outcome of  litigation, government actions and natural phenomena such as floods,
earthquakes and hurricanes. Other unknown or unpredictable factors could cause
the companys
actual results to differ materially from those in the forward-looking
statements.

Financial year
Throughout the
report and accounts, reference to 2005 in the text means the financial
year ended 30 September 2005. Similarly, references to other years, eg
2006,2004 and 2003, also mean the financial
years to 30 September unless stated otherwise.

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|08 | The BOC
          Group plcAnnual
    report and accounts 2005
|-- | --------------------------------------------------------------



|
|
|
|



Board of directors

Rob MargettsCBE(01)59, chairman.Appointed
chairman in January 2002. He is chairman of Legal & General Group plc, a
non-executive director of Anglo American plc and chairman of the Natural Environment
Research Council. Previously he was with ICI PLC for 31 years, becoming a main
board director in 1992 and vice chairman in 1998. He is a fellow of both the
Royal Academy of Engineering and the Institution of Chemical Engineers. Tony Isaac(02)64, chief

executive.Appointed an executive director in October 1994 and became chief executive in May 2000. He was previously finance director of Arjo Wiggins Appleton plc, which he joined shortly before the
demerger from BAT Industries p.l.c. in 1990. Prior to that he had been finance director of GEC Plessey Telecommunications Ltd since its formation in 1988. He is a non-executive director of International Power plc and Schlumberger Ltd. John Bevan(03)48, chief executive,
Process Gas Solutions.Appointed an executive director in December 2002. He joined BOC in 1978 in Australia and has held various positions in general management in Australia, Korea,Thailand and the UK. He was
formerly chief executive Asia, responsible for BOC's operations in 15 countries. He has a degree in commerce (marketing) from the University of New South Wales.


Andrew Bonfield(04)43, non-executive
director.Appointed in July 2003. He is chief financial officer of Bristol-Myers Squibb Company. He qualified as a chartered accountant in South Africa, working for Price Waterhouse, before joining
SmithKline Beecham in 1990 and rising to become chief financial officer in 1999. He joined BG Group plc in 2001 as executive director, finance, before assuming his current role at Bristol-Myers Squibb Company in September 2002. Guy Dawson(05)52, non-executive

director.Appointed in March 2004. He was chairman of European investment banking at Merrill Lynch until 2003. Before joining Merrill Lynch in 1995 he held senior positions in Morgan Grenfell and
Deutsche Bank. He is a founding partner in Tricorn, an independent corporate advisory business that he co-founded in 2003, and he is also a non-executive director of Boots Group PLC. Alan Ferguson(06)47, group
  finance
director.Appointed an executive director in September 2005. Prior to joining BOC as group finance director he held a similar role with Inchcape plc, which he joined in 1983 having qualified as a
chartered accountant with KPMG. He has a degree in business economics from Southampton University. Kent Masters(07)44, chief executive,Industrial
and Special Products.Appointed
an executive director in March 2005. He joined BOC in 1985 and has held positions
of increasing responsibility in engineering, marketing and general management,
most recently,  president, Process Gas Solutions, north America. He holds an
engineering degree from Georgia Institute of Technology and an MBA from New York
University.


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| | Board of
    directors | 09
| | ---------------------- | --



|
|
|
|



Rebecca McDonald(08)53, non-executive
    director.Appointed in July 2005. She is president, gas and power, for BHP Billiton and is a member of the BHP Billiton executive committee. She is a director of Granite Construction Company in
California. Matthew Miau(09)59, non-executive

director.Appointed in January 2002. He is chairman of MiTAC-Synnex Group, one of Taiwan's leading high-tech industrial groups. He is also a Convenor of Civil Advisory Committee of National
Information and Communications Initiatives (NICI) and on the Board of Directors of the Institute for Information Industry (III),Taiwan. He obtained a BS in electronic engineering and computer science from U.C. Berkeley, an MBA from Santa Clara
University and holds an honorary doctorate degree from the National Chiao Tung University,Taiwan. Sir Christopher
ODonnell(10)59, non-executive
director.Appointed
in March 2001. He is chief executive of Smith & Nephew plc. Previously he
held senior positions with Davy Ashmore, Vickers Limited and C R Bard Inc. He
has an honours degree in mechanical engineering from Imperial College, London
and an MBA from the London Business School. He is a chartered engineer and a
member of the Institution of Mechanical Engineers.


Anne QuinnCBE(11)54, non-executive
director.Appointed in May 2004. She is group vice president of BP's gas, power and renewables business. Previously she was managing director of BP Gas Marketing Ltd, managing director of Alliance
Gas Ltd and an executive with Standard Oil of Ohio. She has a Bachelor of Commerce degree from Auckland University and a Masters in management science from the Massachusetts Institute of Technology. She serves on the President's Advisory Committee
to the Sloan School, Massachusetts Institute of Technology. Dr Raj Rajagopal(12)52, chief
executive, BOC Edwards.Appointed
an executive director in July 2000. He joined BOC in 1981 and has held several
positions in BOC Edwards including manufacturing systems manager, director of
manufacturing and  managing director, being appointed chief executive in 1998.
He was appointed a non-executive director of Foseco plc in May 2005 and joined
the Council of Cranfield University in July 2005. He was appointed to The Council
of Science and Technology in
March 2004 and has chaired the Institution of Electrical Engineers Manufacturing
Sector Panel since 2003. He is a Fellow of the Royal Academy of Engineers as
well as the Institution of Mechanical Engineers, the Institution of Electrical
Engineers  and the Chartered Management Institute. He has an MSc in manufacturing
technology and a PhD in mechanical engineering both from Manchester University
and an honorary degree from Cranfield University received in May 2004. He was
awarded the Sir Eric
Mensforth Manufacturing Gold Medal in March 2003. He resigned as a non-executive
director of FSI International Inc in May 2005 and resigned from the board of
the business support organisation, Sussex Enterprise, in February 2005.  Board
    committeesAudit committeeRemuneration committeeNomination committeePensions committeeExecutive management boardInvestment committee


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|10 | The BOC
          Group plcAnnual
          report and accounts 2005
|-- | --------------------------------------------------------------------



|
|
|
|



Executive management board

John Bevan(01)48, chief executive,
Process
Gas Solutions since January 2003.Appointed to the executive management board in June 2000. See page 08 for biographical details. James Cullens(02)42, group human
resources director since April 2005.Appointed
to the executive management board in April 2005. He joined BOC in July 2003 and
most recently was human resources director for BOC Edwards. Prior to joining
BOC, he held a  variety of senior, international HR roles in organisations including
Mars Incorporated, Asda and PA Consulting Group. He has an MA from Cambridge
University, an MLitt from Otago University, New Zealand and an MSc from Thames
Valley University. Nick Deeming(03)51, group legal
director and company secretary since May 2001.Appointed to the executive management board in May 2001. He has over 18 years in-house counsel experience, including Schlumberger SEMA and Axa PPP Healthcare, specialising in corporate
and commercial law. He has a degree in law from Guildhall University, an MBA from Cranfield University and qualified as a solicitor in 1980.


Stephen Dempsey(04)54, group director,
corporate
relations since February 1999.Appointed to the executive management board in October 1999. He joined BOC in 1990 as director of marketing services for the UK gases business and has held various communications roles in
the Group. He has an MA in geography from Oxford University and an MBA from Cranfield University. Peter Dew(05)45, group director,
information
management since February 1998.Appointed
to the executive management board in October 1999. He joined BOC in 1986. He
has held information technology roles in the Groups businesses in South Africa, the UK and
most recently as information management director for the Groups businesses
in Asia/Pacific.


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| |  | Executive
    management board | 11
| |  | ------------------------------ | --









Alan Ferguson(06)
  47, group finance director
  since September 2005.Appointed to the executive management board in September 2005. See page 08 for biographical details. Tony Isaac(07)
64, chief executive since
May 2000.Appointed to the executive management board in July 1996. See page 08 for biographical details. Kent Masters(08)
44, chief executive,Industrial
and Special Products since March 2005.
Appointed to the executive management board in December 2002. See page 08 for biographical details.


Mark Nichols(09)
  48, group director,business
  development since January 2004.
  Appointed to the executive management board in January 2004. He joined BOC in February 1988 and held senior financial roles in the UK and US before moving into general management, most
recently as managing director, Industrial and Special Products, east Asia.
  Before joining BOC he worked for Total Oil and Merck. He is a Fellow of the Association of Chartered Certified Accountants. Dr Raj Rajagopal(10)
52, chief executive,BOC
Edwards since June 1998.Appointed to the executive management board in July 1996. See page 09 for biographical details.




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|12                         | The
          BOC Group plcAnnual
    report and accounts 2005
|-------------------------- | --------------------------------------------------------------
|Group five
    year record
|                          




2001
   
   2002
   
   2003
   
   2004
   
   2005Profit and loss
   
   £ million
   
   £ million
   
   £ million
   
   £ million
   
   £ millionTurnover1
   
   3,772.9
   
   3,657.7
   
   3,718.3
   
   3,885.4
   
   3,754.7Total operating profit beforeexceptional items2
   
   530.6
   
   500.1
   
   505.6
   
   576.9
   
   564.2Exceptional items
   
   (108.3
   )
   (74.5
   )
   (67.0
   )
   (17.4
   )
   (20.7
   )Total operating profit2
   
   422.3
   
   425.6
   
   438.6
   
   559.5
   
   543.5Profit/(loss) on termination/disposalof businesses
   
   
   
   (20.2
   )
   
   
   (79.5
   )
   98.1Profit on disposal of fixed assets
   
   3.6
   
   
   
   
   
   4.9
   
   10.5Profit before interest
   
   425.9
   
   405.4
   
   438.6
   
   484.9
   
   652.1Interest on net debt
   
   (123.4
   )
   (103.1
   )
   (96.1
   )
   (88.4
   )
   (76.7
   )Interest on pension scheme liabilities
   
   (107.2
   )
   (106.1
   )
   (110.2
   )
   (117.4
   )
   (128.9
   )Expected return on pension scheme assets
   
   166.9
   
   139.1
   
   119.6
   
   133.2
   
   147.1Other net financing income
   
   59.7
   
   33.0
   
   9.4
   
   15.8
   
   18.2Profit before tax
   
   362.2
   
   335.3
   
   351.9
   
   412.3
   
   593.6Tax on profit on ordinary activities
   
   (104.6
   )
   (106.2
   )
   (96.4
   )
   (101.7
   )
   (159.9
   )Profit after tax
   
   257.6
   
   229.1
   
   255.5
   
   310.6
   
   433.7Minority interests
   
   (33.5
   )
   (26.2
   )
   (36.4
   )
   (46.6
   )
   (66.7
   )Profit for the financial year
   
   224.1
   
   202.9
   
   219.1
   
   264.0
   
   367.0Earnings per 25p Ordinary shareBasic: on profit for the financial year
   
   46.0
   p
   41.4
   p
   44.5
   p
   53.5
   p
   74.1
   p before exceptional items
   
   57.5
   p
   55.9
   p
   52.9
   p
   63.2
   p
   67.5
   pDiluted: on profit for the financial year
   
   45.9
   p
   41.2
   p
   44.5
   p
   53.5
   p
   73.9
   p before exceptional items
   
   57.3
   p
   55.7
   p
   52.9
   p
   63.1
   p
   67.3
   pOrdinary dividends per share3Actual
   
   37.0
   p
   38.0
   p
   39.0
   p
   40.0
   p
   41.2
   pNumber of fully paid Ordinary sharesin issue at the year end (million)
   
   494.4
   
   497.3
   
   497.7
   
   498.8
   
   502.5 1.
   Subsidiary undertakings only.2.
   Including share of operating profit of joint ventures and associates.3.
   Dividends paid in the calendar year.4.
   Excludes exceptional items. A fuller explanation of the term adjusted, and the reasons for presenting such a measure, is given in the operating review on
pages 40 and 41. A reconciliation of adjusted profit before tax to profit before tax is given in the profit and loss account on page 86. A reconciliation of adjusted return on capital employed to return on capital employed is given in the operating
review on page 41. All turnover and operating profit arose from continuing operations.




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| |  | Group
    five year record | 13
| |  | -------------------------- | --






2001
   
   2002
   
   2003
   
   2004
   
   2005Balance sheet
   
   £ million
   
   £ million
   
   £ million
   
   £ million
   
   £ millionFixed assets intangible assets
   
   48.1
   
   150.7
   
   206.1
   
   174.9
   
   142.6 tangible assets
   
   3,168.6
   
   3,027.4
   
   2,913.4
   
   2,618.4
   
   2,639.9 joint ventures, associates and otherinvestments
   
   390.3
   
   426.1
   
   608.6
   
   548.2
   
   613.9Working capital(excluding bank balances and short-term loans)
   
   257.0
   
   203.1
   
   220.1
   
   154.5
   
   151.8Deferred tax provisions
   
   (294.3
   )
   (291.8
   )
   (279.2
   )
   (253.0
   )
   (241.9
   )Other non current liabilities and provisions
   
   (184.3
   )
   (173.7
   )
   (145.8
   )
   (126.9
   )
   (149.7
   )Net borrowings and finance leases
   
   (1,272.1
   )
   (1,325.6
   )
   (1,368.1
   )
   (962.4
   )
   (839.7
   )Net assets excluding pension assetsand liabilities
   
   2,113.3
   
   2,016.2
   
   2,155.1
   
   2,153.7
   
   2,316.9Pension assets5
   
   107.0
   
   54.3
   
   50.7
   
   68.9
   
   88.7Pension liabilities5
   
   (56.0
   )
   (311.0
   )
   (341.8
   )
   (344.5
   )
   (352.5
   )Net assets including pension assetsand liabilities
   
   2,164.3
   
   1,759.5
   
   1,864.0
   
   1,878.1
   
   2,053.1Shareholders capital and reserves
   
   2,026.7
   
   1,641.6
   
   1,686.7
   
   1,675.3
   
   1,942.0Minority shareholders interests
   
   137.6
   
   117.9
   
   177.3
   
   202.8
   
   111.1Total capital and reserves
   
   2,164.3
   
   1,759.5
   
   1,864.0
   
   1,878.1
   
   2,053.1Other selected financial informationCapital employed6Total capital and reserves
   
   2,164.3
   
   1,759.5
   
   1,864.0
   
   1,878.1
   
   2,053.1Non current liabilities and provisions
   
   478.6
   
   465.5
   
   425.0
   
   379.9
   
   391.6Net borrowings and finance leases7
   
   1,272.1
   
   1,325.6
   
   1,368.1
   
   962.4
   
   839.73,915.0
   
   3,550.6
   
   3,657.1
   
   3,220.4
   
   3,284.4Total assets
   
   5,000.5
   
   4,904.9
   
   4,883.7
   
   4,665.7
   
   4,726.2Long-term liabilities and provisions
   
   1,554.5
   
   1,897.5
   
   1,851.5
   
   1,652.9
   
   1,515.6Capital expenditure1
   
   352.6
   
   354.3
   
   281.2
   
   256.1
   
   397.3Depreciation and amortisation1
   
   329.5
   
   330.9
   
   333.4
   
   324.0
   
   301.9EmployeesUK
   
   10,597
   
   11,266
   
   10,414
   
   10,682
   
   11,014Overseas
   
   32,574
   
   35,014
   
   34,093
   
   32,701
   
   19,558Continuing operations
   
   43,171
   
   46,280
   
   44,507
   
   43,383
   
   30,572RatiosReturn on capital employed8
   
   10.4%
   
   10.6%
   
   10.9%
   
   14.9%
   
   15.6%Adjusted return on capital employed4, 9
   
   13.1%
   
   12.5%
   
   12.6%
   
   15.4%
   
   16.2%Net debt/capital employed
   
   32.5%
   
   37.3%
   
   37.4%
   
   29.9%
   
   25.6%Net debt/equity
   
   58.8%
   
   75.3%
   
   73.4%
   
   51.2%
   
   40.9% 5.
   Pension assets represents the excess of pension assets over pension liabilities in countries where pension assets exceed pension liabilities. Pension liabilities
represents the excess of pension liabilities over pension assets in countries where pension liabilities exceed pension assets.6.
   As defined in note 1 b) to the financial statements.7.
   Analysed for 2005 and 2004 in note 20 to the financial statements.8.
   Operating profit as a percentage of the average capital employed excluding net pension liabilities. The average is calculated on a monthly basis.9.
   Operating profit before exceptional items as a percentage of the average capital employed excluding net pension liabilities. The average is calculated on a monthly
basis.




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|14                | The BOC
          Group plcAnnual
    report and accounts 2005
|----------------- | --------------------------------------------------------------
|Group
    profile



IntroductionThe
    BOC Group began its business life over 100 years ago as the Brins Oxygen
    Company. The company was incorporated in England in 1886 and adopted its present
    name on 1 March
1982.     A
technology to extract oxygen from the air in commercial quantities had just been
developed and in 1886 the Brin brothers started production at a factory in Westminster,
London. Two uses had already been found for oxygen. One was to intensify limelight,
which was then used in theatres. The other was to assist patients breathing
during and after surgery. New technology was soon developed that allowed  air
to be separated into all its major components - nitrogen, oxygen and argon. By
1960, industrial gases were in widespread use and BOCs
business was firmly established. Tonnage plants were supplying steelworks with
oxygen and the customer base had been broadened to extend from metal cutting
and welding to food and medicine. The business had also spread overseas with subsidiaries
or associated companies as far away as Australia and South Africa. During the
1980s, BOCs
South African subsidiary began to invest in private hospitals. This diversification
was the basis of the Afrox hospitals segment.     BOC acquired the vacuum equipment company Edwards High Vacuum International Limited in 1968 and this formed the basis of what was to become the BOC Edwards
line of business today.     The
BOC Distribution Services business (now called Gist) was first established in
1970, initially providing a chilled food distribution service for Marks & Spencer and relying upon distribution skills and liquid nitrogen chilling technology, acquired as a result of BOCs
involvement in gases.     In
1978, BOC completed the acquisition of Airco Inc in America, a predominantly
gases business that doubled the Groups size and brought BOC for the
first time into the US gases market. In the period from 1970 to 1990 The BOC
Group significantly increased its presence in the Asia/Pacific region through
participation in several joint ventures or associated companies. BOC established
strong market positions in Thailand, Indonesia,Taiwan, the Philippines, China
and Korea.     An
investment in 1982 gave BOC effective management control of the Japanese gases
company Osaka Sanso Kogyo KK (OSK). BOCs holding in OSK was raised to
97 per cent before BOC and Air Liquide merged their industrial and medical gases businesses in Japan in January 2003. BOCs
subsidiary in Japan has retained a 45 per cent interest in the joint venture
company, which is called Japan Air Gases
Ltd.     In the period from 1998 to 2001, BOC increased investments in its gases companies in Thailand, Indonesia and the Philippines by acquiring the interests of
joint venture partners or minority shareholders.     The
BOC Group has an international portfolio of companies operating and reporting
as three lines of business. These are Process Gas Solutions (PGS),  Industrial
and Special Products (ISP) and BOC Edwards. In addition two separately managed
specialist businesses,Afrox hospitals and Gist, are reported as business segments.
Until a disposal in March 2005, results for Afrox hospitals were fully
consolidated. Since then BOC has reported its 20 per cent share of this business.     BOC Process Plants was combined with Linde Engineering in the US with effect from September 2002. BOC retains an interest in the manufacture of industrial
gas equipment through its Cryostar business based in France. Cryostar makes specialist cryogenic pumps and expansion turbines that are used by most manufacturers of industrial gas plant. In recent years Cryostar has also developed a strong position
in the market for shipboard compressors and heat exchangers used aboard liquefied natural gas (LNG) tankers. Management believes that Cryostar is the leading manufacturer of its product range worldwide.     The
main exports of the Group in 2005 were special products from the UK, helium from
the US and vacuum equipment and semiconductor manufacturing equipment  from the
UK, the US and Japan. Trade between Group undertakings is conducted at fair market
prices. Analysis of results by business(including share of joint ventures and associates) Turnover
   
   Operating profit
   
   Adjusted operating profit£ million
   
   %
   
   £ million
   
   %
   
   £ million
   
   %Process Gas Solutions
   
   1,466.3
   
   32
   
   207.2
   
   38
   
   207.2
   
   37Industrial and Special Products
   
   1,721.7
   
   37
   
   289.4
   
   53
   
   289.4
   
   51BOC Edwards
   
   826.0
   
   18
   
   17.4
   
   3
   
   38.1
   
   7Afrox hospitals
   
   275.1
   
   6
   
   37.2
   
   7
   
   37.2
   
   7Gist
   
   315.9
   
   7
   
   24.5
   
   5
   
   24.5
   
   4Corporate
   
   
   
   
   
   (32.2
   )
   (6
   )
   (32.2
   )
   (6
   )4,605.0
   
   100
   
   543.5
   
   100
   
   564.2
   
   100Adjusted
      operating profit excludes exceptional items. See also pages 40 and 41 of
    the operating review. The BOC Group contributes to the economies of some 50 countries throughout the world. The UK is the largest single source of sales revenue for the Groups products and services,
followed by the US. Other major geographic areas for the Group are Australia, South Africa, Japan and other markets in the Asia/Pacific region. The business therefore operates from a broad geographical base with local manufacturing in most of the key
overseas markets.


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| | Group
    profile | 15
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Analysis of results by region(including share of joint ventures and associates) Turnover
   
   Operating profit
   
   Adjusted operating profit£ million
   
   %
   
   £ million
   
   %
   
   £ million
   
   %Europe
   
   1,300.8
   
   28
   
   138.6
   
   25
   
   143.7
   
   25Americas
   
   1,222.1
   
   27
   
   84.4
   
   16
   
   100.0
   
   18Africa
   
   586.0
   
   13
   
   91.3
   
   17
   
   91.3
   
   16Asia/Pacific
   
   1,496.1
   
   32
   
   229.2
   
   42
   
   229.2
   
   414,605.0
   
   100
   
   543.5
   
   100
   
   564.2
   
   100Adjusted
      operating profit excludes exceptional items. See also pages 40 and 41 of
    the operating review. The UK accounts for the largest part of the Groups activities in Europe but BOC has significant gases subsidiaries in Ireland and Poland, vacuum products manufacturing in France and
a pharmaceutical packaging machinery operation in the Netherlands.     Gist,
BOCs supply chain solutions business, operates principally in the UK but
also has operations in other countries.    Subsidiaries
in the US are engaged in the Groups three lines of business. The Groups
other principal subsidiaries, joint ventures and associates in the Americas are
located in Canada,Venezuela, Colombia, Chile and Mexico.     The
largest Group subsidiary in Africa is African Oxygen Limited (Afrox), a South
African public company in which the Group owns 56 per cent of the  equity. The
largest shareholder, other than BOC, holds less than 15 per cent of the equity.
Afrox, primarily through wholly-owned subsidiaries, is engaged in the manufacture
and sale of products within the PGS and ISP lines of business. Afrox also has

a 20 per cent interest in private hospitals, clinics and other health care services
in southern Africa.There
are other Group or Afrox subsidiary companies in Africa located in Botswana,
Kenya, Malawi,Mozambique,
N amibia, Nigeria, Swaziland,Tanzania, Uganda, Zambia and Zimbabwe. These companies
are engaged primarily in the manufacture and/or sale of products in the ISP line
of
business.     BOC
has businesses in most of the Asia/Pacific markets, including Japan, Korea,Thailand,Taiwan,
Indonesia, Malaysia, Singapore, China, the Philippines, India, Pakistan, Bangladesh,Australia
and New Zealand. In Australia, the Groups business is conducted by BOC
Limited. This company, as well as its subsidiaries, joint ventures and associates,
is engaged in the manufacture and sale of products in the PGS and ISP lines of
business. BOC participates in the liquefied petroleum gas market in Australia
through a 50 per cent shareholding in Elgas Limited. Elsewhere in the Pacific
region, the Group conducts its business through subsidiaries,
joint ventures and associated companies. Management organisationBOCs management structure is based on three global lines of business and, throughout the period 2003 to 2005, on two specialist businesses. Each line of business serves a clearly
defined type of customer and each pursues its own strategy for growth and performance at a local level. The organisation is designed to maximise BOCs
global as well as local strengths. The lines of business have global responsibility
to set strategy and prioritise investment. They include operational business
units and these local units are responsible to the Group chief executive for
delivering financial, safety and operational performance. The business units contribute
to the
development of the strategies of the lines of business and customise and implement
them in local markets. The business unit heads collaborate in order to share best
practice and to maximise growth and profit opportunities wherever they may
appear.     Process
Gas Solutions (PGS) manages all aspects of BOCs business with customers
requiring bulk supplies of industrial gases from on-site plants or by pipeline
as well as deliveries of liquefied gases. Typical customers are found in the
oil and chemicals, food and beverage, metals, and glass sectors all round the
world.
Marketing, business development and the execution of investments to provide
customer specific solutions for the supply of industrial gases are handled by
Process Systems, which forms part of PGS.     Industrial
and Special Products (ISP) covers BOCs business with customers in the fabrication,
medical and leisure sectors as well as the special products and liquefied petroleum
gases businesses.     BOC Edwards embraces all aspects of business with semiconductor industry customers worldwide including the supply of bulk gases and electronic materials,
vacuum and abatement technology, chemical management systems and semiconductor-related services. BOC Edwards also serves general vacuum markets around the world and manufactures pharmaceutical freeze-drying and packaging machinery.     The
segment reported as Afrox hospitals operated through Afrox Healthcare Limited
up to the end of March 2005. It owned and managed private hospitals and clinics
in southern Africa. BOCs majority-owned subsidiary, African Oxygen Limited
(Afrox), held 69 per cent of Afrox Healthcare Limited (AHealth) when the company
was sold to a consortium led by two major black economic empowerment investors
in March 2005. Afrox has retained a significant interest in the hospitals business
through a 20 per cent holding in the new company.     In
2001, BOC Distribution Services was re-named Gist to reflect the changing nature
of its business. Gist operates as a separate business unit outside the lines
of business structure. It remains focused on developing business with major customers,
including Marks & Spencer, and has developed capability in supply chain consultancy
and end-to-end supply chain solutions.


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|16 | The BOC
          Group plcAnnual
    report and accounts 2005 | Group
    profile
|-- | -------------------------------------------------------------- | -----------------



Corporate developmentOver the last three years BOC has continued to invest in its core businesses at the same time as divesting assets and businesses that were no longer consistent with its strategy.     In October 2002, BOC acquired Environmental Management Corporation (EMC), a privately owned water services company based in St Louis, Missouri. EMC manages
water and wastewater treatment facilities for both industrial and local municipal customers around the US. EMC forms part of the PGS line of business, which is expanding the range of solutions offered to its industrial customer base.     BOC
and Air Liquide merged their industrial and medical gases businesses in Japan
in January 2003 and BOCs subsidiary in Japan has retained a 45 per
cent interest in the combined company called Japan Air Gases Ltd.     At the end of January 2003, BOC acquired the partial oxidation syngas plant at Clear Lake,Texas, from Celanese. Under the agreement BOC fulfils a significant
proportion of the industrial gas requirements for the Celanese chemical facility at Clear Lake.     In March 2003 BOC announced an agreement to purchase the Canadian packaged gas and related welding equipment business of Air Products. The acquisition was
completed in April 2003 following approval from the Canadian regulatory authority.     In June 2003, BOC announced an agreement to obtain half the output of a new helium extraction facility to be constructed in Qatar. Deliveries from the new
source are now scheduled to commence during 2006.     In
May 2004 BOC agreed to buy Duke Energys 30 per cent ownership interest in the Cantarell joint venture company for US$59.7 million in cash. This
increased BOCs overall stake to 65 per cent on completion in September
2004. This company supplies Pemex with nitrogen for the pressurisation of its
oilfields in the Gulf of Mexico.     BOC
completed the disposal of the packaged gas part of its US ISP business to Airgas
Inc on 30 July 2004. The initial consideration received was US$175 million in
cash and a final payment of US$20 million that had been subject to performance
conditions was recognised in 2005. These funds were received in November 2005.
All packaged gases and associated hardgoods were included in the sale. This
comprised compressed industrial, speciality (excluding electronic) and medical
gases in the US, sold through BOC retail and distributor channels. The sale did
not include BOCs bulk liquid helium, bulk medical gases and distributor
businesses.     In
October 2004, BOC purchased a 50 per cent holding in Asia Union Electronic Chemical
Corporation (AUECC). This acquisition expanded BOC Edwards electronic materials
offering to include the purification, blending, packaging and distribution of
wet chemicals for flat panel display, semiconductor and solar cell manufacturers
throughout Asia.     In December 2004, BOC sold its shares in Unique Gas and Petrochemicals thereby divesting interests in the LPG and bulk ammonia businesses in Thailand but the
cylinder and aqueous ammonia business was retained.     At
the end of January 2005, BOC acquired Calor Gas Limiteds UK aerosol propellants business. This includes the sales, marketing and distribution of bulk
and packaged propane, isobutene and butane blends in the UK. The acquisition also included Calors
CARE range of hydrocarbon refrigerants.     The
segment reported as Afrox hospitals operated through Afrox Healthcare Limited
up to the end of March 2005. It owned and managed private hospitals and clinics
in southern Africa. BOCs majority-owned subsidiary, African Oxygen Limited
(Afrox), held 69 per cent of Afrox Healthcare Limited (AHealth) when the company
was sold to a consortium led by two major black economic empowerment investors
in March 2005. Afrox has retained a significant interest in the hospitals business
through a 20 per cent holding in the new company.     In
September2005, Gist acquired G Van Dongen Holding BV, a European temperature-controlled
transport operator. The business, which had an annual turnover of some 46 million
euros, expands Gists existing primary food business into continental Europe
by providing fresh chill and ambient transport services to food manufacturers
in the Netherlands, Spain, Germany, Portugal and France. Industrial gasesThe BOC Group is one of the major producers of industrial gases in the world. Its products include the atmospheric gases (nitrogen, oxygen and argon) produced by air separation plants as
well as hydrogen, carbon monoxide and syngas (a mixture of hydrogen and carbon monoxide) made by technologies including steam-reforming or partial oxidation of hydrocarbons. The Group also markets carbon dioxide, helium and liquefied petroleum
gas. These are generally derived as by-products from chemical processes or from natural sources and are also purchased from other producers. In addition, the Group markets dissolved acetylene and a wide range of special gases, medical gases, gas
mixtures and gaseous chemicals. Industry structure
and consolidationThe
industrial gases business is capital-intensive, with increasing demand, together
 with economies of scale, leading to the need for large production units and
distribution networks. The need for fixed asset investments, the trend towards
global customers and the benefits from the transfer of applications technology
worldwide have
resulted in the business being handled by a relatively small number of companies
internationally.     One
or more of the other major international producers compete in each of the industrial
gases markets served by the Group, and in many of the markets there are smaller
local producers as well. International competitors include Air Liquide, Praxair,
Air Products and Chemicals, Linde and Nippon Sanso. The world market for gases
and
related products is estimated to be some £25 billion a year.


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|Group
    profile |  | 17
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Principal industrial
gas productsNitrogen
possesses two key characteristics that make it the worlds most widely used
 and versatile industrial gas. Nitrogen is almost inert and when liquefied it
is intensely cold. This makes liquid nitrogen a highly effective, versatile and
non-polluting agent for freezing and chilling.     Under
normal conditions nitrogen is chemically inactive. This makes it an important
purging and blanketing gas in the chemical and refining industry as well  as
in the electronics industry.     Oxygen, in contrast to nitrogen, is useful for its reactivity. It supports combustion and it supports life. Oxygen has been used in welding and medicine for
over 100 years and in steel production since the 1950s.     Iron
and steel producers use oxygen to accelerate melting and to improve metal quality
during the refining process. It is also used by the oil and chemicals  industries
and many others for a variety of oxidation processes. Mixed with fuel gases,
oxygen provides a heat source for many welding, cutting and metal fabrication
processes.     Argon makes up less than one per cent of the atmosphere but it is the most abundant truly inert gas. It is used to provide a shielding atmosphere in welding,
metal fabrication, aluminium processing, microelectronics, glass coating, advanced ceramics and other industrial processes. It is also used in the steel industry, principally in the production of stainless steel.     Hydrogen is typically produced by steam reforming or partial oxidation of natural gas, petroleum gas, or liquid or solid hydrocarbon feedstocks. Hydrogen may
also be recovered from by-products purchased by BOC from external suppliers. Hydrogen is used primarily in the oil and chemicals industries for applications aimed at upgrading crude oil through hydrocracking to form lighter fractions and to remove
sulphur in the production of cleaner fuels. The chemicals industry also uses hydrogen where it is required as an active ingredient in many large-scale processes.     Helium
is extracted from natural gas deposits. Only a few sources in the world contain
a sufficient proportion of helium to justify its separation. The
Groups supplies now come from the US, Poland and Russia and are secured
by long-term contracts. In June 2003, BOC announced an agreement to obtain half
the output from a new helium extraction facility to be constructed in Qatar.
Deliveries from this new source are now expected to begin in 2006. Due to its
high value, helium is the only major industrial gas to be extensively traded
internationally. Helium is used in welding, leak detection, hospital MRI scanners
and in the production
of optical fibres. Helium gas mixtures are used in balloons.     Carbon
dioxide supplied by BOC is obtained as a by-product from other companies manufacturing
processes, from natural sources or recovered in the generation process for hydrogen
or syngas and put to constructive use. Solid carbon dioxide is, like liquid nitrogen,
used for chilling and freezing in the food industry. As a gas it is used to carbonate
and dispense beverages of all kinds.     Acetylene is normally supplied in cylinders and used together with oxygen in metal cutting and welding applications. BOC is a major manufacturer of dissolved
acetylene.     Liquefied petroleum gas (LPG) is a fuel gas with a wide variety of domestic, industrial and transport applications. BOC is a major distributor of LPG in
South Africa, and its joint venture company Elgas Limited is a major distributor in Australia. BOC has smaller market positions in several other countries. Production of industrial
      gasesOxygen
      was first extracted from the atmosphere by a chemical process. This was
      superseded over  80 years ago by the cryogenic (low temperature) process
      involving the liquefaction and distillation of air. The cryogenic process
      is still by far the most widely used, but non-cryogenic techniques (pressure
      swing adsorption and membrane diffusion),
  which were first developed during the 1970s, are becoming increasingly significant
      for smaller or less demanding on-site applications.     Cryogenic
  air separation is a mature and stable technology, although incremental technical
  advances are still yielding improvements in capital cost, operating cost, ease
  of operation and reliability. The only significant raw material,
  apart from the air itself, is electricity, which is used in large quantities
  to drive compressors, pumps and other equipment. The production process in
   modern air separation plants is highly automated, and remote operation of
  BOCs
plants from control centres is becoming increasingly common.     The production of hydrogen and syngas uses steam reforming or partial oxidation of hydrocarbon feedstocks such as natural gas, petroleum or coal to separate
the hydrogen and carbon compounds. The choice of feedstock is related to their prices in local markets. Distribution of industrial
gasesIndustrial
gases may be supplied to customers in a variety of ways; through pipelines from
 on-site or nearby cryogenic or non-cryogenic plants, by deliveries of liquefied
gases in road or rail tankers, in portable cryogenic containers or in cylinders
(also called compressed or packaged gases).     Distribution
is an important competitive factor in the industrial gases business and the methods
of distribution vary according to the nature of the products themselves and the
customers volume requirements. Most gases have to be stored and distributed
either under great pressure, which requires them to be carried in heavy and bulky
cylinders, or at extremely low temperatures in specially insulated  tankers,
which limits how far they can be transported before carriage costs become unacceptable.
Pipeline delivery involves high capital costs and the routing is inflexible.
As a result, there is little international trade in industrial gases.
Production has to occur in or near the market being served and there is a trend
towards production at customers own
sites. Business segments
The BOC Group reports financial results for the three lines of business and for Afrox hospitals and Gist separately.


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|18 | The BOC
          Group plcAnnual
    report and accounts 2005 | Group profile
|-- | -------------------------------------------------------------- | -------------

Process Gas Solutions (PGS)
  This line of
  business covers BOCs business with larger-scale industrial customers
  worldwide, typically in the oil and chemicals, food and beverage, metals, and
  glass sectors. Gases and services are supplied as part of customer-specific
  solutions that create the most value for customers at the lowest cost to BOC. These
  range from supply by pipeline or from dedicated on-site plants to the largest
  users, to supply by road tanker
in liquefied form to others.     Tonnage
  (pipeline) customers are usually supplied on the basis of long-term contracts,
  typically containing a fixed facility charge together with a variable  charge
  for product supplied in excess of a set minimum quantity. Revenues from these
  contracts thus have a measure of stability with respect to changes in demand
  for product. Tonnage plants are often built to produce merchant gases in addition
  to
those required by the tonnage customer and these gases can be sold to other customers.
  The BOC Group has substantial positions in the tonnage markets of the UK, the
  US,Australia, South Africa and Asia as well as in some smaller markets. The
  products  supplied to tonnage customers have traditionally been the atmospheric
  gases oxygen, nitrogen and argon. More recently, hydrogen and syngas are becoming
  significant tonnage products as are associated utilities including steam and
  power.     The
delivery of liquefied gases by road or rail to the customers site is normally
limited by transport costs to a radius of about 200 miles. Product for this market
is supplied either from merchant plants or from tonnage plants incorporating
liquefiers. Larger users are typically supplied with product in liquid form delivered
in cryogenic tankers into special storage vessels installed at
customer premises. Tankers and vessels are often BOC Group owned. Liquefied gases
are usually supplied on the basis of contracts with terms of one to five years.
Revenues are generally based upon the actual quantity of gas consumed, with an
additional fixed charge for the use of storage equipment.     The growth of sales and profit in this line of business is driven by investment in new production facilities. Such investment is predominantly the result of
opportunities to satisfy long-term supply contracts with one or more heavy industrial customers for each plant.     Marketing, business development and the execution of investments to provide customer-specific solutions for the supply of industrial gases are handled by
Process Systems, which forms part of PGS. Business developmentIn October 2002, BOC acquired Environmental Management Corporation (EMC), a privately owned water
services company based in St Louis, Missouri. EMC manages water and wastewater treatment facilities for both industrial and local municipal customers around the US. EMCs management services extend to steam systems, cold and chilled water
systems and wastewater treatment. Customers include small to medium-sized municipalities and industrial customers, many of which are in the food sector. EMC forms part of the PGS line of business and BOCs strategy is to expand the range of
solutions offered to its industrial customer base.      

At
the end of January 2003, BOC acquired the partial oxidation syngas plant at Clear
Lake,Texas, from Celanese. Under the agreement BOC fulfils a significant proportion
of the industrial gas requirements for the Celanese chemical facility at Clear
Lake. The Celanese facility is located on the Houston ship canal, and includes
a world scale vinyl acetate monomer plant and the worlds largest acetic
acid plant. These require large quantities of oxygen and nitrogen as well as
carbon
monoxide. 
     A new hydrogen and carbon monoxide (HyCO) plant supplying the Thai Polycarbonate Company for the manufacture of plastic resins began production in
2003.      In
October 2003, BOC commissioned a new hydrogen plant supplying Citgos oil
refinery at Lemont, Illinois. The hydrogen is used in the removal of sulphur
to produce clean fuels.      In the same month BOC, and its joint venture partners, announced plans to invest over US$100 million in developing three schemes in China, at Taiyuan, Suzhou
and in the Pearl River region.      

BOC-TISCO,
the joint venture between BOC Gases and Taiyuan Iron and Steel Corporation (TISCO),
has under construction two new air separation units (ASUs) to supply 1,400 tonnes
a day of oxygen each to TISCOs plant in Shanxi province in north-central
China. The new ASUs represent an investment of US$82 million and they are scheduled
to begin coming on stream during 2006. This investment is in  response to strong
demand for stainless steel in China and will support TISCOs
vigorous expansion plans. 
     Pearl
River Gases (PRG), a joint venture between Guangzhou Iron & Steel (GIS) and
BOCs joint venture, Hong Kong Oxygen, invested in two further
ASUs during 2005. These add some 400 tonnes a day of oxygen capacity to
support the expansion of steelmaking in southern China. 
     Also
in 2005, BOCs wholly owned subsidiaries in Suzhou constructed new on-site
supply scheme pipelines to meet increasing demand for industrial gases from key
customers in Suzhou Industrial Park and the Suzhou New District Industrial Park.      
A
new hydrogen plant to supply both a Sunoco refinery, and a nearby BP refinery
is under construction at Toledo, Ohio. The hydrogen will be used by both BP and
Sunoco in the production of ultra-low sulphur gasoline and diesel fuels. The
complex will be capable of supplying over 120 million standard cubic feet a day
of hydrogen.
BOCs partner for engineering and construction is Linde BOC Process
Plants of Tulsa, Oklahoma. BOC is investing more than US$100 million in the facility. 
     In
May 2004 BOC agreed to buy Duke Energys 30 per cent ownership interest
in the Cantarell joint venture company for US$59.7 million in cash. This  increased
BOCs overall stake to 65 per cent on completion in September
2004. This company supplies Pemex with nitrogen for the pressurisation of its
oilfields in the Gulf of Mexico. 
     In
December 2004, BOC announced a new, 20-year agreement to supply an additional
300 million standard cubic feet a day (scf/d) of nitrogen to be used at the
Cantarell and Ku Maalob Zaap oil fields. The additional supply will lift the
total nitrogen output by 25 per cent to 1.5 billion scf/d at the site. Construction
of a fifth production module has commenced and the new facility is scheduled
to begin
production in 2007.


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|Group
        profile |  | 19
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In China, significant
new business was won in the chemical sector. BOC has agreed to form a joint venture
with the Sinopec Shanghai Petrochemical Company (SPC) at Jinshan, near the  Caojing
chemical complex, to invest in existing assets and then add further air separation
capacity to satisfy the industrial gases requirements of SPC in the region. This
follows the establishment in 2003 of a similar joint venture with Sinopec YPC

to supply the Sinopec and BASF joint venture petrochemical complex at Nanjing. 
     BOCs
subsidiary in Thailand is investing in a venture establishing a 1,300 tonnes-a-day
plant to supply TOC Glycol Co. Ltd. (TOCGC) in Map Ta Phut and  to increase merchant
capacity in the area. When completed in 2006, this will be the largest air separation
unit in Thailand. It will be owned and operated by a joint venture between BOCs
Thai subsidiary,TIG, and Bangkok Industrial Gas
Company. 
     In
January 2005 BOC formed a joint venture with Maanshan Iron & Steel Company
(Ma Steel) to invest initially in the construction of two large air separation
units. Each will be capable of supplying 1,400 tonnes a day of oxygen to meet
the growing needs of Ma Steel in Maanshan City, China. Total production of oxygen,
nitrogen and argon is expected to total some 5,000 tonnes a day when
commissioned during 2007. 
     
At the same time
BOC India Ltd announced that it had been awarded a contract to supply gases requirements
of approximately 1,400 tonnes a day for an  expansion programme by Jindal Vijaynagar
Steel Limited at Bellary in southern India. A plant with an oxygen capacity of
855 tonnes a day will be constructed and is expected to be commissioned in 2006. 
    In
April 2005, BOC agreed to invest approximately US$40 million in equipment and
pipelines in order to supply hydrogen to Valeros 170,000 barrel a day
refinery at Lima, Ohio and to supply other customers in the area. Construction
of the plant has begun and it is expected to start supplying hydrogen during
2006.     In
June 2005, BOC announced further refinery hydrogen business in the US with the
proposed investment of nearly US$50 million at Salt Lake City to supply Chevron
and Holly Corporations Utah subsidiary with hydrogen for cleaner fuels
production at their refineries. The refiners are upgrading their facilities in
accordance with the US Environmental Protection Agencys
lower-sulphur
requirements for gasoline and diesel fuels.     Chevron
is installing additional hydrotreating capacity at its 49,000 barrel per day
(bpd) refinery and will take hydrogen and steam from BOCs plant,
which will be located on the Chevron site. Holly will also receive hydrogen for
new hydrotreating capacity at its nearby 26,000 bpd Woods Cross refinery through
a five-mile pipeline connection from the BOC facility.     Construction of the hydrogen plant has started and production is expected to begin in 2006. Industrial and Special Products (ISP)
Gases for cutting
and welding, hospitality, laboratory applications and a variety of medical purposes
are mainly distributed under pressure in cylinders. The ISP line of business
covers  products and services provided to this section of the market together
with sales of packaged chemicals and liquefied petroleum gas (LPG). Customers
are typically in the fabrication, engineering, automotive, refrigeration, hospitality
or medical
sectors. The customer base is therefore broad and varied. The number of separate
customers served by ISP is much greater than the other two lines of business
and the quality of service is often the key factor in securing existing or obtaining
new  customers. In order to raise service standards at the same time as reducing
costs, national customer service centres have been successfully established in
all the major markets.
     In
addition to supplying gases, BOC also supplies a range of associated equipment
in many of its major markets. This includes cutting and welding products  and,
in some markets, associated safety equipment.     BOC has devoted considerable attention over the last few years to understand the requirements of different types of customer in its major markets and to
provide the required service at an appropriate price. Such customer segmentation programmes have been implemented in the UK, South Africa,Australia,Asia, Latin America and are in progress elsewhere.     The
cutting and welding applications are a relatively mature part of the industrial
gases business and growth opportunities are principally in other segments of
the market such as medical applications, safety products, packaged chemicals,
hospitality and services. BOC is pursuing these opportunities by the development
of new products, packages and services as well as by marketing initiatives to
take
advantage of BOCs global capabilities by introducing existing products
to new regions. Electronic commerce has also become an important tool for sustaining
and growing sales by making it easier for customers to manage their business
with BOC
as a supplier.     BOC is a leading supplier of helium and has liquid helium distribution centres, or transfills, in many markets around the world. With 48 helium transfills in
its global network, management believes that this is the largest of its kind. Helium has a broad range of applications, including welding and the refrigeration of medical scanner magnets, and is vital to the production of optical fibres,
semiconductors and special alloys. It is also used for leak detection, underwater breathing mixtures and lifting. Business developmentIn
April 2002, BOC acquired Matheson Gas Products Canada Inc, one of Canadas
leading providers of  special gases and equipment. Unique Gas and Petrochemicals
Public Company Limited (UGP), a leading distributor of liquefied petroleum gas
(LPG) and ammonia in Thailand, was acquired in May 2002. BOCs associated
company in Malaysia acquired  35.6 per cent of the gases company Nissan Industrial
Oxygen Inc (NIOI) in March 2002 and, following a tender offer, increased its
holding to 100 per cent in September 2002. At the end of August 2002, BOC announced
an agreement to purchase
Praxairs Polish gases business. The transaction was completed in January
2003 following approval by the Polish competition authority. The business acquired
includes a high proportion of ISP sales. 
     Since 2002, BOC has continued its global roll-out of a light-weight medical cylinder with an integrated valve and regulator for homecare patients and
emergency services. Heliox, a helium and oxygen mixture formulated to ease the respiratory effort associated with airway obstruction, was launched in the UK and in some other markets.


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|20 | The
          BOC Group plcAnnual
    report and accounts 2005 | Group
    profile
|-- | -------------------------------------------------------------- | -----------------
|   |                                                                |                  

Capacity at BOCs Otis, Kansas, helium plant was expanded in 2002 to match market demands. In addition, BOC has access to helium produced by other US plants, as well as to product
from Poland and Russia. In 2003 BOC and KRIO, a division of the Polish Oil and Gas Company, entered into a new helium supply agreement.  BOC will purchase for export all of KRIOs helium that is not sold to its domestic customers in Poland. BOC
has been KRIOs sole customer for bulk liquid helium since the original agreement was signed in 1972. In June 2003, BOC announced an agreement to obtain half the output from a new helium extraction facility to be constructed in Qatar.
Deliveries from this new source are now expected to begin in 2006.      Magnetic
resonance imaging (MRI) systems use liquid helium to cool superconducting magnets.
BOC provides helium as well as a liquid nitrogen filling service to meet MRI
operators total requirements. In 2002, ISP signed a major helium supply
scheme with Oxford Magnet Technology (now Siemens) in the UK.      BOC continued to invest in refrigerant filling facilities and in 2003 new filling facilities were installed in Hong Kong, Malaysia and the Philippines. Each
of these was built to a standardised global design. BOC now supplies refrigerants in 19 countries compared with six countries in 1999. In June 2003, BOC announced a global alliance with Hudson Technologies to promote technology for cleaning and
recycling used refrigerants.      Significant
progress in developing web-based customer portals has been made. Amongst others,
ISP has launched customer portals in the UK,Australia and New Zealand. Thousands
of customers are now able to access detailed material on BOCs product service
offers, manage and settle their accounts and place orders on-line.      BOC acquired the Canadian packaged gas and related welding equipment business of Air Products in April 2003.      BOC
completed the disposal of the packaged gas part of its US ISP business to Airgas
Inc on 30 July 2004. The initial consideration was US$175 million in cash and
a final payment of US$20 million that had been subject to performance conditions
was received in November 2005. All packaged gases and associated hardgoods were
included in the sale. This comprised compressed industrial, speciality (excluding
electronic) and medical gases in the US, sold through BOC retail and distributor
channels. The sale did not include BOCs bulk liquid helium, bulk medical
gases and distributor businesses.      In December 2004 BOC sold its shares in Unique Gas and Petrochemicals, thereby divesting interests in the LPG and bulk ammonia businesses in Thailand but the
cylinder and aqueous ammonia business was retained.      In
January 2005, BOC acquired Calors aerosol propellants business in the UK. This includes sales and distribution of bulk and packaged hydrocarbon
blends together with Calors CARE hydrocarbon refrigerants range and propylene
business.      In March 2005, BOC announced plans to build a new liquid plant to extract helium from a natural gas supply at Darwin,Australia. When it begins production in
2007, it will be the only helium production plant in Australia, and will serve not only domestic Australian demand but also customers in New Zealand and Asia. BOC Edwards
This line of business
specialises in gases, services and equipment for the semiconductor industry as
well as vacuum products for a range of other industries. The major markets for
BOC
Edwards products are in Asia, north America and Europe. Until September
2005 it was organised into four customer-facing divisions for sales and marketing
in Asia/Pacific, Japan, the US and Europe and into four manufacturing divisions,Vacuum
and Exhaust Management, Chemical Management, Bulk Gases and Electronic Materials.
Kachina (semiconductor process tool component management service), Coating Technology
and Pharmaceutical Systems were managed separately. BOC Edwards is now organized
around five global business units, Electronic Materials, Electronic Bulk Gases,
Semiconductor Equipment, General Vacuum Equipment and Pharmaceutical Systems.      Management believes that BOC Edwards has a unique position as a fully integrated supplier of gases, vacuum, chemical, slurry and exhaust management products,
as well as services to the global semiconductor industry and is a leader in the design and manufacture of vacuum pumps, instrumentation and systems for both general vacuum and semiconductor applications and of freeze-drying systems for the
pharmaceutical industry.      The vacuum and exhaust product ranges are manufactured or assembled primarily in the UK, with additional manufacturing and assembly in the US, Japan,
Korea,China and Brazil. They include vacuum pumps, coating systems, exhaust management systems, temperature control systems and heat exchangers, instrumentation and controls, vacuum accessories and leak-detection equipment. The range also includes
specially designed systems for specific applications, depending on customer requirements.      BOC Edwards also specialises in the design, manufacture and installation of the systems used to deliver liquid process chemicals, including planarisation
slurries to the point of use within semiconductor fabrication facilities. Manufacture of these products is located mainly in the US.      In addition to the semiconductor industry, the leading customers are in the chemicals, scientific instruments and other industries, as well as in educational
and research establishments. General vacuum products are sold to such customers by a separate sales force.      BOC
Edwards service facilities, including plants for cleaning semiconductor
process tool parts, are located near concentrations of semiconductor fabrication
facilities around the world.      Technology is important to maintain a competitive edge in this business, and considerable resources are committed to enable the business to address new
applications and markets. The major research centres are in the UK, north America and Japan.      
The
Groups vacuum products are sold directly by Group companies to end-users
and also through distributors and agents. Management believes that the Group
is a leading manufacturer of the types of vacuum products that it makes and provides.
The business is highly competitive, with product design and quality, leading
to
the lowest cost of ownership, being very significant factors.


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| | Group
    profile | 21
| | ----------------- | --
| |                   |   

Sales opportunities for much of BOC Edwards semiconductor equipment business are dependent upon capital investment by the semiconductor industry. Management believes that
semiconductor production remains on a long-term growth trend but capital investment by semiconductor manufacturers has been subject to sharp variations for a number of reasons, some of which arise from advances in technology.      The products of BOC Edwards Pharmaceutical Systems are tailored specifically to individual customer requirements in the pharmaceutical industry and are used
mainly for injectable products. Freeze-drying systems are made in Tonawanda, New York, US. Filling, sterilising and packaging lines for the pharmaceutical industry are made at Dongen in the Netherlands and Beijing in China. Business developmentThroughout
the period 2003 to 2005, new ranges of dry pumps for the semiconductor industry
were  introduced as well as a comprehensive new range of exhaust management products. These
new products meet the needs of 300mm wafer and flat panel manufacturing facilities.      In 2004 a new range of high-speed iGX pumps were introduced, offering attractive features for semiconductor applications such as small size, reduced power
consumption and lower lifetime costs.      The range of exhaust management products was also expanded with new burners, wet scrubbers and an advanced plasma-based system for the destruction of
reaction products without the use of methane fuel.      Production of nitrogen trifluoride (NF3) gas for the semiconductor industry was started at a plant in South Africa during 2000 and production capacity was further increased during 2003. This product is an important etchant that is also used
for in-position cleaning of semiconductor process equipment.      On-site fluorine generators were installed at a number of semiconductor and flat panel display manufacturing facilities during 2004 and a fab-wide pilot
programme at LG Philips in Korea was extended during 2005.      BOC
Edwards range of electronic materials in Asia was expanded in October 2004
with the addition of ultra-pure wet chemicals through a partnership with Asia
Union Electronic Chemical Corporation (AUECC) and through that company with Huayi,
a chemical manufacturer in China. Afrox hospitals
African Oxygen Limited (Afrox) sold its 69 per cent controlling interest in its hospitals business (Afrox Healthcare Limited) to a consortium led by two major black economic empowerment
investors in March 2005. Afrox has retained a significant interest in the hospitals business through a 20 per cent holding in the new company.      In the period 2003 to 2004 and in 2005 prior to the disposal,Afrox Healthcare Limited owned 60 hospitals and clinics and had a minority interest in a further
seven hospitals managed by others. It also managed the Lifecare group of chronic-care hospitals. In addition to hospitals and clinics, which were the core business,Afrox Healthcare Limited also included Afrox Healthcare Services, which facilitated a
direct medicines service for chronic medication, and provided occupational health services, nursing training and laboratory services. Gist
Gist is a provider
of specialist supply chain solutions. The name Gist was adopted during 2001 to
reflect both the continuing focus on supply chain operations and an increased
emphasis on supply chain consulting, end-to-end supply chain solutions and logistics
support to e-fulfilment opportunities. This realignment of the business followed
a planned withdrawal from most non-Marks & Spencer primary temperature controlled
operations
in the period 1999 to 2000.      High
quality supply chain operations remain at the core of the business. Gist manages
a range of supply chains on behalf of retailers, mainly in the UK, as well as
some overseas. For over 30 years Gist has been the largest supply chain provider
for Marks & Spencer. Gist currently handles all of its UK food distribution
and the consolidation and dispatch of all overseas shipments to subsidiaries
and
franchised operations.      During
2003, Gist ceased to operate general merchandise logistics and garment stockholding
operations on behalf of Marks & Spencer.      Gist
has provided supply chain consultancy services to major supermarket and catalogue
retailers in the UK and demonstrated its capabilities in managing international
supply chains. In addition an on-line wholesaling operation has extended the
range of Gists skills offered externally.      During
September 2005, Gist expanded its primary business in continental Europe with
the acquisition of G Van Dongen Holding BV, a temperature-controlled transport
operator based in the Netherlands and Spain. This is to provide chilled and ambient
transport to food manufacturers in the Netherlands, Spain, Germany, Portugal
and France, and adds to Gists existing operations in the Czech Republic
and the Netherlands.


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|22       | The BOC
          Group plcAnnual
    report and accounts 2005
|-------- | --------------------------------------------------------------
|Strategy

The BOC Group has an annual planning cycle culminating in a board review, typically held in March each year. The strategy is aligned with the Group objectives, published in 2004, which
are:Over a sustained period, consistently to outperform our peers in terms of safety, customer service, revenue growth, earnings and cash generation. We will be the employer of choice for all existing and future employees. Since
    2000, the main components of the strategy have been:•
   To establish a leading position for BOC in growth markets: BOC has continued to invest in production and infrastructure facilities in the growth markets of Asia in
general and China in particular. It has also expanded by acquisition, notably adding to its gases businesses in Poland and Canada and increasing BOC Edwards range with the turbomolecular pump business of Seiko Instruments. Each line of
business additionally has its own growth strategies; in Process Gas Solutions the emphasis has been on increasing the percentage of tonnage business, particularly in the refining and chemicals sectors.•
   To improve the return on capital employed: BOC has actively pursued opportunities to improve or divest underperforming assets resulting in, amongst others: the
formation of Linde BOC Process Plants LLC in the US; the combination of OSK with part of Air Liquide Japan to form Japan Air Gases; and the sale of the US packaged gas business.•
   To improve business and operational efficiency: BOC has sponsored cost reduction and improved efficiency programmes across all of its operating entities.•
   To maximise the benefits of BOCs operating model: BOCs structure of lines of business and business units allows global strategies to be implemented
successfully while enabling local response to be tailored to local market needs. The operating model has now been extended to all parts of the world, with Asia being the most recent.•
   To recruit, retain and develop the best people: BOC has developed a wide range of people programmes to ensure it has the calibre and quantity of people needed to
implement its growth strategy successfully. The components of the strategy are referred to elsewhere in this annual report, notably in the sections on employees, operating review and financial review.


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| |  | 23
| |  | --

Employees





At 30 September 2005 the Group had 30,572 employees (2004: 43,383 employees, 2003: 44,507 employees). During the year the disposal of the Afrox Healthcare business resulted in the
successful transfer of over 13,000 employees to the new owner. Employees of the company and its subsidiaries were located as follows: Europe
   
   13,408Americas
   
   6,216Africa
   
   3,541Asia/Pacific
   
   7,407 Unplanned employee turnover remains low and as a result, excluding disposals, the employee base remains stable. BOC invests time and energy in developing the potential of its people.
Opportunities are reviewed and discussed with identified individuals to provide cross-line of business experience or to set up a range of functional and geographical assignments. This contributes to BOC's success in retaining and developing the core
skills and capabilities it needs to meet its business, customer service and health and safety targets. BOC regularly reviews its succession planning processes and the availability of essential capabilities. Results show it has solid capability in
most areas and adequate succession depth to meet both its technical and leadership requirements. Employee satisfaction and commitment
Employee satisfaction is measured and managed both centrally and in the business units.      
Levels of employee
satisfaction and commitment are generally high. A culture of accountability,
collaboration, transparency and stretch, known as ACTS, has  been developed throughout
BOC. The ACTS principles provide a framework that employees can use in their dealings
with each other and with customers, suppliers and other stakeholders. 
     The Voice of BOC employee survey was conducted again in 2005. The survey, managed by an independent research company, is an opportunity for
BOCs people to rate the Groups performance on key issues affecting their employment. 68 per cent of employees responded to the survey. This high participation rate demonstrates employees willingness to contribute to BOCs
aim of being the employer of choice. The 2005 survey built on the employee perception
data collated in 2002 regarding ACTS, customer orientation, performance management
and diversity. It also incorporated new measures on safety and the Code of
Conduct. The areas where BOC employees deemed performance to be particularly high
or improved since 2002 were safety, management interest in employee well being,
the Code of Conduct, performance reviews, collaboration and diversity. The areas
deemed to need further improvement were customer focus, which is still a core
strength but slightly down on 2002, and employee engagement, which remained at
a high level but was lower than in 2002. As with previous surveys, business units
and enabling
functions are developing and implementing action plans to address the results
and progress will be reviewed on a regular basis. Employment policies and Code of Conduct
The BOC Group takes its responsibilities as a global organisation seriously. It is committed to fostering a workplace that is safe and environmentally sound. It will always act in line
with all applicable laws, regulations and industry standards. It expects people to respect confidential information and company time and assets. It believes in open and honest communication, fair treatment and equal opportunities. It opposes public
corruption, anti-competitive behaviour and insider trading, and it supports the fundamental principles of good governance and human rights.      In 2003 BOC launched a global Code of Conduct, a set of legal and ethical standards that apply to all BOC employees and to contractors in their business
dealings with BOC. The code is available in ten languages. An extensive programme of communications and workshops has provided training for employees on the substance of the code. Annual sustainability plans embed the code within the businesses and
keep it visible, accessible and relevant to all employees. In 2004, a new network of code sustainability managers was formed to ensure that processes are in place to induct new employees, to provide refresher training and to consolidate
country-specific policies. The Code of Conduct telephone helpline has been extended to cover 49 countries and promotional material has been created to publicise the contact number in each country. BOC operates a strict policy of non-retaliation to
protect and encourage people wishing to share their concerns.      BOCs employee policies and procedures are aligned with the UN Universal Declaration of Human Rights. BOC is a signatory to the UN Global Compact, whose
ten principles - six of which relate to human rights and labour standards - are integrated into BOCs Code of Conduct. In many areas BOCs
existing standards exceed those set out in the Global Compact. In 2005, BOC reported
progress to the
Global Compact Office, according to official guidelines.      
In
addition to the Code of Conduct, BOC provides guidance and human resources policies
to support BOC people in their day-to-day activities and long-term career planning.
These are aligned to the corporate values and principles. At the heart of this
approach
is the recognition that the energy and application of individuals and teams throughout
the organisation will determine which companies have
competitive advantage in todays complex global market. BOCs employment
policies are designed to underpin the Groups
operating requirements and growth strategies. The human resources units implementing
these policies are aligned to the business units in each geography and, as far
as practicable, Group policies are adapted to meet local requirements.


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| | Employees | 25
| | --------- | --
| |           |   





Retirement benefit plansBOC
considers it important that its people provide for their retirement and fully
supports their efforts in this regard. Around the world, the Group provides opportunities
for people to participate in retirement programmes tailored to suit local conditions.
Just as importantly, the boards pensions committee takes prudent steps
to monitor and control Group-wide retirement benefit plans with local managers
being responsible for safeguarding the security of each retirement plan that
they sponsor.The
financial position of the Groups main pension funds is detailed in note
8 to the financial statements. Diversity
BOC believes that
diversity is a key driver of future organisational and operating effectiveness. As
one of the UKs few truly global companies, BOC highly values the rich diversity
of its people. While the Group consistently champions a set of unifying values
and principles, they are not imposed regardless of local sensibilities. Rather,
the Group strives to build on the qualities inherent in its global environment
by
encouraging people with different views, styles and approaches. Wherever in the
world it operates, BOC is committed to maintaining a workplace free from discrimination
for reasons of race, creed, culture, nationality, religion, gender, sexual orientation,
age or marital status. The success of its diversity programme is monitored and
reported regularly.
     Disability is not considered a barrier to employment and, as far as local conditions allow, employees are selected on the basis of their ability to perform
the job. Further necessary training is arranged, taking account of their particular needs and the resources required to meet them. Employee share schemes
Many BOC employees
in the UK and some other countries have built up an equity interest in the Groups
business through employee share schemes. Options may be granted at a discount
to the market price at the date of grant. The term of options granted could be
from three to seven years and any option is conditional on a commitment by the
individual to make regular savings from pay that are then held by an independent
organisation
to purchase shares at the end of the option period. The exercise of options under
these schemes can be satisfied by the issue of new shares or the transfer of
existing shares.


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|26                                                | The BOC
          Group plcAnnual
    report and accounts 2005
|------------------------------------------------- | --------------------------------------------------------------
|Social,
    environmental and ethical performance
|                                                 



Exercising sound corporate responsibility is fundamental to the way BOC operates. The Group aims always to behave ethically and to manage risk strategically. It has a process for
  identifying, evaluating and managing all risks in accordance with best practice.     This
  section outlines the Groups systems for managing its social, environmental
  and ethical (SEE) risks and opportunities - in line with guidelines set  out
  by the Global Reporting Initiative, the Association of British Insurers, the
  UKs Combined Code on Corporate Governance and the provisions of the US
  Sarbanes-Oxley Act 2002 as it applies to foreign private issuers. More details
  about
BOCs risks and corporate responsibility performance can be found in the
sections on risk factors on pages 38 and 39 and on the companys
website, boc.com.
     The
Group works actively with its stakeholders - shareholders, customers, suppliers,
employees, local communities and governments. Underlining the
Groups adherence to best practice, BOC engages with a wide variety of employee,
safety, environmental and community bodies.
     
BOC
is a signatory to the UN Global Compact. All Global Compact principles are integrated
into BOCs Code of Conduct and, in many areas, BOCs
existing standards exceed those set out in the Global Compact. In 2005, BOC submitted its communication on progress to the Global Compact Office, according to official guidelines. BOC continues to review and adapt its business practices to achieve
the Groups SEE objectives and activities. Executive responsibility
BOC has an integrated
approach to SEE risks, managing them in the same way as all other business considerations
through business unit and Group risk management programmes. These processes are
applied to major business decisions such as acquisitions, disposals, new ventures
and major supplier contracts. BOCs business dealings are guided by a global Code of Conduct. The code sets out the safety, environmental, social, legal and
ethical parameters that Group businesses and employees are expected to follow. The code is the responsibility of the executive management board (EMB), whilst BOCs
businesses are responsible for day-to-day implementation.      EMB
members are responsible for each of the codes standards, supported by the
appropriate business and functional structures. The Group chief executive has
ultimate responsibility for the code programme. He delegates oversight to an
EMB sponsor board and day-to-day management to a code advisory group. The code
advisory group is chaired by the general counsel, global compliance.      Safety,
health and environmental management systems are the responsibility of the Group
chief executive and are implemented by business managers, supported by the Group
director for safety, health, environment and quality (SHEQ). Workplace issues,
including labour relations, diversity, equal opportunities and human rights,
are managed by the Group director, human resources (HR). Market issues, including
customer relations and ethical trading practices, are managed by the line of
business chief executives. The director of supply management oversees BOCs
supply chain and ethical purchasing policy and reports to the Group chief executive. The
Group director, corporate relations, manages community relations, including sponsorships
and charitable support.      The
EMB regularly reviews Group systems for managing risks and opportunities, including
business assurance audits, legal, SHEQ and HR reviews, appropriate training and
communications, and performance management and remuneration incentives through
the Groups performance contract process. Directors are provided with appropriate SEE training and communications. For example, they are given regular
safety briefings and Code of Conduct progress reviews. Training on defensive driving and other SHEQ priorities is provided. The EMB sets a strategic direction with regard to all business issues, including SEE matters. Business units implement and
develop the EMBs strategy through their own management teams.      Safety and other SEE measures, as required, are included in performance contracts. Part of the remuneration of business unit managers and their teams is
dependent on achieving these measures. The Code of Conduct
Launched two years
ago, the Code of Conduct embodies BOCs commitment to integrity and responsible
business practice. This year, steps were taken to reinforce the effectiveness
of the
code and to build it into the way that BOC does business.      The code advisory group met twice during the year. The role of the group is to establish globally consistent ethical and legal standards, to support the
business in owning and upholding these standards and to respond to issues that may require BOC to adopt a new or revised position within the Code. Chaired by the general counsel, global compliance, the council comprises representatives from each
line of business and Gist.      A robust central tracking system was introduced to capture allegations from all the businesses and channel them to the global compliance function. The system
not only records allegations that are subsequently substantiated, but also allegations that ultimately prove unfounded but that warranted further investigation.      BOCs
network of sustainability managers is responsible for championing the Code within
the businesses. Guidelines on communications and training were issued and each
business unit head is required to report on progress within the quarterly performance
contract review.      The
Code, available in ten different languages, can be accessed via boc.com, the
intranet, CD or paper copy. It is linked to a number of other systems, notably
the Groups integrated management systems and standards (IMSS). BOC operates
a confidential 24 hours a day/seven days a week helpline in 49 countries, supported
by helpline promotional material in the form of posters, wallet cards and a screensaver.
In 2005, the Group introduced a quarterly Code report, distributed to senior
management for onward cascade to all employees, giving a round up of news, recent
violations, statistics and lessons relating to the Code.      Code sustainability issues are reported to the EMB and appropriate managers on a monthly basis. In 2005, the helpline received 155 allegation cases from
around the world. 19 per cent resulted in disciplinary action and 57 per cent were found to be unsubstantiated or non-violations. The remaining cases are still being investigated.


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| | Social,
    environmental and ethical performance | 27
| | ------------------------------------------------- | --
| |                                                   |   
| |                                                   |   



BOCs
        global management system (IMSS)IMSS
        (integrated management systems and standards) is a system developed by
        BOC. It has three distinct parts: the IMSS Library, Traccess and Audit
      Manager. The IMSS Library houses
  electronic copies of BOCs reference material, work instructions, operating
  procedures and management systems and standards. Traccess is BOCs
  online training and competency tracking system, storing individual learning
  profiles and employee training histories. Audit Manager houses all stages of
  the audit
  cycle and verifies site performance and compliance against best practice and
  minimum standards defined in the IMSS Library. IMSS documents Group knowledge
  from high level policies to
  detailed work instructions, enabling all employees to be trained and assessed
  in the skills required by their roles. IMSS outlines the correct protocols
  and minimum standards, and tracks the performance of actions needed to ensure
  the
  safe, environmentally sound and efficient management of BOC businesses worldwide.
  IMSS and the Code of Conduct are mutually supportive. Stakeholders
BOCs Code of Conduct is segmented into key stakeholder groups, each of which is addressed by specific code standards and management structures and procedures. Details are posted
under the corporate responsibility section of boc.com. For example, BOC works with its suppliers through a supplier evaluation, selection and performance appraisal (SESPA) system, which assures minimum standards of supplier performance, quality
assurance and legal, ethical, social and environmental compliance. BOCs ethical purchasing policy, an integral part of SESPA, is managed by the Group supply management function, underpinned by the Code of Conduct and supported by IMSS and a
number of other web-based platforms. Suppliers are segmented according to a combination of two matrices: supplier risk profile and product risk profile. The highest risk category requires the ethical purchasing policy to be included in the
suppliers signed contract with BOC, with BOC reserving the right to terminate
the contract in the event of a breach. Any employee can raise concerns about supplier
ethics via the Code of Conduct helpline and data is captured and reported as
a
specific category. Identifying and prioritising SEE risks
In 2004 BOC introduced a formal process to identify and manage its SEE risks and to identify potential opportunities. EMB directors, business unit heads and other key managers around the
world submitted potential SEE risks which were consolidated by the Group risk management function and rated using predetermined scoring criteria. Each risk was rated according to its potential impact, the adequacy of plans to mitigate the risk, and
its urgency.      The broad areas identified by the SEE risk and mitigation process are: managing the safety of people associated with BOC; managing major operational hazards;
minimisation of greenhouse gas emissions; energy efficiency; water conservation; global adherence to and the effective working of the Code of Conduct; managing an ethical supply chain; and continuing enhancement of product stewardship
procedures.      The
Groups SEE review found that management systems and mitigations already
exist for identified risks, but in some minor instances enhanced measures have
been, or are being, put in place. One example is a screening process to ensure
that customers have the capability to handle hazardous products safely. Piloted
this year in the UK for the packaged chemicals business, the process will be
rolled
out to the wider Industrial and Special Products business in 2006. Corporate social investment strategy
BOC strives to be a good corporate citizen by: operating safely and minimising the environmental impact of its activities; enhancing the wellbeing of local economies through employment on
the bases of diversity, equal opportunity and merit, and; fostering strong community relations.      BOC is committed to all the communities in which it operates, wherever they are in the world, and its contribution takes on a number of forms. At the Group
level BOC supports a variety of programmes broadly aligned with the nature of the business. Key themes are the environment, education, medical research and the arts.      At the local level BOC encourages a range of volunteering, donation and sponsorship programmes, guided from the centre but ultimately decided and implemented
at country, business unit and site levels. The choice of charitable donations is devolved through matched giving schemes. Managing corporate responsibility performance
This year the Group
continued to participate in the UKs Business in the Community (BiTC) corporate responsibility (CR) index. The index assesses companies performance against a
wide range of environmental, social and ethical measures. BOC has participated in the indexs sister survey, the Business in the Environment (BiE) index, since 1995. BOC scored 89 per cent in BiTCs CR index, ranking it 39th out of 144
participating companies, including 57 from the FTSE100. The average score among participants from BOCs comparator group was 88 per cent. Completing the index demonstrates the Groups commitment to managing, measuring and reporting its
corporate responsibility performance in an open and transparent way. BOCs completed survey and BiTCs independent assessment of the Groups performance are published on boc.com. The BiTC index is the Groups
common measure and
standard response to corporate responsibility and SEE enquiries.


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|28 | The
          BOC Group plcAnnual
    report and accounts 2005 | Social,
    environmental and ethical performance
|-- | -------------------------------------------------------------- | -------------------------------------------------
|   |                                                                |                                                  
|   |                                                                |                                                  
|   |                                                                |                                                  



Safety,health
and the environment There are no
    greater priorities for BOC than the health and safety of our employees, contractors,
    suppliers, customers and local communities, and the protection of the environment.
    BOC is committed to excellence in managing these areas through normal business
practice assisted by its safety, health, environment and quality (SHEQ) function.      SHEQ
    policies and procedures are the responsibility of the Group chief executive
    and are implemented by BOCs businesses with the support of the SHEQ
    function. The SHEQ department works within the businesses to ensure that the
    Group has a deliverable policy, is active in its risk management and professional
in its mitigation.      BOC
    has well-established programmes to drive improvement in SHEQ performance.
    Employees are required to comply with all external regulations and the Groups
    policies and Code of Conduct. Suppliers are expected to meet minimum standards
set by BOCs ethical purchasing policy.      SHEQ
    management standards, procedures and tools are embedded in Group practice
    by the organisations integrated management systems and standards (see
    IMSS section above). IMSS outlines the standards and actions needed to align
    with, or conform to, internationally accredited certifications such as ISO
    9000 (quality assurance), ISO 14001 (environment) and ISO 18001 (health and
safety). BOC
    met its objectives in 2005 when the Group:•
    Retained
        safety, health and environment as the top priority at EMB level;•
    Retained
        SHEQ at the forefront of Group and business unit employee communications;•
    Sustained
        emphasis on behavioural safety through the Safety in BOC programme;•
    Improved
        safety and environmental performance against 2004 figures;•
    Transitioned
        to using proactive measures (leading indicators), in addition to the
        traditionally reported lagging indicators, to measure SHEQ performance;•
    Took
        positive measures to improve road transport safety;•
    Continued
        to conduct its annual environment survey to highlight opportunities for
        continuous improvement;•
    Set
        initial environmental targets for 2006 and beyond. Along with
    the Code of Conduct and the Groups ACTS operating principles, the Safety
    in BOC programme ensures that SHEQ issues are managed consistently across
    all countries and businesses, in accordance with our SHEQ policies and principles.




Overall safety performance 2004
   
   2005Lost workday case rate
   0.41
   
   0.37Total recordable case rate
   1.18
   
   1.09Passenger
    car avoidable accident rate
   2.12
   
   1.81Truck avoidable accident rate
   2.38
   
   2.20




Safety
Safety is BOCs highest priority and the Group has one simple goal: zero incidents and injuries. Safety is the first agenda item at every EMB and business executive meeting. Great
emphasis is put on providing all our employees with the necessary training, equipment and safeguards such that no-one gets hurt. Business managers around the world, with SHEQ support, continually strive to improve safety performance and, through our
Safety in BOC programme, are now focusing on individuals behaviour and
the effect that safe and unsafe behaviour has on the organisation.      Each
business unit has a SHEQ function, reporting to the business units executive
and the Group SHEQ function through a global peer group. This ensures that global
best practice and the functional requirements of the business and Group are always
at the forefront of management thinking.      BOC manufactures and distributes products that are potentially hazardous, some being stored at very low temperature or under pressure, and some having toxic
or flammable properties. Consequently, the Group is committed to reducing the risk of harm to people through its products. Operating safely and communicating safe working practices are an integral part of its safety and product stewardship
processes.      
It is important
for the Group not only to have clear and measurable performance standards practised
by all BOC employees, plants, depots and distributors,  but also to disseminate
these safe working practices to our customers and suppliers. IMSS contains product
safety and stewardship instructions, policies and procedures. Each product line
has specific standards attached to it. BOC undertakes research
into the health and safety of its products, keeps abreast of new scientific information
and works with industry and public bodies to reduce risk and share learning.
This year BOC launched an online safety advice service, bocsafety.net, to help
 customers identify risks and unsafe practices and adopt guidance on best practice
to comply with the law. 
     BOC
continuously strives to improve safety in the workplace and combat the root causes
of safety incidents. In 2005 BOC Edwards, which manufactures hazardous gases
for use in processing semiconductors, was recognised for its safety performance.
In South Africa, BOC Edwards received two NOSA safety awards for occupational
risk management procedures at the nitrogen trifluoride plant in Pelindaba. In
the
US, BOC Edwards special gases plant at Medford, Oregon, was awarded the OSHA Voluntary Protection ProgramsStar Program status for self-sufficiency in their ability to control workplace hazards. EMC, BOCs US-based water
management business, won several Water Environment Association awards. EMCs water treatment plant at Ligonier, Indiana, won the prestigious Water Environment Federations
Burke Award.      Regrettably,
three Group employees died in work related activities in 2005. Two employees tragically
died in road incidents, one in the UK and one in the US, both of which involved
third parties. These incidents reinforce our commitment to remain focused on
transport safety during 2006. Another employee was killed in Taiwan, by falling
from a height at a customer location. In addition, BOC experienced six
contractor fatalities during the period.      
The Group chief executive, SHEQ director and business unit managers review every fatality and major incident personally. Investigations are only closed when
the chief executive is fully satisfied that the root causes of the incident are understood and action has been taken to prevent future recurrences.


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1.
    2003, 2004
        and 2005 safety statistics include mergers, acquisitions and all joint
      ventures. Previous years have not been restated.




Controlling process-related risks is of the utmost importance. Any incidents that do occur are thoroughly investigated and the lessons learned are applied
throughout the organisation to minimise the likelihood of recurrence. Safety lessons are shared throughout the gases industry and BOC continues to participate fully in the development and application of industry-wide
codes.     This year the Group built on the vision, policy and strategy put in place last year when it launched its Safety in BOC programme. Safety in BOC,
which complements and builds upon existing safety systems, standards and tools, aims to prevent people getting hurt by effecting lasting behavioural and cultural change. It is underpinned by the principle that safety is not a small part of
someones job, it is 100 per cent of our behaviour, 100 per cent of the time. The aim is to establish a culture whereby each employee thinks instinctively not just about his own safety, but also about the safety of others, be they
colleagues, contractors or members of the community.     The roadmap is the key tool that supports Safety in BOC. It shows the organisation where it is and
how it can move from its current base to world class through a series of well-defined steps and markers. It is a gap analysis tool that enables a particular department, site or business to assess itself in terms of safety performance, plot year by
year progress on each of the nineteen roadmap components and develop a plan to progress to world class. During 2005, the roadmap has been formally integrated into safety implementation plans within each of the businesses, which are in turn included
in business planning processes and individual performance contracts.     The focus on leading indicators continued in 2005, allowing the Group to monitor
safety performance in terms of proactive measures being taken as well as lagging indicators measuring past performance. In conjunction with the roadmap, a series of practical steps were taken during 2005 to help embed safe behaviour and the desired
safety culture. BOCs business units in Asia and Africa rolled out SiteSafe, a focused approach for implementing the systems, standards and behaviours inherent in Safety in BOC. SiteSafe included various modules such as LeadSafe workshops to
promote visible leadership among management and ActSafe, a series of safety through empowerment seminars encouraging supervisors and front line employees to recognise unsafe acts and challenge them through peer-to-peer conversations.
During 2006 other business units will use SiteSafe to cascade and further embed the Safety in BOC principles into the organisation. At a local level, every BOC business unit throughout the world actively engaged employees through sustained
communications, cascade briefings and training programmes.     Approximately
   half the major incidents across the Group result from road transport, which
   is  also the main cause of fatalities. Driver training has always been a high
   priority at BOC, both for commercial vehicles and passenger cars. Initiatives
   include defensive driver training, driver observation and feedback, vehicle
   design, use of
on-board monitoring technology and anti-rollover and jack-knife training. Last
   year, the Group appointed a director of Group transport safety to collaborate
   with regional counterparts and develop a consistent global strategy for improving
   road
safety throughout BOC.
     In 2005, this appointment has started to deliver new processes and tools to share best operating practice and achieve
sustainable improvements in road transport safety. For example, a new transport audit protocol was piloted in Asia and a new driver-training model will be ready for implementation in the first quarter of 2006. A common vehicle incident reporting
process was established to aid learning, while a global transport team of experts met twice in 2005 to prioritise initiatives to prevent fatalities or serious injuries.
     Building on the Groups total ban on making and receiving calls from mobile phones while driving, a major campaign was launched to promote transport safety and reinforce the wearing of
seatbelts. This campaign was supported by a global transport directive to apply a minimum set of safety standards to all fleet and contractor
 vehicles throughout the Group, including a requirement to fit three-point seat belts rather than lap belts where the latter existed. At Gist, safety rails were introduced for the protection of drivers when coupling tractors to trailers and stability
systems were installed on all high-sided double-decker trailers to reduce the risk of rollover.
     In
addition to the leading indicators previously  mentioned, used to monitor safety
performance proactively, the Group also has four reactive, or lagging, indicators
to provide a consistent measure of its workplace and vehicle safety performance.
These are:
   lost workday case rate (LWCR) per 200,000 hours. This includes all accidents resulting in the loss of one complete day of work, according to best international
practice. Many companies only report cases resulting in three or more lost workdays as deemed reportable under RIDDOR regulations;
   total recordable case rate (TRCR) per 200,000 hours. This includes all LWCRs and medical treatment cases;
   passenger car avoidable accident rate (PCAAR) per million miles;
   truck avoidable accident rate (TAAR) per million miles.The figures for 2005, which include joint ventures and acquisitions, showed an improvement across all four lagging indicators. The disposal of Afrox
Healthcare in 2005 marked a major change in BOCs portfolio, as the business employed over 13,000 people representing around 30 per cent of the total workforce. BOCs lagging indicators are shown with and without Afrox Healthcare, giving a
basis for future comparison. The chart excluding Afrox Healthcare gives a clearer indication of underlying improvement, with a 20 per cent improvement in both lost workday and total recordable case rates since the launch of the Safety in BOC
programme two years ago.


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Occupational
      health and hygieneBOC
         requires its businesses to manage employee health activities in accordance
         with local laws and regulations and according to BOCs codes of
         practice, standards and procedures. The Groups occupational health
         and hygiene (OH)function
         provides a global service striving to eradicate work-related health
         hazards and to ensure that employees can come to work and  carry out
         their duties safely.
     Employees have access to guidance on OH from health professionals and qualified safety, health, environment and quality
(SHEQ) managers. This is supported by a range of up-to-date training programmes, manuals, videos and safety data sheets, which are available through local and global SHEQ functions and on dedicated SHEQ intranet
sites.
     The
OH function carries out reviews in all business units to provide information
and guidance on the main health issues that exist in BOC  operations globally
and how best these potential hazards may be minimised or eliminated. This is achieved
by providing best practice standards and guidance to local SHEQ personnel who
then implement these standards and policies as necessary. Adverse
employee health effects are monitored through local occupational health checks
around the world. Some are internal and others are outsourced to professional
OH providers. In some regions,Well-person health checks are available
for  employees and specific tests are done for employees engaged in hazardous
activities. These vary according to risk and requirements.
     The main potential
health issues that exist in BOC operations differ across business units. When dealing with our gases businesses, the main potential health issues are:
   exposure to noise from gas compression activities and from cylinder handling;
   potential exposure to some gases filled into cylinders;
   potential exposure to chemicals used in metal cleaning and painting operations;
   ergonomic and manual handling risks.As reported last year, the OH programmes developed to deal with these issues continue to be applied across the Group. Other continued work has been the
ongoing programme to reduce some of the hazardous solvents used for metal cleaning and possible substitution of those used in paints with safer and more environmentally friendly alternatives.     Of particular significance this year is the high percentage of lost workday and medical treatment cases as a direct result of manual handling, culminating in short-term acute injury and chronic
conditions such as back, hand, arm or shoulder conditions. In the Industrial and Special Products business, attention to these activities is a high priority with major effort being applied to risk assessment processes and the implementation of best
practice solutions to minimise identified risks. The principle of best practice has also been applied to new plants, such as the new cylinder filling facility in Bangalore, India, which was designed to minimise manual handling of cylinders as much as
possible and hence reduce the potential risk of injury among employees.
     Work
has also been done to gather and analyse information relating to employee  health
issues, with a view to counteracting the costs of ill health and enabling actions
to be established in the priority areas. There is also recognition that even
if ill health is not related to the job, there can still be a benefit to the

employee and the business in facilitating early recovery and return to work.
In the south Pacific region, a scheme has been devised to speed up the diagnosis
and treatment of employees suffering from injury or ill health, therefore bringing
 rehabilitation forward. This process, coupled with pro-active preventative programmes,
has the added benefit of reducing employee liability insurance costs, in real
terms, such that they are significantly less than industry benchmarks. The principles

of this injury management scheme are being examined with a view to globalisation.The
      environmentBOC is classified as part of the chemicals sector, but does not
have the same direct or significant environmental issues to deal with as traditional chemicals manufacturers. The nature of BOCs activities and the type of chemicals handled are quite different. However, in line with other industries, BOC is
committed to sound environmental practices including the conscientious stewardship of its products and services.Across
       the businesses, BOCs most significant environmental impacts fall
       into four main areas. These are: 
   Energy consumption: Process Gas Solutions is a major consumer of electricity, used to power air separation units.The generation of electricity directly contributes to
carbon dioxide emissions.
   Vehicle transport: BOCs gases businesses operate large fleets of vehicles worldwide for delivering gas to customer sites, contributing principally to carbon
dioxide emissions. Gist operates a logistics network in Europe.
   Ozone depleting potential (ODP) substance release: cryogenic air separation techniques require air to be cooled to achieve liquefaction. This requires refrigeration,
which has traditionally used refrigerant gases that have ozone depleting potential.
   Non-hazardous and hazardous waste: this covers a range of categories and varies across business units. For example, one of the main forms of waste from Process Gas
Solutions is oil used in compressors. In Industrial and Special Products, waste comprises packaging materials, metals, acids and alkalines used for abatement purposes in the production of special gases, solvents from painting cylinders and waste
related to transport such as oil and batteries from vehicles. BOC Edwards hazardous waste includes chemicals used in component cleaning and toxic residue from vacuum components replaced during servicing. In Gist, the main waste is packaging
materials such as paper, card and plastics.


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The Group continues to work actively with its stakeholders to ensure that environmental issues are approached responsibly. BOC is a signatory to the UN Global Compact and abides by its
environment principles. In the US and Australia BOC supports the chemical industrys Responsible Care programme. BOC participates in Business in the Communitys Environment Index and this year scored 88.86 per cent, ranking it 48th out of
168 participating companies and number one in the chemicals sector.

     BOC aims to comply fully with all material environmental laws and regulations. No prosecutions for breaches of environmental regulations were incurred in
2005.

     Management of environmental issues that are relevant to the Groups businesses is overseen by the safety, health, environment and quality (SHEQ)
department and implemented through a worldwide environmental management system. This includes operating instructions, training, performance tracking and auditing. The sharing of best practice is achieved through the Groups integrated management
systems and standards (IMSS).

     BOC
has operated a comprehensive environmental survey of its sites for more than
ten years. The annual web-based survey, which covers approximately 550 sites
around the world, highlights issues relevant to the businesses and identifies
opportunities for the development and sharing of best environmental practice. The
results are reviewed by the executive management board, business unit management
teams and
the Group SHEQ director. Annual environment action plans are integrated into
business unit management processes and included in business and individual performance
contracts.

     Many
BOC business units have programmes to achieve ISO 14001 environmental certification.
Our welding product consumables business in Germiston, South  Africa, and our
special gases site at Morden, UK, both achieved ISO 14001 certification this
year. Thirty key industrial sites around the world are now accredited. However,
all BOC sites operate in accordance with ISO standards even if not
specifically accredited, because IMSS, containing the Groups global operating
systems and standards, is aligned to ISO 14001.

     Selecting
the right supplier for BOC is fundamental to conducting business effectively
and ethically. Throughout its businesses, BOC has adopted its  proprietary supplier
evaluation, selection and performance appraisal (SESPA) process, together with
an ethical purchasing policy stating that suppliers must place a high regard
on safety and adhere to local legislation concerning pollution.

     This year BOC appointed a manager to identify, develop, share and support the implementation of environmental best practice. The benefits will include
improvements in cost-efficiency and productivity, as well as a reduction in emissions, waste and water consumption.

     It is now widely recognised that carbon dioxide (CO2), released into the atmosphere by burning fossil fuels for heat and power, is the main greenhouse gas that has an impact on climate change. BOCs climate impact comes from intensive use in air
separation units (ASUs) of electric power, which is still generated largely from coal-based technologies. Improving energy efficiency is a high priority at BOC. Reductions in energy consumption benefit everyone in terms of lower CO2emissions, lower production and purchase costs and lower product prices.

     BOC manages the purchase and use of power extremely carefully. Its ASUs are run at optimal efficiency levels required to meet regulatory and competitive
requirements. Long-established efficiency programmes anticipate power price movements wherever possible. To assure the highest levels of efficiency, state-of-the-art operating centres in each global region control BOCs production plants. Over
the last four years, for example, Process Gas Solutions has undertaken more than one thousand plant and distribution efficiency projects, delivering significant annual savings. Managing climate change issues effectively and responsibly is a matter
of business and environmental necessity for the Group.

     Carbon dioxide equivalent emissions from BOC production plants this year are estimated to be 7.9 million tonnes (2004: 7.5 million tonnes); 7.4 million
tonnes relate to emissions from using electricity and 480,000 tonnes as a by-product of producing hydrogen by steam methane reforming. The hydrogen-related emissions are reported for the first time this year. BOCs electricity consumption for
its production plants was approximately 11.9 Terawatt hours (2004: 11.8 Terawatt hours). The two gases businesses, Process Gas Solutions and Industrial and Special Products, account for 99 per cent of these emissions and in 2005 they produced 2,442
tonnes (2004: 2,521 tonnes(1)) of carbon dioxide equivalents from electricity usage for each
£1 million of turnover.

     BOCs methodology for emission estimation and addressing emission factors(2)has been independently assessed and confirmed to be appropriate. The Group uses energy data to help improve its energy efficiency with resultant improvements in carbon dioxide
emissions.

     During
2005 BOC undertook a number of pilot projects, with the assistance of the Carbon
Trust, to improve energy efficiency at several UK sites. For example  at BOC
Edwards Burgess Hill manufacturing facility a site energy assessment identified
potentially 340 tonnes of CO2equivalent savings and at ISPs
Worsley site a similar survey identified 420 tonnes of CO2savings. These results will
be used to develop best practice in energy management next year. 1.
   Adjusted for the US packaged gas business divested in 2004.2.
   The methodology is consistent with all major mobile and point sources of carbon dioxide emissions within scope 1 of the Greenhouse Gas Protocol (World Business Council
for Sustainable Development and the World Resources Institute, March 2004), all major sources of carbon dioxide emissions under scope 2 of the protocol and major mobile sources of emissions under scope 3 of the protocol. The figure does not include
non-carbon dioxide global warming gases (N2O, SF6, CH4, PFCs and HFCs) or minor sources such as business travel, office electricity at small sites and decomposition of wastes and carbon dioxide emissions associated with heat and/or steam imported to BOC
plants.


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Ozone depleting potential (ODP) substance release has decreased this year by 38 per cent. In 2004, two plants were responsible for 60 per cent of total ODP substance release and in 2005
actions were taken to remedy the situation at these plants. For other plants annual refrigerant consumption and loss targets were set. In Process Gas Solutions a project was undertaken to reduce ODP substance release from the refrigeration system at
a nitrogen liquefaction unit. Cleaning technology developed by Hudson Technologies resulted in a significant reduction in ODP substance loss and the saving of 3,000 tonnes per year CO2equivalent.
     BOCs Industrial and Special Products business supplies a range of refrigerant gases and is phasing out those with ozone depleting potential, according
to the requirements of the Montreal protocol. BOC Edwards supplies special gases for the semiconductor manufacturing process, which can result in ozone depleting emissions at the end of the process. BOC Edwards has developed a wide range of
abatement systems for rendering these emissions harmless. One example is the Zenith Etch Plasma, an integrated vacuum pump and abatement system. The product assists in achieving the World Semiconductor Councils
target for perfluorocarbon (PFC) emissions and is closely aligned to the energy
reduction philosophy of the International Technology Roadmap for Semiconductors
(ITRS). It delivers high performance PFC destruction with total power consumption
of less than 10 kW, less than a quarter
that of conventional systems performing the same function, making it the most
energy efficient system of its kind on the market.
     Hazardous waste and general waste performance improved in 2005 as a result of site based programmes focused on waste minimisation.
     The transport of product by road also has a potentially significant environmental impact. BOC operates its vehicle fleet to the highest environmental
standards. Emissions of carbon dioxide equivalents from our transport operations are approximately 552,000 tonnes of carbon dioxide equivalents(3).
     Process
Gas Solutions has put in place a global reporting card and network to focus on
transport efficiency and delivery for its tanker distribution  network. The tool
analyses vehicle utilisation metrics and delivery statistics. Reports highlight
trends and thus help improve transport efficiency, reduce mileage, and thereby
reduce emissions. BOC Edwards has also been working on a supply chain
management project to replace air freight with sea freight through improved planning
of inventory and supply needs.
     BOCs distribution services business, Gist, undertook an efficiency programme in support of key customer Marks & Spencers transport strategy.
By synchronising volume more closely to store needs and implementing a new planning process, efficiency was improved by 11 per cent and delivery schedules reduced by 2.8 million miles. Gist and Marks & Spencer, working together, also introduced
command steer trailers, drawbar Simply Foods vehicles and double decker trailers to reduce trips and therefore mileage. Road speed was limited to 53 mph to save fuel and automated gearboxes were fitted to the transport fleet, resulting in an
estimated average saving of 0.3 mpg per vehicle. In addition,quiet packs
were fitted to a number of fridge trailers to reduce noise emissions at stores.
     In the past three years much work has been done to improve environmental performance and to establish the business processes and metrics that will permit the
publishing of pre-set performance targets. Every BOC business has internal efficiency targets that have environmental benefits. Some relate to structural changes in the businesses which, when in place, will improve the monitoring of performance
patterns and enable the development of longer-term targets. Process Gas Solutions, which manages the Groups air separation units and thus accounts for the majority of energy usage, will: •
   Implement
       59 power saving projects in 2006, which will reduce electricity usage
       by 83,000 MWh, saving the equivalent of 54,000 tonnes of carbon dioxide
      emissions.•
   Reduce the release of ozone depleting potential materials
    by at least 40 per cent by 2009.Industrial and Special Products, which has BOCs largest distribution fleet worldwide, will:•
   Establish
       single customer delivery vehicle scheduling centres in the UK, South Africa
       and south Pacific in 2006 from a current total of 22 scheduling centres.
        Centralised scheduling will lead to improvements in the efficiency of
       the fleet. As part of the programme, cab computers will be installed to
       give real time feedback on scheduling and the automatic capture of key
       performance data, such as kilometres
driven for each cylinder delivered and litres of fuel consumed for each 100 kilometres
       driven.•
   Review vehicle replacement policy and commit funds in 2006 to replace old vehicles across all business units. For instance, the average vehicle age in South Africa has
fallen from 9.4 years in 2003 to 6.8 years currently. The target is an average age of 6 years. BOC will continue
setting internal targets through business unit performance contracts at site
level where individual improvement opportunities have been highlighted by audits,
the annual  environmental survey and identification of best practice. These targets
include opportunities to reduce waste, conserve water and improve process efficiency. 3.
    First year
      of reporting.


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Product stewardship
    programmes minimise the environmental impact arising from the manufacture
    of BOCs products and their ensuing use by customers. Growing concern
    about the environment and climate change has led to increased legislation,
    which presents BOC with potential business opportunities, such as: •
   BOC
       has formed a partnership with the Morgan Motor Company to develop LIFECar,
       the worlds first hydrogen powered sports car. The hydrogen fuel
       cell produces electric energy, powering four separate electric motors,
       one
       at each wheel. The only waste product is water.•
   BOC has signed a ten-year agreement with Biofuels Corporation in the UK to supply nitrogen and compressed air used in the production of environmentally friendly
biodiesel.•
   BOC and Dabbrook Services have combined solar power and hydrogen fuel cell technologies to develop an eco-friendly water management system for the Environment Agency
in the UK.•
   BOC has signed several contracts in the US to supply oil refineries with hydrogen for producing cleaner fuels. Hydrotreating meets the US Environment Agencys
requirements for lower-sulphur gasoline and diesel fuels.•
   BOC and Cellex Power Products, Canada, are jointly developing hydrogen supply solutions to power forklift trucks used in large distribution warehouses in north
America.•
   BOC and the Australian Commonwealth Scientific and Industrial Research Organisation (CSIRO) have developed an environmentally safe fumigant to replace methyl bromide
in the treatment of soil, pests, weeds and crop diseases.•
  BOC
      is helping to cut the rate of ozone depleting emissions across the building
      sector with the introduction  Ecomate®,
      an environmentally friendly foam blowing agent. Commitment to the environmentThe
UK-based BOC Foundation for the Environment, established with an initial injection
of £1 million in 1990, continues to fund air and water quality projects. New and ongoing
projects include: a review of roadside emissions testing; development of liquid petroleum gas clean fuel
cell technology; a new oxidation technique for pharmaceutical toxic waste; an
evaluation of photovoltaics for solar power; research into the impact of electrical
and electronic hazardous waste; and a programme to develop low cost electrolysers
in support of the hydrogen economy.
     This
year, the Group contributed £385,000 to the Foundation and approved new awards totalling £674,000, bringing the total combined funding to
date from BOC and its co-sponsoring partners to £15 million.
     BOC joined forces with the North East Process Industry Cluster (NEPIC) to launch an environment award for schools in the north east of England. Pupils are
invited to submit practical ideas on environmental issues ranging from recycling to preservation of air and water resources.
     In other parts of the world, notable contributions were made to environmental initiatives in New Zealand and Australia. BOCs Where Theres
Water community environment grants programme in New Zealand, which has awarded 45 grants throughout the country since its inception three years ago, awarded £13,000 in grants, mainly to schools undertaking water conservation projects. In
Australia, BOC donated ten hectares of land at its Wagga Wagga operations centre to Greenfleet, a non-profit organisation that reduces the environmental impact of carbon dioxide emissions by planting trees. BOC volunteers helped local schoolchildren
to plant ten thousand trees on the site. Commitment to educationBOC continues to support educational programmes in local communities through school tours, lessons in the properties of gases, health and safety briefings, careers advice, technical
support and academic research.
     BOCs
Inspiring Gases education programme made further progress in terms of educational
posters and CDs, in addition to development of the web site at  boc.com/education.
The
programme, designed to complement the school chemistry syllabus and to stimulate
young peoples interest in science, is being run in co-operation with the
Royal Society of Chemistry. This year, BOCs UK-wide network of
science ambassadors staged a spectacular new show called Its a Gas.
Staged at the Glasgow Science Centre to coincide with the 7th Institution of
Chemical Engineers World Congress, the show demonstrated the properties and
applications of gases with plenty of flashes, bangs and vapour clouds to appeal
to young audiences. Its run was extended to the end of the school summer holidays
because of its popularity.
     Other
educational activities in the UK included the BOC Gases Challenge, designed to
encourage secondary school students to develop chemical engineering  ideas and
won in its 24th year by a team of pupils from Royal Russell School in Croydon.
For the fifth year, B OC sponsored the Science, Engineering and Technology Student
of the Year Awards, held at the Guildhall in London. The winner, a chemical
engineering graduate undertaking a PhD, received £500 and £500 was
also donated to Loughborough University for his work on the engineering of artificial
blood for transfusions. BOC supports a range of education bodies and initiatives

including: The Council for Industry and Higher Education; The Salters Festival
of Chemistry; The Institute of Chemical Engineers environment award; Surrey County
Councils young entrepreneur scheme; Surrey Scholars Club; the Industrial

Trusts Open Industry programme: SETPOINT and Surrey SATRO.


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Commitment to medical researchBOC
made an annual grant of £10,000 to the Association of Respiratory Nurse
Specialists to aid the fight against chronic respiratory diseases in the UK.
As part of its commitment to  the NHS and the medical establishment as a whole,
BOC leads or supports a number of research programmes, clinical trials and patient
care opportunities, in addition to running clinical seminars on the use of medical
gases for the relief of pain and
respiratory problems. In 2005, BOC provided £400,000 to sponsor several
studies on respiratory issues, lung cancer and chronic obstructive pulmonary
disease (COPD), with a major study being conducted on bronchiolitis at St Marys
Hospital, Paddington. BOC also supports several clinical bodies, jointly founding
the COPD consortium with the British Thoracic Society and others, and including
the long-term sponsorship of the BOC chair of anaesthesia in the UK and the Hong
Kong
College of Anaesthesiologists. In addition, it supports various patient groups
including the Patients Association in the UK. Commitment to the artsThe
fourth BOC Emerging Artist Award, created to support promising young artists
in the UK, was won by photographer Justin Coombes, a graduate of Goldsmiths College,
University of
London. The £20,000 award is designed to cover a years studio rental
and materials, a travel bursary and the costs of a London-based exhibition at
the end of the award period. Five other artists were awarded £1,000
each as
runners-up. Charitable donations and community involvementOperating
within broad guidelines set by the Group, BOCs local businesses are responsible
for choosing and funding their own causes through discretionary volunteering,
donations and  sponsorships. This devolved approach has resulted in support for
a rich variety of programmes that have an impact on BOCs
people and the communities in which they work and live.
     In 2005, BOCs global charitable donations totalled £2,032,000, including funding for the BOC Foundation for the Environment, educational
programmes, medical research and the BOC Emerging Artist Award.
     In
the UK, BOC donated £350,000 to UK-registered charities through a matched
giving scheme operated through the Charities Aid Foundation. In addition  to
the numerous causes supported by matched giving, BOC also supported a number
of Group causes, including the Royal British Legion, Macmillan Cancer Relief,
Limbless Association, Unravel Mills,Voluntary Services Surrey Heath and Royal
Surrey County
Hospitals St Lukes Cancer Fund. The Groups logistics business,
Gist, donated £10,000 to schools and charities at the request of its staff
after they won a competition organised by key customer Marks & Spencer. The
money was
divided between Kent Air Ambulance, Davington Primary School, Pilgrims
Hospice, Bysingwood Primary School and Faversham Cottage Hospital. BOC is a member
of the PerCent Club.
     In
December 2004, the tsunami inflicted terrible devastation on several countries
in the Indian Ocean region. BOC people and businesses in the area responded
with help of all kinds  food, clothing, blankets, medicines and medical
oxygen  as well as money. Across the world, BOC employees donated over £200,000
to help relieve this disaster. Their personal generosity was matched in every
 region by BOC (double matched in most cases), bringing the total raised for
the tsunami victims to £570,000. One example of the enormous support from
BOC employees around the world was BOC in Pakistan and Bangladesh, whose employees

contributed one days salary to provide relief to victims. Another example
was twelve employees from BOC Edwards manufacturing site in Shoreham, who
raised over £20,000 by cycling up Mount Snowdon in Wales.
     Through matched giving, BOC and its employees also contributed £125,000 to the American Red Cross in support of the hurricane Katrina relief effort and
to a special fund to help afflicted BOC employees. BOC also made emergency deliveries of nitrogen to a bottling plant to speed up the distribution of drinking water to local communities around New Orleans.
     In the UK, BOC Edwards sponsored Sussex Business Awards manufacturer of the year category for the second year running. BOC Edwards
sponsorship of the Seishin Judo Club in East Grinstead was matched by government body Sportsmatch and named runner-up in their annual awards ceremony. For the second year running, two drivers from Gists Faversham site delivered a trailer of
much needed furniture and aid to schools in Belarus. In July, BOC medical gas teams across the UK ensured that victims of the terrorist attacks in London got the supplies they needed, delivering 2,500 emergency cylinders to the capital.
     In
the US, employees continued to assist the United Way charitable appeal through
financial donations, volunteering and collections of supplies for needy  children.
All
financial donations were matched by the business. BOC sponsored the building
of a home for a needy family in Ohio, through the Maumee Valley Habitat for Humanity
initiative. A BOC leadership team spent a day helping to build the house in
Toledo, where BOC is building a hydrogen plant to serve oil companies producing
cleaner burning fuels.


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| |  |  |  | Social,
    environmental and ethical performance | 35
| |  |  |  | ------------------------------------------------- | --
| |  |  |  |                                                   |   
| |  |  |  |                                                   |   
| |  |  |  |                                                   |   





In Chile, BOC
    supported several charities, notably those caring for and educating disadvantaged
    children. In Venezuela, BOC made regular donations to charities in Valencia
    in support of impoverished children, health and the environment. A donation
    was also made to the health corporation in the state of Aragua. BOC in Colombia
    supported the Noel childrens hospital and Aburra Norte young community
    leaders. 
             In the south Pacific, the business matches employee donations as a matter of course. BOC in Australia launched the Rotary Youth Driver Awareness road safety
programme, influencing attitudes and behaviour of young people before they start driving. The business continued its long-established relationship with the Malcolm Sargent Cancer Fund, now known as Redkite. Support includes volunteering and a
scholarship programme whereby six young people with cancer receive financial support from BOC. BOC received an award from the New South Wales Cancer Council for its long-term support of Daffodil Day.      

In
South Africa, employees at BOCs subsidiary Afrox continued to support their
community involvement programme (CIP), which helps over seventy  institutions
dealing with disadvantaged children. As in previous years, the main event of
the
year was Bumbanani Day (meaning lets build together), when
8,000 children attended events hosted by BOC staff. The aim of the day is to
 celebrate the relationship that Afrox staff have built up with the children
throughout the year and the achievements they have brought about through their
involvement. In addition, the Afrox donations committee supplemented CIP funds
on certain
projects. For example, a delivery van was donated to Takalani, a home for disabled
children, and four other CIP childrens homes received additional financial
support to help with upgrading and refurbishment. Gas and welding equipment were
 donated to a welding school in Richards Bay and to a skills development initiative
in Johannesburg. Funds were also allocated to: build a home for destitute children
in Postmasburg, a rural town in the Northern Cape; provide a borehole and water

pump at a school in Limpopo Province; purchase desks, chairs and maths sets for
two other schools in the same province; and support the University of South Africas
Mathematics TeachersTraining
Project. 
     Across
Asia, employees supported a wide variety of charities and community organisations.
Every BOC business unit in Asia donated generously to the tsunami appeal. In
Malaysia, employees sponsored several programmes in support of local hospitals,
underprivileged and handicapped children and old peoples homes. In China, BOC provided scholarships to students in Xian
Jiaotong University, which is the leading institution for cryogenic engineering
in the country.      In
India, in addition to supporting a number of poverty, disease and disaster relief
funds, BOC employees donated gifts to several orphanages to commemorate the 70th
year of BOCs presence in India. In Pakistan, BOC continued its support
for organisations engaged in healthcare, social and literacy projects, as well
as the conservation of national heritage. During the year, recipients of donations
included: the Layton Rehmatulla Benevolent Trust, an organization dedicated to
providing free eye care; Friends of APWA Pakistan, a voluntary organization committed
to the development and care of the underprivileged women and children; the Mohatta
Palace Museum that fosters awareness and appreciation of the history and cultural
heritage; and the Aga Khan Medical Hospital and Foundation.


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|36 | The
          BOC Group plcAnnual
    report and accounts 2005
|-- | --------------------------------------------------------------

Research, development and information technology





Research and
  development (R&D)Research
  and development is conducted around the world with key sites located in north
  America, the UK and Japan. The Group Technical Centre (GTC) in Murray Hill,
  New Jersey, is a primary
R&D location for market applications for Process Gas Solutions and for electronic
materials for BOC Edwards. Co-ordination of R&D
is managed through the Group technology council. The council also meets regularly
with the Group new business development forum to ensure the opportunities and
risks from technological change are understood and, where appropriate, exploited.
     Process
Gas Solutions undertakes internal development, forms alliances and partnerships
with universities and customers, licenses or acquires technologies  from third
parties and leverages governmental funding to progress key developments. Internal
developments use its core technical competencies while external partnerships
give access to additional competencies.
     In
2005 BOC successfully commissioned the cryogenic refrigeration system for the
high temperature superconducting (HTS) cable project at Albany, New York. This
34.5 kV HTS cable will form part of the Niagara Mohawk utility grid. BOC was
responsible for the cryogenic system, monitoring and interfacing with the cable
system, working with the Niagara Mohawk utility company. The project drew on
BOCs strengths in heat and mass transfer and its ability to manage remote
operations infrastructures.
     Additional
licenses were signed during the year for BOCs proprietary glass melting
technology, CGM, which is based on its combustion and modelling competencies.
Major glass companies were willing to publicise their results and allow other
glass
companies to visit their installations. These companies include Owens-Corning,
Pilkington, Anchor Glass and LG Philips, representing the fibreglass, flat glass,
container glass
and TV glass segments respectively.
     BOCs
knowledge of adsorption and materials has been applied to the continuing development
of an oxygen generation process. Based on the selective oxygen sorption properties
of specific ceramic materials it has the potential to reduce substantially the
cost of oxygen for certain applications in future chemical and power plants.
As part of a European Union funded project, BOC has identified promising new
materials
for use in oxy-fuel coal boiler-based power plants. Pilot
demonstration of the process is being progressed with government funding in the
US and the European Union.
     BOC has excellent access to hydrogen/synthesis gas production technology through Linde BOC Process Plants. In addition, BOC continues to develop novel
ceramic-based technologies that offer potential step change improvements for the production of hydrogen and synthesis gas.     BOC is working with Ceres Power of the UK jointly to develop fuel cell-based systems for generating electricity, using a variety of cylinder gases. BOC
developed and commercialised a helium conservation system for the optical fibre manufacturing industry and licensed the technology to Fibre Ottiche Sud, a division of Pirelli. This technology improves overall efficiency substantially and reduces
helium wastage.     Based on its combustion and modelling competencies, BOC successfully commercialised a new way to enhance the productivity of steel from basic oxygen furnaces
and reached commercial agreements for licensing the technology to leading steel producers.     BOCs
heat and mass transfer experience enabled it to develop and commercialise a food
freezing technology to crust-freeze luncheon meat logs prior to slicing, allowing
customers to increase the speed of their production lines and overall product
yield. It also eliminates product handling, increases the efficiency of cryogenic
freezing and makes more efficient use of floor space.     For BOC Edwards, the pace of innovation in the silicon semiconductor market is unabated with leading edge customers following a two year technology cycle. In
the storage market the pace is even more rapid with storage capacity doubling every year. Fab investments have generally been at or below those in 2004 with the exception of the flat panel area where investments have been higher than
predicted.     

Emphasis
in product development has been on reducing new products demand for power
and utilities. Monitoring and control capability helps create products with these
capabilities, including active utility control. A sensor-less turbomolecular
pump with an integrated controller, which was introduced this year, is smaller,
easier to install, yet has better performance with lower
vibration.
     Energy
and environmental concerns drive new abatement technology. The Zenith Plasma
for Etch gives excellent destruction and low cost of ownership for  customers
that prefer non-combustion abatement technology. Liquid abatement systems for
copper can be installed at points of use or throughout a production facility.
     In the general vacuum business, new products for the scientific sector offer cost-reduction and enhanced performance. Lower-cost web-enabled sales channels
have been introduced for our broad customer base.     The pharmaceutical business supplied its first systems containing a patented non-contact weighing system. The application, which uses nuclear magnetic
resonance technology, has received approval from the US Food and Drug Administration and is incorporated in several new vial loading products.     
Industrial and
Special Products installed prototypes of a new thermodynamic cylinder filling
package at two sites handling scientific and industrial  gases. Thermodynamic
modelling gives real time control and compensates for raw material impurities
and other system variations, resulting in tighter mixture tolerances and better
production efficiency.


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| |  |  |  | Research,
        development and information technology | 37
| |  |  |  | -------------------------------------------------------- | --
| |  |  |  |                                                          |   
| |  |  |  |                                                          |   
| |  |  |  |                                                          |   





Among areas of
development undertaken by the industrial products technology group are oxy-fuel
cutting, the cryogenic cooling of welds, pipeline welding and shielding gas mixtures.
The cold spray coating process that uses helium or nitrogen is being used in
a number
of new applications and has been accompanied by the successful introduction of
a new helium recovery system. The design and development of new cylinder packages

continues, concentrating on valves with integrated regulators and valve guards.
A
web-based global fabrication technical library was launched, designed to support
technical and product training initiatives. 
     The
medical business continues to research the clinical application of a variety
of gases, including heliox (a mixture of oxygen and helium) that has  demonstrated
promising results in a number of areas, including asthma and brochiolitis in
infants and chronic obstructive pulmonary disease in adults. The BOC Chair of
Anaesthesia and Intensive Care has been awarded to Professor David Menon of
Cambridge University. 
     In
special products, work continues on a new environmentally friendly fumigant,
Vapormate, which has achieved product registration in Australia and New
Zealand. 
     Total
R&D expenditure in 2005 was £43.2 million compared to £41.6 million in 2004 and £39.9
million in 2003. Information management
The information
management (IM) team reports its performance against four criteria: delivering
innovation, creating value, enabling the business and operating efficiently.
It also has measures for developing its people and for its safety performance.
All
users are surveyed regularly to ensure IMs performance matches their needs. As
well as reporting regularly on its short-term performance, IM this year updated
and had
approved its five year strategy. 
     Development
work continues in areas as diverse as wireless technologies, network access,
telephony, and knowledge and document management. The SAP computing  system has
been deployed further, notably to BOC Edwards in north America and more countries
in Asia, and deployment has started of a global asset management system. An IM
helpdesk has been set up that is available to all employees, all the time. It

replaces a number of regional centres. The global data centre, based in the UK,
is now well established and undertakes data processing for BOC businesses around
the world.


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|38               | The BOC
          Group plcAnnual
    report and accounts 2005
|---------------- | --------------------------------------------------------------
|Risk
    factors





This document contains certain forward-looking statements which involve risk and uncertainty as they relate to future events and circumstances. The following risk factors, as well as those
discussed on pages 56 and 57 of the financial review could cause actual results to differ materially from those expressed or implied by these forward-looking statements: BOC is affected by the semiconductor business cycleManufacturers of
semiconductors represent BOC Edwards major customer base, and BOC Edwards profitability is directly linked to the demand of these manufacturers for vacuum
equipment, services and industrial gases. The semiconductor industry has experienced significant growth over the long term, but is cyclical in nature. Any improvements in the level of demand for BOC Edwards products or services may not be
sustained due to reduced demand from end users of technology products and/or excess supply of semiconductors. The competitive nature of the semiconductor industry can reduce profit margins for suppliers of products and services to semiconductor
manufacturers. Either of these factors or a combination could adversely impact BOCs financial results. Any long-term reduction in the growth pattern of the semiconductor industry could also have a negative impact on BOCs
financial
results. Acquisitions
          may not be successful in achieving intended benefits and synergiesBOC
    has completed a number of acquisitions in recent years as part of its growth
    strategy and may make acquisitions in the future. While BOC identifies expected
    synergies, cost savings and growth opportunities prior to completing any
    acquisition, these benefits may not be achieved owing to, among other things:
   delays or difficulties in completing the integration of acquired companies or assets;
   higher than expected costs or a need to allocate resources to manage unexpected operating difficulties;
   diversion of the attention and resources of BOCs management;
   inability to retain key employees in acquired companies;
   inability to retain key customers; and
   assumption of liabilities unrecognised in due diligence. The
          growth of BOCs gases business will depend on the ability to win
          and execute large projects profitablyBOC,
    through its Process Gas Solutions (PGS) line of business, has a strategy
    for growth that requires significant investment each year to serve key customers
    in different geographies. Failure to execute projects successfully for these
    customers will
impact PGSs ability to win new projects from these customers, and therefore
may impact BOCs future financial results. The specific risks associated
with major projects
include:
   failure to complete the project on time owing to unforeseen construction problems (which may require BOC to pay penalties under the terms of the customer
contract);
   failure of the plant to deliver the contracted volumes and quantities of product required by the customer because of design errors or errors in manufacturing or
construction (which may require BOC to pay penalties under the terms of the customer contract); and
   inability to operate the plant at costs assumed in BOCs financial evaluation of the project. The
        safety of BOCs operations is critical to successIndustrial
  gases are hazardous substances and BOC recognises that managing safety in operations,
  transportation and products is critical to achieve growth and financial results.
  Failure to maintain high levels of safety can result in a number of negative
  outcomes, including:
   fines and penalties for breaches of safety laws;
   liability payments and costs to employees or third parties arising from injury or damage;
   exclusion from certain market sectors deemed important for future development of the business (such as medical gases); and
   damage to reputation. Additionally managing social, environmental and ethical matters is key to BOCs reputation. BOC operates in over 50 different countries and is therefore exposed to economic,political, business and natural catastrophe risks associated with international operationsBOCs
overall success as a business with global operations depends, in part, upon its
ability to succeed in differing economic, political and business conditions.
BOC encounters  different legal and regulatory requirements in numerous jurisdictions.
These include taxation laws, environmental regulations, regulations concerning
operational standards and competition laws. BOC is also confronted by political
risks such as the
expropriation of assets and the inability to export currency. The business risks
and challenges faced in each geography include the need to manage credit risks
of local customers, appointing and retaining key staff, general economic conditions
 locally and currency fluctuation. Recognition of changing market conditions
in local geographies is critical to BOCs long-term success, particularly
those where BOC anticipates significant investments to achieve growth, for example
China.  Additionally, a good understanding of political and economic risks is
essential to achieve success from investments in new geographies. BOCs
operations are exposed to varying degrees of natural catastrophe risk, such as
earthquake and flood, as well as security risk, in the different countries in
which BOC operates. BOC operates in a highly competitive environmentThe
industrial gases market is very competitive, with several large competitors and
a significant number of smaller local competitors in different territories. Although
the current trend  in the industry is to seek price increases for industrial
gases, the industry has experienced falling prices in previous years. There is
no guarantee that the current trend will continue and there is a risk that competitors
will seek to maintain or
increase market shares by reducing prices. These price reductions would result
in lower revenues, profits and cash flows.


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| | Risk
    factors | 39
| | ---------------- | --





BOC relies on development of,or access to,technology to support business growthBOCs success is dependent in part on its continued investment in technology to develop new products and services across all businesses, new applications for existing products or to
design effective means for producing industrial gases. Failure to access or develop technology or anticipate, manage or adopt technological changes in operations or product applications on a timely basis will have a material impact on BOCs
future results. For example, the rapid development of technology in the semiconductor
sector requires BOC Edwards to be aware of changes in customer technology requirements
and to introduce new products to meet those requirements in a timely manner.
Failure to do so could result in reduced market share and profitability. Recognising and anticipating changes in the manufacturing economy is key to BOCs
successBOCs
industrial gas businesses serve a wide range of manufacturing customers in major
geographies such as the US, UK, Japan and Australia. This is particularly true
of the Industrial  and Special Products line of business which provides products
and services to customers involved in the welding and cutting of metal, a major
source of revenue for this division. As customers in these traditional manufacturing-based
economies seek to
move their manufacturing operations to lower cost territories in, for example,Asia
and Latin America, the risk arises that BOCs
operations in the major geographies will have lower growth opportunities. Failure
to recognise these trends and manage the consequences, through the development
of alternative markets and/or meeting demand in higher growth territories, could
have a negative impact on future Group financial results. BOCs success depends to a significant extent on its key personnel and employeesBOCs performance depends on the skills and efforts of its employees and management team across all of its businesses. BOC recognises that failure to attract new talent and retain
existing expertise, knowledge and skills in operations, products and infrastructure areas such as information technology could have a negative impact on revenues and profits. In addition, the success of BOCs acquisitions may depend, in part,
on BOCs ability to retain management personnel of acquired companies. Litigation may have an adverse impact on financial results
The global nature
of BOCs business exposes it to the potential for litigation from third
parties. From time to time BOC is involved in lawsuits, resulting from current
and past  operations or products. The outcome of these lawsuits may result in
damages and awards which could have a material impact on BOCs
profitability, its business operations or financial condition. Examples of litigation
in the US for past products include allegations of injury arising from the use
of welding electrodes previously manufactured and distributed by BOC in the US. Increased energy costs could reduce profitability
The production
of industrial gases requires significant amounts of electrical energy. Energy
costs are a key component of the cost of manufacturing industrial gases, and
increases in these costs can impact profitability if they cannot be passed on
to customers. Accurately predicting trends in energy costs is difficult to achieve
as energy costs are to a large extent subject to factors beyond the companys
control  for
example, political conditions in oil producing regions. BOC also operates large
fleets of commercial vehicles in certain major geographies. An increase in energy
costs associated with the use of these commercial vehicles may negatively impact
profit
levels. Further
        consolidation between major competitors may impact BOCs competitive
        position A merger between
    any of the major competitors to BOC within the principal geographies, subject
    to competition authority consent, could result in a longer-term deterioration
    of BOCs competitive position resulting in reduced levels of growth.
    Possible consequences
could include:
   an uncompetitive cost base for large projects;
   an inability to participate in further consolidation due to competition concerns;
   retention and/or recruitment of key personnel;
   weakened geographical positions. Managing joint venture relationships is a key success factor for BOC
BOC needs to ensure that the selection of joint venture partners in new ventures and the relationships with partners in existing relationships is managed effectively to ensure the full
potential for the joint venture is achieved. Failure to achieve alignment of objectives and manage relationships effectively may negatively impact future growth and profit levels. Failure to renew major contracts could reduce profitability
All of BOCs
businesses operate in very competitive markets. The loss of major contracts through
competitive forces, changes in customer purchasing strategy or changes in customer
location, could have a negative impact on Group financial results. Identifying growth opportunities and productivity improvements are necessary for longer term success
Failure to identify
and execute growth and productivity opportunities effectively will limit increases
in profitability. These risks can materialise from inadequate processes or a
lack of
resources to identify opportunities and exploit them. Adoption of accounting changes or new regulations can increase costs and reduce profitability
The implementation of new accounting requirements (for example, International Financial Reporting Standards) or regulations (for example, the US Sarbanes-Oxley Act) can incur significant
costs which reduce profitability. Increased costs arise through recruitment of additional resources, consultancy fees to support implementation or increased external audit fees.


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|40                   | The BOC
          Group plcAnnual
    report and accounts 2005
|-------------------- | --------------------------------------------------------------
|Operating
    review





Introduction
The Groups
results are prepared under UK Generally Accepted Accounting Principles (GAAP)
and comply with UK Companies Act requirements. While the UK GAAP reporting basis
provides the core information for users of this report and accounts to understand
the financial performance of the Group, management believes that users will be
assisted in understanding the performance relative to previous periods by presenting
the results in
an alternative manner. This presentation isolates the impact of currency movements
from year to year and eliminates the impact of exceptional or non-recurring items. This
is consistent with the basis used by management to measure performance of the
business and is a component of variable compensation plans. The elements of this
alternative presentation are described in more detail below. Impact of currency movements
The Group has operations
in some 50 countries around the world and the majority of its profit is generated
outside the UK. Results of overseas operations are translated at the average
rates of exchange against sterling for the year. Changes in such rates from
year to year can significantly affect the Groups results when these are
presented in pounds sterling. In some cases, such changes may make it difficult
to understand underlying business performance trends without providing additional
information. For example, the average value of the US dollar to pounds sterling
changed by three per cent in 2005 compared with 2004. It is important to highlight
such currency
movements to users of financial information to help them understand business
and regional performance.     Consequently,
management has for many years monitored business performance on a constant currency basis.
This basis eliminates the impact of changes in the rates of exchange used to
translate the results of overseas businesses into sterling by retranslating the
results of the comparative year at the rates of exchange used in the current
year. This is the basis for all internal management
reporting throughout the year.     In
this operating review, the comparison of financial performance between years
may in places be referred to as on this constant currency basis.

Comments on all segmental performance are on a constant currency basis.     The impact of changes in the rates of exchange used to translate the results of overseas businesses into sterling is shown in the table below. Impact of
   
   2003 results
   
   
   
   Impact of
   
   2004 results2003 results
   
   movements
   
   (at 2004 rates
   
   2004 results
   
   movements
   
   (at 2005 rates(as reported)
   
   in currency
   
   of exchange)
   
   (as reported)
   
   in currency
   
   of exchange)£ million
   
   £ million
   
   £ million
   
   £ million
   
   £ million
   
   £ millionTurnover (including share ofjoint ventures and associates)Process Gas Solutions
   
   1,242.7
   
   (71.1
   )
   1,171.6
   
   1,275.2
   
   (9.4
   )
   1,265.8Industrial and Special Products
   
   1,751.2
   
   (19.6
   )
   1,731.6
   
   1,782.3
   
   6.9
   
   1,789.2BOC Edwards
   
   684.1
   
   (39.4
   )
   644.7
   
   816.5
   
   (5.5
   )
   811.0Afrox hospitals
   
   353.4
   
   41.4
   
   394.8
   
   432.1
   
   11.6
   
   443.7Gist
   
   291.8
   
   (0.1
   )
   291.7
   
   293.2
   
   0.2
   
   293.4Total
   
   4,323.2
   
   (88.8
   )
   4,234.4
   
   4,599.3
   
   3.8
   
   4,603.1Operating profitProcess Gas Solutions
   
   177.1
   
   (10.3
   )
   166.8
   
   189.5
   
   (0.6
   )
   188.9Industrial and Special Products
   
   238.2
   
   3.1
   
   241.3
   
   253.9
   
   3.0
   
   256.9BOC Edwards
   
   7.9
   
   (1.1
   )
   6.8
   
   46.8
   
   0.4
   
   47.2Afrox hospitals
   
   46.1
   
   5.4
   
   51.5
   
   59.8
   
   1.6
   
   61.4Gist
   
   29.2
   
   0.1
   
   29.3
   
   25.1
   
   
   
   25.1Corporate
   
   (59.9
   )
   6.1
   
   (53.8
   )
   (15.6
   )
   0.5
   
   (15.1
   )Total
   
   438.6
   
   3.3
   
   441.9
   
   559.5
   
   4.9
   
   564.4Adjusted operating profitProcess Gas Solutions
   
   184.0
   
   (10.5
   )
   173.5
   
   190.3
   
   (0.6
   )
   189.7Industrial and Special Products
   
   242.7
   
   2.8
   
   245.5
   
   269.5
   
   2.6
   
   272.1BOC Edwards
   
   18.5
   
   (1.5
   )
   17.0
   
   47.8
   
   0.4
   
   48.2Afrox hospitals
   
   46.1
   
   5.4
   
   51.5
   
   59.8
   
   1.6
   
   61.4Gist
   
   29.2
   
   0.1
   
   29.3
   
   25.1
   
   
   
   25.1Corporate
   
   (14.9
   )
   1.5
   
   (13.4
   )
   (15.6
   )
   0.5
   
   (15.1
   )Total
   
   505.6
   
   (2.2
   )
   503.4
   
   576.9
   
   4.5
   
   581.4 Exceptional or non-recurring items
Management believes that to present the results of the Group in the most meaningful way, items of an exceptional nature should be separately identified and disclosed. This enables users of
the information to have a better understanding of underlying business performance. Examples of such items in 2005 include the profit on disposal of the Afrox hospitals business in Africa and costs of restructuring in BOC Edwards. Included in 2004
were the loss on disposal of the packaged gas business in the US, costs relating to the subsequent restructuring of the remaining US business and charges relating to the integration process in Japan that began in 2003 following the merger of the
industrial and medical gases businesses there of BOC and Air Liquide to form Japan Air Gases.


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| | Operating
    review | 41
| | -------------------- | --
| |                      |   



Exceptional items include those items classified as both operating and non-operating under UK GAAP.     The review of results excluding exceptional items is part of the normal internal management reporting process. The growth in operating profit excluding
exceptional items is also one of the measures used in the variable element of the senior management compensation scheme.     Further information regarding the exceptional items is given in the financial review on page 55. An analysis of all operating and non-operating exceptional
items is given in note 2 b) to the financial statements on page 97.     In
this review, the adjustments to eliminate exceptional items have been made to
operating profit (both Group and by segment), profit before tax and earnings
per share. Exceptional items are commented on in the Group results section as
well as in the individual business segments to which they relate. A reconciliation
of these adjusted items to the equivalent UK GAAP measure is shown in the profit
and loss
account on page 86. When any results or measures used in this review have been
adjusted to exclude exceptional items, they are referred to as adjusted.     Within the individual business segments of the operating review, operating exceptional items are commented on separately. Comments on other aspects of
financial trends and performance are based on adjusted operating profit. This provides more meaningful comment on underlying business performance.A reconciliation of adjusted operating profit to operating profit is given in the table below. 2005
   
   2004
   
   2003Adjusted
   
   Operating
   
   
   Adjusted
   
   Operating
   
   
   Adjusted
   
   Operatingoperating
   exceptional
   Operating
   operating
   exceptional
   Operating
   operating
   exceptional
   Operatingprofit
   items
   profit
   profit
   items
   profit
   profit
   items
   profit£ million
   £ million
   £ million
   £ million
   £ million
   £ million
   £ million
   £ million
   £ millionProcess Gas Solutions
   
   207.2
   
   
   
   207.2
   
   190.3
   
   (0.8
   )
   189.5
   
   184.0
   
   (6.9
   )
   177.1Industrial
    and Special Products
   
   289.4
   
   
   
   289.4
   
   269.5
   
   (15.6
   )
   253.9
   
   242.7
   
   (4.5
   )
   238.2BOC Edwards
   
   38.1
   
   (20.7
   )
   17.4
   
   47.8
   
   (1.0
   )
   46.8
   
   18.5
   
   (10.6
   )
   7.9Afrox hospitals
   
   37.2
   
   
   
   37.2
   
   59.8
   
   
   
   59.8
   
   46.1
   
   
   
   46.1Gist
   
   24.5
   
   
   
   24.5
   
   25.1
   
   
   
   25.1
   
   29.2
   
   
   
   29.2Corporate
   
   (32.2
   )
   
   
   (32.2
   )
   (15.6
   )
   
   
   (15.6
   )
   (14.9
   )
   (45.0
   )
   (59.9
   )Total Group
   
   564.2
   
   (20.7
   )
   543.5
   
   576.9
   
   (17.4
   )
   559.5
   
   505.6
   
   (67.0
   )
   438.6 Other non GAAP measures
This review also
presents return on capital employed (ROCE) and adjusted return on capital employed.
Adjusted return on capital employed removes exceptional items from the measure
of  operating profit used in the calculation. Adjusted return on capital employed
is used by management for reasons similar to those described above.
A
reconciliation of these two measures is shown below. 2005
   
   2004
   
   2003Average
   
   
   
   
   Average
   
   
   
   
   AverageOperating
   capital
   Operating
   capital
   Operating
   capitalprofit
   employed
   ROCE
   profit
   employed
   ROCE
   profit
   employed
   ROCE£ million
   £ million
   %
   £ million
   £ million
   %
   £million
   £ million
   %Adjusted ROCE
   
   564.2
   
   3,478.3
   
   16.2
   
   576.9
   
   3,752.4
   
   15.4
   
   505.6
   
   4,010.5
   
   12.6Operating exceptional
       items
   
   (20.7
   )
   
   
   
   
   (17.4
   )
   
   
   
   
   (67.0
   )
   ROCE
   
   543.5
   
   3,478.3
   
   15.6
   
   559.5
   
   3,752.4
   
   14.9
   
   438.6
   
   4,010.5
   
   10.9 1.
    ROCE
          is operating profit as a percentage of the average capital employed
    excluding net pension liabilities. The Group commentary
    in this review also comments on free cash flow. Free cash flow is a measure
    often referred to by BOC management and other users of financial information
    to highlight  the cash flow available from underlying ongoing business operations
    before acquisition and disposal activity. Whether or not this remains positive
    over time is an indicator that dividends to shareholders are being paid out
    of cash generated by
  existing Group businesses. As such it is a useful additional measure of financial
    performance.
  A reconciliation of this measure to the nearest equivalent UK GAAP measure, net cash flow, is shown below. 2005
   
   2004
   
   2003£ million
   £ million
   £ millionFree cash flow
   
   18.6
   
   257.9
   
   141.8Exceptional cash items
   
   (16.9
   )
   (11.9
   )
   (28.3
   )Acquisitions and disposals1
   
   59.2
   
   92.5
   
   (118.3
   )Other items within capital expenditure and financial investment:Purchases of intangible fixed assets
   
   (0.6
   )
   (0.2
   )
   (1.2
   )Net sales/(purchases) of current asset investments
   
   4.7
   
   (0.9
   )
   16.6Purchases of trade and other investments
   
   (3.4
   )
   (3.8
   )
   (3.3
   )Sales of trade and other investments
   
   30.0
   
   5.6
   
   5.3Net cash inflow before use of liquid resources and financing
   
   91.6
   
   339.2
   
   12.6 1.
   Acquisitions and disposals in 2005 is shown after an adjustment of £69.6 million relating to the disposal of the Afrox hospitals business. This comprises
£54.2 million for the minority interest element of the special dividend paid to the shareholders of African Oxygen Limited following receipt of the proceeds of disposal and £15.4 million for the tax paid on the special
dividend.


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|42                                              | The
            BOC Group plcAnnual
    report and accounts 2005
|----------------------------------------------- | ----------------------------------------------------------------
|Operating
    review (comparing 2005 with 2004)
|                                               






GroupTurnover
including the Group share of joint ventures and associates was £4,605.0 million in 2005, similar to the £4,599.3 million reported in 2004. Operating profit was
£543.5 million, down three per cent compared with £559.5 million in 2004. After crediting operating and non-operating exceptional items totalling £87.9 million and charging net interest and other financing items of £58.5
million, profit before tax was £593.6 million, up 44 per cent compared with £412.3 million in 2004. Earnings per share were 74.1p, up 39 per cent compared with 53.5p in 2004. Excluding the exceptional items, adjusted operating profit for
the year was £564.2 million, adjusted profit before tax was £505.7
million and adjusted earnings per share were 67.5p, a record level for BOC.     Comparisons
with 2004 are affected by exchange rate movements. For the currencies that principally
affect the Groups results, movements in the
Australian dollar and the South African rand were favourable and movements in
the US dollar and Japanese yen were adverse. If the results of a year ago had
been translated at the rates applied to this year, turnover would have been increased
by
£3.8 million. There would have been an increase in operating profit of £4.9
million and an increase in adjusted operating profit of £4.5 million. Adjusted
profit before tax would have been £5.2
million higher and adjusted
earnings per share would have been 0.5p higher.     The table set out below summarises results reported both under UK GAAP and as adjusted. Results for 2004 are shown both as reported in that year and on a
constant currency basis. 12005
   
   2004
   
   2004
     (at 2005exchange
     rates)Turnover including share of joint ventures and associates (£ million)
   
   4,605.0
   
   4,599.3
   
   4,603.1Operating profit (£ million)
   
   543.5
   
   559.5
   
   564.4Adjusted operating profit (£ million)2
   
   564.2
   
   576.9
   
   581.4Profit before tax (£ million)
   
   593.6
   
   412.3
   
   420.5Adjusted profit before tax (£ million)2
   
   505.7
   
   504.3
   
   509.5Earnings per share
   
   74.1
   p
   53.5
   p
   54.5
   pAdjusted earnings per share2
   
   67.5
   p
   63.2
   p
   63.7
   p 1.
   A reconciliation of turnover, operating profit and adjusted operating profit for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted results with UK GAAP results is shown on page 41 and in the profit and loss account on page 86. Exceptional items in 2005 amounted to a profit of £87.9 million. This comprised £84.9 million profit on the disposal of a majority shareholding in Afrox Healthcare Limited,
£13.2 million profit relating to the disposal in 2004 of the US packaged gas business, £10.5 million profit on the disposal of the majority of a shareholding in the US beverage dispense company, NuCo2 Inc, partly offset by a charge of
£20.7 for restructuring in BOC Edwards.      
Exceptional
items in 2004 amounted to a charge of £92.0 million. This comprised a loss of £79.5 million on disposal of the US packaged gas
business, a charge of £14.8 million for restructuring the remaining business in the US following the disposal, a charge of £2.6 million relating to the integration of the industrial and medical gases businesses of BOC and Air Liquide in
Japan, and a profit of £4.9 million on the disposal of fixed assets.      Adjusted
return on capital employed for the year to 30 September 2005 was 16.2 per cent.
Return on capital employed for the year to 30 September 2005 was 15.6 per cent.
Free cash flow (as defined on page 41) was £18.6 million in 2005. Net cash flow, after acquisitions, disposals and other investing activities, and including exceptional cash items, was £91.6
million in 2005. A
reconciliation of these measures is shown on page 41.      
A first interim
dividend for 2005 of 15.9p per share was paid in February 2005 and a second interim
dividend of 25.3p per share was paid in August 2005. In  aggregate this was a
3 per cent increase over the annual dividend of the previous year. A first interim
dividend for 2006 of 16.3p per share has been declared for payment in February
2006. 
     Capital
expenditure by subsidiaries (including interest capitalised) was £397.3 million in 2005, compared with £256.1 million in 2004. This was
covered by cash inflow from operating activities. Capital expenditure by joint ventures and associates was £285.9 million in 2005, of which the BOC share was £144.0 million. Equivalent expenditure in 2004 was £109.0 million, of
which the BOC share was £49.2 million. The Group also made acquisitions of businesses of £57.1 million in 2005 and proceeds from disposals were £224.1 million. Equivalent items in 2004 were £50.9 million and £98.3
million respectively. Process
      Gas Solutions (PGS)Changeon 200412005
   Change
   (constant£ million
   on 2004
   currency)Turnover
   
   1,466.3
   
   +15%
   
   +16% Europe
   
   332.3
   
   +13%
   
   +12% Americas
   
   631.5
   
   +21%
   
   +25% Africa
   
   38.6
   
   +7%
   
   +4% Asia/Pacific
   
   463.9
   
   +10%
   
   +10%Operating profit
   
   207.2
   
   +9%
   
   +10%Adjusted operating profit2
   
   207.2
   
   +9%
   
   +9% 1.
   A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis.


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| | Operating
    review (comparing 2005 with 2004) | 43
| | ----------------------------------------------- | --
| |                                                 |   



The principal business
factors driving increased turnover in 2005 were increased selling prices to recover
higher power and energy costs, increased turnover within the Linde BOC Process
 Plants business in the US and strong demand for gases in the steel sector for
most of the year. The recovery of higher power and energy costs is estimated to
have added approximately one per cent to turnover in 2005. Turnover also rose
because of an
increase in BOCs ownership of the business supplying nitrogen for enhanced
oil recovery in Mexico and as a result of changes to the terms of a supply scheme
contract in the US. These two factors added approximately five per cent to turnover
in
2005 compared with 2004. 
     New plants had a relatively smaller impact on turnover during 2005. Those contributing additional sales included a hydrogen plant supplying Citgo in the US
and a new air separation unit supplying the Sinopec and BASF joint venture petrochemical plant in Nanjing, China. New plants added less than one per cent to turnover in 2005 compared with 2004.      
Operating profit
increased less rapidly than turnover principally because of the factors that
raised turnover without a corresponding impact on profit. These  included increased
prices to recover higher input costs and the changed contract. 
     During
2005, BOC continued to be successful in winning new on-site supply contracts
with major customers in the oil and petrochemical industries and in Asia with
steel customers. Three new plants are under construction for the supply of hydrogen
to US refiners for the production of cleaner-burning fuels and to improve the
processing of heavier crude feedstocks. When these plants are fully commissioned
they are expected to approximately double BOCs worldwide hydrogen capacity. At
the same time, new air separation capacity is being added to satisfy growing
demand from steel and petrochemical customers in Asia. A new plant is being built
for a petrochemical customer at Map Ta Phut in Thailand and several large-scale
plants are under construction in China for both steel and chemical customers.
One of the largest projects currently under way is the addition of a fifth production
module to
the complex supplying nitrogen for the re-pressurisation of oil wells in the
Gulf of Mexico. This facility is already the largest nitrogen plant in the world
and has already proved its worth in boosting oil production. The new module will
increase nitrogen production by approximately 25 per cent. Much of this new capacity
is scheduled to be commissioned in late 2006 and during 2007. 
     There were no operating exceptional items in 2005. Operating exceptional items in 2004 were for the integration of the industrial and medical gases
businesses of BOC and Air Liquide in Japan that began in 2003. EuropeEconomic conditions were mixed during 2005 with some difficult trends in the UK and Ireland partly offset by
industrial growth in Poland. The adverse impact of lower merchant volumes in some sectors was to a large extent offset by further savings from improved operating efficiency.     In
the UK, industrial gases demand from the steel and chemical sectors was strong
in 2005, leading to better tonnage volumes. However, demand for liquefied gases
declined as a result of generally sluggish activity in some manufacturing sectors
exacerbated by sharp increases in energy costs. These also impacted BOCs
merchant gases business. Higher power costs were generally recovered in selling
prices but increased prices led some customers to reduce their consumption of
industrial gases, while a few ceased production in the UK.     There has been another significant increase in UK power prices for 2006 and further selling price increases are being implemented with customers.     BOCs
business in Poland continued to benefit from general economic growth and strong
demand in the steel industry.     Sales volumes were lower in Ireland as some traditional industries declined while economic growth was concentrated in the service sectors.     Cryostars
business as a manufacturer of cryogenic pumps, expansion turbines and compressors
continued to grow in 2005. These devices are used for a variety of industrial
gas applications and for marine liquefied natural gas (LNG) tankers. The AmericasBuoyant
conditions in the steel industry led to strong demand for tonnage gases in the
US during the first half  of 2005. Some slowdown became apparent during the second
half and this, together with isolated plant outages, reduced tonnage volumes
in the second half and for the year as a whole. Higher power costs were progressively
recovered by increased
selling prices in the merchant market for liquefied atmospheric gases and demand
remained firm. Carbon dioxide sales benefited from strong demand for enhanced
oil recovery rather than for food and beverage applications. 
     During 2005, BOC invested in new carbon dioxide capacity to satisfy demand for oil recovery in Texas and made a number of smaller investments to optimise the
US supply chain network and reduce delivery costs.      In
Latin America, the contribution from the joint venture supplying nitrogen to
Pemex for re-pressurising its Cantarell oilfield was increased in 2005 as a result
of BOCs acquisition of Duke Energys 30 per cent interest. This transaction was completed in September 2004 and increased BOCs
overall stake to 65 per cent. Construction of a fifth production module that
will increase output by approximately 25 per cent is now under way and on schedule.
Meanwhile some improvement in the efficiency of existing production units is
expected from a routine maintenance schedule that is currently in progress. AfricaSales volumes increased in 2005 as a result of continuing firm demand for tonnage gases in the South African steel
sector and increasing consumption of liquid nitrogen by food manufacturers. Higher selling prices also contributed to increased turnover. New long-term supply contracts were signed with customers in the metals and automotive components industries.
During 2006, investments will be made to fulfil these contracts and to satisfy growing demand for liquefied gases in the merchant market.


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|44 | The
          BOC Group plcAnnual
    report and accounts 2005 |  | Operating
    review (comparing 2005 with 2004)
|-- | -------------------------------------------------------------- |  | -----------------------------------------------
|   |                                                                |  |                                                
|   |                                                                |  |                                                
|   |                                                                |  |                                                





Asia/PacificSales
growth in north Asia was supported by production from new and recently commissioned
plants in China. There  was also growing demand for liquefied gases in the merchant
markets not only in China but also in Korea and in Taiwan, where available capacity
was fully utilised. Further investment by Chinas leading steel and chemicals
producers continued  strongly in 2005 leading to opportunities for long-term
supply schemes.
     

A
new 1,400 tonnes-a-day air separation unit was commissioned by BOCs joint venture with Sinopec in Nanjing during the year and began to supply
Sinopecs new joint venture with BASF when that began operation in 2005. Two new air separation plants were also commissioned in south China to supply steel customers during 2005. Two 1,400 tonnes-a-day air separation units are under construction
to supply gases for expanded production at the Taiyuan Iron & Steel Corporation (TISCO), which is already the largest stainless steel producer in China and one of the biggest in the world. Construction of a further two similarly large air
separation units to supply the Maanshan Iron & Steel Company (Ma Steel) began
before the end of 2005.      In
Japan, demand for industrial gases from the steel, chemical and glass industries
remained strong in 2005. During the year, BOCs Japan Air Gases
joint venture brought on stream a new 2,100 tonnes-a-day plant serving a major
steel customer.      BOCs
most important PGS businesses in south and south east Asia are in Thailand, Malaysia,
Singapore and India. The major market sectors for PGS across the region are steel,
petrochemicals and the food industry.      The
Thai economy continued to expand in 2005 and BOCs business there benefited
from growth of the chemical industry. Despite a continuation of US anti-dumping
measures that held back prawn exports, there was some recovery in the food-freezing
sector leading to increased sales of carbon dioxide and liquefied nitrogen.      MIG
Production Co. Ltd (MIGP), a joint venture between BOCs Thai subsidiary Thai Industrial Gases PCL and Bangkok Industrial Gas Company Ltd has been
awarded a long-term contract to supply 800 tonnes a day of oxygen to a new mono ethylene glycol project operated by TOC Glycol Co. Ltd. (TOCGC) in Map Ta Phut, Thailand. MIGP is investing US$50 million to build an air separation unit on an adjacent
site to TOCGCs new mono ethylene glycol plant. Scheduled to come on-stream in 2006, the facility will produce 1,300 tonnes of oxygen a day, making it the largest air separation unit in Thailand. The excess capacity from the new facility will
serve the parent companies tonnage and merchant markets.      Business in Malaysia was supported by buoyant conditions in the steel sector for most of the year despite some softening of demand in the final quarter.
Demand from the Malaysian chemical industry also improved in 2005. Business trends in Singapore were positive in 2005, led by expanding activity in the chemicals and electronics sectors.      Strong demand for industrial gases by the steel, chemicals, pharmaceuticals and glass sectors coupled with positive selling price trends led to accelerated
growth in India.      BOCs
subsidiary, BOC India Ltd, has been awarded the contract for supplying the gases
requirements for an expansion programme being undertaken by Jindal Vijaynagar
Steel Limited at Bellary in Southern India. BOC India Ltd has signed a fifteen-year
agreement to supply 1,400 tonnes a day of oxygen and nitrogen and is building
a new 855 tonnes-a-day air separation unit at Bellary, which is due
to be commissioned in 2006. Management sees this latest investment of up to US$40
million as a major move in developing its strategy in southern India.      Elsewhere
in the region, business developed well in Pakistan but growth in the Philippines
was constrained by product availability. Production of oxygen at
BOCs plant at Gresik in Indonesia was limited during 2005 by the availability
of natural gas to generate power. Use of diesel fuel as an alternative led to
less efficient operation.      
In Australia economic
growth continued in 2005 but at a slower rate than in 2004 and there was relatively
little new plant investment. World commodity prices  remained firm leading to
sustained demand from the mineral processing and steel industries for tonnage
gases. Higher energy and labour costs in 2005 were generally recovered by increased
selling prices. 
     

During
2005, BOC renewed its long-term contract to supply a leading titanium dioxide
pigment manufacturer.
      The Government of Western Australias
environmentally friendly fuel cell bus project, which began in 2004 with three
hydrogen-fuelled buses operating in the city of Perth, was commercialised in
2005. BOCs
hydrogen purification plant and re-fuelling facility supports BP in this
project. Water servicesFurther
  business was secured during 2005 with industrial rather than municipal customers,
  in accordance with
  BOCs strategic objectives for this business. Much of the new business continued
  to be with food manufacturers but there was also increasing interest for water
  services in the chemicals and refining sectors. Industrial
      and Special Products (ISP)Changeon 200412005
   
   Change
   
   (constant£ million
   
   on 2004
   
   currency)Turnover
   
   1,721.7
   
   3%
   
   4% Europe
   
   467.0
   
   +4%
   
   +3% Americas
   
   322.3
   
   24%
   
   23% Africa
   
   272.3
   
   +18%
   
   +19% Asia/Pacific
   
   660.1
   
   3%
   
   4%Operating profit
   
   289.4
   
   +14%
   
   +13%Adjusted operating profit2
   
   289.4
   
   +7%
   
   +6% 1.
   A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis.


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| |  |  |  | Operating
        review (comparing 2005 with 2004) | 45
| |  |  |  | --------------------------------------------------- | --
| |  |  |  |                                                     |   
| |  |  |  |                                                     |   
| |  |  |  |                                                     |   





Turnover was lower in 2005 as a result of the disposal of BOCs packaged gas business in the US in July 2004 and the disposal of part of the Unique Gas business in Thailand in
December 2004. These disposals accounted for a ten per cent decrease in turnover for 2005 compared with 2004. The effect of disposals on turnover was partly offset by growth in Europe,Africa and the south Pacific region.      The
elimination of overhead costs following the US packaged gas disposal helped towards
an increase in operating profit. This together with new business won was reflected
in a £15 million increase in north American adjusted operating profit in 2005. Other factors supporting profitability were the extension of best commercial practice and best operating practice business
efficiency programmes to more parts of the world.      
Further
progress was made with the refurbishment of retail stores - particularly in South
Africa and Australia - during 2005 and this led to increased sales. Retail outlets
also supported the growth of BOCs safety products business. At the same
time further comprehensive safety product contracts were won with major customers. 
     New
user-friendly product packages, including lightweight cylinders for emergency
services, continued to drive sales growth of medical gases. Turnover of medical
gases for BOCs major subsidiaries, joint ventures and associates (excluding
Japan) increased by seven per cent in 2005. There was also good growth in the
special products and services business, which includes scientific gases, refrigerant
gases and other packaged chemicals. Special gases turnover increased by 11 per
cent in 2005 on the same basis.      
Higher petroleum prices in 2005 presented a challenge to margins in the liquefied petroleum gas businesses in Australia and South Africa but most of the cost
increases were recovered in higher selling prices.      Demand for helium remained strong worldwide, driven by increasing use of medical imaging. New helium capacity is expected to come into production in Qatar in
2006. This will make more product available to BOC but at a higher price than existing supplies.      There were no operating exceptional items in 2005. Operating exceptional items in 2004 were for the integration of the industrial and medical gases
businesses of BOC and Air Liquide in Japan that began in 2003, as well as for the restructuring of the ISP business in the US following the disposal of the packaged gas business. EuropeIncreased
  turnover reflected growing sales of medical and special products in the UK and
  generally favourable business trends in Poland. The UK industrial market remained
  flat, but BOCs business was expanded by increased sales of welding products.
  Increased energy costs were recovered by increased selling prices.      

  Growth in the medical gases business was once again driven by the introduction of new lightweight cylinder packages and by winning hospital facilities
management contracts.      Increased
turnover of special products was based largely on growing sales of gas mixtures
for scientific applications and additional helium business. New capacity is being
added to satisfy additional requirements for Siemens Magnet Technology (formerly
Oxford Magnet Technology) the leading MRI scanner manufacturer. BOC already manages
Siemens helium requirements during manufacturing and will
now provide on-site services for Siemens magnets in hospitals. Additional sales
also resulted from the acquisition of Calors
aerosol propellants and hydrocarbon refrigerants business in the UK.      
Growth
of BOCs Sureflow hospitality gas and cellar services business was curtailed
by lower sales of draught beer in the UK during 2005. Additional business was
gained in Ireland by providing cellar services for a major brewery chain.      Changes
in the provision of domiciliary oxygen in England and Wales were announced by
the National Health Service in 2005. BOC was awarded one of the 11 regional contracts
and from February 2006 will supply all forms of domiciliary oxygen to patients
for the Eastern region. It is expected that this will lead to a reduction of
BOCs home oxygen sales in the UK over the next two years. However,
the majority of BOCs UK medical gases business is with hospitals and the
emergency services, which is unaffected by this change. The AmericasThe
disposal of BOCs US packaged gas business was completed on 30 July 2004
when initial cash proceeds of  US$175 million were received. This business had
turnover of approximately US$240 million in 2003. 
     

The
ISP business in the US now consists of bulk medical gases, bulk supplies to distributors,
tube trailer and liquefied helium. BOCs US overhead costs
were reduced following the disposal, as the business was then concentrated on
a much smaller number of customers. As a result the US business became profitable
in 2005. 
     During 2005, new distributor channels were added, new helium business was secured in the US and new bulk industrial contracts were won with biotechnology and
laser welding customers.      Buoyant conditions in the oil and gas industry helped towards an improved performance in Canada during 2005.      BOCs
global helium business grew strongly in 2005 with increasing demand in China
and Korea. During 2006 the first supplies from a new source in Qatar will enable
these markets to be served more efficiently. However the financial impact is
expected to be negative initially as additional volumes will be offset by higher
feedstock costs.      Growth
in Latin America was driven by increased sales in Venezuela and Colombia, where
the medical sector is the most important. However there was also growth in the
industrial markets served by BOCs associated company based in Chile. AfricaLower interest rates continued to stimulate South African domestic consumption and manufacturing output during 2005,
leading to better turnover for the African region. Operating profit also increased but by somewhat less than turnover, which was additionally inflated by higher liquefied petroleum gas (LPG) prices.      

Turnover grew in every part of the South African business but was led by particularly strong sales of safety products. During 2005 Afrox Safety was launched
as a business brand and an on-site safety services business was acquired. Sales of scientific gases increased but from a relatively low base.      Despite the challenge of a strong South African rand, export business also grew considerably. Plans are in place to expand production of welding products for
local use and particularly for export.      Other African countries also produced satisfactory results with particularly good performances in Kenya and Zambia.


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|46 | The
          BOC Group plcAnnual
    report and accounts 2005 |  | Operating
    review (comparing 2005 with 2004)
|-- | -------------------------------------------------------------- |  | -----------------------------------------------
|   |                                                                |  |                                                
|   |                                                                |  |                                                
|   |                                                                |  |                                                





Asia/PacificMost of the countries in south and south east Asia achieved good results in 2005 with especially strong
performances in India,Thailand and Bangladesh. Results in India were additionally supported by a profit from the disposal of some land in Bangalore.      

At the same time, trading conditions during 2005 were difficult in Malaysia and industrial activity continued to decline in Hong Kong as production drifted
to mainland China. This trend also continued to affect Taiwan but to a lesser extent.      BOCs
industrial products business remains relatively undeveloped in China. Few attractive
opportunities have been identified but growing demand for helium provides a better
prospect.      The growth of automobile production stimulated demand for welding gases and investment in special gases and packaged chemicals production facilities
supported increased sales of these products in Asia generally.
In Japan, both turnover and adjusted operating profit were similar to a year ago.      An improved performance in the south Pacific region was driven by demand from the natural resources sector and increased sales of safety products while
consumption of welding products and gases by the manufacturing sector grew more slowly. This reflects somewhat slower growth in the Australian economy than in 2004.      
Growth was focused
in the mining regions of Western Australia, Queensland and Papua New Guinea.
BOC was also successful in winning significant contracts to  supply safety and
personal protective products to Xstrata in Australia and to New Zealand Steel.
These added to similar contracts won with Western Mining in 2004. 
     The
construction of a new special gases centre is under way at Wagga Wagga, in Australia,
to meet the increasing demand for packaged chemicals such as ammonia, ethylene
oxide and sulphur dioxide. Meanwhile the gradual re-development of BOCs
retail Gas and Gear stores that began in 2004 continued in 2005 and is now approximately
two thirds completed.      BOCs
joint venture company supplying liquefied petroleum gas in Australia faced the
twin challenges of a sharp rise in input costs and the warmest winter on record
in 2005. Lower consumption for heating applications therefore led to a decline
in volumes. BOC EdwardsChangeon 200412005
   
   Change
   
   (constant£ million
   
   on 2004
   
   currency)Turnover
   
   826.0
   
   +1%
   
   +2%Operating profit
   
   17.4
   
   63%
   
   63%Adjusted operating profit2
   
   38.1
   
   20%
   
   21% 1.
   A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. The upturn in semiconductor equipment spending that had helped BOC Edwards order intake and financial performance in 2004 was not repeated in 2005. At the same time, margins
continued to be adversely affected by weakness of the US dollar, which is the currency in which much of BOC Edwards revenue is earned. The adjusted operating profit for 2005 would have been approximately £9
million more if transactions had been conducted at the exchange rates of a year
ago. Adjusted operating profit was therefore lower in 2005, despite some initial
benefit from cost reduction programmes.      
Where new semiconductor or liquid crystal display (LCD) business was placed, BOC was generally successful in retaining or improving its market share. Demand
for integrated subsystems combining vacuum and exhaust management technologies grew in 2005. BOC Edwards is now launching a new plasma abatement system for the destruction of ozone-depleting PFC chemicals, which are found in the exhaust streams
after etch processes in semiconductor, LCD and solar cell manufacture. BOC Edwards also became a leading supplier of subsystems for immersion lithography. For the latest generation of LCD fabrication units, BOC Edwards has also launched its own iFxK
and iHxK high-capacity pumping systems. For semiconductor applications, a new cost-effective turbomolecular pumping system, whose magnetic bearings are controlled without the use of sensors, was developed.      Demand for component cleaning services and electronic materials was slightly lower as some semiconductor production rates were reduced in 2005 to reduce
stock levels. During 2005 BOC Edwards formed a joint venture to extend its component cleaning business into Taiwan.      While nitrogen trifluoride prices continued to fall in 2005, BOC Edwards made good progress with its alternative technology of on-site fluorine generation
systems for cleaning vapour deposition chambers. Production of fluorine generators has already been established in Korea to achieve lower production and distribution costs to serve the expanding customer base in Asia.      In
October 2004 BOC Edwards expanded its electronic materials offering to include
wet chemicals for flat panel display, semiconductor, and solar cell customers
throughout Asia, by purchasing a 50 per cent ownership in Asia Union Electronic
Chemical Corporation (AUECC) . This company also formed a joint venture with Shanghai
Huayi (Group) Company to supply wet process chemicals to the growing
electronics manufacturing industry in China.  Through the joint venture,AUECC
will use Shanghai as a base to produce, package and distribute a full range of
ultra high-purity process chemicals for the semiconductor and flat panel display
industries.      
In
2005 BOC Edwards retained strong positions in the bulk gases markets of Taiwan
and China and improved its position in Korea. New production capacity was added
to the existing pipeline network in the Hsinchu business park in Taiwan and additional
business was obtained in the business parks at Suzhou, China. BOC Edwards has
also established a position supplying customers in the new Cheng Du park in
China. In Korea, BOC won potentially significant gases business with Samsung,
having previously been a major supplier of semiconductor equipment. BOCs
joint venture company also won new business with semiconductor manufacturers
in
Singapore.


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| | Operating
    review (comparing 2005 with 2004) | 47
| | ----------------------------------------------- | --
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| |                                                 |   



There was better
    demand for vacuum equipment from the chemicals industry and from the aerospace
    industry for metallurgical applications in 2005. A general improvement in
    Asian markets also
helped towards better results from BOC Edwards general vacuum business.
Vacuum pump production was expanded in the Czech Republic and some system assembly
operations
were established in Brazil during 2005.
     Deliveries of pharmaceutical freeze-drying and packaging systems were at a higher level than in 2004. The establishment of a new low-cost manufacturing base
in China has opened up new possibilities for business with the fast-growing pharmaceutical industry in Asia generally and particularly in India.
     Exceptional
costs of £20.7 million were charged within BOC Edwards during 2005. Some £14 million relates to the impairment of goodwill. The
remainder is a charge for restructuring. Savings of approximately £5 million
are targeted from this restructuring.
     Operating exceptional items in 2004 were for the integration of the industrial and medical gases businesses of BOC and Air Liquide in Japan that began in
2003. Afrox hospitals2005£     million
   
   Change
     on 2004
   
   Change
on 2004(constant
  currency)
   1Turnover
   
   275.1
   
   36
   %
   38
   %Operating profit
   
   37.2
   
   38
   %
   39
   %Adjusted operating profit2
   
   37.2
   
   38
   %
   39
   % 1.
   A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. The disposal of the majority shareholding in Afrox Healthcare Limited to a consortium led by two major black empowerment investors was completed on 22 March 2005. African Oxygen Limited
(Afrox), BOCs subsidiary in South Africa, retains a significant interest in the hospitals business through a 20 per cent holding in the new company. Until disposal,Afrox Healthcare Limited was fully consolidated into the BOC Group accounts.
For the second half of 2005, a 20 per cent share of the results of the new company, with its adjusted operating profit and net interest charge, was included in the BOC Group profit and loss account. The comparisons above are therefore distorted by
this change.      After adjusting for this disposal and change of accounting treatment, the underlying performance of the Afrox hospitals business remained positive during
2005.      The disposal proceeds were received by Afrox in March and distributed to The BOC Group and Afrox minority shareholders by means of a special dividend in
June, followed by a share buy-back in July 2005. Gist2005£     million
   
   Change
     on 2004
   
   Change
     on
       2004
       (constant
     currency)
   1Turnover
   
   315.9
   
   +8
   %
   +8
   %Operating profit
   
   24.5
   
   2
   %
   2
   %Adjusted operating profit2
   
   24.5
   
   2
   %
   2
   % 1.
   A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 402.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. While the market for distribution services remained difficult in the UK throughout 2005, Gist continued to expand sales with existing customers and won new business. The higher turnover
was not reflected in better operating profit, principally because of increased pension costs. Gist accounts for a substantial proportion of BOCs UK workforce and the impact of pension costs is therefore significant.      Food
business with Marks & Spencer, Gists major customer, expanded in 2005
as more new retail outlets were opened. Logistic operations for the Ocado home
food service in association with Waitrose also continued to grow. Existing services
for Carlsberg (UK) were expanded in 2005 and new business was won with Woolworths.      In
September 2005 the Van Dongen group of logistics companies based in the Netherlands
was acquired. This adds to Gists primary distribution
operations, bringing products from food manufacturers into the supply chain.
It also extends the reach into continental Europe, which is becoming an increasing
source of food products for UK retailers. This wider network has already generated
additional business between the UK and continental Europe from a number of existing
and new customers.      In
November 2005, Gist was awarded an extension to its food logistics contract with
Marks & Spencer. The contract covers the retailers growing food
business until 2011, confirming it as one of the UKs largest food logistics
contracts. Corporate
Corporate costs
increased in 2005 partly as a result of additional spending on procedures to
ensure compliance with Sarbanes-Oxley legislation and discretionary spending
on litigation support in the US. The corporate charge also included a provision
of £4.3 million for environmental clean-up in the US.


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|48                                              | The
          BOC Group plcAnnual
    report and accounts 2005 | 
|----------------------------------------------- | -------------------------------------------------------------- | 
|Operating
    review (comparing 2004 with 2003)
|                                                |                                                                | 
|                                                |                                                                | 



Group
  Turnover including
the Group share of joint ventures and associates was £4,599.3 million in 2004, up six per cent compared with £4,323.2 million in 2003. Operating profit was
£559.5 million, up 28 per cent compared with £438.6 million in 2003. After charging operating and non-operating exceptional items totalling £92.0 million and net interest and other financing items of £72.6 million, profit
before tax was £412.3 million, up 17 per cent compared with £351.9 million in 2003. Earnings per share were 53.5p, up 20 per cent compared with 44.5p in 2003. Excluding the exceptional items, adjusted operating profit for the year was
£576.9 million, adjusted profit before tax was £504.3 million and
adjusted earnings per share were 63.2p. 
     
Comparisons
of 2004 with 2003 were affected by exchange rate movements. For the currencies
that principally affect the Groups results, movements in the
Australian dollar and the South African rand were favourable and movements in
the US dollar and Japanese yen were adverse. If the 2003 results had been translated
at the rates applied to 2004, turnover would have been reduced by £88.8

million. There would have been an increase in operating profit of £3.3
million and a decrease in adjusted operating profit of £2.2 million. Adjusted
profit before tax would have been £2.9
million higher and adjusted earnings per
share would have been 0.2p lower. 
     
The table set out below summarises results reported both under UK GAAP and as adjusted. Results for 2003 are shown both as reported in that year and on a
constant currency basis. 2004
   
   2003
   
   2003
     (at 2004exchange rates)
   1Turnover including share of joint ventures and associates (£ million)
   
   4,599.3
   
   4,323.2
   
   4,234.4Operating profit (£ million)
   
   559.5
   
   438.6
   
   441.9Adjusted operating profit (£ million)2
   
   576.9
   
   505.6
   
   503.4Profit before tax (£ million)
   
   412.3
   
   351.9
   
   360.3Adjusted profit before tax (£ million)2
   
   504.3
   
   418.9
   
   421.8Earnings per share
   
   53.5
   p
   44.5
   p
   44.9
   pAdjusted earnings per share2
   
   63.2
   p
   52.9
   p
   52.7
   p 1.
   A reconciliation of turnover, operating profit and adjusted operating profit for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted results with UK GAAP results is shown on page 41 and in the profit and loss account on page 86. Exceptional items in 2004 amounted to a charge of £92.0 million. This comprised a loss of £79.5 million on disposal of the US packaged gas business, a charge of £14.8
million for restructuring the remaining business in the US following the disposal, a charge of £2.6 million relating to the integration of the industrial and medical gases businesses of BOC and Air Liquide in Japan, and a profit of £4.9
million on the disposal of fixed assets.      Exceptional
items in 2003 comprised £43.2 million for a litigation settlement, costs of £15.5 million for completion of restructuring programmes
and £8.3 million relating to the integration of the BOC and Air Liquide
businesses in Japan.      Adjusted
return on capital employed for the year to 30 September 2004 was 15.4 per cent.
Return on capital employed for the year to 30 September 2004 was 14.9 per cent.
Free cash flow (as defined on page 41) was £257.9 million in 2004. Net cash flow, after acquisitions, disposals and other investing activities, and including exceptional cash items, was £339.2
million in 2004. A
reconciliation of these measures is shown on page 41.      A first interim dividend for 2004 of 15.5p per share was paid in February 2004 and a second interim dividend of 24.5p per share was paid in August 2004. In
aggregate this was a 2.6 per cent increase over the annual dividend of the previous year.      Capital
expenditure by subsidiaries (including interest capitalised) was £256.1 million in 2004, compared with £281.2 million in 2003. This was
covered by cash inflow from operating activities. Capital expenditure by joint ventures and associates was £109.0 million in 2004, of which the BOC share was £49.2 million. Equivalent expenditure in 2003 was £81.4 million, of which
the BOC share was £36.1 million. The Group also made acquisitions of businesses of £50.9 million in 2004 and proceeds from disposals were £98.3 million. Equivalent items in 2003 were £135.5 million and £3.9
million
respectively. Process
      Gas Solutions (PGS)2004£     million
   
   Change
     on 2003
   
   Change
     on
         2003(constant
  currency)
   1Turnover
   
   1,275.2
   
   +3
   %
   +9
   %Operating profit
   
   189.5
   
   +7
   %
   +14
   %Adjusted operating profit2
   
   190.3
   
   +3
   %
   +10
   % 1.
   A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. Increased turnover reflected strong demand worldwide for both steel and nonferrous metals. In addition, sales from new production facilities accounted for approximately £14 million
of the increase in turnover between 2003 and 2004.      Metal
production increased in 2004 and world metal prices firmed as a result of strong
demand from China. This benefited BOCs steel and nonferrous
metal customers in all the key markets throughout the year.      For 2004 as a whole, the food sector was buoyant outside the US despite the temporary consequences of avian flu in Asia and the imposition of US import
tariffs on prawns.      The recovery in the electronics packaging industry created exceptionally strong demand for industrial gases in the electronics packaging sector. BOC was a
leading beneficiary of this because of its strong position in Asian markets.


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| | Operating
    review (comparing 2004 with 2003) | 49
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Several significant
    new supply scheme contracts were won in 2004. BOCs hydrogen business
    with refiners will be substantially increased with a new plant to supply
    both a Sunoco refinery at Toledo, Ohio, and a nearby BP refinery. The hydrogen
    will be used by both BP and Sunoco in the production of ultra-low sulphur
    gasoline and diesel fuels. 
     
Outside
the US, significant new business in the chemical sector was won with the Sinopec
Shanghai Petrochemical Company. BOC will form a joint venture to invest in existing
assets and then add further air separation capacity. BOCs subsidiary in
Thailand is to invest in a venture establishing a 1,300 tonnes-a-day plant to
supply TOC Glycol Co. Ltd. (TOCGC) in Map Ta Phut and to increase merchant capacity
in the area. 
     
New business with steel customers was mainly concentrated in Asia. In January 2004, BOC announced that its joint venture with the Taiyuan Iron and Steel
Corporation (TISCO) would expand its existing 1,500 tonnes-a-day capacity with the construction of two new 1,400 tonnes-a-day air separation units. 
     
In the UK, BOC supplies Corus at its Port Talbot, Scunthorpe, Rotherham and Redcar plants. BOC is to increase its industrial gases supply to the Port Talbot
strip products plant by 30 per cent to increase steel production locally. 
     
Selling prices were generally firm during 2004 and sufficient to offset input cost inflation except in parts of north Asia. 
     
Operating exceptional items in 2004 were for the integration of the industrial and medical gases businesses of BOC and Air Liquide in Japan that began in
2003. EuropeTurnover
    increased in all parts of Europe except for Ireland. Adjusted operating profit
    increased significantly, mainly  as a result of more efficient plant operation
    and careful control of costs. 
           In the UK, manufacturing activity remained generally weak but customer closures and relocations that had affected business in 2003 were less evident in 2004.
Rising steel production led to increased demands for oxygen.      Price increases were generally sufficient to cover higher input costs in 2004. Further increases are being implemented in 2005 to cover sharply higher
electricity prices in the UK following the expiry of a fixed price supply contract.      Cryostar manufactures cryogenic pumps, expansion turbines and compressors for a variety of industrial gas applications and for marine liquefied natural gas
(LNG) tankers. As in 2003, turnover and adjusted operating profit increased in 2004 principally as a result of demand for shipboard compression units on LNG tankers and following continued investments for gases plants in Asia. North AmericaTurnover
increased as a result of including a full year of syngas production for Celanese
at Clear Lake,Texas
and the start-up of a new plant supplying hydrogen to Citgos refinery at
Lemont, Illinois, in October 2003.      Adjusted operating profit was lower as a result of reduced carbon dioxide volumes to our food and dry ice customers, and reduced argon demand from the
stainless steel and wholesale sectors.      In
general, demand for industrial gases from steel customers was strong in 2004.
Liquid nitrogen volumes for food freezing applications strengthened during the
year, mitigating the reduced carbon dioxide volumes into this sector. BOCs
carbon dioxide business with beverage customers continued to make good progress
in 2004 and new business was won.      Selling prices remained generally firm and significant increases in fuel and energy costs were largely recovered with surcharges or general price
rises. Latin AmericaRevenues increased across the region during 2004, although business in Venezuela continued to be affected by
political uncertainty. In Brazil, BOCs new 400 tonnes-a-day plant entered production serving CST, the worlds biggest producer of slab steel.      The
benefits of re-pressurising the Pemex Cantarell oilfield in the Gulf of Mexico
with nitrogen from BOCs joint venture company continued to be
realised during the year. In May 2004 BOC agreed to buy Duke Energys 30 per cent ownership interest in the joint venture company for US$59.7 million in cash. This increased BOCs
overall stake to 65 per cent on completion in September
2004. AfricaTurnover
increased and adjusted operating profit was further improved by cost savings
and firm pricing trends leading  to better margins. Although the stronger rand
adversely affected platinum and gold mining in 2004, strong demand and firmer
prices led to increased activity in the steel industry. JapanThe
combination of BOCs and Air Liquides industrial and medical gases
businesses in Japan took effect from  January 2003. This distorts the comparison
of turnover and profit for BOCs three lines of business between 2004 and
2003 and with earlier years. The results of Japan Air Gases were consolidated
on an equity basis throughout 2004 and for the last  three quarters of 2003.
In 2004 turnover increased mainly as a result of equipment sales and adjusted
operating profit increased faster as a result of achieving integration cost savings
as planned. North AsiaTurnover
and adjusted operating profit increased in 2004 but at a more modest pace than
in 2003. Production plants  across the region were almost fully utilised and
little new capacity came on stream in 2004. 
     In
China, turnover and adjusted operating profit increased in line with economic
trends but further growth was constrained by available production capacity and
by some unplanned shutdowns, mainly at customers plants.      BOC announced a new joint venture with Sinopec Shanghai Petrochemical Company Limited (SPC), a subsidiary of Sinopec Corporation, to meet the industrial
gases needs of SPC in the Jinshan District of Shanghai.      Economic conditions were stable in Korea but increased turnover and adjusted operating profit came from some additional argon and hydrogen capacity to supply
customers near Pohang.      Turnover in Taiwan increased as a result of full capacity utilisation but adjusted operating profit increased significantly as a result of improved
efficiency in plant operations.      Hong Kong also enjoyed a better economic climate in 2004 for the same reasons and adjusted operating profit was sharply better.


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|50 | The
          BOC Group plcAnnual
    report and accounts 2005 | Operating
    review (comparing 2004 with 2003)
|-- | -------------------------------------------------------------- | -----------------------------------------------



South and South East
AsiaThese
regions came under the same business unit management during 2004. The economies
continued to  be buoyant across both regions during the year, helped by generally
strong steel demand and a more active electronics industry in Singapore, Malaysia
and the Philippines. 
     The SARS infection that had adversely affected 2003 was no longer an issue in 2004 but in Thailand and Malaysia the food sector was hit by an outbreak of
avian flu.The Thai shrimp industry was further affected by the imposition of US tariffs on imports.     In
September 2004, BOCs subsidiary in Thailand announced a major investment
in new joint venture air separation capacity to supply oxygen for ethylene glycol
production and to increase the availability of products for sale in the expanding
merchant market around Map Ta Phut. South PacificTurnover
and adjusted operating profit were higher than a year ago.The Australian and
New Zealand economies  remained generally strong in 2004.The strength of local
currencies led to some further customer plant closures but firm commodity prices
for minerals and particularly for steel enabled leading customers to prosper.
There was some increase in tonnage
volumes but volumes overall were similar to a year ago. 
     Electricity
prices increased in eastern Australia and more so in New Zealand. Increased costs
were passed through to tonnage customers and progressively recovered in the merchant
markets.At the same time, BOCs major plants in Australia achieved significant
cost savings as a result of implementing a global plant optimisation programme.      During
2004 BOC outsourced the transport of its bulk products to Australias leading
transport company, while retaining control of distribution and scheduling.This
change was made only after ensuring that there would be no diminution of safety
standards or the quality of service to customers.      A
hydrogen purification plant and bus re-fuelling facility to support BP in the
Government of Western Australias environmentally friendly fuel cell bus
trial came into operation during September 2004.Three hydrogen-fuelled buses
will be operating in the city of Perth.The trial is to continue for at least
the next two years. Water servicesBOC acquired Environmental Management Corporation (EMC), a US water services company in October 2002. Turnover
increased modestly in 2004 but the business remained close to breakeven after the amortisation of goodwill as a result of planned costs to increase business development resources.      BOCs
strategy for water services is to focus on its industrial customers. Significant
new business was won during 2004, including a multiyear contract for process
and waste water services to a major US beef producer. Tightening regulations
for proteins in effluent seem likely to create fresh demands for water treatment
in the food industry. Industrial
      and Special Products (ISP)Changeon 200312004
   
   Change
   
   (constant£ million
   
   on 2003
   
   currency)Turnover
   
   1,782.3
   
   +2
   %
   +3
   %Operating profit
   
   253.9
   
   +7
   %
   +5
   %Adjusted operating profit2
   
   269.5
   
   +11
   %
   +10
   % 1.
   A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. Nearly all regions
delivered better results in 2004 with increased turnover in most countries and
an overall improvement in operating margin. Robust economic conditions supported
a  further improvement in the south Pacific region and Africa delivered better
results despite the handicap of the stronger currency on manufacturing and mining.
There was also some improvement in the US manufacturing economy. 
     At the same time further progress was made in successfully integrating the businesses recently acquired in Canada and Poland.      
Sales
to the medical sector grew further in 2004 as a result of both gases and liquid
helium sales. Heliox, a new low-density breathing mixture was introduced in the
UK and in Australia. This product enables patients with obstructed airways to
breathe more easily and thereby provides time to treat the underlying problems.
Helium is also used to cool the coils of superconducting magnets in MRI
scanners. BOC not only sells the liquid nitrogen and helium cryogens but offers
a related CryoFill service, taking responsibility for filling customers magnets.
Helium sales also increased in Taiwan,Thailand and China, where significant growth
potential has been identified and where an important distributor agreement was
signed with Meike.The cost of producing and purchasing helium continued to increase
rapidly during 2004 but BOC was largely successful in recovering higher costs
in
selling prices to customers. BOC installed helium recovery systems at the University
of Liverpool in the UK and at Trane in the US during 2004. 
     Consistent
progress was made in growing refrigerant sales. The alliance with Hudson Technologies
for the reclaim of contaminated refrigerants began operation  in the UK during
2004 and will be applied in South Africa in 2005. 
     BOCs
major liquefied petroleum gas (LPG) businesses in Australia and South Africa
were notably successful in managing volatile input costs and sustaining margins
during 2004 as LPG prices increased sharply.


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| | Operating
    review (comparing 2004 with 2003) | 51
| | ----------------------------------------------- | --



Sales of industrial
products increased in aggregate although some developed markets continued to
reflect weak manufacturing activity. Business development was helped by upgrading
the  retail environment of outlets in some major markets and by the continued
introduction of safety products to the markets in the UK, Australia and South
Africa. 
     Operating exceptional items in 2004 were for the integration of the industrial and medical gases businesses of BOC and Air Liquide in Japan that began in
2003, as well as for the restructuring of the ISP business in the US following the disposal of the packaged gas business. EuropeTurnover
and adjusted operating profit increased further in 2004. Manufacturing activity
continued to decline in the  UK but BOC maintained a strong position in the market.
Improved service levels enabled selling price increases to be implemented. At
the same time costs were reduced through improved productivity. 
     Modest increases in industrial product sales were helped by rejuvenation of retail outlets in the UK. Medical product sales increased as a result of gaining
additional National Health Service business and continued demand for lightweight oxygen cylinders. The range of lightweight cylinders will be expanded by introducing additional sizes during 2005.      
The
new business supplying helium to Oxford Magnet Technology for medical imaging
devices began in 2003 and performed well throughout 2004. It was also the first
full year of the refrigerant reclaim service in the UK, based on an exclusive
global licence with Hudson Technologies. A range of gases for scientific applications
was introduced during the year and some additional sales were generated
following the launch of a mail order catalogue for gases and related products.
BOCs Sureflow beverage dispense gas operation was expanded by new business
for Heineken outlets in Ireland during 2004.     BOCs business in Poland was enlarged from February 2003 with the acquisition of Praxairs
Polish business. 2004 was therefore the first full year of the expanded business
and there were further integration benefits. North AmericaThe
BOC Group announced on 27 January 2004 that it had signed a letter of intent
to sell its US packaged gas  business to Airgas. This business had turnover of
approximately US$240 million in 2003. The disposal was completed on 30 July 2004
upon receipt of initial cash proceeds of US$175 million. 
     Following this transaction, the ISP business in north America consists of bulk medical gases, bulk supplies to distributors, tube trailer and liquefied
helium in the US as well as the Canadian packaged gas business. In total these elements currently generate turnover of some US$450 million a year.      The impending disposal of the US packaged gas business created a challenging business environment for a significant part of the year. US sales volumes and
adjusted operating profit were lower in the period prior to the disposal.      Turnover increased in Canada principally as a result of the acquisition of Air Products Canadian gases and related products business with effect from April
2003. Cost synergies arising from the integration further boosted adjusted operating profit in 2004. Latin AmericaTurnover
increased significantly and margins improved. Growth across the region was driven
principally by sales  of medical products supplemented by sales of BOC-branded
cutting and welding equipment. Sales of packaged chemicals increased in Colombia
and Venezuela.
     Results
improved strongly in Venezuela, despite a continuation of political unrest. BOCs
associated company achieved better results in Chile but there was a sharper improvement
in Argentina.     Selling price increases offset inflation in Venezuela and Chile but the trends were less favourable in Colombia during 2004. A new customer service centre was
opened in Venezuela and new business systems were successfully implemented in Venezuela and Colombia during the year. AfricaImportant sections of South African industry were depressed during 2004 because of the stronger currency. Rand
exchange rates reduced the profitability of gold mining and manufacturing for export in particular. At the same time the cost of imported goods was lowered making them more competitive with those manufactured locally. However lower interest rates
began to stimulate domestic consumption towards the end of the year.      Despite the more difficult market conditions, adjusted operating profit improved significantly on the basis of a modest improvement in turnover. Margins
improved as a result of better productivity and operating efficiency, partly offset by increased transport costs arising from the temporary shutdown of some key supplier facilities. Sales of cutting and welding products increased in South Africa and
so did both the sales volume and the turnover of liquefied petroleum gas (LPG). Turnover of special products, including refrigerants, grew particularly rapidly.      
Export
sales of welding products manufactured by Afrox, BOCs South African subsidiary,
also increased significantly. There was a modest improvement in adjusted operating
profit despite the currency disadvantage. Sales of the AfroxPac emergency oxygen
kit for underground miners were substantially lower in 2004 as order intake reflected
weak activity in the gold mining sector. 
     A
programme to renovate the Afrox retail network in South Africa with the development
of a number of Gas & Gear outlets and a range of safety
products is under way. In addition a range of diving gases and a fire suppression
product have been launched in South Africa.      Good progress was made in growing both turnover and adjusted operating profit in the other southern African countries during 2004. A new carbon dioxide plant
supported growth in Nigeria. JapanThe
basis of accounting for BOCs business in Japan changed during 2003 as a
result of a merger. Full details can  be seen in the PGS section on page 49.
In 2004 ISPs turnover in Japan was slightly less than the previous year
but adjusted operating profit was higher through cost savings following the merger
and from some asset disposals.


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|52 | The
          BOC Group plcAnnual
          report and accounts 2005 | Operating
        review (comparing 2004 with 2003)
|-- | -------------------------------------------------------------------- | ---------------------------------------------------



South and South East
AsiaThese
regions came under the same business unit management during 2004. In aggregate
there were  modest improvements in both turnover and adjusted operating profit.
In Taiwan, buoyant activity in manufacturing and infrastructure development was
reflected in higher turnover and adjusted operating profit. There were also sharply
better results
from the industrial products business in Thailand but ammonia margins were under
strong competitive pressure and liquefied petroleum gas (LPG) selling prices
remained subject to restrictive regulation. Hong Kong continued to be affected
by the  migration of manufacturing to mainland China and in Singapore shipbuilding
and construction activity failed to improve in 2004. Competition intensified
in the Malaysian market for industrial gases. Demand for helium was strong throughout

Asia. 
     In south Asia, turnover increased and adjusted operating profit was further boosted by an asset disposal. Trading conditions in Bangladesh were adversely
affected by a combination of political uncertainty, strikes and floods. South PacificTurnover
and adjusted operating profit increased in 2004 and margins were improved by
holding down costs. The  economic environment remained favourable across the region.
Manufacturing activity was buoyant in Australia despite a challenging environment
for export-oriented manufacturers created by the stronger currency. New projects
in the oil and gas sector
and in mining generated increased demand for welding and safety products. During
2004 BOC secured major contracts with Western Mining to meet its requirements
for safety products across Australia. 
     The
economy also continued to grow in New Zealand but somewhat less rapidly than
in Australia. There was also an improvement in the Pacific Islands, while  gold
mining activity and oil refining investment led to increased business in Papua
New Guinea. 
     Major
initiatives in 2004 included an agreement with the Australian CSIRO to commercialise
ethanedinitrile, a gas that can be used to sterilise soil and timber, and which
management believes has significant potential. The acquisition of OccCorp, an
injury management provider, gives BOC entry to a largely untapped market by combining
BOCs safety services and products.      A
dedicated refrigerant reclaim fleet was established to help customers comply
with new refrigeration regulations that make it mandatory to recover, return
and safely dispose of hydrofluorocarbons. BOCs new Heliox gas mixture,
which helps the treatment of patients with airway obstructions, and Inhalo, the
new lightweight cylinder, were both successfully launched into the medical market.      BOC
commenced an extensive redevelopment program of its Gas & Gear stores, supporting
traditional industrial customers and new customers alike, giving a stronger retail
position, providing better visibility, higher traffic flow, attractive merchandising
and design.      The
price of liquefied petroleum gas (LPG) was particularly volatile during 2004.
BOCs associated company in Australia, Elgas, was notably successful
in preserving sales margins in these difficult circumstances and adjusted operating
profit was increased. Elgas expanded through the acquisition of a leisure gas
business during the year. The potential impact of Government plans to remove
an excise tax exemption for automobile gas in the period from 2008 to 2012 was
softened by a subsequent decision to delay the introduction by three years and
by an agreement to provide capital allowances to encourage car owners to convert
their vehicles to
use LPG fuel. Automobile gas is a minor part of Elgas turnover. BOC EdwardsChangeon 200312004
   
   Change
   
   (constant£ million
   
   on 2003
   
   currency)Turnover
   
   816.5
   
   +19
   %
   +27
   %Operating profit
   
   46.8
   
   +492
   %
   +588
   %Adjusted operating profit2
   
   47.8
   
   +158
   %
   +181
   % 1.
   A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. Operating exceptional items in 2004 were for the integration of the industrial and medical gases businesses of BOC and Air Liquide in Japan that began in 2003.      Conditions
improved in most of BOC Edwards key markets during 2004. Orders for semiconductor
equipment began to pick up in the first quarter leading to increased sales in
subsequent quarters. At the same time a major expansion of liquid crystal display
(flat panel) manufacturing facilities got under way. This provided fresh business
opportunities for both gases and equipment. Sales of chemical
management equipment for new semiconductor fabrication plants improved only slightly
and profitability continued to be affected by competitive market conditions.
Demand for scientific equipment vacuum systems and for pharmaceutical packaging
machines was better in 2004 but sales of vacuum systems for aerospace metallurgy
applications remained at a low level.      At the beginning of 2004, high levels of capacity utilisation encouraged a number of semiconductor manufacturers to add fresh capacity or upgrade existing
facilities. This led to increased orders, which were reflected in higher turnover and adjusted operating profit from the second quarter onwards.      BOC Edwards was successful in winning new equipment business with the majority of semiconductor fabrication facilities for which construction began in
2004. These included several investments in Taiwan, Korea, Japan, China, Europe and the US.


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|Operating
    review (comparing 2004 with 2003) |  | 53
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|                                                |  |   





New pumping
    and exhaust systems were introduced for semiconductor, flat panel display
    and other vacuum applications. A new range of iGX pumps for the semiconductor
    industry provides better control and monitoring capabilities and use less
    power than before. BOC Edwards also launched high capacity pumps of its own
    design and manufacture for flat panel applications. New turbomolecular and
    scroll pumps were designed for scientific
instrumentation. Wet chemical abatement systems were introduced to expand and
    complement the capabilities of BOC Edwards exhaust abatement systems.
         Increased production of semiconductors was reflected in better demand for electronic materials. Production of nitrogen trifluoride was expanded further in 2004 to over 100 tonnes a year. New investments in semiconductor facilities also provided opportunities for nitrogen supply
contracts. BOC Edwards has become one of the leading suppliers of bulk gas to the growing semiconductor industry in China and continued to benefit from the expansion of semiconductor manufacturing in Taiwan, Japan and Singapore. New nitrogen
generators were installed at several customer sites and further capacity was added to satisfy growing demand from customers within the Hsinchu science park in Taiwan.
     Accelerated
investment in new flat panel display production facilities led to significant
orders for large capacity pumping systems in both Taiwan and Korea.  Gas supply
contracts were also signed with a number of display manufacturers in Taiwan and
Japan. Liquid crystal display production leads to substantial demand for chamber
cleaning chemicals. Onsite fluorine generation equipment is now installed at

a number of semiconductor and flat panel manufacturers. A full commercial-scale
generator is functioning at LG Philips new sixth generation plant in Korea.
     Demand
for pharmaceutical freeze-drying and packaging equipment picked up in 2004 leading
to better sales and adjusted operating profit. A new non-contact  check-weighing
machine was introduced. Nuclear magnetic resonance technology allows every package
to be checked, enables packing lines to operate at higher speeds and facilitates
immediate correction of any deviation from specification.
     The
basis of accounting for BOCs gases business in Japan changed during 2003
as a result of a merger. Full details can be seen in the PGS section on  page
49. Electronic gases turnover increased significantly in 2004 as a result of
the pick up in the semiconductor industry. The benefit of increased turnover
on gases adjusted operating profit was amplified by synergy benefits arising
from the
merger.
     Contracts
were won in Asia and Europe furthering a strategy to expand the range of value-added
services to electronic manufacturers. These include gases  management, chemicals
supply, support services and materials logistics. Other developments included
an improved offering of gases and vacuum systems for lithography and supercritical
carbon dioxide cleaning technology. Afrox hospitals2004
£ million
   
   Change
    on 2003
   
   
   Change
   on 20031(constant
   currency)Turnover
   
   432.1
   
   +22
   %
   
   +9
   %Operating profit
   
   59.8
   
   +30
   %
   
   +16
   %Adjusted operating profit2
   
   59.8
   
   +30
   %
   
   +16
   % 1.
   A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.2.
   A reconciliation of adjusted operating profit with operating profit is shown on page 41.3.
   All comments below are on a constant currency basis. Adjusted operating
profit increased faster than turnover as a result of careful control of overhead
costs and positive pricing trends. Hospital occupancy rates remained similar
to a year  ago. Acquisitions were a minor factor in the turnover increase. The
Lifecare chronic care facilities and Afrox occupational health services both
delivered a good performance in 2004.
     The
change to a new reimbursement system that began during 2003 was completed in
2004. The previous system of paying health care providers a fee for their  services
changed to a fixed payment for each kind of procedure as well as a per day tariff
structure.


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|54 | The
          BOC Group plcAnnual
    report and accounts 2005 | Operating
    review (comparing 2004 with 2003)
|-- | -------------------------------------------------------------- | -----------------------------------------------
|   |                                                                |                                                





GistChangeon 200312004
   
   Change
   
   
   (constant£ million
   
   on 2003
   
   
   currency)Turnover
   
   293.2
   
   no change
   
   
   +1
   %Operating profit
   
   25.1
   
   14
   %
   
   14
   %Adjusted operating profit2
   
   25.1
   
   14
   %
   
   14
   % 1.
   A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.2.
  A
      reconciliation of adjusted operating profit with operating profit is shown
      on page 41.3.
   All comments below are on a constant currency basis. The comparison
of turnover and adjusted operating profit between 2003 and 2004 is distorted
by a non-recurrent item during 2003. In 2003 a gain of some £4.1 million
arising
principally from the termination of operations for the Marks & Spencer General
Merchandise business was credited to adjusted operating profit. The termination
of this business also eliminated some £26 million of turnover in 2004 compared
 with 2003. After adjusting for this item, underlying turnover grew principally
as a result of increased food business for Marks & Spencer, as well as new
contracts and the expansion of activity with Ocado and Carlsberg UK. On the same
basis,
adjusted operating profit in 2004 was at a similar level to 2003.
     Primary food distribution operations were also expanded in 2004 when Gist took on the transport operations of John Rannoch foods, one of the leading
suppliers of poultry products to Marks & Spencer. Gist manages the complex supply chain for all of Marks & Spencers chilled and ambient foods. During 2004, a major investment was made to expand a chilled food facility in Kent to meet
the demands of the growing network of M&S Simply Food stores.


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| | 55
| | --

Financial review






Corporate transactions and restructuringIn
South Africa the disposal of Afrox Healthcare Limited to a consortium lead by
two major black empowerment investors was completed on 22 March 2005. African
Oxygen Limited, BOCs
subsidiary in South Africa, retains a significant interest in the hospitals business
through a 20 per cent holding in the new company. The gain on disposal of £84.9
million has been recognised as an exceptional item. African Oxygen Limited has
 distributed the proceeds of the disposal to its shareholders through a buy back
of shares and a special dividend. The amount of the special dividend payable
to
minority shareholders was some £54
million, which is included in the total dividends paid to minorities in subsidiaries
within the Group cash flow statement.
     The
sale of BOCs packaged gas business in the US to Airgas Inc was completed
in July 2004. Part of the consideration was payable subject to certain  conditions
and accordingly was not recognised in 2004. This remaining consideration amounting
to US$20 million was received in November 2005 and has been recognised in 2005
as an exceptional item. The disposal of the business in 2004 resulted in a
loss of £79.5 million plus associated restructuring costs of £14.8
million.
     In
2005 £20.7 million has been charged for restructuring in BOC Edwards. This
comprises £13.9 million of goodwill impairment and severance costs.
Savings of approximately £5 million are targeted from this restructuring
during 2006. Further costs are anticipated from this programme in 2006 leading
to additional benefits.
     Group
expenditure on acquisitions of businesses was £57.1 million (2004: £50.9
million). The main acquisitions during 2005 were G Van Dongen  Holding BV, to
expand Gists primary business into Europe, and an additional equity investment
in Compania de Nitrogeno de Cantarell (CNC) in proportion to BOCs existing
65 per cent equity holding. The main acquisition in 2004 was to
increase BOCs holding in CNC. Financial indicatorsThe
trends of financial indicators which, taken together, are a measure of the performance
and efficiency of the Groups finance and tax structures, are: 2005
   
   2004
   
   2003Interest cover (times)1
   
   7.1
   
   6.3
   
   4.6Adjusted interest cover (times)2
   
   7.4
   
   6.5
   
   5.3Net debt/equity (%)
   
   40.9
   
   51.2
   
   73.4Net debt/capital employed (%)
   
   25.6
   
   29.9
   
   37.4Group tax rate (%)
   
   26.9
   
   24.7
   
   27.4Adjusted Group tax rate (%)3
   
   26.0
   
   29.0
   
   29.0 Adjusted means excluding exceptional items.1.
   Interest on net debt covered by operating profit.2.
   Interest on net debt covered by adjusted operating profit.3.
   The adjusted tax charge expressed as a percentage of adjusted profit before tax.The ratios are commented on below in the appropriate section.Liquidity and capital resourcesCash flowsThe Groups cash flows from operating, investing and financing activities,
as reflected in the Group cash flow statement on page 88, are summarised in the following table: 2005£ million
   
   2004
£ million
   
   2003
£ millionNet cash inflow from operating activities
   
   665.5
   
   758.5
   
   700.1Dividends from joint ventures and associates
   
   51.1
   
   79.1
   
   35.0Returns on investment and servicing of finance
   
   (131.6
   )
   (91.2
   )
   (94.4
   )Tax paid
   
   (118.4
   )
   (98.2
   )
   (90.7
   )Total provided by operating activities
   
   466.6
   
   648.2
   
   550.0Capital expenditure and financial investment
   
   (299.7
   )
   (204.2
   )
   (227.0
   )Acquisitions and disposals
   
   128.8
   
   92.5
   
   (118.3
   )Total used by investing activities
   
   (170.9
   )
   (111.7
   )
   (345.3
   )Decreases in debt
   
   (165.7
   )
   (180.7
   )
   (128.7
   )Shares issued
   
   9.6
   
   12.4
   
   (2.6
   )Equity dividends paid
   
   (204.1
   )
   (197.3
   )
   (192.1
   )Net sales/(purchases) of short-term investments
   
   14.3
   
   (20.8
   )
   16.2Total used for financing activities
   
   (345.9
   )
   (386.4
   )
   (307.2
   )(Decrease)/increase in cash
   
   (50.2
   )
   150.1
   
   (102.5
   )




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|56 | The
          BOC Group plcAnnual
    report and accounts 2005 |  | Financial
    review
|-- | -------------------------------------------------------------- |  | --------------------







Cash flow from
      operationsTotal
cash generated by operating activities in 2005 was £466.6 million compared
to
£648.2 million in 2004.The decrease was associated with a lower net cash
inflow from operating activities of £665.5 million (2004: £758.5
million) primarily as a result of an approximate £70 million impact of
the disposal of  the Afrox hospitals business part way through the year. Returns
on investment and servicing of finance increased significantly in 2005 compared
with 2004.The 2005 total included approximately £54 million for the minority
interest element of  the special dividend paid by African Oxygen Limited following
the disposal of its majority shareholding in Afrox Healthcare Limited in March
2005. The 2005 tax paid includes approximately £15 million in connection
with this transaction. In  2004, the increase in cash provided by operating activities
to £648.2 million (2003: £550.0 million) was driven by higher operating
profit before exceptional items of £576.9 million in 2004 (2003: £505.6
million) and improved  working capital management offsetting the impact of higher
contributions to the UK pension scheme. Higher dividends from joint ventures
and associates in 2004 of £79.1 million (2003: £35.0 million), which
included a second dividend from  Japan Air Gases, also helped to improve cash
flows. InvestingCash used by investing activities was £170.9 million in 2005 (2004: £111.7 million).The increase in
capital expenditure and financial investment over the prior year reflects a higher level of expenditure in new supply scheme projects, principally in Asia/Pacific and the Americas.The higher net cash inflow from acquisitions and disposals in 2005
reflects the proceeds from the sale by African Oxygen Limited of its majority shareholding in Afrox Healthcare Limited in March 2005. In 2004, the reduction in cash used by investing activities to £111.7 million (2003: £345.3 million)
reflected a lower level of expenditure on acquisitions in 2004 compared to 2003, proceeds from the divestment of the US packaged gas business in July 2004 and receipts of £53.0 million from capital restructuring of Japan Air Gases Ltd. FinancingOverall, net debt decreased by £122.7 million as a result of a net cash inflow of £91.6 million, a
£9.6 million inflow from the issue of shares, an inflow of £34.7 million for the net debt acquired/disposed on business acquisitions and disposals and £(13.2) million for the effect of exchange rate and inception of finance leases.
Decreases in debt in 2005 principally relate to the repayment of £168.6 million of medium term notes. In 2004, net debt decreased by £405.7 million as a result of a net cash inflow of £339.2 million, a £12.4 million inflow
from the issue of shares, an outflow of £4.7 million for the net debt acquired/disposed on business acquisitions and disposals and £58.8 million for the effect of exchange rate and other movements. Decreases in debt in 2004 principally
related to the repayment of £125.0 million of 6.75% bonds due in 2004 and £42.6 million net repayment of commercial paper.
     The Group has access to a range of funding. Debt
finance is raised by issuing bonds, commercial paper, other obligations to investors
and through borrowings
from banks.
     As
well as medium and long-term borrowings, the Group maintains short-term borrowings,
principally in the form of commercial paper and bank borrowings. At 30 September
2005, the Group had US$450 million (£254 million) of committed multi-currency
facilities with a group of relationship banks maturing in 2008. In October 2005
these facilities were replaced with US$600 million (£339
million) of committed multi-currency facilities maturing in 2010. These facilities
provide back-up for the issue of commercial paper as well as general liquidity
for the Group. Additional committed facilities are maintained by the principal
operating units in the
Group.
     At 30 September 2005, the gearing ratio (net debt
including finance leases as a percentage of capital employed) was 25.6 per cent
compared with 29.9 per cent in 2004 and 37.4 per cent in 2003. The net debt/equity
ratio was 40.9 per cent, compared with 51.2 per cent in 2004 and 73.4 per cent
in 2003.
     The Group has access to a diverse range of debt
finance including commercial paper, public bonds and bank borrowings which, it
believes, will be available to meet long-term financing needs. The Group has
sufficient facilities to cover likely borrowing needs. Management anticipates
that capital
expenditure in 2006 will be at a higher level than in 2005 and will be covered
by cash inflow from operating
activities and existing sources of financing. Management of financial risksThe
board of directors sets the treasury policies and objectives of the Group which
include controls over the procedures used to manage currency, interest rate and
credit risk. The  approach to managing risk is set out below. This approach is
expected to continue during the next financial year. On a day-to-day basis, Group
treasury carries out these policies, with regular review meetings with the Group
finance director.
Specific and significant activities need approval from the finance committee,
which includes any two directors of the company.The Group
        does not undertake any trading activity in financial instruments nor does
  it enter into any leveraged derivative transactions. Currency riskThe
Group faces currency risk principally on its net assets, most of which are in
currencies other than  sterling. Currency movements can therefore have a significant
effect on the Groups balance sheet when translating these foreign currency
assets into sterling. In order to reduce this effect the Group manages its borrowings,
where practicable
and cost effective, to hedge its foreign currency assets.
     Where possible,
      hedging is done using direct borrowings in the same currency as the assets
      being hedged or through the use of other hedging methods such as currency
      swaps. Group borrowings are currently held in a wide range of currencies
      and, after swaps, 79 per cent of net debt (2004: 82 per cent) is denominated
      in the principal currencies affecting the Group: US dollars, Australian
  dollars, Japanese yen, South African rand and sterling.
     The
  aggregate of the notional principal values of currency swaps was £341.7
  million (2004: £593.1 million) spread over a range of currencies. The
  fair value of such swaps is included in note 21 b) i) to the financial statements.


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| |  |  | Financial
    review | 57
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The balance
    sheets of overseas operations are translated into sterling at the closing
    rates of exchange for the year and any exchange difference is dealt with
    as a movement in  reserves. This is explained more fully in the accounting
    policy note on page 91. The profit and loss accounts of overseas businesses
    are translated at average rates of exchange and this translation impact directly
    affects the profit and loss account
of the Group.The
Group manages its currency flows to minimise currency transaction exchange risk
      and forward contracts are used as appropriate to hedge net currency flows
      and selected individual transactions. The Groups foreign exchange
      cover is mainly managed in the UK, Australia, Japan and South Africa. The
      UK manages the cover for exposures on net trade flows of the Groups
      companies in the US and certain other countries. The aggregate principal
      amount of forward cover outstanding at 30 September 2005 amounted to £222.6
  million (2004: £224.4 million). Interest rate riskAt 30 September 2005, the Groups net debt position after interest rate hedging activity included a
net exposure of £36.6 million (2004: £74.6 million) to floating interest rates. Based on the Groups 2005 year end level and composition of net debt, an increase in average interest rates of one per cent per annum would result in a
decrease in future earnings, before tax, of £0.4 million per annum (2004: £0.7 million).
     In order
      to manage interest rate risk the Group maintains both floating rate and
  fixed rate debt. At
    30 September 2005, there was a 4:96 ratio (2004: 8:92) between floating and
    fixed rate net debt. Underlying borrowings are arranged on both a fixed rate
    and a floating rate basis and, where appropriate, the Group uses interest
  rate swaps to vary this mix and to manage the Groups interest rate exposure.
     At
  30 September 2005, the aggregate of the notional principal values of swap agreements
      which affect the floating rate/fixed rate mix was £286.4 million
      (2004: £285.3 million). The fair value of such swaps is included
      in note 21 b) i) to the financial statements. Foreign exchange riskAt
30 September 2005, the Group had outstanding forward exchange contracts totalling £222.6

million (2004: £224.4 million) in respect of its actual and forecast transaction
exposures. The fair value of these contracts at 30 September 2005 amounted to
a gain of £0.2 million (2004: a gain of £7.5 million). A ten per
cent

appreciation of sterling would increase the fair value of these contracts by £15.2
million (2004: £11.0 million).
     In
addition to these forward contracts, the Group is exposed to foreign exchange
movements
      on its net debt position. At 30 September 2005 net debt, after currency
      swaps, comprised net sterling liabilities of £153.2 million (2004: £104.6
      million) and net currency liabilities of £686.5 million (2004: £857.8
      million). Based on the Groups 2005 year end level and composition
      of net debt, a ten per cent appreciation of sterling would result in a
      reduction in the value of net currency liabilities of £62.4 million
  (2004: £78.0 million). Counterparty riskCash
deposits and other financial instruments give rise to credit risk on the amounts
due from  counterparties. Credit risk is managed by limiting the aggregate amount
and duration of exposure to any one counterparty depending upon its credit rating
and by regular reviews of these ratings. The possibility of material loss arising
in the event
of non-performance by a counterparty is considered unlikely by management.
     The
currency and interest rate hedging profile of the Groups borrowings at
30 September 2005 is shown in note 21 to the financial statements. Further
      information on financial risk management is also given in note 21 to the
  financial statements. Interest on net debtThe
net charge before the Groups share of interest of joint ventures and associates
was £47.6 million in 2005 (2004: £70.5 million, 2003: £75.8
million), which,  after excluding interest income from loans to joint ventures
and associates, represented 7.2 per cent of average net borrowings during the
year. After taking into account interest capitalised of £1.1 million (2004: £0.1
million, 2003:
£0.8 million) and the Groups share of the net interest of joint ventures
and associates of £29.1 million (2004: £17.9 million, 2003: £20.3
million), the net charge was £76.7
million. Adjusted interest cover (the number of times that the interest charge
on net debt is covered by adjusted operating profit) increased to 7.4 times (2004:
6.5 times, 2003: 5.3 times). Net interest on pension financing itemsThe
interest on pension scheme liabilities was £128.9 million in 2005 (2004: £117.4 million, 2003: £110.2 million). The expected return on pension scheme assets was
£147.1 million in 2005 (2004: £133.2 million, 2003: £119.6 million).The increase in the expected return on scheme assets was a result of the increased value of the Groups
pension assets.This reflects the increase in the value of world equity markets
and the impact of the additional cash contributions made by the Group to the
UK pension scheme. Debt
      maturity profileThe
      maturity profile of the commitments relating to the Groups gross
      borrowings and the estimated associated interest cost, if the debt runs
      to the full term,
is as follows:2005
   
   2004Principal
   
   Interest
   
   Principal
   
   Interest£ million
   
   £ million
   
   £ million
   
   £ millionMore than five years
   
   303.9
   
   82.7
   
   320.5
   
   111.2Three to five years
   
   202.2
   
   58.0
   
   260.9
   
   76.6One to three years
   
   265.4
   
   82.4
   
   347.1
   
   93.9Within one year
   
   259.2
   
   52.7
   
   262.1
   
   64.6Total
   
   1,030.7
   
   275.8
   
   1,190.6
   
   346.3


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|58 | The
          BOC Group plcAnnual
          report and accounts 2005 |  | Financial
        review
|-- | -------------------------------------------------------------------- |  | ------------------------








At 30 September 2005, the Group had US$450 million (£254 million) of committed multi-currency facilities with a group of relationship banks maturing in 2008. In October 2005 these
facilities were replaced with US$600 million (£339 million) of committed multi-currency facilities maturing in 2010.These facilities provide back-up for the issue of commercial paper as well as general liquidity for the Group.Additional
committed facilities are maintained by the principal operating units in the Group.Additional
      information on the Groups gross borrowings can be found in note 20.
      Details of the Groups share of net debt of joint ventures and associates,
  the majority of which is non-recourse, are given in note 13 a). Other
    contractual obligationsThe
    maturity of other contractual obligations of the Group is as follows:Other creditors
   
   
   
   
   
   Total other(excluding
   
   
   
   Unconditional
   
   contractualdeferred
   
   Operating
   
   purchase
   
   cashincome)
   
   leases
   
   obligations
   
   obligations£ million
   
   £ million
   
   £ million
   
   £ millionMore than five years
   
   3.0
   
   59.9
   
   371.2
   
   434.1Three to five years
   
   10.7
   
   25.9
   
   116.9
   
   153.5One to three years
   
   5.2
   
   49.1
   
   137.0
   
   191.3Within one year
   
   872.3
   
   40.6
   
   71.4
   
   984.3Total
   
   891.2
   
   175.5
   
   696.5
   
   1,763.2See
      also note 25 to the financial statements for further information on operating
    leases and unconditional purchase obligations. Off-balance sheet arrangementsThe
Group has provided guarantees of £49.3 million to third parties at 30 September
2005 as shown in note 26 a) to the financial statements. The guarantees include
performance bonds  in the Cantarell joint venture, a guarantee of the borrowings
of a joint venture in China and other guarantees provided in the ordinary course
of business. Other than disclosed, there are no off-balance sheet arrangements
that have or are reasonably
likely to have a current or future material effect on the Groups financial
condition, changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources. TaxationThe
tax charge on profit before exceptional items for 2005 of £131.5 million
is calculated in accordance with UK accounting standards, including FRS19 (deferred
tax), under which
full provision is made for deferred taxes.The
effective tax rate on adjusted profit in 2005 was 26 per cent (2004: 29 per cent,
      2003: 29 per cent). The main reason for the reduction in the tax rate was
      the resolution of various matters with the US tax authorities, including
      the utilisation of tax losses.The total tax rate in 2005 was 26.9 per cent
      (2004: 24.7 per cent, 2003: 27.4 per cent).The Group pays corporation tax
      in the UK at a rate of 30 per cent. Additional information on tax rates
  is shown in note 4 to the financial statements.The
Group is currently liable to pay federal tax at the rate of 35 per cent in the
      US. This is reduced by the existence of tax credits. In the other principal
      subsidiaries, the tax rate is typically between 29 per cent and 42 per
  cent. ContingenciesThe
Group monitors all contingent liabilities including matters relating to litigation
and the environment via a process of consultation and evaluation which includes
senior management,  internal and external legal advisers and internal and external
technical advisers. This process results in conclusions with respect to potential
exposure and provisions are made or adjusted accordingly. Management believes
that the Group has
adequately provided for contingencies which are likely to become payable in the
future. Legal proceedingsBOC Group companies are parties to various legal proceedings in the ordinary course of business, including some in which claims for damages in large amounts have been asserted.The
outcome of litigation to which BOC Group companies are party cannot be readily
      foreseen, but the directors believe that such litigation should be disposed
      of without material adverse effect on the Groups financial condition
  or profitability. Welding fumes litigationA
US subsidiary of BOC,The BOC Group, Inc., currently is party to a number of lawsuits
in the US  for alleged injuries resulting from exposure to manganese, asbestos
and/or toxic fumes in connection with the welding process. The BOC Group, Inc.
has not manufactured welding rods in the US since 1986 when the welding electrodes
business was
sold. The BOC Group, Inc. ceased selling welding rods in the US manufactured
by others when the sale of the US packaged gas business, including the operations
that distributed packaged gases and welding equipment, was completed in July
2004.


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Manganese litigationAt
30 September 2005, there were a total of approximately 8,574 claimants (Total
Claimants)
in pending manganese related cases in both US federal and state courts that name
The BOC Group, Inc. as a defendant, a net decrease of approximately 1,100 claimants
from 30 September 2004. The BOC Group, Inc. is typically one of several defendants
in  these cases that claim compensatory and punitive damages, in most cases for
unspecified amounts, for alleged neurological injury, including Parkinsons
disease, through exposure to manganese in welding fumes. Of the Total Claimants,
 approximately 4,607 claimants have filed in, or been transferred for pre-trial
purposes to, the federal district court in the Northern District of Ohio, where
a multi-district litigation (MDL) proceeding has been commenced, and approximately
50
claimants are in process to be transferred to or from the MDL. The MDL proceeding
is a vehicle for coordinating pre-trial proceedings in cases pending in different
federal district courts in the US. It is currently contemplated that the MDL
court  will try three cases during the MDL proceeding. The first such case is
currently scheduled for February 2006. In addition to the cases in federal court,The
BOC Group, Inc. is a defendant in a number of similar cases pending in state
courts, which are
in different stages of procedural development, and certain cases are scheduled
for trial from time to time. The BOC Group, Inc. has been a co-defendant in other
manganese related claims that have been resolved as follows. From 1 January 1997
to 30  September 2005, 3,965 claims were dismissed. Through 30 September 2005,
seven cases were tried to final jury verdicts in favour of the defendants, including
The BOC Group, Inc., and one case was tried to a final jury verdict in favour
of the
plaintiffs, which is being appealed. Asbestos litigationAt
30 September 2005, there were a total of approximately 15,966 claimants in pending
asbestos related  cases that name The BOC Group, Inc. as a defendant, a net decrease
of approximately 600 from 30 September 2004. The BOC Group, Inc. is typically
one of a large number of defendants in these cases that claim compensatory and
punitive damages, in most
cases for unspecified amounts, for alleged injuries, including cancer, through
exposure to asbestos in welding fumes or from welding consumables. A very small
number of these claimants allege injuries from exposure to asbestos in non-welding
rod  products and premises. The BOC Group, Inc. has been a co-defendant in other
asbestos related claims that have been resolved as follows. From 1 January 1997
to 30 September 2005, 11,776 claims were dismissed and 75 claims were dismissed
on summary
judgments. Through 30 September 2005, nine cases were tried to final jury verdicts
in favour of the defendants, including The BOC Group, Inc., and one case was
tried to a final jury verdict in favour of the plaintiffs, which is being
appealed. The BOC Group, Inc. believes that it has strong defences to the claims asserted in all of the various manganese and asbestos related cases and intends to defend vigorously such claims. In
the manganese related claims,The BOC Group, Inc. believes that recent relevant scientific literature, based on epidemiological studies, strongly supports its defence of such claims. Based on its experience to date, together with its current
assessment of the merits of the claims being asserted and applicable insurance, BOC believes that continued defence and resolution of the welding fumes litigation will not have a material adverse effect on its financial condition or profitability
and no provision has been made. Nonetheless, it is not possible to predict either the number of future claims or the number of claimants that any future claims may present. In addition, the outcome of welding fume cases, either involving BOC or
other defendants, is inherently uncertain and always difficult to predict, and BOC cannot provide any assurances that any future resolutions of these types of claims will necessarily be consistent with its experience to date. In the event of an
adverse outcome to any of the proceedings, a liability would be recognised if it was considered likely that it would give rise to an outflow of future economic benefits. Where there is applicable insurance, this would be recognised when its
recoverability was virtually certain. Fluorogas litigationIn
February 2003, the company was notified that a jury verdict in the US District
Court for the Western  District of Texas (the District Court) was obtained for
US$132 million against Fluorogas Limited, The BOC Group, Inc. and The BOC Group
plc. The verdict arose primarily out of an alleged breach of a memorandum of understanding
by Fluorogas Limited
before it was acquired by The BOC Group plc in September 2001. In March 2003,
the court also awarded interest and costs against the defendants, making them
jointly and severally liable for a total of US$174 million. A bond for the full
amount was
posted with the District Court as part of the normal appeals process.
     In August 2004, the appellate court reversed the entire judgement against the BOC entities and all but US$170,000 in reliance damages against Fluorogas
Limited. In addition, the appellate court remanded for reconsideration by the District Court an award of attorneys fees on the US$170,000 recovery.
     Fluorogas Limited was placed in administration under the Insolvency Act of 1986 pursuant to an order of an English Court. In January 2005 the parties
resolved the outstanding matters to their satisfaction. The appeal bond was released and Fluorogas Limited applied for, and received, a discharge from the administration order. Insurance
Operational management is responsible for managing business risks. Several Group departments advise management on different aspects of risk and monitor results. Insurance cover is held
against major catastrophes. For any such event, the Group will bear an initial cost before external cover begins.


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Inflation
Over the last three years, inflation has not had a material impact on the revenue or profit of the Group. Critical accounting policies
The principal accounting policies affecting the results of operations and financial condition are set out on pages 91 and 92 of the financial statements. The application of certain of
these policies requires assumptions or subjective judgements by management. Management bases these on a combination of past experience and any other evidence that is relevant to the particular circumstances.
     The
application of these assumptions and judgements affects the reported amounts
of profit during the year and the assets and liabilities at the balance  sheet
date. Actual results may differ from the estimates calculated using these assumptions
and judgements. Management believes that the following are the critical policies
where the assumptions and judgements made could have a significant impact on

the consolidated financial statements. Tangible fixed assetsA significant part of the capital employed of the Group, particularly in the Process Gas Solutions and
Industrial and Special Products lines of business, is invested in tangible fixed assets. The nature of the business demands significant capital investment to renew or increase production capacity or to enable the business to achieve greater
productivity and efficiency.
     It
is the Groups policy to depreciate tangible fixed assets, except land,
on a straight line basis over the effective lives of the assets.This ensures
 that there is an appropriate matching of the revenue earned with the capital
costs of production and delivery of goods and services. A key element of this
policy is the estimate of the effective life applied to each category of fixed
assets which, in
turn, determines the annual depreciation charge. In deciding the appropriate
lives to be applied, management takes into account various factors including,
among other things, the accumulated experience of the effective asset lives from
historic  business operations and an assessment of the likely impact of any changes
in technology.
     While
Group earnings in any period would fluctuate if different asset lives were applied,
in some cases the original estimated life of an asset is closely  related to
contractual arrangements with large customers. Some of the earnings impact of
choosing a different asset life would be mitigated, as the different life may
reflect different contractual arrangements with such customers. Nevertheless,

variations in the effective lives could impact the earnings of the business through
an increase or decrease in the depreciation charge. It is estimated that a change
of one year in the effective life of all plant, machinery, vehicles and cylinders

would have an impact of between £15 million and £20 million on annual
Group operating profit. A change in the effective life of buildings would have
only a negligible impact. Intangible fixed assetsIn a similar manner to tangible fixed assets, management uses its judgement to determine the extent
to which goodwill arising from the acquisition of a business has a value that will benefit the performance of the Group over future periods. It is the Groups policy to amortise goodwill on a straight line basis over its useful economic
life.This takes into account, among other things, the maturity of the business acquired and its product and customer base. Any change in these assumptions would have an impact on the earnings of the Group.
     It is estimated that a change of one year in the useful economic life of all goodwill would have an impact of approximately £1 million on annual Group
operating profit. Retirement benefitsResults
of the Group include costs relating to the provision of retirement benefits for
employees. It is
the directors responsibility to set the assumptions used in determining
the key elements of the costs of meeting such future obligations. The assumptions
are based on actual historical experience and are set after consultation with
the
Groups actuaries. They include the assumptions used for regular service
costs and for the financing elements related to the pension schemes assets
and liabilities. Whilst management believes that the assumptions used are appropriate,
a  change in the assumptions used would affect both the operating profit and
net interest cost of the Group.
     There
are a number of elements used in the assumptions and these vary for the different
countries in which the Group operates. There may also be an  inter-dependency
between some of the assumptions, making it potentially misleading to consider
any approximate impact on Group results of a change in any one assumption in
isolation. Nevertheless, for the UK and US schemes together, it is estimated

that an absolute 0.25 per cent change in the assumptions on rates of inflation,
discount rates and return on equities in pension scheme assets would individually
result in changes of approximately £6 million, £3 million and £3
 million respectively in the total pension cost in annual Group profit before
tax. A similar change in the assumptions on all other schemes would have only
a negligible impact. Environmental provisionsIn certain parts of the business, mainly in the US, the Group has obligations to carry out
environmental clean-ups at former and current production sites. Many of these obligations will not arise for a number of years, and the costs are difficult to predict accurately. Management uses its judgement and experience to provide an appropriate
amount for the likely cost of such clean-ups, and the amounts, if material, are discounted to present values. Both the amount of anticipated costs, and the interest rates used to discount such costs, are subjective. The use of different assumptions
would impact the earnings of the Group.
     It is estimated that a change of one per cent in the interest rate used to discount such costs would have an impact of approximately £1 million on
annual Group profit before tax.


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Current asset provisionsIn
the course of normal trading activities, management uses its judgement in establishing
the net
realisable value of various elements of working capital  principally stocks,
work-in-progress and accounts receivable. Provisions are established for obsolete
or slow moving stocks, bad or doubtful debts and product warranties. Actual costs
in  future periods may be different from the provisions established and any such
differences would affect future earnings of the Group.
     The provisions are established at levels appropriate to the circumstances within individual Group business units, and not on a Group-wide systematic basis.
It is therefore considered that any estimate of the impact on annual Group operating profit of any change in such provisions may not be meaningful. Nevertheless, a change of ten per cent in the level of provision for bad and doubtful debts at 30
September 2005 would have an impact of approximately £3 million on annual Group operating profit.
     The areas covered by critical accounting policies under UK GAAP do not materially differ from those under US GAAP. Further details of the differences between
UK and US GAAP are given in note 30 to the financial statements. Accounting
The Groups
accounting policies are based on accounting principles generally accepted in
the UK (UK GAAP). During the year, the following new UK standards were issued: FRS22  Earnings per share
FRS23  The
effects of changes in foreign exchange rates
FRS24  Financial reporting
in hyperinflationary economies
FRS25  Financial instruments: Disclosure
and
presentation 
FRS26  Financial instruments: Measurement 
FRS27  Life
assurance 
FRS28  Corresponding amounts 
RS1 Operating
and financial review None of these standards are effective for the Group for the financial year ended 30 September 2005. The accounts for the financial year ended 30 September 2005 have therefore been prepared
on an accounting basis consistent with that applied in the financial year ended 30 September 2004. With effect from 1 October 2005 the Groups accounting policies will be based on International Financial Reporting Standards, as outlined in the
following section. International Financial Reporting Standards
In accordance with
EU legislation, the Group is required to adopt International Financial Reporting
Standards (IFRS) in accounting periods commencing on or after 1 January 2005. Accordingly,
IFRS will first apply to the Groups financial statements for the financial
year commencing 1 October 2005. Results for the quarter ending 31 December 2005,
which will be announced in February 2006, will be presented on an IFRS basis.
In January 2006 the Group intends to present results for each quarter of the
financial year to 30 September 2005 restated on an IFRS basis.
     The
Group established an IFRS project team in 2003.This is overseen by a formal steering
committee, which includes the Group finance director. There have been  regular
reports on progress to the audit committee and executive management board. A
comprehensive training programme has been undertaken covering Group finance personnel
worldwide. The
Groups auditors have been kept informed of, and consulted
on, the development of the IFRS project and the preparation and implementation
of the new Group accounting policies.
     The
Group is still in the process of finalising the full effects of adopting IFRS
but management is confident that all areas have been identified where  significant
differences will arise between UK GAAP and IFRS. These areas are set out below.This
is based on the IFRS that are expected to be in effect for the year to 30 September
2006. However, it is possible that there could be further changes to
IFRS and interpretations prior to this date. The Group has elected to adopt early
the amendment to IAS19 as set out below, but does not currently intend to adopt
early any other IFRS or interpretations. The
        principal differences which management expects to affect the Group are
    as follows:a)
    Goodwill.
        Under UK GAAP, goodwill is amortised over a period up to a maximum of
        20 years. Under IFRS, goodwill is not amortised but instead is reviewed
    for impairment annually.b)
    Share based
        payments. Under UK GAAP the cost of share options is calculated by reference
        to their intrinsic value, which means that there is no charge for options
        granted at the market price. Under IFRS, the Group will record a charge
    for the fair value of all share options including Save As You Earn schemes.c)
    Taxation.
        Preliminary estimates indicate that the tax rate will be slightly higher
        under IFRS and the impact will be fully quantified as part of the restated
    results to be announced in January 2006.d)
    Pensions. The
        Group has already adopted FRS 17 under UK GAAP. The equivalent IFRS is
        IAS 19 and the Group intends to adopt early the amendment to IAS 19 allowing
        for immediate recognition of actuarial gains and losses in a Statement
        of Recognised Income and Expense. Accordingly, the impact of accounting
        for pensions under IFRS will be similar, although not identical, to UK
        GAAP and as a result management does not expect a significant impact
        on earnings. There will be a difference in presentation in the balance
        sheet, and differences relating to the calculation of certain assets
        and liabilities. Under UK GAAP, net pension assets or liabilities are
        shown after deduction of the appropriate deferred tax. Under IFRS, net
        pension assets or liabilities are shown before the deduction of any deferred
    tax, which is then included with other deferred tax items.




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e)
    Foreign
        exchange. There are certain differences in the requirements of IAS 21
        compared to UK GAAP in respect of functional currencies and in relation
        to the accounting for foreign exchange on loans between Group companies.
        This is an area where there may be
increased volatility in the Groups ongoing results on an IFRS basis compared
to UK GAAP arising from exchange gains and losses.f)
    Financial
        instruments. The Group will adopt IAS 39 on 1 October 2005 in line with
        the exemption under IFRS
1.This
standard impacts the accounting for a range of financial instruments and embedded
derivatives. The Group has few financial instruments and they are predominantly
related to managing currency and interest rate risk. The Group has reviewed its
financial instruments and has concluded that at present they meet the requirements
to enable it to apply hedge accounting. Embedded derivatives typically arise
from escalation clauses in contracts with customers to recover cost increases.
Whilst the impact is not material at 1 October 2005, embedded derivatives may
give rise
to greater volatility in the Groups earnings arising from marking to market
the underlying
derivative. The
adoption of IFRS will also result in a number of changes to the presentation
of the
  financial statements including disclosures. For example, the Groups share
  of the post-tax profit arising in joint ventures and associates will be shown
  as one line in the income statement rather than as part of Group turnover,
  operating profit and interest. There will be a number of other presentational
  changes including reclassifications
within the balance sheet and a change to the layout of the cash flow statement.Overall, management believes that the impact of IFRS on earnings and net assets will be broadly neutral subject to the effects of IAS 21 and IAS 39 as noted
above. Cashflows and the underlying economics of the business will not change. US GAAP
The financial statements of the Group have been prepared in accordance with UK GAAP, which differs in certain respects from US GAAP.The
US accounting information in note 30 to the financial statements gives a summary
of the principal differences between the amounts determined in accordance with
the Groups accounting policies (based on UK GAAP) and amounts determined in accordance with US GAAP, together with the reconciliation of net profit and shareholders funds from a UK GAAP basis to a US GAAP basis and a
movement in shareholders funds on a US GAAP basis.
     The
net income for the year ended 30 September 2005 under US GAAP was £326.7
million (2004:£297.7 million, 2003: £264.3 million), compared with the net profit of £367.0 million in 2005 (2004: £264.0 million, 2003: £219.1 million) under UK GAAP. Shareholders funds at 30 September 2005 under US GAAP were £2,122.2 million (2004: £1,920.1 million), compared with £1,942.0 million (2004: £1,675.3
million) under UK GAAP. The difference primarily results from the differing accounting
treatment of pensions, goodwill, financial instruments, investments, fixed asset
revaluations, deferred tax and variable interest entities. Related party transactions
During the year,
interest income of £13.8 million (2004: £7.3 million, 2003: £7.6
million) was received from the Cantarell joint venture in Mexico.During
the year, the Group was invoiced £45.9 million in respect of purchases
of production plants from Linde BOC Process Plants in the US.At 30  September
2005, £1.9 million was payable in respect of these invoices.
No material purchases were made in 2004 or 2003.The
Group had no other material related party transactions that might reasonably
be expected to influence decisions made by the users of these
accounts. Exchange rates
The majority of
the Groups operations are located outside the UK and operate in currencies
other than sterling.The
effects of fluctuations in the relationship between the various currencies are
extremely complex and variations in any particular direction may not have a consistent
impact on the reported results. In terms of average rates for the year, in 2005
sterling strengthened against two of the four principal currencies affecting
the Group: by three per cent against the US dollar and by two per cent against
the Japanese yen. Sterling weakened by two per cent against the Australian dollar
and by three per cent against the South African rand.In
2004, sterling strengthened against the US dollar and the Japanese yen. Sterling
weakened against the Australian dollar and the South African rand.In
2003, sterling strengthened against the US dollar and the Japanese yen. Sterling
weakened against the Australian dollar and the South African rand.


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The
      rates of exchange to sterling for the currencies which have principally
    affected the Groups results over the last five years were:2005
   
   2004
   
   2003
   
   2002
   
   2001US dollarAt 30 September
   
   1.77
   
   1.81
   
   1.66
   
   1.57
   
   1.47Average for the year
   
   1.85
   
   1.79
   
   1.60
   
   1.47
   
   1.44Highest rate during year
   
   1.95
   
   1.90
   
   1.69
   
   1.58
   
   1.50Lowest rate during year
   
   1.73
   
   1.66
   
   1.54
   
   1.41
   
   1.37Australian dollarAt 30 September
   
   2.32
   
   2.50
   
   2.45
   
   2.89
   
   2.98Average for the year
   
   2.41
   
   2.47
   
   2.62
   
   2.77
   
   2.76Highest rate during year
   
   2.56
   
   2.68
   
   2.89
   
   3.00
   
   3.03Lowest rate during year
   
   2.27
   
   2.33
   
   2.40
   
   2.54
   
   2.62Japanese yenAt 30 September
   
   200.51
   
   199.44
   
   185.60
   
   191.45
   
   175.09Average for the year
   
   198.20
   
   195.17
   
   191.01
   
   184.34
   
   170.04Highest rate during year
   
   205.25
   
   206.90
   
   199.49
   
   193.05
   
   181.26Lowest rate during year
   
   189.75
   
   180.80
   
   182.17
   
   173.82
   
   153.13South African randAt 30 September
   
   11.25
   
   11.72
   
   11.57
   
   16.58
   
   13.24Average for the year
   
   11.54
   
   11.85
   
   13.24
   
   15.64
   
   11.47Highest rate during year
   
   12.46
   
   13.33
   
   16.41
   
   19.49
   
   13.26Lowest rate during year
   
   10.77
   
   10.75
   
   11.40
   
   13.00
   
   10.54The
      average for the year is an average of daily rates. On 12 November 2005,
      the latest practicable date for inclusion in this report and accounts,
      the rates of exchange to sterling for the principal currencies were as
      follows: US dollar 1.74; Australian dollar 2.38; Japanese yen 206.55; South
    African rand 11.75. The
      highest and lowest rates of exchange for sterling against the US dollar
    for the last six months were:May
   
   June
   
   July
   
   August
   
   September
   
   OctoberHigh
   
   1.90
   
   1.84
   
   1.77
   
   1.81
   
   1.84
   
   1.79Low
   
   1.82
   
   1.79
   
   1.73
   
   1.77
   
   1.76
   
   1.75 Principal
    operating companiesThe
      following operating companies principally affect the amount of profit or
    assets of the Group:•
   The BOC Group Inc., a wholly-owned Delaware corporation and a subsidiary of The BOC Group Inc., a wholly-owned Nevada corporation;•
   BOC Limited, a wholly-owned English company;•
   BOC Limited, a wholly-owned Australian company;•
   Gist Limited, a wholly-owned English company;•
   Japan Air Gases Ltd, a Japanese company, in which the Groups Japanese 99 per cent owned subsidiary holds 45 per cent;•
   African Oxygen Limited, a South African company, in which the Groups shareholding is 56 per cent. Supplier payment policy
The Group applies
a policy of agreeing and clearly communicating the terms of payment as part of
the commercial arrangements negotiated with suppliers and then paying according
to those
terms. In addition the UK-based businesses have committed to the Better
Payment Practice Code.
A copy of the code can be obtained from the Department of Trade and Industry,
DTI Publications Orderline,Admail 528, London SW1W 8YT.
For UK businesses, of amounts owing to suppliers, trade creditors represents 58 days at 30 September 2005. Going concern
The directors are
confident, after having made appropriate enquiries, that both the company and
the Group have adequate resources to continue in operation for the foreseeable
future. For this reason, they continue to adopt the going concern basis in preparing
the accounts. Management believes that its current credit facilities provide
sufficient working capital to meet the present requirements of its existing businesses
and that the
gearing ratio is appropriate given the nature of the Groups activities. Substantial holdings
Details of substantial holdings of Ordinary shares at 12 November 2005 are shown on page 141.


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|64 | The BOC
          Group plcAnnual
    report and accounts 2005
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Corporate governance





The BOC Group is committed to business integrity, high ethical values and professionalism in all its activities. As an essential part of this commitment, the board supports the highest
standards of corporate governance. Combined Code on Corporate Governance
BOC has applied the principles contained in Section 1 of the Combined Code on Corporate Governance issued by the Financial Reporting Council and has complied throughout the year with the
provisions set out therein as they applied to the company. US Sarbanes-Oxley Act of 2002
BOC has securities registered in the US and, as a result, is required to comply with the provisions of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) that apply to foreign private
issuers. Whilst the company already has a robust corporate governance framework in line with best practice under UK standards, the requirements of Sarbanes-Oxley were considered and adjustments made to comply with Sarbanes-Oxley as far as it applies
to BOC. The board continues to monitor the implementation of the rules to ensure continued compliance.As
recommended by the US Securities and Exchange Commission (SEC), BOC has established
a disclosure committee. The committee comprises the Group finance  director, Group
legal director and representatives from the finance, company secretarial, treasury,
investor relations, risk management and human resources functions. The committee
meets regularly. It is responsible for overseeing and advising on
the disclosure process for the quarterly announcements and on the content and
form of the annual report and Form 20-F. To permit the signing of the certifications
required by Sarbanes-Oxley the committee makes recommendations to the executive

management board on the adequacy of Group disclosure controls and procedures. New York Stock Exchange Corporate Governance Listing Standards
The New York Stock Exchange (NYSE) has in place listing standards related to the corporate governance practices of listed companies. BOC, as a foreign private issuer with American
Depositary Shares listed on the NYSE, is required to comply with certain of these rules, in particular as they relate to audit committees, and must disclose any significant ways in which its corporate governance practices differ from those followed
by US domestic companies under the NYSE listing standards. At this time BOC does not believe that there are any significant differences in the corporate governance practices followed by the company as compared to those followed by US domestic
companies, except that the membership of the nomination committee is not composed entirely of independent non-executive directors. The membership of the nomination committee is however in line with the Combined Code on Corporate Governance, which
permits membership of this committee to be composed of a majority of independent non-executive directors. The board
There are 12 members
of the board namely the chairman, five executive directors and six non-executive
directors who collectively have responsibility for leadership of the company. This
is considered to be the optimum size for the board, providing a balance between
executive management and non-executives and bringing a good mix of skills and
experience. As has been demonstrated during 2005 changes to the boards composition can be
managed without undue disruption. The directors holding office at the date of this report and their biographical details are given on pages 8 and 9. The executive directors are the chief executive, Group finance director and the three chief executives
of the lines of business. Kent Masters was appointed chief executive, Industrial and Special Products and a member of the board on 1 March 2005 in place of John Walsh who resigned from the board on 1 March 2005. Alan Ferguson joined the company as
Group finance director on 15 September 2005 and was appointed to the board on 30 September 2005 in place of René Médori
who resigned on 31 May 2005.The board believes that executive directors and members of the executive management board can gain valuable experience and knowledge by taking on
non-executive directorships of other listed companies. Such appointments are subject to review by the nomination committee and approval of the board and, unless otherwise agreed, only one non-executive directorship may be held in a FTSE100 company.
Executives are permitted to retain any fees in respect of such external appointments, details of which are set out in the report on remuneration on page 76.The
roles of chairman and chief executive have been separate since 1994. Rob Margetts
as chairman leads the board, ensuring that each director, particularly the non-executive
directors, is able to make an effective contribution. He monitors, with assistance
from the company secretary, the information distributed to the board to ensure
that it is sufficient, accurate, timely and clear. He meets twice a
year with the non-executive directors without the executive management present.
Between meetings, the chairman has responsibility for maintaining the integrity
and effectiveness of the board. This requires his interaction with the chief executive
between board meetings, as well as his contact with other board members and shareholders. Tony
Isaac as chief executive maintains day-to-day executive management responsibility
for the Groups operations, implementing Group strategies and
policies agreed by the board. The division of responsibilities between the chairman
and chief executive has been agreed by the board.


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| |  | Corporate
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During the year Rob Margetts commitments have not changed. Details are set out in his biography on page 8. During 2005, as part of the board evaluation process, the non-executive
directors, led by Sir Christopher ODonnell as the senior independent director, reviewed the chairmans performance and considered this against the background of his other commitments. In their view the chairman has performed well against
all the measured criteria. He has consistently demonstrated full commitment to his responsibilities at BOC and he has always made himself available when circumstances have required additional time commitment. Rob Margetts appointment as
chairman assumes he will spend approximately one and a half days a week on activities at BOC. The board is satisfied that he has the personal commitment, the available time, including additional time should circumstances demand it, to fulfil his
responsibilities as chairman. Furthermore, the board is of the view that Rob Margetts expertise and the continuity that he brings to the post of chairman, is of great benefit to BOC.     The
  senior independent director is Sir Christopher ODonnell. He has responsibility for chairing meetings of the non-executive directors at which the
  chairmans performance is appraised. He is also available to shareholders
  should they have any concerns which contact through other channels has failed
  to resolve or for which such contact may be inappropriate.     During the year Iain Napier and Julie Baddeley resigned as independent non-executive directors on 22 December 2004 and 28 February 2005 respectively. Rebecca
McDonald was appointed as a non-executive director on 1 July 2005. Non-executive directors are initially appointed for a three year term after which, whilst not automatic, their appointment may be extended for a second term subject to mutual
agreement and shareholder approval.     The Group has long recognised the vital role that non-executive directors play in ensuring high governance standards. BOC has for many years had high calibre
non-executive directors who bring a wide range of experience and expertise to the BOC board. The board has determined that all the non-executive directors are independent in accordance with the definition of that term in the Combined Code on
Corporate Governance and the New York Stock Exchange listing standards and that they have no relationships which could materially interfere with the exercise of their independent judgement.     The
board has considered the position of Matthew Miau and determined that he is independent,
notwithstanding that he is also a non-executive director of BOC Lienhwa Industrial
Gases Company Limited, a 50:50 joint venture in Taiwan between BOC and Lien Hwa
Industrial Corporation. He is a representative of Lien Hwa Industrial Corporation,
a Taiwanese company. He does not have any executive
responsibilities with either company. Matthew Miau is the chairman of MiTAC-Synnex
Group, a major electronics organisation with a turnover greater than that of
BOC, and he brings considerable expertise in the electronics and semiconductor
markets and an Asian business perspective to the board of BOC. The turnover of
the joint venture attributable to BOC represents approximately one per cent of
the Groups total turnover. The board has satisfied itself that neither this
association nor the time period with which he has been connected with the company
are of sufficient significance to either BOC or Matthew Miau to compromise his
independence.     The
board has a formal schedule of matters reserved to it. In particular the boards main focus is on strategic and policy issues, reviewing objectives
and performance and the overall management of the Group. The board also has responsibility for the review and monitoring of key company policies in such areas as risk management, corporate governance, treasury matters and corporate social
responsibility including safety, environment and the Code of Conduct as well as all matters relating to the companys listings on the London and New York Stock Exchanges. On an annual basis the board reviews the senior managers and their
succession and development plans. The board has to approve all Group commitments in excess of £25
million. Presentations are made to the board on major projects and periodic reviews
are given by management from each of the lines of business and Gist. The board
delegates certain functions to committees. There are six board committees, details
of which are given below.     The
board meets six times a year, with two meetings held at major operating subsidiaries.
One of the board meetings is combined with a strategy meeting lasting over a
two day period. The meetings held at operating sites provide the opportunity for
the board to meet with the local management teams and receive presentations about
the local business operations. During 2005 the board visited the
Groups operations in South Africa and Poland.


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|66 | The
          BOC Group plcAnnual
    report and accounts 2005 |  | Corporate
    governance
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The attendance of directors at board and principal board committee meetings during the year are detailed in the chart below: Audit
   
   Nomination
   
   RemunerationBoard
   
   committee
   
   committee
   
   committee(six meetings)
   
   (four meetings)
   
   (six meetings)
   
   (six meetings)Rob Margetts
   
   6
   
   n/a
   
   6
   
   n/aTony Isaac
   
   6
   
   n/a
   
   6
   
   n/aJulie Baddeley1
   
   3
   
   2
   
   3
   
   3John Bevan
   
   6
   
   n/a
   
   n/a
   
   n/aAndrew Bonfield
   
   6
   
   4
   
   6
   
   6Guy Dawson
   
   6
   
   4
   
   6
   
   6Alan Ferguson2
   
   n/a
   
   n/a
   
   n/a
   
   n/aKent Masters3
   
   3
   
   n/a
   
   n/a
   
   n/aRebecca McDonald4
   
   1
   
   1
   
   1
   
   1René Médori5
   
   5
   
   n/a
   
   n/a
   
   n/aMatthew Miau6
   
   6
   
   2
   
   6
   
   5Iain Napier7
   
   1
   
   1
   
   2
   
   2Sir Christopher ODonnell
   
   6
   
   4
   
   6
   
   6Anne Quinn
   
   6
   
   4
   
   6
   
   6Raj Rajagopal
   
   6
   
   n/a
   
   n/a
   
   n/aJohn Walsh8
   
   3
   
   n/a
   
   n/a
   
   n/a 1.
   Julie Baddeley resigned on 28 February 2005 and she attended all board and committee meetings up to her resignation.2.
   Alan Ferguson was appointed on 30 September 2005. This being the last day of the financial year he did not attend any board meetings.3.
   Kent Masters was appointed on 1 March 2005 and he has attended all board meetings since his appointment.4.
   Rebecca McDonald was appointed on 1 July 2005 and she has attended all board and committee meetings since her appointment.5.
   René Médori resigned on 31 May 2005 and he attended all board meetings up to his resignation.6.
   Matthew Miau missed three committee meetings due to conflicts in his schedule.7.
   Iain Napier resigned on 22 December 2004. He attended all committee meetings up to his resignation but missed one board meeting due to a conflict in his
schedule.8.
   John Walsh resigned on 1 March 2005 and he attended all board meetings up to his resignation. Throughout 2005 the company continued to maintain directors and officers insurance.     There
is a well established procedure enabling any director, in the furtherance of
his or her duties as a BOC director, to seek independent professional advice
at the companys expense.     All directors have access to the advice and services of the company secretary. The company secretary is responsible for ensuring that the correct board
procedures are followed and advises the board on all corporate governance matters. In addition the company secretary manages the provision of information and documentation, notably meeting papers, to the board promptly with enough time to enable
them to prepare fully for any meeting. Both the appointment and the removal of the company secretary are matters for the whole board. Induction and professional developmentUpon
joining the board, new directors are required to undertake a full induction comprising,
as appropriate to the individual, site visits, meetings with the line of business
chief executives, each member of the executive management board and also key
advisers. New directors are also advised of their legal and other duties and
obligations as a director of a listed company. This is supplemented by a reference
binder, which is
regularly updated, including information about the board, the committees, directors duties, procedures for dealing in the companys
shares and other regulatory and governance matters.     Appropriate training and briefings are available to all directors on appointment and subsequently, as necessary, taking into account their individual
qualifications and experience and any training requirements identified during the annual performance review process. The company secretary monitors the availability and suitability of external courses, details of which are circulated to the board.
During the year certain directors attended external seminars relating to specific areas of their responsibility. The board receives regular briefings on governance and regulatory matters affecting the Group and its market sector activity and also on
litigation relating to the Group.     The
non-executive directors have full access to management and both internal and
external auditors, and are encouraged to stay fully abreast of the
Groups business, aided by site visits and meetings with senior management.


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Performance
evaluationIn
line with the boards decision to alternate each year between an internally
    and an externally facilitated review process, during 2005 an externally facilitated
    review was undertaken with the emphasis on continuous improvement and effectiveness
    of the board, its committees and the individual directors. The review focused
    on matters such as the role and organisation of the board, the monitoring
    of Group performance, board leadership and culture and board priority tasks
    including strategy and safety. The effectiveness of each of the principal
    committees was evaluated as was the performance of each director. The chairman
    met with each director to give feedback on his or her individual performance.     The results of the review were
    presented to the board. The chairmen of each of the audit, nomination and
    remuneration committees reviewed the results of the evaluation of each committee
    at meetings of their respective committees. The results were very positive,
    showing an improvement in performance overall since the previous review. Where
    areas for improvement have been identified, actions are being agreed. From
    the results of the 2005 review the board and principal committees are comfortable
    that they are operating effectively and that all directors continue to contribute
    effectively and are committed to their respective roles at BOC.     Sir Christopher ODonnell,
    as senior independent director, led a meeting of the non-executive directors
    to review the performance of the chairman. Comments on the chairmans
    performance are
given on page 65. Board committeesThere
    are six board committees to which the board delegates specific areas of responsibility
    as described below. The terms of reference of the audit, nomination and remuneration
    committees are available on the companys website (www.boc.com) or upon
    request to the company
secretary.
     Whilst
only the members of each committee are entitled to attend the respective committee
meetings, the chairmen of each committee invite, as they consider appropriate,
management and advisers to certain meetings to assist the committees in carrying
out their duties. Audit committeeMembers:Andrew
    Bonfield, Guy Dawson, Rebecca McDonald, Matthew
Miau, Sir Christopher ODonnell (chairman) and Anne Quinn. All members are
independent non-executive directors. Secretary: Nick Deeming. The
      primary objective of the audit committee is to assist the board of directors
      in fulfilling
its responsibilities related to:
   financial reporting and quarterly results announcements;
   ensuring the independence and objectivity of the Groups external auditors;
   determining the adequacy and effectiveness of the internal control environment. The audit committee
    reviews its terms of reference on an annual basis.The audit committee meets four
    times a year, the agendas being organised around the companys financial
    reporting cycle. Members attendance at meetings is detailed on page
    66 and their qualifications are on pages 8 and 9. Time is set aside at one
    of these meetings for the committee to meet with the internal and the external
    auditors separately without the executive management present. The committee
    reviews the effectiveness of internal controls, matters raised by the internal
    and external auditors in their regular reports to the committee and the quarterly
    financial statements prior to their release, as well as the arrangements
    by which staff of the Group may, in confidence, raise concerns. The committee
    also monitors that an appropriate relationship between BOC and the external
    auditors is maintained and reviews the policies and procedures in place to
    ensure the independence and objectivity of the audit. The work undertaken
    by the committee during 2005 is described in more detail in its report below.Andrew
    Bonfield is considered by the board to be the audit committee financial expert.
    He is considered to be independent in accordance with the definition of that
    term in the Combined Code on Corporate Governance and the NewYork Stock Exchange
    listing standards. All other members of the committee are
financially literate.


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|68 | The BOC
          Group plcAnnual
    report and accounts 2005 | Corporate
    governance
|-- | -------------------------------------------------------------- | ------------------------





Audit
    committee reportIn
        2005 the audit committee discharged its responsibilities as set out in
        the terms of reference and the specific matters reviewed by the committee
    included:i)
    interim
    and full year financial results and announcement statements;ii)
    interim
        and full year report from the internal audit function of progress against
    the 2005 audit plan and effectiveness of internal controls;iii)
    the Groups
        project to comply with the requirements of Section 404 of the US Sarbanes-Oxley
    Act.This review
        included the project plan, progress against the plan and matters arising
        in the implementation of the plan;iv)
    details
        of the Groups project to transition to International Financial
    Reporting Standards from 2006;v)
    the external
        audit plan for 2005 presented by the Groups auditors, PricewaterhouseCoopers
    LLP (PwC).This review
        included the audit objectives, auditor independence and objectivity policies
        managed by PwC, partner rotation, audit scope, team, timetable deliverables
    and fee proposal;vi)
    the annual
        report disclosure items relevant to the audit committee. Included in
        this review were the Groups critical accounting policies, the going
        concern statement, the report on risk and internal controls and the risk
        factors statement. The audit committee also reviewed the disclosure control
        review procedures employed by the Group which enabled the chief executive
        and Group finance director to sign the Section 302 and 906 certificates
        pursuant to the
US Sarbanes-Oxley Act;vii)
    the
    external auditors report to the committee for 2005;viii)
    the independence
        and objectivity of the external auditors, including a review of non-audit
        fees. The audit committee has reviewed and approved a policy for the provision
        of non-audit services by the external auditors. This policy has been in
    place since 2002 and defines services which can be provided by the auditors. The
    policy also specifies which services cannot be provided. The policy requires
    all non-audit services to be approved in advance by the audit committee,
    which has delegated this task to the chairman of the audit committee. The
    approval process requires full disclosure of the objectives and scope of
    the services to be performed and fee structure. The audit committee reviews
    all approved services at subsequent meetings. The auditors are permitted
    to perform non-audit services only if the scope of work is within the terms
    of the policy and there is a business benefit to the Group in these services
    being performed by the external auditors rather than an alternative supplier. The
    level of the fee spend is closely monitored to ensure independence and objectivity
    of the audit is maintained. Further details of actual fees paid to external
    auditors are given in note 2c) on page 97;ix)
    the procedures
        by which staff can report, in confidence, any matters of a financial
        or non-financial nature alleging breaches of the Groups Code of
        Conduct. The audit committee also reviewed the procedures by which allegations
        are reported to
senior management and the audit committee. During this period the audit committee met with the Groups external auditors without the presence of management. The audit committee also met with the Groups head of internal
audit without the presence of management. The head of internal audit has access to the chairman of the audit committee, if necessary, outside of meetings.     Regular
attendees to audit committee meetings, at the invitation of the chairman of the
committee, include: the chairman, chief executive, Group finance  director, director
of risk management, head of business assurance audit, director financial planning
and control, and the external auditors. Other senior managers are invited to
attend as required to participate in presentations or discussions to
enable the committee to discharge its duties.     The audit committee concludes that, based on the foregoing, it has discharged its responsibilities as set out in the terms of reference and is satisfied that
auditor independence and objectivity have been maintained. Nomination committeeMembers:Andrew
  Bonfield, Guy Dawson,Tony Isaac, Rob Margetts (chairman), Rebecca McDonald,
Matthew Miau, Sir Christopher ODonnell and Anne Quinn. The majority of members
are independent non-executive directors. Secretary: Nick Deeming.The nomination committee reviews its terms of reference on an annual basis.     The
nomination committee meets periodically as required but at least annually. During
2005 the committee met six times. Members attendance at meetings
is detailed on page 66. The committee primarily monitors the composition and balance
of the board and its committees, and identifies and recommends to the board the
appointment of new directors. The committee also keeps under review the board
committee structure and the composition of each committee and makes recommendations
to the board of any changes considered necessary. Whilst the chairman of the
board chairs this committee he is not permitted to chair meetings when the appointment
of his successor is being considered or during discussions regarding his performance.     The
committee reviews annually the succession plans for the executive directors and
the executive management board. During 2005 the vacant roles of chief executive,
Industrial and Special Products and Group human resources director were both
filled by internal candidates. The committee also considers the reappointment
of non-executive directors upon expiry of their term of office and the proposals
for
re-election of directors retiring by rotation at the Annual General Meeting.
Directors submit themselves for re-election at regular intervals and at least
every three years in accordance with the companys Articles of Association
and the Combined Code on Corporate Governance. During these deliberations consideration
is given to the results of the annual board evaluation. The evaluation process
is explained in more detail above. The Notice of Annual General Meeting is contained
in a
separate circular and details the directors who will be standing for election
and re-election at the meeting.


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During the year
    one new non-executive director and two executive directors were appointed
    to the board. When considering the appointment of new directors the committee
    reviews the current  balance of skills and experience on the board. A detailed
    specification is drawn up to include any specific knowledge or expertise
    that is considered of future benefit to the board and having regard to the
    business throughout the Group and the
overall business strategy. For executive vacancies internal candidates identified
    through the succession planning process are always considered in the first
    instance. External search consultants are used to identify suitable candidates
    for  non-executive positions or where alternative candidates are required
    for executive vacancies. The consultant draws up a short list of candidates
    for consideration. The committee then reviews and evaluates the short listed
    candidates before submitting
its recommendation to the board as a whole. Remuneration committeeMembers:Andrew
Bonfield, Guy Dawson (chairman), Rebecca McDonald, Matthew Miau, Sir Christopher
ODonnell and Anne Quinn. All members are independent non-executive directors.
Secretary: James Cullens.
     The remuneration committee reviews its terms of reference on an annual basis.

     The
remuneration committee meets six times a year. Members attendance at meetings is detailed on page 66. The committee recommends to the board the
policy on executive directors remuneration and the specific remuneration, benefits and terms of employment of each executive director. The committees full report on directors remuneration
is set out on pages 72 to 83. Pensions committeeMembers: Guy Dawson (chairman),Alan Ferguson,Tony Isaac, Rob Margetts. Secretary: Stephen Pegg, Corporate pensions director.
     The
pensions committee meets twice a year and oversees the review of governance and
control procedures applying to all employee retirement benefit plans, and reviews
and makes recommendations on the investment policies and strategies applied to
the Groups retirement benefit plans. Executive management boardThe members of
the executive management board are detailed on pages 10 and 11 and are considered
as the officers of the company. The executive management board is chaired by Tony
Isaac. All members held office throughout the year ended 30 September 2005 except
that John Walsh resigned on 31 March 2005, Rob Lourey resigned on 30 April 2005
and René Médori resigned on 31 May 2005. James Cullens, Group human
resources director, became a member of the executive management board on 30 April
2005 and Alan Ferguson, Group finance director, did so on 15 September 2005. There
have been no further changes up to the date of this report.
     The
executive management board meets regularly having primary authority for the day-to-day
management of the Groups operations and policy
implementation in line with the Groups strategy agreed by the board. Investment committeeMembers:
John Bevan, Alan
Ferguson,Tony Isaac (chairman), Kent Masters, Mark Nichols, Raj Rajagopal,
and representatives from the finance function.
     The
investment committee meets regularly and reviews and approves Group commitments
up to £25 million as delegated by the board. Group commitments over
£25 million are presented to the board for approval on recommendation from
the committee. Accountability and auditStatements of the respective responsibilities of the directors and auditors for these accounts are set out on pages 84 and 85. Risk management and internal controlsThis statement of compliance with the Combined Code on Corporate Governance in respect of risk management and internal controls is in line with the arrangements set out by the Financial
Reporting Council.
     The board has overall
responsibility for the Groups system of risk management and internal controls.The schedule of matters reserved to the board ensures that the directors maintain full and effective control over all significant strategic, financial, organisational and compliance
issues. Risk management in BOCThe BOC risk management programme assists management throughout the Group to identify, assess and
mitigate business risk on a continuous basis.
     The objective of risk management within BOC is to improve performance and decision making through identification, assessment and mitigation of key
risks.
     A dedicated central
team of risk management specialists is responsible for delivering the risk management
programme. During 2005 approximately 86 risk  workshops or reviews have been
conducted covering a broad range of matters. These include risks in strategy,
risks in meeting business unit targets, risks in acquisitions or ventures and
risks in major projects.
     The
risk management process operates on a global basis and covers the Groups
key risks, lines of business, business units and corporate
functions.
     The output from
each risk assessment is a set of prioritised risks with associated action plans. Line
management retains responsibility for completion of action plans. Progress of
action plans is monitored and reported.     A
report on the risk management process is provided to the board twice a year.
These reports include reviews of key strategic risks to the Group as well as
 the individual lines of business and identifies the status of action plans against
key risks.


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|70 | The BOC
          Group plcAnnual
    report and accounts 2005 | Corporate
    governance
|-- | -------------------------------------------------------------- | ------------------------





Internal
        controls in BOCThe
        directors have delegated to executive management the establishment and
        implementation of a system of internal controls appropriate to the various
        business environments in which it operates. The Group operates under a
        system of controls that has been developed and refined over time to meet
        its current and future needs and the risks and opportunities to which
        it is exposed. These controls, which are communicated through various
        operating and procedural manuals and processes, include but are not limited
    to:
   The
       definition of the organisational structure and the appropriate delegation
       of authorities to operational management;
   Procedures for the review and authorisation of capital investments through the investment committee including post-acquisition reviews and appraisals;
   Strategic planning and the related annual planning process including the ongoing review by the board of the Groups strategies;
   The establishment of individual business unit annual performance targets and the quarterly business review of actual performance;
   The monthly financial reporting and review of financial results and other operating statistics such as the health and safety reports as well as the Groups
published quarterly financial statements, which are based on a standardised reporting process;
   Accounting and financial reporting policies to ensure the consistency, integrity and accuracy of the Groups accounting records;
   Specific treasury policies and objectives and the ongoing reporting and review of all significant transactions and financing operations. The internal control system is monitored and supported by an internal audit function that operates on a global basis and reports its results on the Groups operations to management
and the audit committee. The work of the internal auditors is focused on the areas of greatest risk to the Group determined on the basis of a risk management approach to audit.     There
have been regular reviews by the audit committee of the board of the effectiveness
of the Groups overall internal control processes throughout
the year.     During
2005 the Group has developed and progressed its plan to meet the requirements
of Section 404 of the US Sarbanes-Oxley Act 2002 which is a requirement for BOC
with effect from 2006. The internal audit function has played an important role
in developing and implementing the plan to identify, document and test key controls
over financial reporting as required by Section 404 and will have a
significant role in supporting managements evaluation of design effectiveness
and operational effectiveness of these controls.     The
directors therefore believe that the Groups system of risk management and
internal controls provides reasonable but not absolute assurance that assets
are safeguarded, transactions are authorised and recorded properly and that material
errors and irregularities are either prevented or would be detected within a
timely period.     Having
reviewed its effectiveness, the directors are not aware of anything in the Groups
system of internal controls during the period covered by this report and accounts
which would render them ineffective.     There
were no changes in the Groups internal controls over financial reporting that occurred in the year ended 30 September 2005 that have materially
affected, or are reasonably likely to affect, the Groups internal control
over financial reporting. Disclosure controls and proceduresThe
chief executive and Group finance director, based on the evaluation of the effectiveness
of the Groups disclosure controls and procedures as of the end of the period covered by
this annual report and accounts, have concluded that, as of such date, the Groups
disclosure controls and procedures were effective. Going concernThe
directors report on going concern is included in the financial review on
page 63. Communication with shareholdersThe
board considers communication with shareholders, whether institutional, private
or employee shareholders, to be extremely important.  A variety of communication
mechanisms are used by the company. Financial results are published quarterly,
and half year and annual reviews are sent to all shareholders. Copies of the
full annual report are available by election or on request. The companys
website (www.boc.com) provides  financial and other business information about
The BOC Group. It contains an archive of past announcements and annual reports,
share price information and a calendar of events as well as BOCs social
responsibility policies, including the
companys Code of Conduct. There are also facilities in place to enable
shareholders to receive communications from the company in electronic form rather
than by
mail and for shareholders to provide their proxy votes for the Annual General
Meeting by electronic means.     The
Annual General Meeting provides an opportunity for shareholders to question directors
about the companys activities and prospects. The chairmen of
each of the principal board committees are normally present. Members of the board
meet informally with shareholders after the meeting. During the year responses
are given to letters received from shareholders on a variety of subjects.     Separate
resolutions are proposed for each substantially separate item of business proposed
at the Annual General Meeting. All resolutions will be voted on by taking a poll,
with an indicative result advised to the meeting and the verified result announced
as soon as practicable after the meeting. The proxy voting result will also be
available on the companys website (www.boc.com).


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| |  |  | Corporate
          governance | 71
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There
    is a programme of regular dialogue with major institutional shareholders
    and fund managers which is led by the chief executive and Group finance director
    although the chairman, senior independent director and other board members
    are offered the opportunity to attend meetings with major shareholders and
    are expected to do so if shareholders request. The company also maintains
    contact, when appropriate, through the chairman
of the remuneration committee and other executive management to discuss overall
    remuneration policies and plans. Summaries of these discussions and meetings
    are provided to the board. In addition the board receives copies of most
    analysts and
brokers reports issued on the company. Periodically the board receives
presentations from external advisers on investor perceptions. These summaries,
reports and presentations enable the directors to gain an understanding of the
views and
opinions of those with an interest in the company.

     The directors are supported by the companys investor relations department, which is in regular contact with institutional shareholders, analysts and
brokers. All contact with major shareholders, analysts, brokers and the media is controlled by strict company guidelines to ensure that any price sensitive information that has not been made generally available to all shareholders and potential
investors is protected. Annual General Meeting
The Annual General Meeting will be held at the Institution of Electrical Engineers (Lecture Theatre), Savoy Place, London WC2R 0BL on Friday 27 January 2006 commencing at 11.00 am. The
Notice of Annual General Meeting, which includes explanations of all resolutions, is contained in a separate circular which is being sent to all shareholders more than 20 working days before the meeting. Resolutions
      will seek approval to the following:a)
    receipt
    of the report and accounts;b)
    the dividend
    policy;c)
    reappointment
        of Kent Masters, Rebecca McDonald, Alan Ferguson, John Bevan, Matthew
    Miau and Sir Christopher ODonnell as directors;d)
    reappointment
        of PricewaterhouseCoopers LLP as auditors and granting authority to the
    directors to fix their remuneration;e)
    approval
    of the directors remuneration report;f)
    renewal
    of the authority for the directors to allot shares;g)
    renewal
        of the authority for the directors to allot shares for cash other than
    to existing shareholders in proportion to their holdings;h)
    granting
        of general authority for the company to purchase its own shares up to
        a maximum of ten per cent of issued share capital. No purchases were
    made following last years authority; andi)
    amendments
    to the Articles of Association. The report of the directors has been approved by the board and signed on its behalf by: Nick DeemingCompany Secretary 
28 November 2005


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|72                         | The
          BOC Group plcAnnual
          report and accounts 2005 |  | 
|-------------------------- | -------------------------------------------------------------------- |  | 
|Report
    on remuneration
|                           |                                                                      |  | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | The remuneration
    committee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | The remuneration
        committee comprises all the independent non-executive directors, namely
        Guy Dawson (chairman),Andrew Bonfield, Matthew Miau, Sir Christopher
        ODonnell,Anne Quinn and Rebecca McDonald (appointed 1 July 2005). Whilst
        neither the Group chairman nor the chief executive are members of the
        remuneration committee they both attend the meetings by invitation but
        are not present when their personal remuneration is discussed and reviewed. The
        Group human resources director acts as secretary to the committee and
        provides it with information and data from national and international
        surveys. He is assisted by the Group compensation and benefits director.
        In addition the remuneration committee has appointed Towers Perrin to
    advise on the remuneration arrangements for senior executives.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | The
        remuneration committee sets the overall remuneration policy of the Group
        and makes recommendations to the board on the framework of executive
        remuneration. It meets six times a year. Individual member attendance
        at the meetings is shown on page 66. The terms of reference are reviewed
        annually to ensure that they conform with best practice. Specifically,
        the remuneration committee determines, on behalf of the board, the detailed
        terms of service of the executive directors and other members of the
        executive management team including basic salary, performance-related
        bonus arrangements, benefits in kind, long-term incentives and pension
        benefits. The remuneration committee also reviews the remuneration of
        the chairman, following a recommendation from the chief executive and
        the senior independent director. The board as a whole determines the non-executive
    directors fees.                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Remuneration
    policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | BOCs
        remuneration policy for executive directors and other executive management
        is designed to attract and retain executives of the highest calibre so
        that the Group is managed successfully to the benefit of its stakeholders.
        In setting remuneration levels the remuneration committee takes into
        account the remuneration practices found in other UK listed companies
        of similar size, internationality and complexity. The policy is to pay
        salaries and total remuneration around mid-market levels for on target
        performance and to provide the opportunity, via annual and long-term
        incentives, for executives to be rewarded at the 75th percentile if this
        is justified by the achievement of top of the range performance goals.
        It is the view of the remuneration committee that performance-related
        remuneration should form a substantial element of total remuneration.
        Based on assumptions about expected values for awards from the Long-Term
        Incentive Plan (LTIP) and the Share Matching Plan (SMP), the proportion
        of performance-related remuneration to fixed remuneration (excluding
        pensions and benefits in kind) for current arrangements is approximately
        67 per cent to 33 per
cent (see chart 1).
| | Last
        year, the remuneration committee made a number of changes to the performance-related
        elements of the executive remuneration package. These changes were approved
        by shareholders at the Annual General Meeting in January 2005. The changes
        included the ceasing of option awards under the Executive Share Option
        Scheme, an increase in target and maximum value of the Variable Compensation
        Plan (VCP) with one third of the bonus being compulsorily transferred
        into a new SMP, and an increase in the maximum award level for the LTIP.
        The increase in the maximum LTIP award level was to ensure that the remuneration
        committee has the flexibility to remain fully competitive in the event
        that a higher level of award was required for an appointment to an executive
        role. The remuneration committee does not propose to make any significant
    changes to the executive remuneration package this year.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Remuneration
    components                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Basic salarySalaries
        for executive directors and executive management board members are based
        on median market rates drawn from market data provided by remuneration
        consultants,Towers Perrin, and take account of an executives experience,
        responsibilities and performance. Performance is assessed both from an
        individual and business perspective. Remuneration for those executives
    of businesses outside the UK is denominated in the local currency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Benefits
          in kindBenefits
        in kind comprise company car benefits and membership of BOCs healthcare
        insurance scheme. Where appropriate, directors on international assignment
        receive overseas allowances such as housing and childrens education
        fees. These allowances are on similar terms to those applying to other
        employees on the international programme. Such benefits are in line with
        those offered by peer group companies. Benefits in kind do not form part
    of pensionable earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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Variable Compensation
Plan (VCP)The
executive directors and senior management participate in the variable compensation
bonus  plan. The plan focuses on annual objectives and links individual performance
with business plans. Last year, as part of the review of performance-related
elements of the executive remuneration package, the remuneration committee agreed
that the
target and maximum value of the VCP be increased to 110 per cent and 160 per
cent of salary respectively and that one third of the VCP bonus be compulsorily
deferred into the Share Matching Plan. Details of the plan are shown on page
74. The  financial targets for the executive directors and other executive management
board members are set on an annual basis by the remuneration committee and performance
against these targets is reviewed by the remuneration committee on a six monthly

basis. The remuneration committee considers that a six monthly review acts as
a significant incentive and is conducive to sustaining performance throughout
the year. The financial targets are based equally on adjusted earnings per share
(EPS) and  adjusted return on capital employed (ROCE) at Group level. Adjusted
means excluding exceptional items. Bonuses are assessed two thirds on these financial
targets with the remaining third based on personal objectives. These are based
on BOCs
strategic priorities and include safety, growth, people and change management
and productivity. Performance is measured against key performance indicators
determined during formal appraisals. There is a threshold performance level below
which no  bonus is paid. For the financial year 2005 the financial targets set
by the remuneration committee were EPS 66p and ROCE 15.3 per cent and the achievement
against these targets was EPS 64.3p and ROCE 15.3 per cent. The bonus payable
in respect of the
financial targets amounts to 58.6 per cent of salary. In addition, an amount
equal to 29.3 per cent of salary has been deferred into the Share Matching Plan. 
     

The
bonuses for the executive directors and other members of the executive management
board are paid half yearly following the remuneration committee review. Details
of the payments to directors are included in the directors remuneration
for the year on page 78. Current long-term incentive arrangements Long-Term Incentive
Plan (LTIP)Executive
directors, members of the executive management board and a number of other key

executives selected from the companys global operations participate in
the LTIP. The remuneration committee has the discretion to grant awards up to
a maximum of 2.5 times salary. The award made in November 2004 to the chief executive
was based  on 2 times salary and for other board directors 1.5 times salary.
There are three performance conditions: total shareholder return (TSR), adjusted
earnings per share (EPS) and adjusted return on capital employed (ROCE). Up to
one third of the award
could vest in respect of each performance condition. 
     

The
TSR performance condition compares BOCs TSR performance with two separate
comparator groups, a UK comparator group comprising 31 industrial and manufacturing
companies and a global industrial gases group of six leading companies as follows: UK groupAggregate Industries
   
   BPB
   
   Invensys
   
   Scottish & Southern EnergyAMEC
   
   Centrica
   
   Johnson
    Matthey
   
   Scottish PowerAnglo American
   
   Corus Group
   
   Kelda Group
   
   Severn TrentAWG
   
   FKI
   
   National
       Grid Transco
   
   Shell Transport &TradingBAE Systems
   
   Hanson
   
   Pilkington
   
   Smiths GroupBG Group
   
   IMI
   
   Rio
    Tinto
   
   TomkinsBHP Billiton
   
   ICI
   
   RMC Group
   
   United UtilitiesBP
   
   International Power
   
   Rolls-Royce Aggregate Industries and RMC Group were taken over in 2005. Their TSR performance to the point at which they were taken over has been included in the performance measurement. Global gases groupAirgas
   
   (US  S&P 500 Index)Air Liquide
   
   (France  CAC 40 Index)Air Products & Chemicals
   
   (US  S&P 500 Index)Linde
   
   (Germany  DAX 30 Index)Taiyo Nippon Sanso
   
   (Japan  NIKKEI 225 Index)Praxair
   
   (US  S&P 500 Index)The BOC
    Group
   
   (UK  FTSE100
    Index) When determining
BOCs performance relative to the global gases group, the TSR for BOC and
the comparator companies is adjusted (adjusted TSR) so that it reflects the excess
(or  shortfall) in returns relative to the local stockmarket index where each
company has its primary listing. The nationality and the local stockmarket index
that is used to calculate the adjusted TSR for each company is shown in the parentheses.


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|74 | The
          BOC Group plcAnnual
    report and accounts 2005 | Report
    on remuneration
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For the awards
made in November 2004 which will vest in November 2007, the target set by the
remuneration committee is such that if the companys TSR position measured
over a three  year period is median in respect of both comparator groups, then
40 per cent of the shares in respect of the TSR part of the award will vest.
If the companys TSR position is upper quartile, all of the shares in respect
of the TSR part of the  award will vest. If the TSR performance is between the
median and upper quartile, a proportion of between 40 per cent and all of the
shares in respect of the TSR part of the award will vest. If the companys
TSR position is below the median for  both comparator groups, the TSR part of
the award will lapse. The same TSR performance criteria were used for the awards
made in the financial year 2004. The remuneration committee has decided that
for
any awards made in the financial year 2006
onwards, 25 per cent rather than 40 per cent of the shares for the TSR part of
the award will vest at median. 
     The
adjusted EPS performance condition is based on the companys EPS relative
to three year targets on a sliding performance scale. For the awards made in
November 2004 which will vest in November 2007, the target set by the remuneration
committee is 70.3p at the end of the three year performance period for minimum
vesting. If this is achieved, 40 per cent of the shares in respect of the EPS
part
of the award will vest. All of the shares in respect of the EPS part of the award
will vest if the company achieves 80.8p at the end of the three year performance
period. If the EPS performance is between 70.3p and 80.8p, a proportion of between
40 per cent and all of the shares in respect of the EPS part of the award will
vest. If EPS is less than 70.3p at the end of the three year period, the EPS
part of the award will lapse. The EPS targets for the financial year 2004 awards
were 60.3p for
threshold vesting and 69.3p for full vesting. 
     The
adjusted ROCE performance condition is based on the companys ROCE relative
to three year targets on a sliding performance scale. For the awards made in
November 2004, and for further awards, the remuneration committee decided that
it would be appropriate to widen the ROCE band. The threshold target set by the
remuneration committee for the November 2004 awards, which will vest in November
2007, is 13.5 per cent at the end of the three year performance period. If this
is achieved, 40 per cent of the shares in respect of the ROCE part of the award
will vest. All of the shares in respect of the ROCE part of the award will vest
if the
company achieves a ROCE of 16 per cent. If the ROCE performance is between 13.5
per cent and 16 per cent a proportion of between 40 per cent and all of the shares
in respect of the ROCE part of the award will vest. If the ROCE is less than
13.5 per cent the ROCE part of the award will lapse. The ROCE targets for the
financial year 2004 awards were 13.5 per cent for threshold vesting and 15 per
cent for full vesting.      In
setting three performance conditions for the LTIP awards, the remuneration committee
took the view that these were the most important measures that drive or measure
sustainable improvements in shareholder value: the TSR performance condition
measures comparative performance while EPS and ROCE reflect a core part of the
companys business strategy, enabling high levels of both earnings growth
and capital efficiency. Details of the awards made to directors are shown on
page 82.      For the awards made for the financial year 2003, the performance conditions have been met to the extent that 52.6 per cent of the shares vest on the third
anniversary of the award date. Share Matching Plan
(SMP)The
plan was adopted by shareholders at the 2005 Annual General Meeting. Executive
directors,  members of the executive management board and other senior managers
who participate in the VCP are eligible to participate in the SMP. One-third
of any VCP award is compulsorily applied to the acquisition of BOC shares. The
executives will become
entitled to these shares only if they are still in service with BOC three years
after the award is made or are considered to be good leavers. The
executives will receive an additional number of shares equal to the value of
the dividends  paid during the deferral period of the shares and they may also
receive a matching share award of up to 100 per cent of the number of shares
originally allotted. The percentage award will depend on the companys performance
over the deferral  period. Adjusted EPS will account for 75 per cent of the performance
weighting, with TSR accounting for the remaining 25 per cent. The adjusted EPS
performance condition is based on the companys EPS relative to three year
targets. These targets  will be on a sliding scale, where five per cent per annum
growth rate over three years is required for threshold vesting of 25 per cent
of that portion. Full vesting will be achieved if EPS growth is 12 per cent per
annum over the three year
period. 
     The
TSR performance condition compares BOCs TSR performance against the same
UK comparator group as used for the LTIP. Awards will vest for this portion
where BOCs TSR position is median, measured over three years. At this point
25 per cent of this portion of the award will vest. Full vesting occurs if the
company is ranked at or above the upper quartile. Details of the value of VCP
awards for directors that will be applied to the acquisition of BOC shares under
the SMP are shown on page 78. Executive Share Option
Scheme 2003 (ESOS 2003)The last grant under the ESOS 2003 to executive directors and employees who
participate in the SMP took place in November 2003. The scheme was retained for selected middle management throughout the companys global operations. However, it is intended to develop an alternative scheme for this group in the financial year
2006. The performance condition set for the ESOS 2003 by the remuneration committee is that the growth in the adjusted EPS over a three year performance period must be equal to or greater than the growth in the UK retail prices index (RPI) plus three
per cent per annum over the three year performance period. In line with current corporate governance best practice there is no rolling retesting of performance. In the event that the performance condition is not satisfied over the original three
year period then the remuneration committee has the discretion to re-test performance after five years, but only where the remuneration committee believes the extension to be a fair and reasonable basis for assessing the sustained underlying
performance of the company.


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Awards under the LTIP, SMP and ESOS 2003 which vest may be satisfied in cash, for example, where it is necessary for legal or tax reasons. The amount to be paid will, in the case of share
options, be equal to the participants gain on the exercise of the share option. Also, the remuneration committee may decide, prior to grant, that an award shall be expressed to be a right to acquire a cash sum rather than shares.This type of
award, known as a phantom award, will normally only be granted to participants in jurisdictions where, because of local securities laws or exchange control provisions, it is difficult to issue or transfer shares to employees. The LTIP, SMP and ESOS
2003 awards may be satisfied by using existing shares purchased in the market through The BOC Group plc Employee Share Trust or by issuing new shares. In addition, the SMP awards may be satisfied by using shares held in treasury.     Awards under the LTIP, SMP and ESOS 2003 are not pensionable.     The current performance measures as a percentage of salary for on target performance are shown in chart 2. Savings Related Share Option SchemesNew schemes were adopted by shareholders at the 2005 Annual General Meeting . These are
operated in the UK,Australia, New Zealand and Ireland and are open to all employees, including executive directors, with one years service or more. The UK scheme is approved by HM Revenue and Customs. TSR performance
The graph to the
left has been included to meet the requirement set out in the Directors Remuneration
Report Regulations 2002. It shows BOCs TSR performance, assuming
dividends are reinvested, compared with all FTSE100 companies.This has been chosen
because it provides a basis for comparison against companies in a relevant, broad
based equity index of which BOC is a constituent member. The remuneration committee
 decided that other comparator groups were more appropriate as performance measurement
for the LTIP. A graph showing BOCs TSR performance compared with the six
major gases companies relative to respective local indices, which is one of the

comparator groups chosen for the LTIP, is shown in the chairmans statement
on page 5. Former long-term incentive arrangements Executive Share Option
Scheme 1995The
last grant of options to the executive directors and members of the executive
 management board took place in February 2002 and the last award to other Group
employees took place in December 2002. No further awards will be made under this
scheme. The options vest when the companys adjusted EPS growth is equal
to, or  exceeds, the growth in the retail prices index (RPI) by three per cent
per annum over any three year performance period. Details of directors individual remuneration, share options, LTIP awards, amounts deferred from VCP bonus to SMP and shareholdings are given on pages 78 to 82. Retirement benefits
Pension arrangements for executive directors are in line with those of comparable executives in the countries in which the directors are located.      
In
the UK, the BOC senior executive pension scheme is a funded, tax-approved, defined
benefit pension arrangement. Where necessary, the directors
pensionable pay is limited by the earnings cap provisions of the
Finance Act 1989. In such cases, the company pays the director a salary supplement
on earnings above the earnings cap to reflect the loss of pension coverage.This

supplement is recorded in the directors emoluments and is not taken into
account in calculating bonuses or any other form of remuneration.
     BOC
closed its UK defined benefit pension arrangements to all new employees on 30
June 2003. Pension arrangements for new employees are provided under a defined
contribution Retirement Savings Plan. The company makes contributions to the
plan equal to two times the employees core contributions which can be three,
four or five per cent of salary.
     From
6 April 2006, the new Life Time Allowance rules will apply to UK pension provision.
BOC will continue to provide benefits under its defined benefit and defined contribution
pension arrangements as set out above. As an alternative, it will allow employees
whose benefits will, or are likely to, exceed the Life Time Allowance to opt
out of some, or all, further tax-approved pension provision. In such
cases, the company will pay the individual a salary supplement on earnings which
no longer benefit from pension coverage. For members of the defined benefit
arrangements, the supplement will be at the same rate as now applies to earnings
above the earnings cap and for members of the defined contribution
pension arrangements, the supplement will be at the rate which would have been
paid into the Retirement Savings Plan. In both cases the supplement, when paid,
will be similarly
recorded in the directors emoluments.
     In the US, the
Cash Balance Retirement Plan is a funded, tax-qualified, defined benefit arrangement.
     In
the US, the BOC Senior Executive Retirement Plan is  an un-funded, non-tax-qualified,
defined benefit arrangement which tops up the benefits provided under the Cash
Balance Retirement Plan.
     In Australia, the BOC Gases Superannuation Fund is a funded, defined contribution arrangement underpinned by a defined benefit guarantee for long-serving
employees who were members under a prior benefit structure.


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|76 | The
          BOC Group plcAnnual
    report and accounts 2005 | Report
    on remuneration
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Outside appointments
The remuneration
committees view is that non-executive directorships are a significant benefit in broadening executives experience. Any such appointments are subject to review
by the nominations committee and the approval of the board. The executive is permitted to retain any fees for the service.Tony Isaac received fees of £50,000 as a non-executive director of International Power plc and US$70,000 and an annual
award of 2,000 shares as a non-executive director of Schlumberger Ltd. Dr Raj Rajagopal received fees of US$15,000 and an option over 15,000 shares at an option price of $4.21 as a non-executive director of FSI International Inc. and £13,542
as a non-executive director of Foseco plc. Non-executive directors
Non-executive directors
are initially appointed for a three year term after which, whilst not automatic,
their appointment may be extended for a second term subject to mutual agreement
and shareholder approval. The fees are set at a level which will attract individuals
with the necessary experience and ability to make a significant contribution
to The BOC Groups affairs and are benchmarked with those fees paid by other UK
listed companies. The basic fees for the non-executive directors are £40,000 per annum, £10,000 of which, less tax, is invested in BOC shares. In addition, the fees for chairing a committee are £10,000 per annum, £5,000 of
which, less tax, is invested in BOC shares. Following a review in November 2005 the board agreed that the basic fee should be increased by £5,000 per annum with effect from 1 January 2006.This increase, less tax, will be invested in BOC
shares. The fee for Rob Margetts, company chairman, is £260,000 per annum.
     The
non-executive directors do not have service contracts. They do not participate
in the Groups variable compensation arrangements, its long-term
incentive arrangements or its pension arrangements. They do not receive any benefits
in kind. Appointment of director
Alan Ferguson joined
the company on 15 September 2005 and was appointed a director on 30 September
2005. As permitted under 9.4.2R(2) of the Listing Rules, Mr Ferguson received
an award
of shares to the value of £550,000 on the day he joined the company.Two
thirds of this award will vest in March 2006. The remaining shares will vest in
March 2007. He also received an award of shares to the value of 200 per cent
of salary under  the LTIP. Vesting will be in accordance with the performance
conditions and performance period set by the remuneration committee for the November
2004 LTIP award. In addition, the number of shares vesting will be pro-rated
to the number of months
worked during the performance period.This will amount to twenty four months at
the expected vesting date. These awards were used to facilitate the recruitment
of Mr Ferguson. He held a significant number of share options and restricted
shares under
his previous employers share plans. The value of the awards provided was
calculated on a straight swap basis and will be payable unless his employment
is terminated by reason of summary dismissal. The details of Mr Fergusons
contract are
included below. Future arrangements for chief executive
Tony Isaac, the
chief executive is due to retire in 2007. The remuneration committee wish to ensure
that he continues to be rewarded appropriately. With this in mind the remuneration
committee has decided that he should continue to participate in the long-term
incentive arrangements during the financial year 2006. However for the financial
year 2007 the remuneration committee have agreed that he should not participate
in these
arrangements and propose to award delivery of his 2007 objectives solely in cash,
based on salary and cash bonus and linked to additional specific and rigorous
performance conditions.This approach will align Mr Isaacs pay with that
of the
other directors, although at a lower level of deferred pay. Service contracts
The companys
policy is for all executive directors to have contracts of employment that terminate
on the attainment of retirement age. In order to mitigate its liability on early

termination, the companys policy is that it should be able to terminate
such contracts on no more than 12 months notice, and that payments on termination
are restricted to the value of salary, car benefit and bonus entitlement  (calculated
on the basis of the average of actual payments over the preceding two years)
for the unexpired portion of the notice period. The company has revised this policy
further for all new appointments, so that in the event of early termination,

the company will pay either monthly compensation calculated as per the terms
set out above for the unexpired portion of the notice period, or else a lump
sum payment equal to the base salary pro-rated to the unexpired portion of the
notice period.  In the event that monthly compensation is paid, should an individual
obtain alternative employment during the period of the monthly payments, the
companys
obligation is reduced by the amount of the monthly remuneration from the alternative
employment. The revised policy has applied to all new appointments during the
financial year and will apply to subsequent appointments. Pension provisions
on termination are detailed in the individual service contracts below.


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Individual service contractsMr
    Bevan has a contract dated 5 December 2002 that can be terminated by the
    company on 12
months notice. In the event of early termination, the contract provides
for the payment of compensation based on the value of salary, car benefit and
bonus entitlement (calculated on the basis of the average of actual payments
over the preceding two years) for the unexpired portion of the notice period.
Mr Bevan would also be entitled to his deferred pension, with the unexpired portion
of the notice period being added to his pensionable service in the calculation
of his pension
entitlement.     Mr
Isaac has a contract dated 19 November 2002, varied by letter dated 1 June 2004,
which expires upon the conclusion of the Annual General Meeting in 2007 subject
to possible extension by mutual agreement. The contract can be terminated by
the company on 12 months notice. In the event of early termination, the contract provides for the payment of compensation based on the value of salary, car
benefit and bonus entitlement (calculated on the basis of the average of actual payments over the preceding two years) for the unexpired portion of the notice period. Mr Isaac would also be entitled to a contribution to his funded unapproved
retirement benefit scheme amounting to the sum of 40 per cent of his pay above the pension cap imposed
by the Finance Act 1989 and 58.33 per cent of his pay up to the cap for the unexpired
portion of his notice period.     Dr
Rajagopal has a contract dated 1 May 1999, amended 22 November 2002, that can
be terminated by the company on 12 months notice. In the event of
early termination, the contract provides for the payment of compensation based
on the value of salary, car benefit and bonus entitlement (calculated on the
basis of the average of actual payments over the preceding two years) for the
unexpired portion of the notice period. Dr Rajagopal would also be entitled to
have his deferred pension from the UK senior executive pension scheme (a) calculated
with the inclusion of the unexpired portion of his notice period in the calculation
of
pensionable service; and (b) paid without actuarial reduction from age 55.     Mr
Masters has a contract dated 11 March 2005, effective from 1 March 2005, that
can be terminated by the company on 12 months notice. In the event of
early termination, the contract provides for the monthly payment of compensation
based on the value of salary, car benefit and bonus entitlement (calculated on
the basis of the average of actual payments over the preceding two years) for
the unexpired portion of the notice period. Should Mr Masters obtain alternative
employment during the period for payment of the monthly payments then each monthly
payment still outstanding would be reduced by the basic monthly remuneration
received
from his alternative employment.     Alternatively,
the contract also provides for the company to pay a lump sum termination payment
in lieu of the unexpired portion of the notice period instead of the monthly
termination payments. Such a payment would be equal to the base salary pro-rated
to the unexpired portion of the notice period. The unexpired portion of Mr Masters
notice period would be added to his pensionable service in the calculation of
his pension entitlement from the US Senior Executive Retirement Plan. His US
Cash Balance Retirement Plan and Savings Investment Plan benefits would be credited
with an amount equivalent to the amount the company would have
contributed during the unexpired portion of his notice period. His active participation
in the Cash Balance Retirement Plan and Savings Investment Plan would cease on
termination.     Mr
Ferguson has a contract dated 5 May 2005 that can be terminated by the company
on 12 months notice. In the event of early termination, the contract
provides for the monthly payment of compensation based on the value of salary,
car benefit and bonus entitlement (calculated on the basis of the average of
actual payments over the preceding two years) for the unexpired portion of the
notice period. Should Mr Ferguson obtain alternative employment during the period
for payment of the monthly payments then each monthly payment still outstanding
would be reduced by the basic monthly remuneration received from his alternative
employment.     Alternatively, the contract also provides for the company to pay a lump sum termination payment in lieu of the unexpired portion of the notice period instead
of the monthly termination payments. Such a payment would be equal to the base salary pro-rated to the unexpired portion of the notice period. Mr Ferguson would be entitled to a contribution to his personal pension plan or a cash amount in lieu of
his pay supplement for the unexpired portion of his notice period.     If
the contract is terminated within two years of his date of appointment, the company,
with Mr Fergusons agreement, has the discretion to make such
termination payments in one lump sum or on a monthly basis.All
of the above contracts can be terminated by the individual director on six months notice.     Mr Walsh resigned from the board on 1 March 2005 and left the company on 31 March 2005. He received no severance payment. All of his long-term incentive plans
lapsed on his resignation.     Mr
Médori resigned from the board and left the company on 31 May 2005. He
received no severance payment. He was entitled to exercise one vested share option
which he was granted under the Executive Share Option Scheme 1995 within three
months of leaving the company. All of his other long-term incentives lapsed on
his resignation. Shareholding guidelines
The remuneration committee encourages the executive management group to grow personal shareholding in the business over time. It is anticipated that each executive would build towards a
shareholding of one times salary. The remuneration committee believes that the vehicle of the long-term incentive arrangements will facilitate the building of such a shareholding over a period of time.


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|78 | The
          BOC Group plcAnnual
    report and accounts 2005 | Report
    on remuneration
|-- | -------------------------------------------------------------- | --------------------------
|   |                                                                |                           





Directors emoluments and compensationCharged against profit in the year
   
   2005
   
   2004£000
   £000Salaries and benefits
   
   3,255
   
   3,028
   4Annual bonuses payable for the year
   
   1,625
   
   2,028Share Matching Plan
   
   655
   
   Fees to non-executive directors
   
   508
   
   4586,043
   
   5,514Company pension contributions to money purchase plans
   
   308
   
   283Provision for share incentive schemes1
   
   875
   
   1,011Payments to former directors and their dependants
   
   32
   
   317,258
   
   6,839 Individual remuneration
   
   Year ended 30 September 2005
   
   2004Allowances
   2
   
   
   Share
   
   TotalBasic
   and
   Bonus
   Matching
   remunera-
   Totalsalary/fees
   benefits
   payable
   Plan
   tion
   remuneration£000
   £000
   £000
   £000
   £000
   £000ChairmanR J Margetts
   
   251
   
   
   
   
   
   
   
   251
   
   225Executive directorsJ A Bevan3
   
   236
   
   192
   
   222
   
   142
   
   792
   
   739
   4A E Isaac5
   
   721
   
   145
   
   606
   
   303
   
   1,775
   
   1,508J K Masters3.6
   
   175
   
   323
   
   124
   
   62
   
   684
   
   Dr K Rajagopal
   
   360
   
   16
   
   297
   
   148
   
   821
   
   702Non-executive directorsA R J Bonfield
   
   40
   
   
   
   
   
   
   
   40
   
   39G N Dawson
   
   46
   
   
   
   
   
   
   
   46
   
   23M F C Miau
   
   40
   
   
   
   
   
   
   
   40
   
   39R A McDonald6
   
   10
   
   
   
   
   
   
   
   10
   
   Sir Christopher ODonnell7
   
   50
   
   
   
   
   
   
   
   50
   
   49A C Quinn
   
   40
   
   
   
   
   
   
   
   40
   
   17Former directorsR Médori8.9
   
   278
   
   356
   
   204
   
   
   
   838
   
   1,008J L Walsh3.8
   
   178
   
   275
   
   172
   
   
   
   625
   
   1,099
   4J M Baddeley8
   
   21
   
   
   
   
   
   
   
   21
   
   49I J G Napier8
   
   10
   
   
   
   
   
   
   
   10
   
   17Total
   
   2,456
   
   1,307
   
   1,625
   
   655
   
   6,043
   
   5,514 1
   This represents the amount charged to operating profit for those elements of the various share incentive schemes relating to directors.2.
   Allowances and benefits include car, fuel, medical insurance and international assignment benefits. The latter includes housing,utilities, home leave flights,
education, relocation, shipping costs, and any other assignment allowances not covered in this indicative listing.3.
   Mr Masters and Mr Bevan are international assignees, and Mr Walsh was an international assignee prior to his resignation. The pay of international assignees is managed
under a tax equalisation programme funded by the company. This programme ensures that they are not penalised financially by accepting roles of an international nature which would result in higher taxation costs than would have been the case if they
had remained in their home country, as in the case of Mr Walsh and Mr Masters, or benefit from a tax windfall as in the case of Mr Bevan.  Mr Bevans basic salary/fees is set by reference to his UK notional salary of £342,000.4.
   Total remuneration disclosed in the 2004 Report and Accounts did not include a correction for the tax associated with international assignments.5.
   Mr Isaac was the highest paid director in 2005.6.
   Mr Masters was appointed to the board on 1 March 2005 and Ms McDonald was appointed to the board on 1 July 2005. The remuneration above is the total remuneration earned
since their appointment.7.
   Fees in respect of Sir Christopher ODonnell are paid to Smith & Nephew plc.8.
   Mr Médori, Mr Walsh, Ms Baddeley and Mr Napier resigned from the board on 31 May 2005, 1 March 2005, 28 February 2005 and 22 December 2004 respectively. The
remuneration above is the total remuneration earned to their date of resignation.9.
   The allowances and benefits of Mr Médori include a salary supplement of £84,000 (2004: £103,600) in respect of the pensions earnings
cap.10.
   The aggregate remuneration charged against profits for directors and members of the executive management board in the year was £10.5 million. Remuneration of
members of the executive management board other than directors is given on page 79.11.
   Mr Ferguson joined BOC on 15 September 2005 and was appointed a director on 30 September 2005. As such he was not remunerated as a director during the year.


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| | Report
    on remuneration | 79
| | -------------------------- | --
| |                            |   





Executive officersThe aggregate remuneration of members of the executive management board, other than directors, for
services in all capacities during 2005 was as follows: Charged against profit in the year
   
   2005£000Salaries, allowances and benefits
   
   1,606Annual bonuses payable for the year
   
   899Share Matching Plan
   
   393Provision for share incentive schemes1
   
   376Company pension contributions
   
   43,278 Directors share
interests at 30 September 2005The directors of the company and their families had the following
beneficial interests in the companys securities and rights under the share incentive schemes: At 1 October 2004At 30 September 2005
   (or at date of appointment if later)Long-term
   
   
   
   
   
   
   
   Long-termOrdinary
   Share
   Share
   incentive
   Ordinary
   Share
   Share
   incentiveshares
   award
   options
   plan
    awards
   shares
   award
   options
   plan awardsJ A Bevan
   
   23,108
   
   
   
   301,107
   
   150,186
   
   17,108
   
   
   
   307,107
   
   95,490A R J Bonfield
   
   1,772
   
   
   
   
   
   
   
   1,175
   
   
   
   
   
   G N Dawson
   
   1,663
   
   
   
   
   
   
   
   892
   
   
   
   
   
   A M Ferguson2
   
   
   
   48,077
   
   
   
   76,106
   
   
   
   48,077
   
   
   
   76,106A E Isaac
   
   8,057
   
   
   
   1,079,824
   
   432,889
   
   8,057
   
   
   
   1,129,824
   
   279,387R J Margetts
   
   34,000
   
   
   
   
   
   
   
   34,000
   
   
   
   
   
   J K Masters3
   
   2,356
   
   
   
   240,726
   
   78,469
   
   1,856
   
   
   
   240,726
   
   78,469R A McDonald4
   
   500
   
   
   
   
   
   
   
   
   
   
   
   
   
   M F C Miau
   
   4,044
   
   
   
   
   
   
   
   3,447
   
   
   
   
   
   Sir ChristopherODonnell
   
   2,364
   
   
   
   
   
   
   
   2,274
   
   
   
   
   
   A C Quinn
   
   1,376
   
   
   
   
   
   
   
   779
   
   
   
   
   
   Dr K Rajagopal
   
   21,816
   
   
   
   524,765
   
   159,995
   
   21,816
   
   
   
   549,765
   
   102,432Former directorsJ M Baddeley
   
   
   
   
   
   
   
   
   
   2,268
   
   
   
   
   
   R Médori
   
   
   
   
   
   
   
   
   
   16,772
   
   
   
   442,496
   
   107,312I J G Napier
   
   1,184
   
   
   
   
   
   
   
   779
   
   
   
   
   
   J L Walsh
   
   22,175
   
   
   
   
   
   
   
   22,175
   
   
   
   477,412
   
   102,432 1.
   This represents the amount charged to operating profit for those elements of the various share incentive schemes relating to executive officers.2.
   Mr Ferguson was appointed to the board on 30 September 2005.3.
   Mr Masters was appointed to the board on 1 March 2005.4.
   Ms McDonald was appointed to the board on 1 July 2005. There has been no change in the interest of any of the directors between 1 October 2005 and 12 November 2005.     No director had a non-beneficial interest at 30 September 2005 or between 1 October 2005 and 12 November 2005. Options are granted over Ordinary shares of
25p each under senior executive and general employee share option schemes.     Apart from the above and service agreements, no director has had any material interest in any contract with the company or its subsidiaries requiring
disclosure under the Companies Act 1985.     At
30 September 2005, members of the executive management board, other than directors,
had the following aggregate beneficial interests in the companys
securities: 4,421 Ordinary shares; 819,077 share options and 322,694 long-term incentive plan share awards. The cumulative shareholdings of the companys directors and members of the executive management board represent less than one per cent of
the companys outstanding Ordinary shares.


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|80 | The
          BOC Group plcAnnual
    report and accounts 2005 | Report
    on remuneration
|-- | -------------------------------------------------------------- | --------------------------
|   |                                                                |                           





Directors share
        interests  movements
during the yearShare
      optionsAt
   1 October
   2004
   (or at date of
   appointment
   if later)
   
   Granted
   
   Exercised
   
   Lapsed
   
   At
   30 September
   2005
   
   Exercise
     price
     pence
   
   Opening
   market price
   at date
   of exercise
   pence
   
   Earliest
     exercise
     date
   
   Latest
     exercise
     date
   
   NotesJ A Bevan6,000
   
   
   
   (6,000
   )
   
   
   
   
   722
   
   98510,000
   
   
   
   
   
   
   
   10,000
   
   919
   
   
   
   14/02/99
   
   13/02/06
   
   c.10,000
   
   
   
   
   
   
   
   10,000
   
   980
   
   
   
   21/02/00
   
   20/02/07
   
   c.10,000
   
   
   
   
   
   
   
   10,000
   
   914
   
   
   
   11/02/01
   
   10/02/08
   
   c.30,000
   
   
   
   
   
   
   
   30,000
   
   894
   
   
   
   18/11/01
   
   17/11/08
   
   c.45,000
   
   
   
   
   
   
   
   45,000
   
   937
   
   
   
   26/05/03
   
   25/05/10
   
   c.35,000
   
   
   
   
   
   
   
   35,000
   
   993
   
   
   
   07/02/04
   
   06/02/11
   
   c.55,000
   
   
   
   
   
   
   
   55,000
   
   1016
   
   
   
   06/02/05
   
   05/02/12
   
   c.67,654
   
   
   
   
   
   
   
   67,654
   
   776
   
   
   
   06/02/06
   
   05/02/13
   
   c.36,574
   
   
   
   
   
   
   
   36,574
   
   820
   
   
   
   14/11/06
   
   13/11/131,879
   
   
   
   
   
   
   
   1,879
   
   795
   
   
   
   01/04/09
   
   30/09/09
   
   a.b.307,107
   
   
   
   (6,000
   )
   
   
   301,107A E Isaac50,000
   
   
   
   (50,000
   )
   
   
   
   
   722
   
   94650,000
   
   
   
   
   
   
   
   50,000
   
   919
   
   
   
   14/02/99
   
   13/02/06
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   980
   
   
   
   21/02/00
   
   20/02/07
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   914
   
   
   
   11/02/01
   
   10/02/08
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   851
   
   
   
   10/02/02
   
   10/02/09
   
   c.250,000
   
   
   
   
   
   
   
   250,000
   
   937
   
   
   
   26/05/03
   
   25/05/10
   
   c.200,000
   
   
   
   
   
   
   
   200,000
   
   993
   
   
   
   07/02/04
   
   06/02/11
   
   c.200,000
   
   
   
   
   
   
   
   200,000
   
   1016
   
   
   
   06/02/05
   
   05/02/12
   
   c.149,178
   
   
   
   
   
   
   
   149,178
   
   776
   
   
   
   06/02/06
   
   05/02/13
   
   c.80,646
   
   
   
   
   
   
   
   80,646
   
   820
   
   
   
   14/11/06
   
   13/11/131,129,824
   
   
   
   (50,000
   )
   
   
   1 ,079,824J K Masters15,000
   
   
   
   
   
   
   
   5,000
   
   919
   
   
   
   14/02/99
   
   13/02/06
   
   c.7,000
   
   
   
   
   
   
   
   7,000
   
   980
   
   
   
   21/02/00
   
   20/02/07
   
   c.11,000
   
   
   
   
   
   
   
   11,000
   
   914
   
   
   
   11/02/01
   
   10/02/08
   
   c.18,000
   
   
   
   
   
   
   
   18,000
   
   851
   
   
   
   10/02/02
   
   09/02/09
   
   c.54,000
   
   
   
   
   
   
   
   54,000
   
   937
   
   
   
   26/05/03
   
   25/05/10
   
   c.35,000
   
   
   
   
   
   
   
   35,000
   
   993
   
   
   
   07/02/04
   
   06/02/11
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   1016
   
   
   
   06/02/05
   
   05/02/12
   
   c.37,590
   
   
   
   
   
   
   
   37,590
   
   776
   
   
   
   06/02/06
   
   05/02/13
   
   c.23,136
   
   
   
   
   
   
   
   23,136
   
   820
   
   
   
   14/11/06
   
   13/11/13240,726
   
   
   
   
   
   
   
   240,726Dr K Rajagopal25,000
   
   
   
   (25,000
   )
   
   
   
   
   722
   
   98335,000
   
   
   
   
   
   
   
   35,000
   
   919
   
   
   
   14/02/99
   
   13/02/06
   
   c.20,000
   
   
   
   
   
   
   
   20,000
   
   848
   
   
   
   14/08/99
   
   13/08/06
   
   c.35,000
   
   
   
   
   
   
   
   35,000
   
   980
   
   
   
   21/02/00
   
   20/02/07
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   914
   
   
   
   11/02/01
   
   10/02/08
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   851
   
   
   
   10/02/02
   
   09/02/09
   
   c.87,500
   
   
   
   
   
   
   
   87,500
   
   937
   
   
   
   26/05/03
   
   25/05/10
   
   c.50,000
   
   
   
   
   
   
   
   50,000
   
   993
   
   
   
   07/02/04
   
   06/02/11
   
   c.80,000
   
   
   
   
   
   
   
   80,000
   
   1016
   
   
   
   06/02/05
   
   05/02/12
   
   c.74,589
   
   
   
   
   
   
   
   74,589
   
   776
   
   
   
   06/02/06
   
   05/02/13
   
   c.2,353
   
   
   
   
   
   
   
   2,353
   
   698
   
   
   
   01/05/08
   
   31/10/08
   
   a. b.40,323
   
   
   
   
   
   
   
   40,323
   
   820
   
   
   
   14/11/06
   
   13/11/13549,765
   
   
   
   (25,000
   )
   
   
   524,765 1.
    Mr Masters
      was appointed to the board on 1 March 2005.


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| | Report
    on remuneration | 81
| | -------------------------- | --
| |                            |   







At
     1
      October
      2004
   
   Granted
   
   Exercised
   
   Lapsed
   
   At
   30 September
   2005
   
   Exercise
   price
   pence
   
   Opening
     market price
     at date
     of exercise
     penceFormer directorsR Médori15,000
   
   
   
   (15,000
   )
   
   
   
   
   919
   
   94515,000
   
   
   
   (15,000
   )
   
   
   
   
   980
   
   1,03830,000
   
   
   
   (30,000
   )
   
   
   
   
   914
   
   94530,000
   
   
   
   (30,000
   )
   
   
   
   
   851
   
   945100,000
   
   
   
   
   
   (100,000
   )
   2,112
   
   
   
   
   
   (2,112
   )
   50,000
   
   
   
   
   
   (50,000
   )
   80,000
   
   
   
   
   
   (80,000
   )
   78,141
   
   
   
   
   
   (78,141
   )
   42,243
   
   
   
   
   
   (42,243
   )
   442,496
   
   
   
   (90,000
   )
   (352,496
   )
   J L Walsh10,000
   
   
   
   (10,000
   )
   
   
   
   
   722
   
   94410,000
   
   
   
   (10,000
   )
   
   
   
   
   919
   
   98512,500
   
   
   
   (12,500
   )
   
   
   
   
   980
   
   1,01530,000
   
   
   
   (30,000
   )
   
   
   
   
   914
   
   98570,000
   
   
   
   (70,000
   )
   
   
   
   
   851
   
   985100,000
   
   
   
   
   
   (100,000
   )
   50,000
   
   
   
   
   
   (50,000
   )
   80,000
   
   
   
   
   
   (80,000
   )
   74,589
   
   
   
   
   
   (74,589
   )
   40,323
   
   
   
   
   
   (40,323
   )
   477,412
   
   
   
   (132,500
   )
   (344,912
   )
    a.
   Options granted under the Savings Related Share Option scheme. All other options shown above are granted under the executive share option schemes.b.
   Options with no performance conditions attached. All other options shown above have performance related conditions attached to them. These conditions are described on
pages 74 and 75.c.
   The performance conditions attaching to these options have been satisfied. The total gains made by directors on options exercised during the year were £391,400 (2004: £208,400).      At 30 September 2005, there were no options outstanding where the exercise price exceeded the market price of 1153p. During the year, the share price ranged
from a high of 1173p to a low of 870p.


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|82 | The
          BOC Group plcAnnual
    report and accounts 2005 | Report
    on remuneration
|-- | -------------------------------------------------------------- | --------------------------
|   |                                                                |                           





Long-Term
        Incentive
Plan  movements during the yearAt1 October2004(or at date ofappointmentif later)
   
   Granted
   
   Lapsed
   
   At30 September2005
   
   Performance period
   
   Earliestexercise
       date
   
   Latestexercise dateJ A Bevan
   
   38,659
   1
   
   
   
   
   38,659
   
   01/10/02  30/09/05
   
   06/02/06
   
   05/02/1356,831
   
   
   
   
   
   56,831
   
   01/10/03  30/09/06
   
   04/02/07
   
   03/02/14
   
   54,696
   
   
   
   54,696
   
   01/10/04  30/09/07
   
   19/11/07
   
   18/11/1495,490
   
   54,696
   
   
   
   150,186A M Ferguson2
   
   76,106
   
   
   
   
   
   76,106
   
   01/10/04  30/09/07
   
   15/09/08
   
   14/09/1576,106
   
   
   
   
   
   76,106A E Isaac
   
   127,867
   1
   
   
   
   
   127,867
   
   01/10/02  30/09/05
   
   06/02/06
   
   05/02/13151,520
   
   
   
   
   
   151,520
   
   01/10/03  30/09/06
   
   04/02/07
   
   03/02/14
   
   153,502
   
   
   
   153,502
   
   01/10/04  30/09/07
   
   19/11/07
   
   18/11/14279,387
   
   153,502
   
   
   
   432,889J K Masters3
   
   25,060
   1
   
   
   
   
   25,060
   
   01/10/02  30/09/05
   
   06/02/06
   
   05/02/1328,340
   
   
   
   
   
   28,340
   
   01/10/03  30/09/06
   
   04/02/07
   
   03/02/1425,069
   
   
   
   
   
   25,069
   
   01/10/04  30/09/07
   
   19/11/07
   
   18/11/1478,469
   
   
   
   
   
   78,469Dr K Rajagopal
   
   42,622
   1
   
   
   
   
   42,622
   
   01/10/02  30/09/05
   
   06/02/06
   
   05/02/1359,810
   
   
   
   
   
   59,810
   
   01/10/03  30/09/06
   
   04/02/07
   
   03/02/14
   
   57,563
   
   
   
   57,563
   
   01/10/04  30/09/07
   
   19/11/07
   
   18/11/14102,432
   
   57,563
   
   
   
   159,995Former directorsR Médori
   
   44,652
   
   
   
   (44,652
   )
   62,660
   
   
   
   (62,660
   )
   
   
   67,127
   
   (67,127
   )
   107,312
   
   67,127
   
   (174,439
   )
   J L Walsh
   
   42,622
   
   
   
   (42,622
   )
   59,810
   
   
   
   (59,810
   )
   
   
   57,563
   
   (57,563
   )
   102,432
   
   57,563
   
   (159,995
   )
    1.
   The performance conditions for these awards have been met to the extent that 52.6 per cent of the shares vest on the third anniversary of the award date.2.
   Mr Ferguson was appointed to the board on 30 September 2005.3.
   Mr Masters was appointed to the board on 1 March 2005. The performance
conditions attaching to the above awards are shown on pages 73 and 74. Awards
take the form of nil cost options. Pensions
The pension arrangements for each individual director are as follows:      Mr
Bevans pension is provided under the Australian superannuation fund. On retirement at age 60 he will be entitled to the accumulated value of his
defined contribution fund subject to that not being less than the guaranteed lump sum of approximately six times his final 12 months salary.      
Mr
Fergusons pension is being funded by contributions to a tax-approved personal
pension plan on earnings up to the earnings cap imposed by
the Finance Act 1989. Mr Ferguson also receives a salary supplement on earnings
above the earnings cap to reflect the loss of pension coverage. With
effect from 5 April 2006 no further contributions will be made by the company
to Mr
Fergusons pension plan. Instead these contributions will be paid to him
in the form of a salary supplement. 
     Mr
Isaacs pension is being funded in the UK through a combination of a tax-approved
personal pension plan on earnings up to the earnings
cap imposed by the Finance Act 1989, and a funded unapproved retirement
benefit scheme on earnings above the earnings cap. With effect from
5 April 2006 no further contributions will be made by the company to Mr Isaacs
pension plans. Instead these contributions will be paid to him in the form of
a salary supplement. 
     Mr
Masters pension is provided under the US Cash Balance Retirement Plan and the US Senior Executive Retirement Plan, which, in combination, entitle Mr
Masters to a lump sum benefit on retirement at age 60 equivalent to a pension of approximately 82.2 per cent of final base salary. In accordance with local competitive practices existing in his country of operation prior to his appointment as a
director, Mr Masters bonus is pensionable.


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| | Report
    on remuneration | 83
| | -------------------------- | --
| |                            |   
| |                            |   
| |                            |   



Mr Médoris pension benefits were funded under the UK senior executive pension scheme on earnings up to the earnings cap imposed by the Finance Act 1989. Mr
  Médori also received a salary supplement on earnings above the earnings cap to
  reflect the loss of pension coverage. In addition, he had a vested deferred
  benefit under the US Cash Balance Retirement Plan.
       Dr
  Rajagopals pension benefits are funded under the UK senior executive pension scheme. On retirement at age 60, he will be entitled to a pension of
  two-thirds of his final 12 months salary.
       Mr
  Walshs pension was provided under the US Cash Balance Retirement Plan and the US Senior Executive Retirement Plan. In accordance with local
  competitive practices existing in his country of operation prior to his appointment as a director, Mr Walshs
  bonus was pensionable.Further details of the pension plans for executive directors are given below. Defined benefit
      plansDeferred
   
   Increase in
   
   Transfer
     value
         at
         1
      October
      2004
   
   Transfer
   
   Change in
   
   Increase in
   
   Transfer
     value
      of
      increase inbenefit at
   deferred
   (or at date of
   value at
   transfer value
   deferred
   deferred30 September
   benefit in
   appointment
   30 September
   less
      members
   benefit (net
   benefit (net2005
   year
   if later)
   2005
   contributions
   of inflation)
   of inflation)£000
   £000
   £000
   £000
   £000
   £000
   £000Annual pensionDr K Rajagopal
   
   181
   
   16
   
   2,002
   
   2,664
   
   644
   
   11
   
   157 former directorsR Médori
   
   17
   
   3
   
   147
   
   211
   
   61
   
   2
   
   26Lump sum benefit1J A Bevan
   
   1,593
   
   164
   
   1,326
   2
   1,593
   
   164
   
   120
   
   120J K Masters3
   
   472
   
   98
   
   343
   
   472
   
   98
   
   86
   
   86 former directorsR Médori
   
   177
   
   8
   
   165
   
   177
   
   8
   
   3
   
   3J L Walsh
   
   714
   
   190
   
   512
   
   714
   
   190
   
   174
   
   174 1.
   All amounts have been retranslated at the exchange rate prevailing at 30 September 2005.2.
   The transfer value of Mr Bevans lump sum benefit at 1 October 2004 has been adjusted to reflect the correction of his notional pensionable salary.3.
   The increase in deferred benefit for Mr Masters represents the increase from the date of his appointment to the board on 1 March 2005. All transfer values have been calculated in accordance with Actuarial Guidance Note GN11. Money purchase plansThe company made contributions in the year to money purchase plans in respect of the following
directors: 2005
   
   2004£000
   £000A E Isaac
   
   283
   
   270J K Masters
   
   7
   
   J L Walsh
   
   18
   
   13308
   
   283 Excess retirement benefits
No person who has served as a director at any time during the financial year has received retirement benefits in excess of those to which he or she was entitled on the date that the
benefits first became payable. Sums paid to third parties
Except for fees
paid to Smith & Nephew plc for the services of Sir Christopher ODonnell
as noted on page 78, no consideration was paid to or receivable by any third
party in respect of any person who served as a director during the financial
year. Auditable
      part of the report on remunerationThe
        following sections and tables constitute the auditable part of the report
        on remuneration, as defined in Part 3, Schedule 7A of the Companies Act
      1985:a)
    sections
        relating to Long-Term Incentive Plan,Share Matching
        Plan,Executive Share Option Scheme 2003, Pensions,Excess
      retirement benefits and Sums paid to third parties;b)
    tables
        headed Directors emoluments and compensation,Individual
        remuneration,Directors share interests at 30 September
        2005,Directors share interests  movements during
        the year,Long-Term Incentive Plan movements during
        the year,Defined benefit plans and Money purchase
      plans. The report on remuneration has been approved by the board and signed on its behalf by: Guy DawsonRemuneration committee chairman 
28 November 2005


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|86 | The BOC
          Group plcAnnual
    report and accounts 2005
|-- | --------------------------------------------------------------

Group profit and loss account
Years ended 30
September

|                                                                        |      
|----------------------------------------------------------------------- | -----
|                                                                        |      
|                                                                        |      
|                                                                        |      
|                                                                        |      
|                                                                        |      
|                                                                        | Notes
|                                                                        |      
|Turnover, including share of                                            |      
|joint ventures and associates                                           | 1    
|Less:Share
    of turnover of joint ventures                            |      
|Share of turnover of associates                                         |      
|                                                                        |      
|Turnover of subsidiary undertakings                                     |      
|Cost of sales                                                           | 2(a) 
|                                                                        |      
|Gross profit                                                            |      
|Net operating expenses                                                  | 2(a) 
|                                                                        |      
|Operating profit of subsidiary undertakings                             |      
|Share of operating profit of joint ventures                             |      
|Share of operating profit of associates                                 |      
|                                                                        |      
|Total operating profit including                                        |      
|share of joint ventures and associates                                  | 1    
|Profit/(loss) on termination/disposal                                   |      
|of businesses  continuing operations                                   | 2(b) 
|Profit on disposal of fixed assets                                      |      
| continuing operations                                                 | 2(b) 
|                                                                        |      
|Profit on ordinary activities before interest                           |      
|Interest on net debt                                                    | 3    
|Interest on pension scheme liabilities                                  | 8(a) 
|Expected return on pension scheme assets                                | 8(a) 
|                                                                        |      
|Other net financing income                                              |      
|                                                                        |      
|Profit on ordinary activities before tax                                |      
|Tax on profit on ordinary activities                                    | 4(a) 
|                                                                        |      
|Profit on ordinary activities after tax                                 |      
|Minority interests  equity                                             |      
|                                                                        |      
|Profit for the financial year                                           |      
|Dividends                                                               | 9    
|                                                                        |      
|Retained profit for the financial year                                  |      
|                                                                        |      
|Earnings per 25p Ordinary share                                         | 10   
| basic                                                                 |      
| diluted                                                               |      
|                                                                        |      
|                                                                        |      
|All
    turnover and operating profit arose from continuing operations. |      
|Acquisitions
    in 2005 were not material.                             |      
|                                                                        |      

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| | 87
| | --

Group balance sheet
At 30 September

|                                                          | 
|--------------------------------------------------------- | 
|                                                          | 
|                                                          | 
|                                                          | 
|Fixed assets                                              | 
|Intangible assets                                         | 
|Tangible assets                                           | 
|Investment in joint ventures                              | 
| share of gross assets                                   | 
| share of gross liabilities                              | 
|                                                          | 
| loans to joint ventures                                 | 
|Investment in associates                                  | 
| share of net assets                                     | 
| loans to associates                                     | 
|Other investments                                         | 
|                                                          | 
|Investments                                               | 
|                                                          | 
|                                                          | 
|                                                          | 
|Current assets                                            | 
|Stocks                                                    | 
|Debtors falling due within one year                       | 
|Debtors falling due after more than one year              | 
|Investments                                               | 
|Cash at bank and in hand                                  | 
|                                                          | 
|                                                          | 
|                                                          | 
|Creditors: amounts falling due within one year            | 
|Borrowings and finance leases                             | 
|Other creditors                                           | 
|                                                          | 
|                                                          | 
|                                                          | 
|Net current assets                                        | 
|                                                          | 
|Total assets less current liabilities                     | 
|                                                          | 
|Creditors: amounts falling due after more than one year   | 
|Borrowings and finance leases                             | 
|Other creditors                                           | 
|                                                          | 
|                                                          | 
|                                                          | 
|Provisions for liabilities and charges                    | 
|Deferred tax                                              | 
|Other                                                     | 
|                                                          | 
|Total provisions for liabilities and charges              | 
|                                                          | 
|Total net assets excluding pension assets and liabilities | 
|                                                          | 
|Pension assets                                            | 
|Pension liabilities                                       | 
|                                                          | 
|Total net assets including pension assets and liabilities | 
|                                                          | 
|Capital and reserves                                      | 
|Equity called up share capital                            | 
|Share premium account                                     | 
|Revaluation reserves                                      | 
|Profit and loss account                                   | 
|Pensions reserves                                         | 
|Joint ventures reserves                                  | 
|Associates reserves                                      | 
|Own shares                                                | 
|                                                          | 
|Equity shareholders funds                                | 
|Minority shareholders equity interests                   | 
|                                                          | 
|Total capital and reserves                                | 
|                                                          | 

The financial statements were approved by the board of directors on 28 November 2005 and are signed on its behalf by:

A E IsaacDirectorA M FergusonDirector

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|88 | The
          BOC Group plcAnnual
    report and accounts 2005
|-- | --------------------------------------------------------------

Group cash flow statement
Years ended 30 September

|                                                             | 
|------------------------------------------------------------ | 
|                                                             | 
|                                                             | 
|                                                             | 
|Net cash inflow from operating activities                    | 
|                                                             | 
|Dividends from joint ventures and associates                 | 
|Dividends from joint ventures                                | 
|Dividends from associates                                    | 
|                                                             | 
|Dividends from joint ventures and associates                 | 
|                                                             | 
|Returns on investments and servicing of finance              | 
|Interest paid                                                | 
|Interest received                                            | 
|Dividends paid to minorities in subsidiaries                 | 
|Interest element of finance lease rental payments            | 
|                                                             | 
|Returns on investments and servicing of finance              | 
|                                                             | 
|Tax paid                                                     | 
|                                                             | 
|Capital expenditure and financial investment                 | 
|Purchases of tangible fixed assets                           | 
|Sales of tangible fixed assets                               | 
|Purchases of intangible fixed assets                         | 
|Net sales/(purchases) of current asset investments           | 
|Purchases of trade and other investments                     | 
|Sales of trade and other investments                         | 
|                                                             | 
|Capital expenditure and financial investment                 | 
|                                                             | 
|Acquisitions and disposals                                   | 
|Acquisitions of businesses                                   | 
|Net cash acquired with subsidiaries                          | 
|Disposals of businesses                                      | 
|Net cash disposed of with subsidiaries                       | 
|Receipts from capital restructuring of joint ventures1       | 
|Investments in joint ventures                                | 
|Divestments/repayments from joint ventures                   | 
|Investments in associates                                    | 
|Divestments/repayments from associates                       | 
|                                                             | 
|Acquisitions and disposals                                   | 
|                                                             | 
|Equity dividends paid                                        | 
|                                                             | 
|Net cash inflow before use of liquid resources and financing | 
|                                                             | 
|Management of liquid resources                               | 
|Net sales/(purchases) of short-term investments              | 
|                                                             | 
|Financing                                                    | 
|Issue of shares2                                             | 
|Decrease in debt                                             | 
|                                                             | 
|Net cash outflow from financing                              | 
|                                                             | 
|(Decrease)/increase in cash                                  | 
|                                                             | 

|1. | Receipts from capital restructuring of joint ventures relates to amounts received from Japan Air Gases Ltd. This has no impact on BOCs effective
shareholding.                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Issue of shares in 2005 is net of an outflow of £18.8 million for the 10 per cent buy back of shares in African Oxygen Limited relating to minority
shareholders. This has no impact on BOCs effective shareholding.

A reconciliation of the movement in cash to the movement in net debt in the year is given in note 27(b).

Liquid resources are defined as short-term deposits.

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89

Total recognised gains and lossesYears ended 30 September

|                                                                |      
|--------------------------------------------------------------- | -----
|                                                                |      
|                                                                | Notes
|                                                                |      
|Parent1                                                         | 24(b)
|Subsidiary undertakings                                         |      
|Joint ventures                                                  |      
|Associates                                                      |      
|                                                                |      
|Profit for the financial year                                   |      
|Actuarial loss recognised on the pension schemes                |      
|Movement on deferred tax relating to actuarial loss on pensions |      
|Movement on current tax relating to actuarial loss on pensions  |      
|Unrealised profit on disposal of a subsidiary                   |      
|Exchange translation effect on:                                 |      
| results for the year of subsidiaries                          |      
| results for the year of joint ventures                        |      
| results for the year of associates                            |      
| foreign currency net investments in subsidiaries              |      
| foreign currency net investments in joint ventures            |      
| foreign currency net investments in associates                |      
|                                                                |      
|Total recognised gains and losses for the financial year        | 24(a)
|                                                                |      

|1. | In
       accordance with the concession granted under the Companies Act 1985, the
       profit and loss account of The BOC Group plc has not been presented separately
       in these
financial statements.                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | There were no material differences between reported profits and losses and historical cost profits and losses on ordinary activities before tax for 2005, 2004 and
2003.                                                                                                                                                                                                                        
|3. | Profit attributable to the parent company includes dividends received from subsidiaries, joint ventures and associates, often through intermediate holding
companies. These dividends may include the distribution of earnings of previous periods. As a result, the relationship of profit between parent, subsidiaries, joint ventures and associates may show fluctuations from year to year.
|4. | Excluding the amounts recognised above, a current tax charge of £(5.8) million (2004: £6.7 million credit, 2003: £9.7 million credit) has been
recognised directly in the Group reserves.                                                                                                                                                                                                       



|Movement
      in shareholders fundsYears
  ended 30 September                       | 
|------------------------------------------------------------------------------------- | 
|                                                                                      | 
|                                                                                      | 
|                                                                                      | 
|                                                                                      | 
|Profit for the financial year                                                         | 
|Dividends                                                                             | 
|                                                                                      | 
|                                                                                      | 
|Other recognised gains and losses                                                     | 
|Reversal of goodwill in total recognised gains and losses on disposal of subsidiaries | 
|Shares issued                                                                         | 
|Consideration paid for the purchase of own shares held in an ESOP trust               | 
|Consideration received for the sale of own shares held in an ESOP trust               | 
|Credit in respect of employee share schemes                                           | 
|                                                                                      | 
|Net increase/(decrease)
    in shareholders funds for the financial year             | 
|Shareholders funds at 1 October                                                      | 
|                                                                                      | 
|Shareholders funds at 30 September                                                   | 
|                                                                                      | 

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|90                                     | The
          BOC Group plcAnnual
    report and accounts 2005
|-------------------------------------- | --------------------------------------------------------------
|Balance
    sheet of The BOC Group plc
|At
    30 September                   

|                                                        |      
|------------------------------------------------------- | -----
|                                                        |      
|                                                        | Notes
|                                                        |      
|Fixed assets                                            |      
|Tangible assets                                         | 12(e)
|Investments                                             | 13(d)
|                                                        |      
|                                                        |      
|                                                        |      
|Current assets                                          |      
|Debtors falling due within one year                     | 15(a)
|Cash at bank and in hand                                | 17   
|                                                        |      
|                                                        |      
|                                                        |      
|Creditors: amounts falling due within one year          |      
|Borrowings and finance leases                           | 18(a)
|Other creditors                                         | 18(b)
|                                                        |      
|                                                        |      
|                                                        |      
|Net current liabilities                                 |      
|                                                        |      
|Total assets less current liabilities                   |      
|                                                        |      
|Creditors: amounts falling due after more than one year |      
|Borrowings and finance leases                           | 19(a)
|Other creditors                                         | 19(b)
|                                                        |      
|                                                        |      
|                                                        |      
|Total net assets                                        |      
|                                                        |      
|Capital and reserves                                    |      
|Equity called up share capital                          | 23   
|Share premium account                                   | 24(b)
|Other reserves                                          | 24(b)
|Profit and loss account                                 | 24(b)
|Own shares                                              | 24(b)
|                                                        |      
|Total capital and reserves                              |      
|                                                        |      

The financial statements were approved by the board of directors on 28 November 2005 and are signed on its behalf by:

A E IsaacDirectorA M FergusonDirector

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91

Accounting policies

|General
|-------
|      
|       
|      
|       
|      
|       
|      

| | i)                                                                                                                                                                                          | the translation
    of the opening net assets of overseas operations;                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------
| | ii)                                                                                                                                                                                         | the
        retranslation of retained earnings of overseas operations from average
    to closing rates of exchange; and
| | iii)                                                                                                                                                                                        | the
        translation or conversion of foreign currency borrowings taken to hedge
    overseas assets.                
| |                                                                                                                                                                                             |                                                                                                                         
| | All
        other exchange differences are taken to the profit and loss account. The
        principal exchange rates affecting the Group are shown in the financial
    review on page 63.

Revenue recognitionTurnover is based on the invoiced value of the sale of goods and services, and includes the sales value of long-term contracts appropriate to the state of completion. It excludes sales
between Group undertakings,VAT and similar sales-based taxes. Turnover for goods and services is recognised when the significant risks and rewards of ownership are transferred to the customer. This is determined to be when delivery has occurred, title
of the goods has passed to the purchaser, and where the price is fixed or determinable and reflects the commercial substance of the transaction. Sales returns are not a significant business issue in the industries in which the Group operates.

|Revenue
    on long-term supply contracts with customers generally contains two elements:                                                                                                                     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|i)                                                                                                                                                                                                            
|ii)                                                                                                                                                                                                           
|                                                                                                                                                                                                              
|Profit
        on long-term contracts is recognised on a percentage of completion basis.
        Provision is made for all losses incurred together with any foreseeable
        or anticipated future
losses.

Retirement benefitsRetirement benefits are accounted for under FRS17.
     For defined benefit schemes the regular service cost of providing retirement benefits to employees during the year is charged to operating profit in the
year. The full cost of providing amendments to benefits in respect of past service is also charged to operating profit in the year.      A credit representing the expected return on the assets of the retirement benefit schemes during the year is included within other net financing income. This
is based on the market value of the assets of the schemes at the start of the financial year.      A charge representing the expected increase in the liabilities of the retirement benefit schemes during the year is included within other net financing
income. This arises from the liabilities of the schemes being one year closer to payment.      Differences between actual and expected returns on assets during the year are recognised in the statement of total recognised gains and losses in the year, together with differences arising from changes in assumptions.For defined contribution schemes the cost of providing benefits is charged to operating profit as incurred.

Research and development
Revenue expenditure on research and development is written off when incurred.

Operating leases
The cost of operating leases is written off on the straight line basis over the period of the lease.

|Intangible
    fixed assets
|---------------------------
|                          
|                          

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|92 | The
          BOC Group plcAnnual
    report and accounts 2005 |  | Accounting
    policies
|-- | -------------------------------------------------------------- |  | -----------------------



|Tangible
    fixed assets                                                                                                                                                                                                                                                                                                                                                                                      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Tangible
      fixed assets are stated at cost less accumulated depreciation. No depreciation
      is charged on freehold land or construction in progress. Depreciation
  is charged on all other fixed assets on the straight line basis to write them
  down to their residual values over the effective lives. Straight line depreciation
  rates vary
according to the class of asset, but are typically:
|                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                               
|Freehold property                                                                                                                                                                                                                                                                                                                                                                                              
|Leasehold property (or at higher rates based on the life of the lease)                                                                                                                                                                                                                                                                                                                                         
|Plant and machinery                                                                                                                                                                                                                                                                                                                                                                                            
|Cylinders                                                                                                                                                                                                                                                                                                                                                                                                      
|Motor vehicles                                                                                                                                                                                                                                                                                                                                                                                                 
|Computer hardware and major software                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                               

|• | Until 30 September 1999, land and buildings were revalued periodically. Following the adoption of FRS15, land and buildings are no longer revalued. At 1 October 1999,
the net book value of assets previously revalued is regarded as the historical cost.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                            
|• | Interest costs on major fixed asset additions are capitalised during the construction period and written off as part of the total cost.                                                                                                                    
|  |                                                                                                                                                                                                                                                            
|• | Where finance leases have been entered into, the capital element of the obligations to the lessor are shown as part of borrowings and the rights in the corresponding
assets are treated in the same way as owned fixed assets.                            
|  |                                                                                                                                                                                                                                                            
|• | Any impairment in the value of fixed assets, calculated by comparing the carrying value against the higher of the net realisable value or value in use, is dealt with
in the profit and loss account in the period in which it arises.                     

InvestmentsInvestments
which are held for the long term and in which the Group has a participating interest
and exercises joint control with one or more other parties are treated as joint
ventures and accounted for on the gross equity method. Investments which are
held for the long term and in which the Group has a participating interest and
exercises significant influence are treated as associates and accounted for on
the equity method. In
both cases, the Groups share of the results of the investment is included in the profit and loss account, and the Groups
share of the net assets is included in investments in the balance sheet. Other
investments are shown on the balance
sheet at cost less any provision for impairment.

StocksStocks
and work in progress are valued at the lower of cost and net realisable value.
Cost where
appropriate includes a proportion of overhead expenses. Work in progress is stated
at cost less progress payments received or receivable. Cost is arrived at principally
on the average and first-in, first-out (FIFO) basis. The amount of
long-term contracts, net of amounts transferred to cost of sales and after deducting
foreseeable losses and payments on account, is included in stocks as long-term
contract amounts.

Deferred taxThe Group provides for deferred tax assets and liabilities arising from timing differences between the recognition of gains and losses in the financial statements and their recognition
for tax purposes. Deferred tax assets are only recognised where it is more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

ProvisionsProvisions are made when an obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably estimated. Restructuring provisions
are made for direct expenditures of a business reorganisation where the plans are sufficiently detailed and well advanced, and where appropriate communication to those affected has been undertaken at the balance sheet date. Provisions for warranties
are based on contractual arrangements with customers and experience of product performance.

Financial instrumentsThe
Group uses financial instruments, including interest rate and currency swaps,
to raise finance for its operations and to manage the risks arising from those
operations. All transactions are undertaken only to manage interest and currency
risk associated with the Groups underlying business activities and the
financing of those activities. The Group does not undertake any trading activity
in financial
instruments.

|• | Foreign
         exchange transaction exposuresThe
         Group generally hedges actual and forecast foreign exchange  exposures
         up to two years ahead. Forward contracts are used to hedge the forecast
         exposure and any gains or losses resulting from changes in exchange
         rates on contracts designated as hedges of forecast foreign exchange
         are deferred until the
financial period in which they are realised. If the contract ceases to be a hedge,
         any gains and losses are recognised through the profit and loss account.                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|• | Balance
         sheet translation exposuresA
         large proportion of the Groups net assets are denominated in
currencies other than sterling. Where practicable and cost effective the Group
         hedges these balance sheet translation exposures by borrowing in relevant
         currencies and markets and by the use of currency swaps. Currency swaps
         are used only as balance  sheet hedging instruments, and the Group does
         not hedge the currency translation of its profit and loss account. Exchange
         gains and losses arising on the notional principal of these currency
         swaps during their life and at termination or maturity are
dealt with as a movement in reserves. If the swap ceases to be a hedge of the
         underlying transaction, any gains or losses are recognised in the profit
         and loss account.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|• | Interest
       rate risk exposuresThe
       Group hedges its exposure to movements in interest rates associated with
        its borrowings primarily by means of interest rate swaps and forward
       rate agreements. Interest payments and receipts on these agreements are
       included with net interest payable. They are not revalued to fair value
       and are not shown on the Group
balance sheet at the balance sheet date.                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| | 93
| | --

Notes to the financial statements

1. Segmental
information

|a)
    Turnover (including share of joint ventures and associates) |          
|------------------------------------------------------------------ | ---------
|                                                                   |          
|                                                                   |          
|                                                                   |          
|                                                                   |          
|BOC                                                                | Afrox    
|Edwards                                                            | hospitals
|£ million                                                          | £ million
|                                                                   |          
|2005                                                               |          
|Europe                                                             |          
|Americas                                                           |          
|Africa                                                             |          
|Asia/Pacific                                                       |          
|                                                                   |          
|Turnover                                                           |          
|                                                                   |          
|2004                                                               |          
|Europe                                                             |          
|Americas                                                           |          
|Africa                                                             |          
|Asia/Pacific                                                       |          
|                                                                   |          
|Turnover                                                           |          
|                                                                   |          
|2003                                                               |          
|Europe                                                             |          
|Americas                                                           |          
|Africa                                                             |          
|Asia/Pacific                                                       |          
|                                                                   |          
|Turnover                                                           |          
|                                                                   |          

|1. | Inter segment turnover is not material.                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The Afrox hospitals business was accounted for as a subsidiary company until March 2005 and thereafter as an associated company, following the disposal of BOCs
controlling interest.

|                                                 |                              
|------------------------------------------------ | -----------------------------
|b)
    Business analysis                         |                              
|                                                 |                              
|                                                 |                              
|                                                 |                              
|                                                 |                              
|Process Gas     Solutions     £ million          | BOC     Edwards     £ million
|Gist                                             | Corporate                    
|£ million                                        | £ million                    
|                                                 |                              
|2005                                             |                              
|Total operating profit before exceptional items1 |                              
|Operating exceptional items1                     |                              
|                                                 |                              
|Operating profit                                 |                              
|Profit on disposal of businesses                 |                              
|Profit on disposal of fixed assets               |                              
|Capital employed2                                |                              
|Capital expenditure3                             |                              
|Depreciation and amortisation3                   |                              
|                                                 |                              
|2004                                             |                              
|Total operating profit before exceptional items1 |                              
|Operating exceptional items1                     |                              
|                                                 |                              
|Operating profit                                 |                              
|Loss on disposal of business                     |                              
|Profit on disposal of fixed assets               |                              
|Capital employed2                                |                              
|Capital expenditure3                             |                              
|Depreciation and amortisation3                   |                              
|                                                 |                              
|2003                                             |                              
|Total operating profit before exceptional items1 |                              
|Operating exceptional items1                     |                              
|                                                 |                              
|Operating profit                                 |                              
|Capital employed2                                |                              
|Capital expenditure3                             |                              
|Depreciation and amortisation3                   |                              
|                                                 |                              

|1. | Including share of joint ventures and associates.                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Capital
       employed comprises the capital and reserves of the Group, its long-term
       liabilities and all current borrowings net of cash and deposits.                        
|3. | Subsidiary undertakings only.                                                                                                                                                         
|4. | Net interest and net borrowings are managed centrally and are not directly attributable to individual business segments or regions.                                                   
|5. | The Afrox hospitals business was accounted for as a subsidiary company until March 2005 and thereafter as an associated company, following the disposal of BOCs
controlling interest.

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|94 | The
          BOC Group plcAnnual
          report and accounts 2005 |  | Notes
        to the financial statements
|-- | -------------------------------------------------------------------- |  | -----------------------------------------



1. Segmental
      informationcontinued

|c)
    Regional analysis                         |          
|------------------------------------------------ | ---------
|                                                 |          
|                                                 |          
|Europe                                           | Americas 
|£ million                                        | £ million
|                                                 |          
|2005                                             |          
|Total operating profit before exceptional items1 |          
|Operating exceptional items1                     |          
|                                                 |          
|Operating profit                                 |          
|Profit on disposal of businesses                 |          
|Profit on disposal of fixed assets               |          
|Capital employed2                                |          
|Capital expenditure3                             |          
|                                                 |          
|2004                                             |          
|Total operating profit before exceptional items1 |          
|Operating exceptional items1                     |          
|                                                 |          
|Operating profit                                 |          
|Loss on disposal of business                     |          
|Profit on disposal of fixed assets               |          
|Capital employed2                                |          
|Capital expenditure3                             |          
|                                                 |          
|2003                                             |          
|Total operating profit before exceptional items1 |          
|Operating exceptional items1                     |          
|                                                 |          
|Operating profit                                 |          
|Capital employed2                                |          
|Capital expenditure3                             |          
|                                                 |          

|1. | Including share of joint ventures and associates.                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Capital employed comprises the capital and reserves of the Group, its long-term liabilities and all current borrowings net of cash and deposits.                                      
|3. | Subsidiary undertakings only.                                                                                                                                                         
|4. | Net interest and net borrowings are managed centrally and are not directly attributable to individual business segments or regions.                                                   
|5. | The Afrox hospitals business was accounted for as a subsidiary company until March 2005 and thereafter as an associated company, following the disposal of BOCs
controlling interest.

|                                                           |            
|---------------------------------------------------------- | -----------
|d)
      Joint ventures
and associates  business analysis |            
|                                                           |            
|                                                           |            
|                                                           |            
|                                                           |            
|Process Gas                                                | and Special
|Solutions                                                  | Products   
|£ million                                                  | £ million  
|                                                           |            
|2005                                                       |            
|Turnover1                                                  |            
|Operating profit before exceptional items1                 |            
|Operating exceptional items1                               |            
|                                                           |            
|Operating profit                                           |            
|Capital employed2                                          |            
|Capital expenditure                                        |            
|Group share                                                |            
|Other partners                                             |            
|Depreciation and amortisation1                             |            
|                                                           |            
|2004                                                       |            
|Turnover1                                                  |            
|Operating profit before exceptional items1                 |            
|Operating exceptional items1                               |            
|                                                           |            
|Operating profit                                           |            
|Capital employed2                                          |            
|Capital expenditure                                        |            
|Group share                                                |            
|Other partners                                             |            
|Depreciation and amortisation1                             |            
|                                                           |            

|1. | Group share.                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Capital employed comprises the Groups share of the net assets of joint ventures or associates.                                                                                                 
|3. | The decrease in capital employed of joint ventures in 2004 is principally due to the acquisition of an additional 30 per cent ownership interest in the Cantarell joint
venture (see note 28a)).
|4. | The Afrox hospitals business was accounted for as a subsidiary company until March 2005 and thereafter as an associated company, following the disposal of BOCs
controlling interest.          

---



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| | Notes
    to the financial statements | 95
| | ------------------------------------- | --
| |                                       |   
| |                                       |   



|1. Segmental
         informationcontinued |             |            |             |             |           |                |   |            |  |     |  |     |  |            | 
|------------------------------------------ | ----------- | ---------- | ----------- | ----------- | --------- | -------------- | - | ---------- |  | --- |  | --- |  | ---------- | 
|                                           |             |            |             |             |           |                |   |            |  |     |  |     |  |            | 
|                                           |             |            |             |             |           | Joint ventures |   |            |  |     |  |     |  | Associates | 
|                                           |             |            |             |             |           |                |   |            |  |     |  |    
|                                           |             | Industrial |             |             |           |                |   | Industrial |  |     |  |    
|Process Gas                                | and Special | BOC        | Process Gas | and Special | BOC       | Afrox         
|Solutions                                  | Products    | Edwards    | Solutions   | Products    | Edwards   | hospitals     
|£ million                                  | £ million   | £ million  | £ million   | £ million   | £ million | £ million     
|                                           |             |            |             |             |           |                |   |           
|2003                                       |             |            |             |             |           |                |   |            |  |     |  |     |  |            | 
|Turnover1                                  |             | 191.9      |             | 221.6       |           | 130.8          |   | 30.9       |  | 8.6 |  | 5.7 |  | 15.4       | 
|Operating profit before exceptional items1 |             | 39.0       |             | 25.6        |           | 22.2           |   | 5.8        |  | 0.7 |  | 1.4 |  | 3.5        | 
|Operating exceptional items1               |             | (2.5       | )           | (1.8        | )         | (2.5           | ) |           |  |    |  |    |  |           | 
|                                           |             |            |             |             |           |                |   |            |  |     |  |     |  |            | 
|Operating profit                           |             | 36.5       |             | 23.8        |           | 19.7           |   | 5.8        |  | 0.7 |  | 1.4 |  | 3.5        | 
|Capital employed2                          |             | 183.8      |             | 108.2       |           | 118.0          |   | 40.8       |  | 7.2 |  | 3.3 |  | 8.3        | 
|Capital expenditure                        |             | 40.7       |             | 10.5        |           | 20.7           |   | 8.0        |  | 1.1 |  | 0.4 |  |           | 
|Group share                                |             | 17.7       |             | 5.1         |           | 10.3           |   | 2.5        |  | 0.3 |  | 0.2 |  |           | 
|Other partners                             |             | 23.0       |             | 5.4         |           | 10.4           |   | 5.5        |  | 0.8 |  | 0.2 |  |           | 
|Depreciation and amortisation1             |             | 28.0       |             | 10.1        |           | 9.6            |   | 5.4        |  | 1.2 |  | 0.6 |  | 0.7        | 
|                                           |             |            |             |             |           |                |   |            |  |     |  |     |  |            | 

|1.                                                       | Group share.                                                                                   
|-------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|2.                                                       | Capital employed comprises the Groups share of the net assets of joint ventures or associates.
|                                                        
|e) Joint
    ventures and associates  regional analysis

|                                           |           |              |           |                |   |        |   |              |  |            | 
|------------------------------------------ | --------- | ------------ | --------- | -------------- | - | ------ | - | ------------ |  | ---------- | 
|                                           |           |              |           | Joint ventures |   |        |   |              |  | Associates
|                                           |           |              |           |                |   |        |   |              |  |           
|Americas                                   |           | Asia/Pacific |           | Americas       |   | Africa |   | Asia/Pacific
|£ million                                  | £ million | £ million    | £ million | £ million     
|                                           |           |              |           |                |   |        |   |              |  |            | 
|2005                                       |           |              |           |                |   |        |   |              |  |            | 
|Turnover1                                  |           | 140.2        |           | 587.6          |   | 41.5   |   | 57.7         |  | 23.3       | 
|Operating profit before exceptional items1 |           | 24.1         |           | 83.0           |   | 3.7    |   | 10.2         |  | 6.6        | 
|Operating exceptional items1               |           |             |           |               |   |       |   |             |  |           | 
|                                           |           |              |           |                |   |        |   |              |  |            | 
|Operating profit                           |           | 24.1         |           | 83.0           |   | 3.7    |   | 10.2         |  | 6.6        | 
|Capital employed2                          |           | (10.8        | )         | 302.3          |   | 16.0   |   | 31.6         |  | 33.1       | 
|Capital expenditure                        |           | 103.2        |           | 161.1          |   | 0.1    |   | 17.8         |  | 3.7        | 
|Group share                                |           | 64.0         |           | 76.9           |   |       |   | 2.0          |  | 1.1        | 
|Other partners                             |           | 39.2         |           | 84.2           |   | 0.1    |   | 15.8         |  | 2.6        | 
|                                           |           |              |           |                |   |        |   |              |  |            | 
|2004                                       |           |              |           |                |   |        |   |              |  |            | 
|Turnover1                                  |           | 87.6         |           | 559.4          |   | 26.5   |   | 17.4         |  | 23.0       | 
|Operating profit before exceptional items1 |           | 17.2         |           | 82.2           |   | 1.1    |   | 4.7          |  | 7.3        | 
|Operating exceptional items1               |           |             |           | (2.6           | ) |       |   |             |  |           | 
|                                           |           |              |           |                |   |        |   |              |  |            | 
|Operating profit                           |           | 17.2         |           | 79.6           |   | 1.1    |   | 4.7          |  | 7.3        | 
|Capital employed2                          |           | (30.0        | )         | 288.7          |   | 12.5   |   | 9.7          |  | 30.2       | 
|Capital expenditure                        |           | 6.0          |           | 98.1           |   | 0.1    |   |             |  | 4.8        | 
|Group share                                |           | 2.4          |           | 45.5           |   |       |   |             |  | 1.3        | 
|Other partners                             |           | 3.6          |           | 52.6           |   | 0.1    |   |             |  | 3.5        | 
|                                           |           |              |           |                |   |        |   |              |  |            | 
|2003                                       |           |              |           |                |   |        |   |              |  |            | 
|Turnover1                                  |           | 68.0         |           | 476.3          |   | 19.1   |   | 15.4         |  | 26.1       | 
|Operating profit before exceptional items1 |           | 19.1         |           | 67.7           |   | (0.7   | ) | 3.5          |  | 8.6        | 
|Operating exceptional items1               |           |             |           | (6.8           | ) |       |   |             |  |           | 
|                                           |           |              |           |                |   |        |   |              |  |            | 
|Operating profit                           |           | 19.1         |           | 60.9           |   | (0.7   | ) | 3.5          |  | 8.6        | 
|Capital employed2                          |           | 26.5         |           | 383.5          |   | 13.1   |   | 8.3          |  | 38.2       | 
|Capital expenditure                        |           | 13.8         |           | 58.1           |   | 6.0    |   |             |  | 3.5        | 
|Group share                                |           | 5.4          |           | 27.7           |   | 1.8    |   |             |  | 1.2        | 
|Other partners                             |           | 8.4          |           | 30.4           |   | 4.2    |   |             |  | 2.3        | 
|                                           |           |              |           |                |   |        |   |              |  |            | 

|1. | Group share.                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Capital employed comprises the Groups share of the net assets of joint ventures or associates.                                                                                                 
|3. | The decrease in capital employed of joint ventures in 2004 is principally due to the acquisition of an additional 30 per cent ownership interest in the Cantarell joint
venture (see note 28a)).
|4. | The Afrox hospitals business was accounted for as a subsidiary company until March 2005 and thereafter as an associated company, following the disposal of BOCs
controlling interest.          

---



Back to Contents

|96 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|-- | -------------------------------------------------------------- | -------------------------------------
|   |                                                                |                                      
|   |                                                                |                                      

1. Segmental
      informationcontinuedf) Significant
country analysis

|                                                 |           |           |           |           |           |       |      |       |      |       |   |         |  
|------------------------------------------------ | --------- | --------- | --------- | --------- | --------- | ----- | ---- | ----- | ---- | ----- | - | ------- | -
|                                                 |           |           |           |           |           | UK    |      |       |      |       |   | US     
|                                                 |           |           |           |           |           |       |      |       |     
|2005                                             |           | 2004      |           | 2003      | 2005      |       | 2004 |       | 2003
|£ million                                        | £ million | £ million | £ million | £ million | £ million
|                                                 |           |           |           |           |           |       |      |       |      |       |   |        
|Turnover1                                        |           | 993.2     |           | 973.9     |           | 914.3 |      | 887.1 |      | 959.7 |   | 1,013.5 |  
|Total operating profit before exceptional items1 |           | 85.5      |           | 112.9     |           | 110.4 |      | 41.7  |      | 21.5  |   | 31.3    |  
|Operating exceptional items1                     |           | (5.1      | )         |          |           | (5.0  | )    | (15.6 | )    | (14.8 | ) | (48.9   | )
|                                                 |           |           |           |           |           |       |      |       |      |       |   |         |  
|Operating profit                                 |           | 80.4      |           | 112.9     |           | 105.4 |      | 26.1  |      | 6.7   |   | (17.6   | )
|Profit/(loss) on disposal of business            |           |          |           |          |           |      |      | 13.2  |      | (79.5 | ) |        |  
|Profit on disposal of fixed assets               |           |          |           | 4.9       |           |      |      | 10.5  |      |      |   |        |  
|Capital employed2                                |           | 530.2     |           | 575.8     |           | 629.5 |      | 932.1 |      | 820.7 |   | 1,039.5 |  
|Capital expenditure3                             |           | 93.1      |           | 60.7      |           | 92.4  |      | 115.5 |      | 56.2  |   | 71.0    |  
|                                                 |           |           |           |           |           |       |      |       |      |       |   |         |  

|1.                          | Including share of joint ventures and associates.                                                                                               
|--------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|2.                          | Capital employed comprises the capital and reserves of the Group, its long-term liabilities and all current borrowings net of cash and deposits.
|3.                          | Subsidiary undertakings only.                                                                                                                   
|                           
|2.
         Profit and loss
|a) Analysis of costs       

|                                          |             |            |       |           |   |           |  
|----------------------------------------- | ----------- | ---------- | ----- | --------- | - | --------- | -
|                                          |             | 2005       |       | 2004      |   | 2003      |  
|i) Expense category                       |             | £ million  |       | £ million |   | £ million |  
|                                          |             |            |       |           |   |           |  
|Cost of sales                             |             | (2,161.6   | )     | (2,181.7  | ) | (2,137.9  | )
|                                          |             |            |       |           |   |           |  
|Distribution costs                        |             | (316.3     | )     | (317.7    | ) | (321.7    | )
|Administrative expenses1                  |             | (861.0     | )     | (936.6    | ) | (913.2    | )
|Income from other fixed asset investments |             | 0.1        |       | 0.2       |   | 1.7       |  
|                                          |             |            |       |           |   |           |  
|Net operating expenses                    |             | (1,177.2   | )     | (1,254.1  | ) | (1,233.2  | )
|                                          |             |            |       |           |   |           |  
|                                          |             |            |       |           |   |           |  
|                                          |             |            |       |           |   |           |  
|                                          |             | Continuing |       |           |   |           |  
|operations                               
|before                                   
|exceptional                               | Exceptional
|items                                     | items       | 2          | Total
|ii) 2005 analysis                         | £ million   | £ million  |       | £ million
|                                          |             |            |       |           |   |           |  
|Cost of sales                             |             | (2,161.6   | )     |          |   | (2,161.6  | )
|                                          |             |            |       |           |   |           |  
|Distribution costs                        |             | (316.3     | )     |          |   | (316.3    | )
|Administrative expenses1                  |             | (840.3     | )     | (20.7     | ) | (861.0    | )
|Income from other fixed asset investments |             | 0.1        |       |          |   | 0.1       |  
|                                          |             |            |       |           |   |           |  
|Net operating expenses                    |             | (1,156.5   | )     | (20.7     | ) | (1,177.2  | )
|                                          |             |            |       |           |   |           |  
|iii) 2004 analysis                        |             |            |       |           |   |           |  
|                                          |             |            |       |           |   |           |  
|Cost of sales                             |             | (2,181.7   | )     |          |   | (2,181.7  | )
|                                          |             |            |       |           |   |           |  
|Distribution costs                        |             | (317.7     | )     |          |   | (317.7    | )
|Administrative expenses1                  |             | (921.8     | )     | (14.8     | ) | (936.6    | )
|Income from other fixed asset investments |             | 0.2        |       |          |   | 0.2       |  
|                                          |             |            |       |           |   |           |  
|Net operating expenses                    |             | (1,239.3   | )     | (14.8     | ) | (1,254.1  | )
|                                          |             |            |       |           |   |           |  
|iv) 2003 analysis                         |             |            |       |           |   |           |  
|                                          |             |            |       |           |   |           |  
|Cost of sales                             |             | (2,136.2   | )     | (1.7      | ) | (2,137.9  | )
|                                          |             |            |       |           |   |           |  
|Distribution costs                        |             | (318.6     | )     | (3.1      | ) | (321.7    | )
|Administrative expenses1                  |             | (857.8     | )     | (55.4     | ) | (913.2    | )
|Income from other fixed asset investments |             | 1.7        |       |          |   | 1.7       |  
|                                          |             |            |       |           |   |           |  
|Net operating expenses                    |             | (1,174.7   | )     | (58.5     | ) | (1,233.2  | )
|                                          |             |            |       |           |   |           |  

|1. | Included in total administrative expenses is research and development expenditure of £43.2 million (2004: £41.6 million, 2003: £39.9
million).
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------
|2. | All exceptional items arose in continuing operations.                                                                                         

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| | Notes
    to the financial statements | 97
| | ------------------------------------- | --
| |                                       |   
| |                                       |   

2. Profit and
losscontinuedb) Exceptional items analysis

|                                        |           |           |   |       |   |       |  
|--------------------------------------- | --------- | --------- | - | ----- | - | ----- | -
|                                        |           | 2005      |   | 2004  |   | 2003 
|£ million                               | £ million | £ million
|                                        |           |           |   |       |   |       |  
|Charged in arriving at operating profit |           |           |   |       |   |       |  
|Restructuring costs                     |           | (6.8      | ) | (17.4 | ) | (23.8 | )
|Impairment of goodwill                  |           | (13.9     | ) |      |   |      |  
|Litigation settlement                   |           |          |   |      |   | (43.2 | )
|                                        |           |           |   |       |   |       |  
|Total operating exceptional items       |           | (20.7     | ) | (17.4 | ) | (67.0 | )
|                                        |           |           |   |       |   |       |  

i) Restructuring costs and impairment of goodwill
£20.7 million has been charged in 2005 for restructuring in BOC Edwards. This comprises goodwill impairment of £13.9
million and severance costs. Savings of approximately
£5 million are targeted from this restructuring during 2006.      
In
2004 following the sale of the packaged gas business in the US, costs of £14.8 million were incurred to restructure the footprint of the remaining
business in the US. This covered the severance costs and other costs of restructuring those functions which are shared by BOCs businesses in the US. Restructuring costs in 2004 also included a charge of £2.6 million (2003: £8.3
million) relating to the integration of BOCs gases business and part of
the Air Liquide business in Japan to form Japan Air Gases.      The
restructuring costs in 2003 related to various programmes including programmes
under the business initiative announced in August 2001. The major programmes
covered investments in information management systems, the restructuring of BOC
Edwards manufacturing capacity and restructuring to deliver operational
efficiencies in Process Gas Solutions and Industrial and Special Products. These
programmes were completed in 2004.      
Cash
flow from operating activities includes an outflow of £16.9 million (2004: £11.9 million, 2003: £28.3
million) in respect of the
various restructuring programmes.

ii) Litigation settlementAn
action was filed in the US against The BOC Group Cash Balance Retirement Plan
(the Plan). It was alleged that the Plan improperly calculated lump sum distributions
from the Plan in violation of the Employee Retirement Income Security Act. In
November 2003, the parties reached an agreement to settle at US$69 million (£43.2
million). The settlement was approved by the court in March 2004. The full amount
was provided in 2003 as an exceptional item. The settlement is being paid out
of Plan assets.

|                                                           |           |           |  |       |   |      | 
|---------------------------------------------------------- | --------- | --------- |  | ----- | - | ---- | 
|                                                           |           | 2005      |  | 2004  |   | 2003
|£ million                                                  | £ million | £ million
|                                                           |           |           |  |       |   |      | 
|Credited/(charged) after operating profit                  |           |           |  |       |   |      | 
|Profit on disposal of businesses  continuing operations   |           | 98.1      |  |      |   |     | 
|Loss on disposal of business  continuing operations       |           |          |  | (79.5 | ) |     | 
|Profit on disposal of fixed assets  continuing operations |           | 10.5      |  | 4.9   |   |     | 
|                                                           |           |           |  |       |   |      | 
|Total non-operating exceptional items                      |           | 108.6     |  | (74.6 | ) |     | 
|                                                           |           |           |  |       |   |      | 

iii) Disposal of businesses
The sale of Afrox
Healthcare Limited in South Africa was completed on 22 March 2005. African Oxygen
Limited, BOCs subsidiary in South Africa, retains a significant interest in the
hospitals business through a 20 per cent holding in the new company. The gain on disposal was £84.9
million.      The
sale of the packaged gas business in the US was completed on 30 July 2004. The
loss on disposal of £79.5 million in 2004 included the write-off of
the assets associated with the business, severance and other disposal costs. It also included a goodwill write-off of £19.9 million, of which £15.3
million had been written off to reserves in the years up to, and including, 1998
in accordance with prevailing UK GAAP at that time. Part of the consideration
was payable subject to certain conditions and accordingly was not recognised
in 2004. This remaining consideration was received in November 2005 and has been
recognised in
2005 as an exceptional item.

iv) Profit on disposal of fixed assets
The sale of an
investment in the US in 2005 resulted in a profit of £10.5 million, which has been accounted for as an exceptional item. The sale of property in the UK in 2004
resulted in a profit of £4.9 million, which was accounted for as an exceptional
item.

c) Fees to auditors

|                                                                         |              |           |      |     |      |     |      | 
|------------------------------------------------------------------------ | ------------ | --------- | ---- | --- | ---- | --- | ---- | 
|                                                                         |              |           | 2005 |     | 2004 |     | 2003
|£ million                                                                | £ million    | £ million
|                                                                         |              |           |      |     |      |     |      | 
|Audit fees (Parent £0.3 million, 2004: £0.4 million, 2003: £0.4 million) |              | 2.2       |      | 2.5 |      | 2.0 |     
|                                                                         |              |           |      |     |      |     |      | 
|Non-audit fees                                                           |              |           |      |     |      |     |     
|Tax services                                                             |  advisory   |           | 1.0  |     | 0.7  |     | 0.8  | 
|                                                                         |  compliance |           | 0.2  |     | 0.4  |     | 0.8  | 
|Audit related services1                                                  |              | 1.9       |      | 0.9 |      | 0.5 |     
|Other services (expatriate administration services)2                     |              | 1.1       |      | 1.1 |      | 1.4 |     
|                                                                         |              |           |      |     |      |     |      | 
|Total non-audit fees                                                     |              | 4.2       |      | 3.1 |      | 3.5 |     
|                                                                         |              |           |      |     |      |     |      | 
|Total fees paid to auditors                                              |              | 6.4       |      | 5.6 |      | 5.5 |     
|                                                                         |              |           |      |     |      |     |      | 

|1. | Audit
       related services include advice associated with the implementation of
       Section 404 of the US Sarbanes-Oxley Act 2002 and International Financial
       Reporting Standards. These services are treated as non-audit services
    in 2005.        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The expatriate administration contract was signed in June 2001 for a five year period following a competitive tender process.                                                                                                                                        
|3. | The audit fees for the Afrox hospitals business are £0.4 million for 2005. These fees are not included in the above figures for 2005 following the disposal by
BOCs South African subsidiary of its majority shareholding in Afrox Healthcare Limited in March 2005.

BOC operates a number of policies designed to ensure auditor independence and objectivity. The audit committee is responsible for overseeing implementation of these policies including the
review of all expenditure related to non-audit services. The audit committee, by delegation to the chairman of the audit committee, approves in advance any non-audit services and has approved a policy that prevents the use of the auditor for any
services that could threaten the independence or objectivity of the audit.

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|98 | The BOC
          Group plcAnnual
    report and accounts 2005 | Notes
    to the financial statements
|-- | -------------------------------------------------------------- | -------------------------------------



|3. Interest
    on net debt                                        |  |           |   |           |   |           |  
|------------------------------------------------------------------ |  | --------- | - | --------- | - | --------- | -
|                                                                   |  |           |   |           |   |           |  
|                                                                   |  | 2005      |   | 2004      |   | 2003      |  
|                                                                   |  | £ million |   | £ million |   | £ million |  
|                                                                   |  |           |   |           |   |           |  
|Interest payable on borrowings totally repayable within five years |  | 52.5      |   | 55.9      |   | 48.0      |  
|Interest payable on all other borrowings                           |  | 30.5      |   | 35.9      |   | 46.5      |  
|                                                                   |  |           |   |           |   |           |  
|Interest payable and similar charges                               |  | 83.0      |   | 91.8      |   | 94.5      |  
|Interest capitalised                                               |  | (1.1      | ) | (0.1      | ) | (0.8      | )
|                                                                   |  |           |   |           |   |           |  
|Interest payable (net of interest capitalised)                     |  | 81.9      |   | 91.7      |   | 93.7      |  
|Interest receivable and similar income                             |  | (34.3     | ) | (21.2     | ) | (17.9     | )
|                                                                   |  |           |   |           |   |           |  
|Interest (net)                                                     |  | 47.6      |   | 70.5      |   | 75.8      |  
|Share of interest of joint ventures (net)                          |  | 25.1      |   | 17.0      |   | 19.3      |  
|Share of interest of associates (net)                              |  | 4.0       |   | 0.9       |   | 1.0       |  
|                                                                   |  |           |   |           |   |           |  
|Total interest on net debt                                         |  | 76.7      |   | 88.4      |   | 96.1      |  
|                                                                   |  |           |   |           |   |           |  
|Interest payable on finance leases                                 |  | 0.7       |   | 1.7       |   | 3.5       |  
|Interest payable on borrowings repayable by instalments            |  | 7.0       |   | 10.0      |   | 14.1      |  
|                                                                   |  |           |   |           |   |           |  
|

Share of interest of joint ventures and associates is after deducting interest capitalised of £1.8 million (2004: £0.5 million, 2003: £0.1 million).

4. Tax

|a) Tax
        on profit
on ordinary
activities   |  |           |   |           |   |           |  
|------------------------------------------------- |  | --------- | - | --------- | - | --------- | -
|                                                  |  |           |   |           |   |           |  
|                                                  |  | 2005      |   | 2004      |   | 2003      |  
|                                                  |  | £ million |   | £ million |   | £ million |  
|                                                  |  |           |   |           |   |           |  
|Current tax:                                      |  |           |   |           |   |           |  
|Payable in the UK                                 |  |           |   |           |   |           |  
|Corporation tax at 30% (2004: 30%, 2003: 30%)     |  | 116.6     |   | 79.8      |   | 85.7      |  
|Double tax relief                                 |  | (84.1     | ) | (52.9     | ) | (57.5     | )
|                                                  |  |           |   |           |   |           |  
|                                                  |  | 32.5      |   | 26.9      |   | 28.2      |  
|                                                  |  |           |   |           |   |           |  
|Payable overseas                                  |  |           |   |           |   |           |  
|US  Federal tax at 35% (2004: 35%, 2003: 35%)    |  | (3.2      | ) | 0.1       |   | 0.2       |  
|US State and local taxes                         |  |          |   | 0.1       |   | (0.3      | )
|Australia at 30% (2004: 30%, 2003: 30%)           |  | 20.7      |   | 23.2      |   | 16.4      |  
|South Africa at 29% (2004: 30%, 2003: 30%)        |  | 58.3      |   | 35.5      |   | 26.0      |  
|Japan at 42% (2004: 42%, 2003: 42%)               |  | 16.8      |   | 14.1      |   | 11.3      |  
|Other countries                                   |  | 40.9      |   | 14.3      |   | 35.6      |  
|                                                  |  |           |   |           |   |           |  
|                                                  |  | 133.5     |   | 87.3      |   | 89.2      |  
|                                                  |  |           |   |           |   |           |  
|Total current tax                                 |  | 166.0     |   | 114.2     |   | 117.4     |  
|                                                  |  |           |   |           |   |           |  
|Deferred tax:                                     |  |           |   |           |   |           |  
|Origination and reversal of timing differences    |  | (6.1      | ) | (12.4     | ) | (20.9     | )
|Effect of change in tax rate on opening liability |  |          |   | (0.1      | ) | (0.1      | )
|                                                  |  |           |   |           |   |           |  
|Total deferred tax1                               |  | (6.1      | ) | (12.5     | ) | (21.0     | )
|                                                  |  |           |   |           |   |           |  
|Tax on profit on ordinary activities              |  | 159.9     |   | 101.7     |   | 96.4      |  
|                                                  |  |           |   |           |   |           |  
|                                                  |  |           |   |           |   |           |  
|                                                  |  | 2005      |   | 2004      |   | 2003      |  
|                                                  |  | £ million |   | £ million |   | £ million |  
|                                                  |  |           |   |           |   |           |  
|Analysis of charge in the year by entity type     |  |           |   |           |   |           |  
|Subsidiary undertakings                           |  | 130.2     |   | 75.9      |   | 77.9      |  
|Share of joint ventures                           |  | 26.1      |   | 23.5      |   | 16.0      |  
|Share of associates                               |  | 3.6       |   | 2.3       |   | 2.5       |  
|                                                  |  |           |   |           |   |           |  
|Tax on profit on ordinary activities              |  | 159.9     |   | 101.7     |   | 96.4      |  
|                                                  |  |           |   |           |   |           |  

|1. | The deferred tax includes a credit of £4.7 million (2004: £13.5 million, 2003: £18.5 million) relating to subsidiary undertakings.The balance relates
to the Groups share of joint ventures and associates.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The tax charge
includes a credit of £7.7 million for operating exceptional items (2004: £18.9
million, 2003: £25.0 million) and a charge of £36.1 million for
non-operating exceptional items (2004: £25.6 million credit, 2003: £nil).
The effective rate of tax on adjusted profit was 26.0 per cent (2004: 29.0 per
cent,
2003: 29.0 per cent). The total rate of tax was 26.9 per cent (2004: 24.7 per

cent, 2003: 27.4 per cent).

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| | Notes
    to the financial statements | 99
| | ------------------------------------- | --



4. Taxcontinued

|b) Deferred
    tax                                             |  |           |   |           |   |           |  
|--------------------------------------------------------------- |  | --------- | - | --------- | - | --------- | -
|                                                                |  |           |   |           |   |           |  
|                                                                |  | 2005      |   | 2004      |   | 2003      |  
|i) Deferred
         tax  UK GAAP                              |  | £ million |   | £ million |   | £ million |  
|                                                                |  |           |   |           |   |           |  
|Analysis                                                        |  |           |   |           |   |           |  
|Arising from accelerated depreciation allowances                |  | 271.6     |   | 312.2     |   | 346.5     |  
|Other timing differences                                        |  | (27.7     | ) | (34.2     | ) | (43.7     | )
|Tax losses and other credits available                          |  | (8.3      | ) | (30.8     | ) | (30.2     | )
|                                                                |  |           |   |           |   |           |  
|                                                                |  | 235.6     |   | 247.2     |   | 272.6     |  
|                                                                |  |           |   |           |   |           |  
|Movement during the year1                                       |  |           |   |           |   |           |  
|At 1 October 2004                                               |  | 247.2     |   | 272.6     |   | 283.9     |  
|Exchange adjustment                                             |  | 6.6       |   | (3.8      | ) | 5.7       |  
|Arising during the year                                         |  | (4.7      | ) | (13.5     | ) | (18.5     | )
|Transfers to current tax                                        |  | (14.4     | ) | (0.2      | ) | (1.0      | )
|Acquisitions/(disposals) of businesses                          |  |          |   |          |   | (18.7     | )
|Other movements                                                 |  | 0.9       |   | (7.9      | ) | 21.2      |  
|                                                                |  |           |   |           |   |           |  
|At 30 September 2005                                            |  | 235.6     |   | 247.2     |   | 272.6     |  
|                                                                |  |           |   |           |   |           |  
|1. Subsidiary undertakings only.                                |  |           |   |           |   |           |  
|                                                                |  |           |   |           |   |           |  
|The balance at 30 September 2005 is shown in:                   |  |           |   |           |   |           |  
|Provisions for liabilities and charges (note 22)                |  | 241.9     |   | 253.0     |   | 279.2     |  
|Less: Debtors falling due after more than one year (note 15 b)) |  | 6.3       |   | 5.8       |   | 6.6       |  
|                                                                |  |           |   |           |   |           |  
|                                                                |  | 235.6     |   | 247.2     |   | 272.6     |  
|                                                                |  |           |   |           |   |           |  

ii) Deferred
tax  US GAAPFor
US GAAP reporting, the Group follows SFAS109, Accounting for Income Taxes, in
respect of deferred taxation. SFAS109 requires deferred tax to be fully provided
on all temporary
differences.

|The
      table below provides a reconciliation of deferred taxes from a UK GAAP
    basis to a US GAAP basis at 30 September 2005.
|-----------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Accelerated capital allowances                                                                                                     
|Other temporary differences                                                                                                        
|Tax losses and other credits available                                                                                             
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   

|1. | The
       UK deferred tax balance of £235.6 million does not include the deferred
       tax asset of £98.4 million relating to the Groups net pension
        liabilities. As required by the applicable UK GAAP accounting standard,
       FRS17, this asset is set against the relevant retirement benefit liability
       to show the net position (see note 8 a)). If it was included above, it
       would be wholly reversed in the
adjustments to US GAAP.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                       |  |           |  
|-------------------------------------- |  | --------- | -
|                                       |  | US GAAP   |  
|                                       |  | £ million |  
|                                       |  |           |  
|Movement during the year               |  |           |  
|At 1 October 2004                      |  | 237.0     |  
|Exchange adjustment                    |  | 8.0       |  
|Arising during the year2               |  | 22.2      |  
|Transfers to current tax               |  | (14.4     | )
|Acquisitions/(disposals) of businesses |  |          |  
|Other movements3                       |  | (23.5     | )
|                                       |  |           |  
|At 30 September 2005                   |  | 229.3     |  
|                                       |  |           |  
|

|2. | The amount arising during the year includes a charge of £28.5 million in respect of the undistributed earnings of foreign subsidiaries and joint
ventures.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | This mainly relates to the deferred tax on an additional minimum pension liability under US GAAP. See note 8 c) and 30 f).                                

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|100 | The BOC
          Group
plcAnnual
report and accounts 2005 | Notes
    to the financial statements
|--- | ---------------------------------------------------------- | -------------------------------------



|4. Taxcontinued                                                                    |  |           |   |           |  
|---------------------------------------------------------------------------------- |  | --------- | - | --------- | -
|The components
    of deferred tax assets/(liabilities) at 30 September 2005 were: |  |           |   |           |  
|                                                                                   |  |           |   |           |  
|                                                                                   |  | 2005      |   | 2004      |  
|                                                                                   |  | £ million |   | £ million |  
|                                                                                   |  |           |   |           |  
|Long-term                                                                          |  |           |   |           |  
|Asset                                                                              |  | 156.9     |   | 153.6     |  
|Liability                                                                          |  | (370.8    | ) | (383.9    | )
|                                                                                   |  |           |   |           |  
|Net liability                                                                      |  | (213.9    | ) | (230.3    | )
|                                                                                   |  |           |   |           |  
|Short-term                                                                         |  |           |   |           |  
|Asset                                                                              |  | 26.8      |   | 19.1      |  
|Liability                                                                          |  | (42.2     | ) | (25.8     | )
|                                                                                   |  |           |   |           |  
|Net (liability)/asset                                                              |  | (15.4     | ) | (6.7      | )
|                                                                                   |  |           |   |           |  
|Total deferred tax assets                                                          |  | 183.7     |   | 172.7     |  
|Total deferred tax liabilities                                                     |  | (413.0    | ) | (409.7    | )
|                                                                                   |  |           |   |           |  
|                                                                                   |  | (229.3    | ) | (237.0    | )
|                                                                                   |  |           |   |           |  



|c) Factors
        affecting the
current and total tax charge for the period                                                                                                                                                                                                                                                                                          | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|The table
  set out below provides a reconciliation between the UK corporation tax rate
  and the Groups total tax rate, and between the UK corporation tax rate
  and the effective tax rate on adjusted profit, computed by taking the various
  elements of the tax reconciliation as a percentage of the profit before tax
  and the adjusted profit before tax. | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|UK corporation tax rate                                                                                                                                                                                                                                                                                                                                               | 
|Difference in tax rates of overseas subsidiaries,                                                                                                                                                                                                                                                                                                                     | 
|joint ventures and associates                                                                                                                                                                                                                                                                                                                                         | 
|Excess of tax depreciation over book depreciation                                                                                                                                                                                                                                                                                                                     | 
|Other timing differences                                                                                                                                                                                                                                                                                                                                              | 
|State and local taxes                                                                                                                                                                                                                                                                                                                                                 | 
|Net (utilisation)/creation of losses                                                                                                                                                                                                                                                                                                                                  | 
|Investment tax credits                                                                                                                                                                                                                                                                                                                                                | 
|Prior year tax                                                                                                                                                                                                                                                                                                                                                        | 
|Tax effect of exceptional items                                                                                                                                                                                                                                                                                                                                       | 
|Permanent items and other items with less than a 5% net effect                                                                                                                                                                                                                                                                                                        | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|Current total tax rate/effective tax rate                                                                                                                                                                                                                                                                                                                             | 
|Deferred tax timing differences                                                                                                                                                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|Total tax rate/effective tax rate                                                                                                                                                                                                                                                                                                                                     | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|Profit on ordinary activities before tax, as shown in the consolidated profit and loss account, is analysed over its component parts as follows:                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|UK                                                                                                                                                                                                                                                                                                                                                                    | 
|Overseas                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                      | 

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| |  | Notes
    to the financial statements | 101
| |  | ------------------------------------- | ---



4. Taxcontinued

d) Factors that may
affect future tax chargesThe total charge in future periods will be affected by any changes to the corporation tax rates in force in the countries in which the Group operates. The current tax charge will also be
affected by changes in the excess of tax depreciation over book depreciation and the use of tax credits.

e) Unused tax creditsOn a consolidated
basis, the Group has net operating loss carryforwards of £1.3 million.
If not offset against taxable income, these losses will expire as follows:

|                              |          
|----------------------------- | ---------
|                              |          
|operating loss               
|Year                          | £ million
|                              |          
|2006                          |          
|2007                          |          
|2008                          |          
|2009                          |          
|2010                          |          
|Thereafter, or no expiry date |          
|                              |          

For US Federal
tax purposes, the Group has investment tax credits and general business tax credits
to carry forward of approximately £7.8 million, which are available to
reduce
income taxes otherwise payable. These do not expire until 2006 or thereafter.     In
addition, the Group has alternative minimum tax credits for US Federal income
tax purposes of approximately £27.3 million which can be carried
forward to reduce regular tax liabilities of future years. There is no expiration
date on these credits.     Investment tax credits are accounted for by the flow-through method whereby they reduce income taxes currently payable and the provision for income taxes in
the period in which the assets giving rise to such credits are placed in service. Deferred tax assets, subject to the need for a valuation allowance, are recognised to the extent that the investment tax credits are not currently utilised.

5. DirectorsDirectors remuneration
and interests are given in the report on remuneration on pages 72 to 83.

6. Employee numbers

a) Subsidiaries

|                                        | 
|--------------------------------------- | 
|                                        | 
|                                        | 
|Year end                                | 
|                                        | 
|i) Employees
         by business       | 
|Process Gas Solutions                   | 
|Industrial and Special Products         | 
|BOC Edwards                             | 
|Afrox hospitals                         | 
|Gist                                    | 
|Corporate                               | 
|                                        | 
|                                        | 
|                                        | 
|                                        | 
|ii) Employees
         by region        | 
|Europe                                  | 
|Americas                                | 
|Africa                                  | 
|Asia/Pacific                            | 
|                                        | 
|                                        | 
|                                        | 
|                                        | 
|b) Joint
       ventures and associates | 
|Joint ventures                          | 
|Associates                              | 
|                                        | 
|                                        | 
|                                        | 
|                                        | 
|c) Employment
    costs1                | 
|                                        | 
|                                        | 
|                                        | 
|                                        | 
|Wages and salaries                      | 
|Social security costs                   | 
|Other pension costs2                    | 
|                                        | 
|                                        | 
|                                        | 

|1. | Subsidiary undertakings only.                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------
|2. | Other pension costs includes an exceptional credit of £nil (2004: £4.4 million, 2003 £43.2 million charge). See also notes 2 b) and 8 a).

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|102 | The
          BOC Group
plcAnnual
report and accounts 2005 |  | Notes
    to the financial statements
|--- | ---------------------------------------------------------- |  | -------------------------------------



7. Options
  and incentive schemes

a) Policy
Executive options
that are granted at the market price of the companys shares at the time of the grant do not attract a compensation expense under UK GAAP. For those executive
options, including the Long-Term Incentive Plan, that are granted at a discount to the market price of the companys
shares at the time of the grant, the compensation expense is charged to the profit
and loss account over the life of the option.The Group takes advantage of the
exemption granted under UITF17 (revised 2003), Employee Share Schemes, whereby
no compensation expense need be recorded for employee schemes that are granted
at a discount.

b) Summary of
movementsBOC operates share option schemes for both executives and employees.The features of these are given in the report on remuneration on pages 73 to 75 and in the employees report on page
25.

|                                            |                  
|------------------------------------------- | -----------------
|                                            |                  
|                                            |                  
|Employee
    options                        | Executive options
|                                            |                  
|Number of                                   |                  
|shares                                      | Range of         
|million                                     | option prices    
|                                            |                  
|Outstanding at 1 October 2002               |                  
|Granted                                     |                  
|Exercised                                   |                  
|Lapsed                                      |                  
|                                            |                  
|Outstanding at 30 September 2003            |                  
|Granted                                     |                  
|Exercised                                   |                  
|Lapsed                                      |                  
|                                            |                  
|Outstanding at 30 September 2004            |                  
|Granted                                     |                  
|Exercised                                   |                  
|Lapsed                                      |                  
|                                            |                  
|Outstanding at 30 September 2005            |                  
|                                            |                  
|Number of participants at 30 September 2005 |                  
|                                            |                  
|Options exercisable:                        |                  
|At 30 September 2005                        |                  
|At 30 September 2004                        |                  
|                                            |                  
|Fair value of options granted during:       |                  
|Year ended 30 September 2005                |                  
|Year ended 30 September 2004                |                  
|                                            |                  

|1. | The
    long-term incentive plan was granted at an option price of £nil.
|-- | ------------------------------------------------------------------------

The weighted average fair value of options granted during the year was calculated using the Black-Scholes option pricing model. Details of the assumptions used are given in note 30
h).

c) Analysis of options
outstanding

|                                 |             
|-------------------------------- | ------------
|                                 |             
|                                 |             
|Number of                        |             
|options                          | average     
|thousand                         | option price
|                                 |             
|Outstanding at 30 September 2005 |             
|Date of grant                    |             
|1996                             |             
|1997                             |             
|1998                             |             
|1999                             |             
|2000                             |             
|2001                             |             
|2002                             |             
|2003                             |             
|2004                             |             
|2005                             |             
|                                 |             
|                                 |             
|                                 |             

|1. | The long-term
    incentive plan was granted at an option price of £nil.
|-- | ------------------------------------------------------------------------

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| | Notes to
    the financial statements | 103
| | ------------------------------------- | ---

8. Pensions and other retirement benefits

a) UK GAAP GroupThe
Group operates a number of pension schemes throughout the world.The larger schemes
are self-administered and the schemes assets are held independently of the Groups
finances. Pension costs are assessed in accordance with the advice of independent,
professionally qualified actuaries.     Contributions to funded defined benefit schemes are based on advice from independent actuaries using actuarial methods, the objective of which is to provide
adequate funds to meet pension obligations as they fall due. For the two largest schemes, in the UK and US, the dates of the latest actuarial reviews are 31 March 2002 and 1 January 2004 respectively.     In
South Africa, under the Pension Funds Second Amendment Act 2001, surpluses in
pension funds have to be used in a manner specified in Regulations to the Act
to improve current and former members benefits before the employer can
obtain any benefit from the surpluses. Consequently, it is considered unlikely
that the company will obtain any benefit from the surpluses in the South African
schemes. Therefore, in accordance with FRS17, the surpluses at 30 September
2005
have been written off in the statement of total recognised gains and losses.     In
Europe, company contributions to the main scheme in respect of current service
are currently payable at a rate of 13.8 per cent of payroll. In the year ended
30 September 2005 the company made additional contributions of £36 million
to this scheme in order to reduce the funding valuation deficit. The level of
additional contributions for the year to 30 September 2006 is expected to be
up to
20 per cent higher than in 2005.     In the Americas, company contributions to the main pension plan remain suspended as the plan continues to be in surplus.     In Africa, company contributions were payable at rates ranging from 11 per cent to 21 per cent of payroll and are expected to remain at that level for the
year to 30 September 2006.     In Asia/Pacific, company contributions to the main scheme were payable at rates ranging from 9 per cent to 20 per cent of payroll and are expected to remain
at that level for the year to 30 September 2006.     Some of the defined benefit schemes, including the UK scheme, are closed to new members. It is therefore expected that under the projected unit method
prescribed by FRS17 the contribution rate in respect of current service will increase as the members of the schemes approach retirement.     The most recent actuarial funding valuations have been updated by independent qualified actuaries, in order to assess the liabilities of the schemes at 30
September 2005 for the purposes of FRS17. Scheme assets are stated at their market value at 30 September 2005.

|                                           | 
|------------------------------------------ | 
|Main assumptions for FRS17 purposes        | 
|                                           | 
|2005                                       | 
|Rate of increase in salaries               | 
|Rate of increase in pensions in payment    | 
|Discount rate                              | 
|Inflation                                  | 
|                                           | 
|2004                                       | 
|Rate of increase in salaries               | 
|Rate of increase in pensions in payment    | 
|Discount rate                              | 
|Inflation                                  | 
|                                           | 
|2003                                       | 
|Rate of increase in salaries               | 
|Rate of increase in pensions in payment    | 
|Discount rate                              | 
|Inflation                                  | 
|                                           | 
|Date of latest actuarial funding valuation | 
|                                           | 

The assumptions used for the US health care benefits for FRS17 purposes are a discount rate of 5.4 per cent (2004: 5.7 per cent, 2003: 5.9 per cent) and an ultimate health care cost trend
rate of 4.5 per cent (2004: 4.5 per cent, 2003: 4.5 per cent).

     Contributions to
non defined benefit schemes in the year were £15.9 million (2004: £15.6 million, 2003: £12.0
million) and are included in note 6 c).

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|104 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------

8. Pensions and
other retirement benefitscontinued
The assets in the schemes and the expected rates of return
were:

|                                                       |  |          |   |       |   |       |   |         | 
|------------------------------------------------------ |  | -------- | - | ----- | - | ----- | - | ------- | 
|                                                       |  | Equities |   | Bonds |   | Other |   | Total   | 
|                                                       |  |          |   |       |   |       |   |         | 
|Long-term rate of return expected at 30 September 2005 |  |          |   |       |   |       |   |         | 
|Europe                                                 |  | 7.7      | % | 4.6   | % | 7.2   | % |        | 
|Americas                                               |  | 7.7      | % | 3.9   | % | 3.9   | % |        | 
|Africa                                                 |  | 10.9     | % | 6.4   | % | 5.7   | % |        | 
|Asia/Pacific                                           |  | 7.7      | % | 4.3   | % | 4.9   | % |        | 
|                                                       |  |          |   |       |   |       |   |         | 
|Value at 30 September 2005 (£ million)                 |  |          |   |       |   |       |   |         | 
|Europe                                                 |  | 1,016.0  |   | 279.7 |   | 218.1 |   | 1,513.8 | 
|Americas                                               |  | 310.3    |   | 76.2  |   | 0.3   |   | 386.8   | 
|Africa                                                 |  | 111.9    |   | 15.6  |   | 14.7  |   | 142.2   | 
|Asia/Pacific                                           |  | 154.8    |   | 8.8   |   | 51.7  |   | 215.3   | 
|                                                       |  |          |   |       |   |       |   |         | 
|Total                                                  |  | 1,593.0  |   | 380.3 |   | 284.8 |   | 2,258.1 | 
|                                                       |  |          |   |       |   |       |   |         | 
|Long-term rate of return expected at 30 September 2004 |  |          |   |       |   |       |   |         | 
|Europe                                                 |  | 8.5      | % | 5.1   | % | 7.5   | % |        | 
|Americas                                               |  | 9.5      | % | 3.2   | % | 3.5   | % |        | 
|Africa                                                 |  | 13.5     | % | 10.0  | % | 9.0   | % |        | 
|Asia/Pacific                                           |  | 8.1      | % | 4.6   | % | 5.0   | % |        | 
|                                                       |  |          |   |       |   |       |   |         | 
|Value at 30 September 2004 (£ million)                 |  |          |   |       |   |       |   |         | 
|Europe                                                 |  | 870.3    |   | 260.5 |   | 106.9 |   | 1,237.7 | 
|Americas                                               |  | 292.7    |   | 76.1  |   | 0.3   |   | 369.1   | 
|Africa                                                 |  | 93.8     |   | 17.5  |   | 6.9   |   | 118.2   | 
|Asia/Pacific                                           |  | 116.7    |   | 15.6  |   | 37.1  |   | 169.4   | 
|                                                       |  |          |   |       |   |       |   |         | 
|Total                                                  |  | 1,373.5  |   | 369.7 |   | 151.2 |   | 1,894.4 | 
|                                                       |  |          |   |       |   |       |   |         | 
|Long-term rate of return expected at 30 September 2003 |  |          |   |       |   |       |   |         | 
|Europe                                                 |  | 8.5      | % | 5.0   | % | 6.4   | % |        | 
|Americas                                               |  | 9.5      | % | 4.1   | % |      |   |        | 
|Africa                                                 |  | 13.0     | % | 10.0  | % | 8.1   | % |        | 
|Asia/Pacific                                           |  | 8.5      | % | 4.8   | % | 5.2   | % |        | 
|                                                       |  |          |   |       |   |       |   |         | 
|Value at 30 September 2003 (£ million)                 |  |          |   |       |   |       |   |         | 
|Europe                                                 |  | 793.9    |   | 216.1 |   | 62.3  |   | 1,072.3 | 
|Americas                                               |  | 307.0    |   | 66.2  |   |      |   | 373.2   | 
|Africa                                                 |  | 73.6     |   | 16.8  |   | 7.9   |   | 98.3    | 
|Asia/Pacific                                           |  | 105.6    |   | 15.1  |   | 25.2  |   | 145.9   | 
|                                                       |  |          |   |       |   |       |   |         | 
|Total                                                  |  | 1,280.1  |   | 314.2 |   | 95.4  |   | 1,689.7 | 
|                                                       |  |          |   |       |   |       |   |         | 

---



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| | Notes
    to the financial statements | 105
| | ------------------------------------- | ---

8. Pensions and
other retirement benefitscontinued
The following amounts at 30 September 2005 were measured in accordance with the requirements of FRS17:

|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|-------------------------------------- | --------- | ----------- | --------- | ------------ | --------- | -------- | - | ------ | - | ------ | - | -------- | -
|                                       |           |             |           | Americas     |           | Americas |   |        |   |        |   |          |  
|Europe                                 | pensions  | health care | Africa    | Asia/Pacific | Total    
|£ million                              | £ million | £ million   | £ million | £ million    | £ million
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|2005                                   |           |             |           |              |           |          |   |        |   |        |   |          |  
|Total market value of assets           |           | 1,513.8     |           | 386.8        |           |         |   | 142.2  |   | 215.3  |   | 2,258.1  |  
|Present value of scheme liabilities    |           | (1,969.0    | )         | (257.8       | )         | (44.5    | ) | (104.5 | ) | (206.8 | ) | (2,582.6 | )
|Irrecoverable surplus                  |           |            |           |             |           |         |   | (37.7  | ) |       |   | (37.7    | )
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|(Deficit)/surplus in the scheme        |           | (455.2      | )         | 129.0        |           | (44.5    | ) |       |   | 8.5    |   | (362.2   | )
|Related deferred tax asset/(liability) |           | 133.4       |           | (51.4        | )         | 18.6     |   |       |   | (2.2   | ) | 98.4     |  
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|Net pension (liabilities)/assets1      |           | (321.8      | )         | 77.6         |           | (25.9    | ) |       |   | 6.3    |   | (263.8   | )
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|2004                                   |           |             |           |              |           |          |   |        |   |        |   |          |  
|Total market value of assets           |           | 1,237.7     |           | 369.1        |           |         |   | 118.2  |   | 169.4  |   | 1,894.4  |  
|Present value of scheme liabilities    |           | (1,682.0    | )         | (266.0       | )         | (46.4    | ) | (91.8  | ) | (163.8 | ) | (2,250.0 | )
|Irrecoverable surplus                  |           |            |           |             |           |         |   | (26.4  | ) |       |   | (26.4    | )
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|(Deficit)/surplus in the scheme        |           | (444.3      | )         | 103.1        |           | (46.4    | ) |       |   | 5.6    |   | (382.0   | )
|Related deferred tax asset/(liability) |           | 130.4       |           | (41.0        | )         | 18.3     |   |       |   | (1.3   | ) | 106.4    |  
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|Net pension (liabilities)/assets1      |           | (313.9      | )         | 62.1         |           | (28.1    | ) |       |   | 4.3    |   | (275.6   | )
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|2003                                   |           |             |           |              |           |          |   |        |   |        |   |          |  
|Total market value of assets           |           | 1,072.3     |           | 373.2        |           |         |   | 98.3   |   | 145.9  |   | 1,689.7  |  
|Present value of scheme liabilities    |           | (1,516.9    | )         | (294.0       | )         | (50.5    | ) | (92.5  | ) | (142.1 | ) | (2,096.0 | )
|Irrecoverable surplus                  |           |            |           |             |           |         |   | (5.8   | ) |       |   | (5.8     | )
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|(Deficit)/surplus in the scheme        |           | (444.6      | )         | 79.2         |           | (50.5    | ) |       |   | 3.8    |   | (412.1   | )
|Related deferred tax asset/(liability) |           | 133.4       |           | (31.2        | )         | 19.9     |   |       |   | (1.1   | ) | 121.0    |  
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  
|Net pension (liabilities)/assets1      |           | (311.2      | )         | 48.0         |           | (30.6    | ) |       |   | 2.7    |   | (291.1   | )
|                                       |           |             |           |              |           |          |   |        |   |        |   |          |  

|1. | Included
       in the net pension (liabilities)/assets are assets of £88.7 million
       (2004: £68.9 million, 2003: £50.7 million) and liabilities
       of
£352.5 million (2004: £344.5 million, 2003: £341.8 million).
In addition to deferred tax on pension assets and liabilities, a further £42.1
million (2004: £22.0 million) of current tax relating to pension assets
and  liabilities is included within Creditors: amounts falling due within one
year. Of this, £8.4 million (2004: £3.2 million) has been accounted
for in the total recognised gains and losses and £11.7 million (2004: £18.8
million)  has been included in the profit and loss account. There were no equivalent
current tax items in 2003.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|-------------------------------------------------- | --------- | ----------- | --------- | ------------ | --------- | -------- | - | ---- | - | ---- | - | ------ | -
|Analysis of the amount charged to operating profit |           |             |           | Americas     |           | Americas |   |      |   |      |   |        |  
|Europe                                             | pensions  | health care | Africa    | Asia/Pacific | Total    
|£ million                                          | £ million | £ million   | £ million | £ million    | £ million
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|Year to 30 September 2005                          |           |             |           |              |           |          |   |      |   |      |   |        |  
|Current service cost                               |           | (48.7       | )         | (10.1        | )         | (1.5     | ) | (2.2 | ) | (8.2 | ) | (70.7  | )
|Past service cost                                  |           |            |           |             |           |         |   |     |   |     |   |       |  
|Curtailments/settlements                           |           |            |           |             |           |         |   |     |   |     |   |       |  
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|Total operating charge                             |           | (48.7       | )         | (10.1        | )         | (1.5     | ) | (2.2 | ) | (8.2 | ) | (70.7  | )
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|Year to 30 September 2004                          |           |             |           |              |           |          |   |      |   |      |   |        |  
|Current service cost                               |           | (47.4       | )         | (10.1        | )         | (1.5     | ) | (2.4 | ) | (7.7 | ) | (69.1  | )
|Past service cost                                  |           | (0.5        | )         |             |           |         |   |     |   |     |   | (0.5   | )
|Curtailments/settlements2                          |           |            |           | 1.6          |           | 2.8      |   |     |   |     |   | 4.4    |  
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|Total operating charge                             |           | (47.9       | )         | (8.5         | )         | 1.3      |   | (2.4 | ) | (7.7 | ) | (65.2  | )
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|Year to 30 September 2003                          |           |             |           |              |           |          |   |      |   |      |   |        |  
|Current service cost                               |           | (39.4       | )         | (12.3        | )         | (1.6     | ) | (2.1 | ) | (7.9 | ) | (63.3  | )
|Past service cost3                                 |           | (0.4        | )         | (43.2        | )         |         |   |     |   |     |   | (43.6  | )
|Curtailments/settlements                           |           | 3.5         |           |             |           |         |   |     |   |     |   | 3.5    |  
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  
|Total operating charge                             |           | (36.3       | )         | (55.5        | )         | (1.6     | ) | (2.1 | ) | (7.9 | ) | (103.4 | )
|                                                   |           |             |           |              |           |          |   |      |   |      |   |        |  

|2. | The curtailment gains in Americas pensions and Americas health care in 2004 relate to the sale of the US packaged gas business and were accounted for as exceptional
items (see note 2b)).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | The past service cost amounts in Americas pensions in 2003 were accounted for as exceptional items (see note 2b)).                                                                        

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|106 | The
          BOC Group plcAnnual
          report and accounts 2005 | Notes
        to the financial statements
|--- | -------------------------------------------------------------------- | -----------------------------------------

8. Pensions
      and other retirement benefitscontinued

|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|------------------------------------------------------------- | --------- | ----------- | --------- | ------------ | --------- | -------- | - | ---- | - | ----- | - | ------ | -
|Analysis of the amount included in other net financing income |           |             |           | Americas     |           | Americas |   |      |   |       |   |        |  
|Europe                                                        | pensions  | health care | Africa    | Asia/Pacific | Total    
|£ million                                                     | £ million | £ million   | £ million | £ million    | £ million
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|Year to 30 September 2005                                     |           |             |           |              |           |          |   |      |   |       |   |        |  
|Expected return on pension scheme assets4                     |           | 96.7        |           | 26.9         |           |         |   | 10.9 |   | 12.5  |   | 147.0  |  
|Interest on pension scheme liabilities4                       |           | (92.2       | )         | (13.5        | )         | (2.5     | ) | (8.7 | ) | (11.7 | ) | (128.6 | )
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|Net interest on FRS17 pension schemes                         |           | 4.5         |           | 13.4         |           | (2.5     | ) | 2.2  |   | 0.8   |   | 18.4   |  
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|Year to 30 September 2004                                     |           |             |           |              |           |          |   |      |   |       |   |        |  
|Expected return on pension scheme assets4                     |           | 83.1        |           | 28.1         |           |         |   | 11.2 |   | 10.7  |   | 133.1  |  
|Interest on pension scheme liabilities4                       |           | (80.4       | )         | (15.4        | )         | (2.6     | ) | (8.9 | ) | (9.7  | ) | (117.0 | )
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|Net interest on FRS17 pension schemes                         |           | 2.7         |           | 12.7         |           | (2.6     | ) | 2.3  |   | 1.0   |   | 16.1   |  
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|Year to 30 September 2003                                     |           |             |           |              |           |          |   |      |   |       |   |        |  
|Expected return on pension scheme assets4                     |           | 70.2        |           | 29.1         |           |         |   | 10.8 |   | 9.4   |   | 119.5  |  
|Interest on pension scheme liabilities4                       |           | (72.9       | )         | (15.8        | )         | (3.1     | ) | (8.8 | ) | (9.2  | ) | (109.8 | )
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  
|Net interest on FRS17 pension schemes                         |           | (2.7        | )         | 13.3         |           | (3.1     | ) | 2.0  |   | 0.2   |   | 9.7    |  
|                                                              |           |             |           |              |           |          |   |      |   |       |   |        |  

|4. | The profit and loss account includes amounts relating to joint ventures and associates of £0.1 million and £(0.3) million in respect of expected return on
pension scheme assets and interest on pension scheme liabilities respectively (2004: £0.1 million and £(0.4) million, 2003: £0.1 million and £(0.4) million).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|-------------------------------------------------------------------------------------------------------- | --------- | ----------- | --------- | ------------ | --------- | -------- | - | ----- | - | ----- | - | ------ | -
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Analysis
         of the amount recognised in the statementof
         total recognised gains and losses |           |             |           | Americas     |           | Americas |   |       |   |       |   |        |  
|Europe                                                                                                   | pensions  | health care | Africa    | Asia/Pacific | Total    
|£ million                                                                                                | £ million | £ million   | £ million | £ million    | £ million
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Year to 30 September 2005                                                                                |           |             |           |              |           |          |   |       |   |       |   |        |  
|Actual return less expected return on pension scheme assets                                              |           | 159.8       |           | 25.6         |           |         |   | 27.8  |   | 18.6  |   | 231.8  |  
|Experience gains and losses arising on the scheme liabilities                                            |           | 9.2         |           | 1.2          |           | 7.6      |   |      |   | (16.0 | ) | 2.0    |  
|Changes in assumptions underlying the present value of the                                               |           |             |           |              |           |          |   |       |   |       |   |        |  
|scheme liabilities                                                                                       |           | (206.9      | )         | (9.0         | )         | (3.1     | ) | (13.3 | ) | (0.6  | ) | (232.9 | )
|Irrecoverable surplus                                                                                    |           |            |           |             |           |         |   | (16.2 | ) |      |   | (16.2  | )
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Actuarial (loss)/gain recognised in the statement                                                        |           |             |           |              |           |          |   |       |   |       |   |        |  
|of total recognised gains and losses5                                                                    |           | (37.9       | )         | 17.8         |           | 4.5      |   | (1.7  | ) | 2.0   |   | (15.3  | )
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Year to 30 September 2004                                                                                |           |             |           |              |           |          |   |       |   |       |   |        |  
|Actual return less expected return on pension scheme assets                                              |           | 31.9        |           | 17.6         |           |         |   | 12.5  |   | 14.2  |   | 76.2   |  
|Experience gains and losses arising on the scheme liabilities                                            |           | (28.6       | )         | 12.5         |           | 0.2      |   |      |   | (14.2 | ) | (30.1  | )
|Changes in assumptions underlying the present value of the                                               |           |             |           |              |           |          |   |       |   |       |   |        |  
|scheme liabilities                                                                                       |           | (29.4       | )         | (3.3         | )         | (2.0     | ) | 5.9   |   |      |   | (28.8  | )
|Irrecoverable surplus                                                                                    |           |            |           |             |           |         |   | (20.6 | ) |      |   | (20.6  | )
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Actuarial (loss)/gain recognised in the statement                                                        |           |             |           |              |           |          |   |       |   |       |   |        |  
|of total recognised gains and losses5                                                                    |           | (26.1       | )         | 26.8         |           | (1.8     | ) | (2.2  | ) |      |   | (3.3   | )
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Year to 30 September 2003                                                                                |           |             |           |              |           |          |   |       |   |       |   |        |  
|Actual return less expected return on pension scheme assets                                              |           | 73.7        |           | 44.2         |           |         |   | (10.8 | ) | 4.7   |   | 111.8  |  
|Experience gains and losses arising on the scheme liabilities                                            |           | 8.3         |           | (1.7         | )         | 0.1      |   | 0.1   |   | (2.6  | ) | 4.2    |  
|Changes in assumptions underlying the present value of the                                               |           |             |           |              |           |          |   |       |   |       |   |        |  
|scheme liabilities                                                                                       |           | (134.8      | )         | (6.3         | )         | (2.0     | ) |      |   |      |   | (143.1 | )
|Irrecoverable surplus                                                                                    |           |            |           |             |           |         |   | 8.7   |   |      |   | 8.7    |  
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  
|Actuarial (loss)/gain recognised in the statement                                                        |           |             |           |              |           |          |   |       |   |       |   |        |  
|of total recognised gains and losses5                                                                    |           | (52.8       | )         | 36.2         |           | (1.9     | ) | (2.0  | ) | 2.1   |   | (18.4  | )
|                                                                                                         |           |             |           |              |           |          |   |       |   |       |   |        |  

|5. | The statement of total recognised gains and losses includes amounts relating to joint ventures and associates and amounts in respect of minority interests of
£(2.9) million (2004: £(1.1) million, 2003: £(0.9) million).
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Notes to
    the financial statements | 107
|------------------------------------- | ---

|8.Pensions
    and other retirement benefitscontinued
|-----------------------------------------------------

|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   
|----------------------------------------------------------------------------- |  | ------ | -- | -------- | -- | ----------- | -- | ------ | -- | ------------ | -- | ------ | --
|                                                                              |  |        |    | Americas |    | Americas    |    |        |    |              |    |        |   
|History of experience gains and losses                                        |  | Europe |    | pensions |    | health care |    | Africa |    | Asia/Pacific |    | Total  |   
|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   
|Year to 30 September 2005                                                     |  |        |    |          |    |             |    |        |    |              |    |        |   
|Difference between the expected and actual return on scheme assets            |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | 159.8  |    | 25.6     |    |            |    | 27.8   |    | 18.6         |    | 231.8  |   
|Percentage of scheme assets                                                   |  | 10.6   | %  | 6.6      | %  |            |    | 19.6   | %  | 8.6          | %  | 10.3   | % 
|Experience gains and losses on scheme liabilities                             |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | 9.2    |    | 1.2      |    | 7.6         |    |       |    | (16.0        | )  | 2.0    |   
|Percentage of the present value of scheme liabilities                         |  | 0.5    | %  | 0.5      | %  | 17.1        | %  |       |    | (7.7         | %) | 0.1    | % 
|Total amount recognised in the statement of total recognised gains and losses |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (37.9  | )  | 17.8     |    | 4.5         |    | (1.7   | )  | 2.0          |    | (15.3  | ) 
|Percentage of the present value of scheme liabilities                         |  | (1.9   | %) | 6.9      | %  | 10.1        | %  | (1.6   | %) | 1.0          | %  | (0.6   | %)
|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   
|Year to 30 September 2004                                                     |  |        |    |          |    |             |    |        |    |              |    |        |   
|Difference between the expected and actual return on scheme assets            |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | 31.9   |    | 17.6     |    |            |    | 12.5   |    | 14.2         |    | 76.2   |   
|Percentage of scheme assets                                                   |  | 2.6    | %  | 4.8      | %  |            |    | 10.6   | %  | 8.4          | %  | 4.0    | % 
|Experience gains and losses on scheme liabilities                             |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (28.6  | )  | 12.5     |    | 0.2         |    |       |    | (14.2        | )  | (30.1  | ) 
|Percentage of the present value of scheme liabilities                         |  | (1.7   | %) | 4.7      | %  | 0.4         | %  |       |    | (8.7         | %) | (1.3   | %)
|Total amount recognised in the statement of total recognised gains and losses |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (26.1  | )  | 26.8     |    | (1.8        | )  | (2.2   | )  |             |    | (3.3   | ) 
|Percentage of the present value of scheme liabilities                         |  | (1.6   | %) | 10.0     | %  | (3.9        | %) | (2.4   | %) |             |    | (0.1   | %)
|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   
|Year to 30 September 2003                                                     |  |        |    |          |    |             |    |        |    |              |    |        |   
|Difference between the expected and actual return on scheme assets            |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | 73.7   |    | 44.2     |    |            |    | (10.8  | )  | 4.7          |    | 111.8  |   
|Percentage of scheme assets                                                   |  | 6.9    | %  | 11.8     | %  |            |    | (11.0  | %) | 3.2          | %  | 6.6    | % 
|Experience gains and losses on scheme liabilities                             |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | 8.3    |    | (1.7     | )  | 0.1         |    | 0.1    |    | (2.6         | )  | 4.2    |   
|Percentage of the present value of scheme liabilities                         |  | 0.5    | %  | (0.6     | %) | 0.2         | %  | 0.1    | %  | (1.8         | %) | 0.2    | % 
|Total amount recognised in the statement of total recognised gains and losses |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (52.8  | )  | 36.2     |    | (1.9        | )  | (2.0   | )  | 2.1          |    | (18.4  | ) 
|Percentage of the present value of scheme liabilities                         |  | (3.5   | %) | 12.3     | %  | (3.8        | %) | (2.2   | %) | 1.5          | %  | (0.9   | %)
|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   
|Year to 30 September 2002                                                     |  |        |    |          |    |             |    |        |    |              |    |        |   
|Difference between the expected and actual return on scheme assets            |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (246.4 | )  | (71.6    | )  |            |    | 3.0    |    | (13.6        | )  | (328.6 | ) 
|Percentage of scheme assets                                                   |  | (26.2  | %) | (21.0    | %) |            |    | 4.3    | %  | (11.1        | %) | (22.3  | %)
|Experience gains and losses on scheme liabilities                             |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (9.7   | )  | 6.7      |    | 5.8         |    | (3.9   | )  | (1.3         | )  | (2.4   | ) 
|Percentage of the present value of scheme liabilities                         |  | (0.7   | %) | 2.7      | %  | 11.6        | %  | (6.6   | %) | (1.0         | %) | (0.1   | %)
|Total amount recognised in the statement of total recognised gains and losses |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (347.8 | )  | (67.1    | )  | (0.1        | )  | (12.5  | )  | (9.4         | )  | (436.9 | ) 
|Percentage of the present value of scheme liabilities                         |  | (26.1  | %) | (26.8    | %) | (0.2        | %) | (21.1  | %) | (7.0         | %) | (23.9  | %)
|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   
|Year to 30 September 2001                                                     |  |        |    |          |    |             |    |        |    |              |    |        |   
|Difference between the expected and actual return on scheme assets            |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (346.2 | )  | (156.4   | )  |            |    | (11.9  | )  | (13.3        | )  | (527.8 | ) 
|Percentage of scheme assets                                                   |  | (30.3  | %) | (37.6    | %) |            |    | (15.0  | %) | (10.4        | %) | (29.9  | %)
|Experience gains and losses on scheme liabilities                             |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (7.6   | )  | (0.9     | )  | (6.9        | )  | (0.3   | )  | 10.7         |    | (5.0   | ) 
|Percentage of the present value of scheme liabilities                         |  | (0.6   | %) | (0.3     | %) | (13.3       | %) | (0.4   | %) | 8.2          | %  | (0.3   | %)
|Total amount recognised in the statement of total recognised gains and losses |  |        |    |          |    |             |    |        |    |              |    |        |   
|Amount (£ million)                                                            |  | (289.8 | )  | (157.3   | )  | (6.9        | )  | (15.1  | )  | (2.6         | )  | (471.7 | ) 
|Percentage of the present value of scheme liabilities                         |  | (24.7  | %) | (60.9    | %) | (13.3       | %) | (22.7  | %) | (2.0         | %) | (28.1  | %)
|                                                                              |  |        |    |          |    |             |    |        |    |              |    |        |   

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|108 | The BOC
          Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------



|8. Pensions and other retirement benefitscontinued | 
|-------------------------------------------------- | 
|                                                   | 
|                                                   | 
|                                                   | 
|Movement in (deficit)/surplus during the year      | 
|                                                   | 
|Year to 30 September 2005                          | 
|(Deficit)/surplus in scheme at 1 October           | 
|Movement in the year:                              | 
|Current service cost                               | 
|Past service cost                                  | 
|Curtailments/settlements                           | 
|Contributions                                      | 
|Other finance income                               | 
|Actuarial (loss)/gain                              | 
|Exchange adjustment                                | 
|                                                   | 
|(Deficit)/surplus in scheme at 30 September        | 
|                                                   | 
|Year to 30 September 2004                          | 
|(Deficit)/surplus in scheme at 1 October           | 
|Movement in the year:                              | 
|Current service cost                               | 
|Past service cost                                  | 
|Curtailments/settlements                           | 
|Contributions                                      | 
|Other finance income                               | 
|Actuarial (loss)/gain                              | 
|Exchange adjustment                                | 
|                                                   | 
|(Deficit)/surplus in scheme at 30 September        | 
|                                                   | 

b)UK
        GAAP parent company
        The company
    accounts for pension costs in accordance with FRS17 on retirement benefits.
    In accordance with the standard, the company treats contributions to defined
    benefit schemes as if they were contributions to a defined contribution plan. This
    is because the underlying assets and liabilities of the defined benefit schemes
    cover a number of the Groups UK undertakings and cannot readily be
    split between each undertaking on a
consistent and reliable basis.The
pension cost recognised in the companys accounts is the total of company
contributions payable to Group UK pension schemes in the year.The
  assets of all Group UK pension schemes are held independently of the Groups
finances. The largest schemes are self-administered.

c) US GAAPFor
    the purposes of US GAAP, the pension costs of the largest schemes have been
    reclassified
      in the following tables in accordance with the requirement of SFAS132. The
      changes in projected benefit obligation, plan assets and details of the
    funded status of these retirement plans, together with the changes in the
    accumulated
      other post-retirement benefit obligations of the Groups US business,
      are given below. The measurement date for UK and US pension plans is 30
      June and the measurement date for the Australian and South African plans
      is 30
      September. The difference between the UK and US GAAP information disclosed
in note 8a) and c) is included in note 30.     Investment strategy for the schemes is generally set by their respective trustee or fiduciary, after taking advice from their investment advisers, and in
consultation with the company. The strategy reflects the funding position of the schemes, and a careful assessment of the risks inherent over the long term in various asset classes. The assets of the schemes are diversified by asset class, by
investment manager and by geography, in order to reduce risk. Strategy is reviewed periodically.

At 30 June 2005 the measurement date for SFAS132 reporting, the target asset allocation and actual asset allocation of the main UK scheme was:

|                  |  |        |   |        |   |        |  
|----------------- |  | ------ | - | ------ | - | ------ | -
|                  |  | 2005   |   | 2004   |  
|                  |  |        |   |        |  
|                  |  | Target |   | Actual |   | Actual |  
|                  |  |        |   |        |   |        |  
|Equity securities |  | 68     | % | 69     | % | 72     | %
|Debt securities   |  | 18     | % | 17     | % | 19     | %
|Real estate       |  | 14     | % | 13     | % | 8      | %
|Cash              |  | 0      | % | 1      | % | 1      | %
|                  |  |        |   |        |   |        |  

In the US, the fiduciary invests in short-term bonds to broadly cash match the liabilities that are expected to fall due within three years. The balance of the plans assets is
currently invested in equities. Following this policy, the actual asset allocations of the plan at 30 June 2005 were as follows:

|                  |  |      |   |      |  
|----------------- |  | ---- | - | ---- | -
|                  |  | 2005 |   | 2004 |  
|                  |  |      |   |      |  
|Equity securities |  | 84.9 | % | 77.5 | %
|Debt securities   |  | 15.1 | % | 22.5 | %
|                  |  |      |   |      |  

The company establishes the long-term expected rate of return on the schemes assets
by developing a long-term rate of return assumption for each asset class, taking
into account such factors as the market yield on bond investments of appropriate
duration, and the expected risk premium for other asset classes, based on long-term
historical trends. A single, long-term return assumption is then calculated as
a weighted average
return, based on the expected returns for each asset class.

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|Notes to
    the financial statements | 109
|------------------------------------- | ---

|                                                      | 
|----------------------------------------------------- | 
|8.Pensions
    and other retirement benefitscontinued

|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|------------------------------------------------------------------------------------------------ | ---------------- | ----------------- | --------------- | ------------- | - | ------------- | - | ------------- | -
|                                                                                                 | Pension benefits |                   | Other benefits1 |              
|                                                                                                 |                  |                   |                 |               |  
|                                                                                                 |                  | 2005£     million |                 | 2004£ million |   | 2005£ million |   | 2004£ million |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Change in benefit obligation                                                                     |                  |                   |                 |               |   |               |   |               |  
|Projected benefit obligation at 1 October 2004                                                   |                  | 2,167.6           |                 | 2,089.3       |   | 46.3          |   | 50.5          |  
|Exchange adjustment                                                                              |                  | 24.8              |                 | (28.4         | ) | 0.9           |   | (4.2          | )
|Service cost                                                                                     |                  | 65.2              |                 | 67.4          |   | 1.5           |   | 1.7           |  
|Interest cost                                                                                    |                  | 130.4             |                 | 114.0         |   | 2.5           |   | 2.6           |  
|Plan participants contributions                                                                 |                  | 13.9              |                 | 13.5          |   |              |   |              |  
|Actuarial (gains)/losses                                                                         |                  | 250.0             |                 | 6.6           |   | (4.4          | ) | 1.7           |  
|Benefits paid                                                                                    |                  | (85.4             | )               | (93.6         | ) | (2.4          | ) | (2.9          | )
|Other (income) less expenses                                                                     |                  | 1.1               |                 | (0.2          | ) |              |   |              |  
|Curtailments, settlements, termination benefits                                                  |                  | (44.8             | )               | (1.0          | ) |              |   | (3.1          | )
|Disposal of subsidiary                                                                           |                  | (10.3             | )               |              |   |              |   |              |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Projected benefit obligation at 30 September 2005                                                |                  | 2,512.5           |                 | 2,167.6       |   | 44.4          |   | 46.3          |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Change in fair value of assets                                                                   |                  |                   |                 |               |   |               |   |               |  
|Fair value of assets at 1 October 2004                                                           |                  | 1,877.1           |                 | 1,640.5       |   |              |   |              |  
|Exchange adjustment                                                                              |                  | 28.8              |                 | (34.8         | ) |              |   |              |  
|Actual return on plan assets                                                                     |                  | 288.2             |                 | 279.5         |   |              |   |              |  
|Employer contributions                                                                           |                  | 82.2              |                 | 72.2          |   |              |   |              |  
|Plan participants contributions                                                                 |                  | 13.9              |                 | 13.5          |   |              |   |              |  
|Other income less (expenses)                                                                     |                  | 1.1               |                 | (0.2          | ) |              |   |              |  
|Benefits paid                                                                                    |                  | (85.4             | )               | (93.6         | ) |              |   |              |  
|Curtailments, settlements, termination benefits                                                  |                  | (44.8             | )               |              |   |              |   |              |  
|Disposal of subsidiary                                                                           |                  | (17.2             | )               |              |   |              |   |              |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Fair value of assets at 30 September 2005                                                        |                  | 2,143.9           |                 | 1,877.1       |   |              |   |              |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Funded status and unrecognised (gains)/losses                                                    |                  |                   |                 |               |   |               |   |               |  
|Funded status                                                                                    |                  | (368.6            | )               | (290.5        | ) | (44.4         | ) | (46.3         | )
|Unrecognised net transition asset                                                                |                  | 14.9              |                 | (10.8         | ) |              |   |              |  
|Unrecognised prior service cost/(credit)                                                         |                  | 10.9              |                 | 13.2          |   | (1.4          | ) | (1.7          | )
|Unrecognised net loss                                                                            |                  | 629.2             |                 | 535.8         |   | 3.1           |   | 7.7           |  
|Adjustment for post measurement date contributions                                               |                  | 17.2              |                 | 17.2          |   |              |   |              |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Prepaid/(accrued) pension cost                                                                   |                  | 303.6             |                 | 264.9         |   | (42.7         | ) | (40.3         | )
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Amounts recognised in the statement of financial position consist of:                            |                  |                   |                 |               |   |               |   |               |  
|Prepaid benefit cost                                                                             |                  | 184.5             |                 | 165.2         |   |               |   |               |  
|Accrued benefit liability                                                                        |                  | (318.4            | )               | (263.4        | ) |               |   |               |  
|Intangible asset                                                                                 |                  | 3.8               |                 | 5.4           |   |               |   |               |  
|Accumulated other comprehensive income                                                           |                  | 433.7             |                 | 357.7         |   |               |   |               |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|Prepaid pension cost                                                                             |                  | 303.6             |                 | 264.9         |   |               |   |               |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|1. Other benefits relate to post retirement medical benefits.                                    |                  |                   |                 |               |   |               |   |               |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|The weighted-average asset allocations, by asset category, for the pension plans are as follows: |                 
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|                                                                                                 |                  | Europe            |                 | Americas      |   | Africa        |   | Asia/Pacific  |  
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|At 30 September 2005                                                                             |                  |                   |                 |               |   |               |   |               |  
|Equity securities                                                                                |                  | 68.9              | %               | 80.2          | % | 78.7          | % | 71.9          | %
|Debt securities                                                                                  |                  | 16.7              | %               | 19.7          | % | 11.0          | % | 4.1           | %
|Real estate                                                                                      |                  | 13.2              | %               |              |   | 1.9           | % | 7.1           | %
|Other                                                                                            |                  | 1.2               | %               | 0.1           | % | 8.4           | % | 16.9          | %
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  
|At 30 September 2004                                                                             |                  |                   |                 |               |   |               |   |               |  
|Equity securities                                                                                |                  | 70.3              | %               | 79.3          | % | 79.4          | % | 68.9          | %
|Debt securities                                                                                  |                  | 21.1              | %               | 20.6          | % | 14.8          | % | 9.2           | %
|Real estate                                                                                      |                  | 8.6               | %               |              |   | 1.0           | % | 7.2           | %
|Other                                                                                            |                  |                  |                 | 0.1           | % | 4.8           | % | 14.7          | %
|                                                                                                 |                  |                   |                 |               |   |               |   |               |  

The accumulated benefit obligation for all pension plans totalled £2,282.0 million (2004: £1,962.2 million).
     The fair value of plan assets exceeds the accumulated benefit obligation for all plans except the UK plans, where the accumulated benefit obligation,
projected benefit obligation and fair value of plan assets were £1,718.0 million, £1,893.7 million and £1,382.4 million respectively (2004: £1,460.6 million, £1,602.8 million and £1,180.0 million).

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|110 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes
    to the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------

8. Pensions
      and other retirement benefitscontinued The weighted-average
    assumptions used to determine the benefit obligation are as follows:

|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | - | -------- | - | ------ | - | ------------ | -
|                                                                                                                                                                                                      |  | Europe |   | Americas |   | Africa |   | Asia/Pacific |  
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|At
          30 September 2005                                                                                                                                                                        |  |        |   |          |   |        |   |              |  
|Discount
        rate                                                                                                                                                                                 |  | 4.9    | % | 5.0      | % | 8.5    | % | 6.0          | %
|Expected
        return on all plan assets                                                                                                                                                            |  | 7.0    | % | 6.8      | % | 9.9    | % | 7.0          | %
|Rate of
        compensation increase                                                                                                                                                                 |  | 4.2    | % | 3.5      | % | 5.5    | % | 3.5          | %
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|At
          30 September 2004                                                                                                                                                                        |  |        |   |          |   |        |   |              |  
|Discount
        rate                                                                                                                                                                                 |  | 5.75   | % | 6.1      | % | 10.0   | % | 6.1          | %
|Expected
        return on all plan assets                                                                                                                                                            |  | 7.75   | % | 8.0      | % | 12.0   | % | 7.1          | %
|Rate of
        compensation increase                                                                                                                                                                 |  | 4.5    | % | 3.75     | % | 7.5    | % | 3.5          | %
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|The weighted-average
        assumptions used to determine the net benefit cost are as follows:                                                                                                       | 
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|                                                                                                                                                                                                      |  | Europe |   | Americas |   | Africa |   | Asia/Pacific |  
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|At
          30 September 2005                                                                                                                                                                        |  |        |   |          |   |        |   |              |  
|Discount
        rate                                                                                                                                                                                 |  | 5.75   | % | 6.1      | % | 10.0   | % | 6.1          | %
|Expected
        return on all plan assets                                                                                                                                                            |  | 7.75   | % | 8.0      | % | 12.0   | % | 7.1          | %
|Rate of
        compensation increase                                                                                                                                                                 |  | 4.5    | % | 3.75     | % | 7.5    | % | 3.5          | %
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|At
          30 September 2004                                                                                                                                                                        |  |        |   |          |   |        |   |              |  
|Discount
        rate                                                                                                                                                                                 |  | 5.2    | % | 5.8      | % | 10.0   | % | 6.2          | %
|Expected
        return on all plan assets                                                                                                                                                            |  | 7.6    | % | 8.0      | % | 12.0   | % | 7.6          | %
|Rate of
        compensation increase                                                                                                                                                                 |  | 4.0    | % | 3.75     | % | 7.5    | % | 3.5          | %
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|The
        Group presently expects its contributions to its pension plans and post
        retirement medical plans to be up to 20 per cent higher in 2006 than
    the amounts contributed in 2005. | 
|                                                                                                                                                                                                      |  |        |   |          |   |        |   |              |  
|The
        following benefit payments, which reflect future service, as appropriate,
    are expected to be paid:                                                                                   

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |           |  |           |  |           |  |              |  |                       |  |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- |  | --------- |  | --------- |  | ------------ |  | --------------------- |  | --------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |           |  |           |  |           |  |              |  | Total
        pension |  | Other     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Europe    |  | Americas  |  | Africa    |  | Asia/Pacific |  | benefits              |  | benefits  | 2
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | £ million |  | £ million |  | £ million |  | £ million    |  | £ million             |  | £ million |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |           |  |           |  |           |  |              |  |                       |  |           |  
|Year
          ending 30 September                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |           |  |           |  |           |  |              |  |                       |  |           |  
|2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 65.0      |  | 12.8      |  | 4.2       |  | 10.6         |  | 92.6                  |  | 2.9       |  
|2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 68.2      |  | 12.1      |  | 4.3       |  | 11.4         |  | 96.0                  |  | 2.8       |  
|2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 71.4      |  | 12.5      |  | 4.5       |  | 12.2         |  | 100.6                 |  | 2.8       |  
|2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 75.4      |  | 12.4      |  | 4.7       |  | 13.0         |  | 105.5                 |  | 2.7       |  
|2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 79.6      |  | 12.1      |  | 4.9       |  | 14.2         |  | 110.8                 |  | 2.7       |  
|2011  2015                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 471.4     |  | 58.9      |  | 28.3      |  | 87.9         |  | 646.5                 |  | 13.6      |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |           |  |           |  |           |  |              |  |                       |  |           |  
|For
        the post retirement medical benefits plan at 30 September 2005, the initial
        health care cost trend rates for valuing the medical benefits and drug
        benefits post age 65 were 10.0 per cent (2004: 9.0 per cent) and 2.5
        per cent (2004: 3.2 per cent) respectively. The rates for valuing post
        age 65 medical benefits are assumed to reduce gradually to 4.5 per cent
        in 2013 (2004: 4.5 per cent in 2011). The rates for valuing drug benefits
        post age 65 are assumed to reduce gradually to 0.55 per cent in 2013
        (2004: 0.65 per cent in 2011). For valuing pre age 65 medical and drug
        benefits, a blended health care trend rate of 10.0 per cent was used
        for 30 September 2005 (2004: 9.0 per cent). This blended rate was assumed
    to reduce gradually to 4.5 per cent in 2013 (2004: 4.5 per cent in 2011). | 

|                                                       |  |                          |   |                    |   |           |   |           |   |           |  
|------------------------------------------------------ |  | ------------------------ | - | ------------------ | - | --------- | - | --------- | - | --------- | -
|                                                       |  | Pensionable
    benefits |   | Other
    benefits | 2
|                                                       |  |                          |   |                    |   |           |   |           |   |           |  
|                                                       |  | 2005                     |   | 2004               |   | 2003      |   | 2005      |   | 2004      |  
|                                                       |  | £ million                |   | £ million          |   | £ million |   | £ million |   | £ million |  
|                                                       |  |                          |   |                    |   |           |   |           |   |           |  
|Service
        cost net of employees contributions   |  | 65.2                     |   | 67.4               |   | 53.0      |   | 1.5       |   | 1.7       |  
|Interest
        cost on projected benefits obligation |  | 130.4                    |   | 114.0              |   | 108.7     |   | 2.5       |   | 2.6       |  
|Expected
        return on assets                      |  | (165.7                   | ) | (157.4             | ) | (166.2    | ) |          |   |          |  
|Amortisation
        of net transition asset           |  | (1.5                     | ) | (2.9               | ) | (14.8     | ) |          |   |          |  
|Amortisation
        of prior service cost/(credit)3   |  | 2.4                      |   | 3.1                |   | 46.4      |   | (0.3      | ) | (0.5      | )
|Amortisation
        of net loss/(gain)                |  | 18.9                     |   | 14.8               |   | (1.6      | ) | 0.2       |   | 0.3       |  
|Cost of
        special termination benefits           |  |                         |   | 0.7                |   | 0.9       |   |          |   |          |  
|Curtailment/settlement                                 |  | (0.6                     | ) | 0.6                |   |          |   |          |   | (0.4      | )
|                                                       |  |                          |   |                    |   |           |   |           |   |           |  
|Net periodic
        pension cost                      |  | 49.1                     |   | 40.3               |   | 26.4      |   | 3.9       |   | 3.7       |  
|                                                       |  |                          |   |                    |   |           |   |           |   |           |  

|2. | Other
    benefits relate to post retirement medical benefits.                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | In
        2003 the amortisation of pension prior service cost includes £43.2
        million in respect of a settlement of litigation from which the company
    will derive no future economic benefit.

|                                                                                                                                                                                                                                          | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|It
        is estimated that a one per cent change in the weighted average health
        care costs trend would have the following effects on the accumulated
    benefit obligation and net periodic pension cost at 30 September 2005: | 
|                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|Accumulated
        benefit obligation                                                                                                                                                                                                    | 
|Net periodic
        pension cost                                                                                                                                                                                                         | 
|                                                                                                                                                                                                                                          | 

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| | Notes
    to the financial statements | 111
| | ------------------------------------- | ---



|9. Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |               |  |       |  |       |  |           |  |           |  |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | ----- |  | ----- |  | --------- |  | --------- |  | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Per
    share |  |       |  |       |  |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 2005          |  | 2004  |  | 2003  |  | 2005      |  | 2004      |  | 2003      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | pence         |  | pence |  | pence |  | £ million |  | £ million |  | £ million | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|Ordinary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |               |  |       |  |       |  |           |  |           |  |           | 
|First interim                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 15.9          |  | 15.5  |  | 15.5  |  | 78.6      |  | 76.3      |  | 76.4      | 
|Second
        interim                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 25.3          |  | 24.5  |  | 23.5  |  | 125.5     |  | 121.0     |  | 115.7     | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 41.2          |  | 40.0  |  | 39.0  |  | 204.1     |  | 197.3     |  | 192.1     | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|10. Earnings
          per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |               |  |       |  |       |  |           |  |           |  |           | 
|Basic
          earnings per share are calculated by dividing the earnings attributable
          to Ordinary shareholders by the weighted average number of shares in
          issue during the year.
          For
          diluted earnings per share, the weighted average number of shares in
          issue is adjusted to assume conversion of all potential dilutive shares.
          The company has only one category of potential dilutive shares: those
          share options granted to employees where the exercise price is less
          than the average market price of the companys shares during the
          year and where any performance conditions have been met at the balance
          sheet date.
          Adjusted
          earnings per share (excluding exceptional items) are presented in order
    to show the underlying earnings performance of the Group.

|                                                                              |  |           |   |           |  |           | 
|----------------------------------------------------------------------------- |  | --------- | - | --------- |  | --------- | 
|                                                                              |  | 2005      |   | 2004      |  | 2003      | 
|i)
          Earnings                                                         |  | £ million |   | £ million |  | £ million | 
|                                                                              |  |           |   |           |  |           | 
|Amounts
          used in computing the earnings per share                    |  |           |   |           |  |           | 
|Earnings
        attributable to Ordinary shareholders for the financial year |  | 367.0     |   | 264.0     |  | 219.1     | 
|Adjustment
        for exceptional items1                                     |  | (32.8     | ) | 47.5      |  | 41.6      | 
|                                                                              |  |           |   |           |  |           | 
|Adjusted
        earnings                                                     |  | 334.2     |   | 311.5     |  | 260.7     | 
|                                                                              |  |           |   |           |  |           | 

|1. | This comprises
        the exceptional items before interest of £87.9 million (2004: £(92.0)
        million, 2003: £(67.0) million) adjusted for the impact of tax
        of £(28.4) million (2004: £44.5 million, 2003: £25.0
        million) and minority interests of £(26.7) million (2004: £nil,
    2003: £0.4 million).
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                                |  |           |   |             |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | - | ----------- | - | --------- | -
|                                                                                                                                                                |  | 2005      |   | 2004        |   | 2003      |  
|ii)
          Average number of 25p Ordinary shares                                                                                                             |  | million   |   | million     |   | million   |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|Average
        issued share capital                                                                                                                            |  | 500.4     |   | 498.2       |   | 497.5     |  
|Less:Average
        own shares held in trust                                                                                                                   |  | 5.4       |   | 5.2         |   | 5.0       |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|Basic                                                                                                                                                           |  | 495.0     |   | 493.0       |   | 492.5     |  
|Add:Dilutive
        share options                                                                                                                              |  | 1.6       |   | 0.8         |   | 0.2       |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|Diluted                                                                                                                                                         |  | 496.6     |   | 493.8       |   | 492.7     |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|11. Fixed
          assets  intangible assets                                                                                                                  |  |           |   |             |   |           |  
|a) Group summary                                                                                                                                                |  |           |   |             |   |           |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|                                                                                                                                                                |  |           |   | Other       |   |           |  
|                                                                                                                                                                |  | Goodwill  |   | intangibles |   | Total     |  
|                                                                                                                                                                |  | £ million |   | £ million   |   | £ million |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|Gross
          book value                                                                                                                                      |  |           |   |             |   |           |  
|At 1 October
        2004                                                                                                                                       |  | 212.8     |   | 4.8         |   | 217.6     |  
|Exchange
        adjustment                                                                                                                                     |  | 3.9       |   | 0.2         |   | 4.1       |  
|Acquired
        during the year                                                                                                                                |  |          |   | 0.6         |   | 0.6       |  
|Adjustment
        relating to prior year acquisition                                                                                                           |  | (0.6      | ) |            |   | (0.6      | )
|Acquisition
        of businesses                                                                                                                               |  | 16.8      |   | 1.3         |   | 18.1      |  
|Disposed
        of during the year                                                                                                                             |  | (28.7     | ) | (0.1        | ) | (28.8     | )
|                                                                                                                                                                |  |           |   |             |   |           |  
|At 30 September
        2005                                                                                                                                    |  | 204.2     |   | 6.8         |   | 211.0     |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|Amortisation                                                                                                                                                    |  |           |   |             |   |           |  
|At 1 October
        2004                                                                                                                                       |  | 41.2      |   | 1.5         |   | 42.7      |  
|Exchange
        adjustment                                                                                                                                     |  | 1.6       |   | 0.1         |   | 1.7       |  
|Provided
        during the year                                                                                                                                |  | 12.6      |   | 0.4         |   | 13.0      |  
|Impairment                                                                                                                                                      |  | 14.8      |   | 0.2         |   | 15.0      |  
|Disposed
        of during the year                                                                                                                             |  | (4.0      | ) |            |   | (4.0      | )
|                                                                                                                                                                |  |           |   |             |   |           |  
|At 30 September
        2005                                                                                                                                    |  | 66.2      |   | 2.2         |   | 68.4      |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|Net
          book value                                                                                                                                        |  |           |   |             |   |           |  
|At 1 October
        2004                                                                                                                                       |  | 171.6     |   | 3.3         |   | 174.9     |  
|At 30 September
        2005                                                                                                                                    |  | 138.0     |   | 4.6         |   | 142.6     |  
|                                                                                                                                                                |  |           |   |             |   |           |  
|The
        adjustment relating to prior year acquisition reflects the finalisation
    of the fair value of the consideration for a business acquired in 2003. | 



---



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|112 | The
          BOC Group plcAnnual
          report and accounts 2005 | Notes
        to the financial statements
|--- | -------------------------------------------------------------------- | -----------------------------------------

|                                                                                                                                                                                                                                          | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|11.
    Fixed assets  intangible assetscontinued                                                                                                                                                                                         | 
|                                                                                                                                                                                                                                          | 
|b)
    Analysis of acquisitions and disposals                                                                                                                                                                                             | 
|The
        increase in positive goodwill represents the excess of the fair value
        of the purchase price over the provisional fair value of the net assets
    of businesses acquired.The most significant amounts are as follows: | 
|                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|i)
          Businesses acquired                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                          | 
|2005                                                                                                                                                                                                                                      | 
|G Van Dongen
        Holding BV                                                                                                                                                                                                           | 
|                                                                                                                                                                                                                                          | 
|2004                                                                                                                                                                                                                                      | 
|There was
        no significant goodwill on acquisitions of subsidiary undertakings in
        the year.                                                                                                                                 | 
|                                                                                                                                                                                                                                          | 
|2003                                                                                                                                                                                                                                      | 
|Praxair
        Polska                                                                                                                                                                                                                    | 
|Environmental
        Management Corporation1                                                                                                                                                                                             | 
|                                                                                                                                                                                                                                          | 
|2002                                                                                                                                                                                                                                      | 
|Seiko Instruments
        Inc  turbomolecular pumps business2                                                                                                                                                                            | 
|Unique
        Gas and Petrochemicals Public Company Limited                                                                                                                                                                              | 
|Enron Teesside
        Operations Limited  industrial assets                                                                                                                                                                             | 
|Hydromatix
        Inc                                                                                                                                                                                                                    | 
|Semco3                                                                                                                                                                                                                                    | 
|Minorities
        in Osaka Sanso Kogyo KK                                                                                                                                                                                                | 
|                                                                                                                                                                                                                                          | 

|1. | Restated
        in 2005 and 2004 to reflect an adjustment of £0.8 million to the
    fair value of the consideration.                                                                              
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Restated
        in 2003 to reflect an adjustment of £0.8 million to the fair value
    of the net assets.                                                                                          
|3. | Restated
        in 2003 to reflect an adjustment of £0.6 million to the fair value
    of the consideration.                                                                                       
|4. | Amortisation
        periods are those over which it is estimated that the value of the business
        acquired will exceed the value of the identifiable net assets of the
    business acquired.

|                                                             |  |           |  
|------------------------------------------------------------ |  | --------- | -
|                                                             |  | Goodwill  |  
|ii)
          Businesses disposed of                         |  | £ million |  
|                                                             |  |           |  
|2005                                                         |  |           |  
|Unique
        Gas and Petrochemicals Public Company Limited |  | 14.8      |  
|Afrox Healthcare
        Limited                             |  | 13.9      |  
|                                                             |  |           |  
|2004                                                         |  |           |  
|US packaged
        gas business                             |  | 9.1       |  
|                                                             |  |           |  
|2003                                                         |  |           |  
|Osaka Sanso
        Kogyo KK (see note 28c))                 |  | (10.5     | )
|                                                             |  |           |  

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| | Notes
    to the financial statements | 113
| | ------------------------------------- | ---
| |                                       |    

|12. Fixed
         assets  tangible assets |             
|------------------------------------------- | ------------
|a) Group summary                            |             
|                                            |             
|                                            |             
|Land and                                    | machinery   
|buildings                                   | and vehicles
|£ million                                   | £ million   
|                                            |             
|Gross book value                            |             
|At 1 October 2004                           |             
|Exchange adjustment                         |             
|Capital expenditure2                        |             
|Disposals                                   |             
|Transfers                                   |             
|Acquisitions of businesses                  |             
|Disposals of businesses                     |             
|                                            |             
|At 30 September 2005                        |             
|                                            |             
|Depreciation                                |             
|At 1 October 2004                           |             
|Exchange adjustment                         |             
|Provided during the year                    |             
|Disposals                                   |             
|Disposals of businesses                     |             
|Transfers                                   |             
|                                            |             
|At 30 September 2005                        |             
|                                            |             
|Net book value at 1 October 20043           |             
|Owned assets                                |             
|Leased assets4                              |             
|                                            |             
|                                            |             
|                                            |             
|Net book value at 30 September 20053        |             
|Owned assets                                |             
|Leased assets4                              |             
|                                            |             
|                                            |             
|                                            |             

|1. | Net book value of land and buildings at cost was £276.6 million (2004: £369.7 million).                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Subsidiary undertakings only. Capital expenditure of joint ventures and associates is given in note 1.                                                    
|3. | Net book value includes net interest capitalised of £40.7 million (2004: £47.8 million). The tax effect of this is included in the deferred tax
provision.
|4. | Leased assets are shown net of accumulated depreciation of £107.1 million (2004: £121.1 million).                                                         
|   |                                                                                                                                                           

|b) Depreciation and operating lease rentals         |  |           |  |           |  |           | 
|--------------------------------------------------- |  | --------- |  | --------- |  | --------- | 
|                                                    | 
|                                                    |  | 2005      |  | 2004      |  | 2003      | 
|                                                    |  | £ million |  | £ million |  | £ million | 
|                                                    |  |           |  |           |  |           | 
|Depreciation on leased assets included above        |  | 6.2       |  | 6.5       |  | 8.1       | 
|Amortisation of capitalised interest included above |  | 5.1       |  | 5.5       |  | 4.0       | 
|Operating lease rentals                             |  |           |  |           |  |           | 
| hire of plant, machinery and vehicles             |  | 40.5      |  | 45.4      |  | 37.3      | 
| property rent                                     |  | 26.5      |  | 31.6      |  | 34.3      | 
|                                                    |  |           |  |           |  |           | 

|c)
    Regional analysis                                                                                                                                                                                                                                                                                                  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|The
        Group has numerous manufacturing, distribution and office facilities
        which are located in some 50 countries. At 30 September 2005, the Groups
        property, plant and equipment, comprising land and buildings, plant,
    machinery, vehicles and cylinders were located regionally as follows: | 
|                                                                                                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                                                                                                          | 
|Europe (mainly the UK)                                                                                                                                                                                                                                                                                                    | 
|Americas (mainly the US)                                                                                                                                                                                                                                                                                                  | 
|Africa                                                                                                                                                                                                                                                                                                                    | 
|Asia/Pacific                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                                                                                                          | 
|                                                                                                                                                                                                                                                                                                                          | 
|The above
    amounts are stated at cost net of accumulated depreciation.                                                                                                                                                                                                                                                 | 

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|114 | The
            BOC Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|--- | ---------------------------------------------------------------- | -------------------------------------
|    |                                                                  |                                      

12. Fixed
      assets  tangible
      assetscontinued

d) Asset revaluations
Following the adoption
of FRS15  Tangible fixed assets in 2000, land and buildings are no longer revalued (see Accounting policies on page 92). The net book value of properties
revalued in earlier years was £113.8 million. Properties not revalued were £193.0
million.

|e) Parent summary        |             
|------------------------ | ------------
|                         |             
|                         |             
|Land and                 | machinery   
|buildings                | and vehicles
|£ million                | £ million   
|                         |             
|Gross book value         |             
|At 1 October 2004        |             
|Capital expenditure      |             
|Disposals                |             
|                         |             
|At 30 September 2005     |             
|                         |             
|Depreciation             |             
|At 1 October 2004        |             
|Provided during the year |             
|Disposals                |             
|                         |             
|At 30 September 2005     |             
|                         |             
|                         |             
|Net book value           |             
|At 1 October 2004        |             
|At 30 September 2005     |             
|                         |             

|f) Net book value of land and buildings |              |           |           |        |      |     |   |     |  
|--------------------------------------- | ------------ | --------- | --------- | ------ | ---- | --- | - | --- | -
|                                        |             
|                                        |              | Group     |           | Parent |     
|                                        |             
|2005                                    |              | 2004      | 2005      |        | 2004
|£ million                               | £ million    | £ million | £ million
|                                        |              |           |           |        |      |     |   |     |  
|Freehold property                       |              | 274.9     |           | 368.5  |      | 9.3 |   | 9.7 |  
|Leasehold property                      |  long-term  |           | 26.6      |        | 33.9 |     |  |     | 
|                                        |  short-term |           | 5.3       |        | 4.1  |     |  |     | 
|                                        |              |           |           |        |      |     |   |     |  
|                                        |              | 306.8     |           | 406.5  |      | 9.3 |   | 9.7 |  
|                                        |              |           |           |        |      |     |   |     |  

|g) Capital commitments               |           |       |  |       | 
|------------------------------------ | --------- | ----- |  | ----- | 
|                                     |          
|                                     |           | Group | 
|                                    
|2005                                 |           | 2004 
|£ million                            | £ million
|                                     |           |       |  |       | 
|Against which orders had been placed |           | 95.8  |  | 26.2  | 
|Authorised but not committed         |           | 74.8  |  | 101.2 | 
|                                     |           |       |  |       | 
|                                     |           | 170.6 |  | 127.4 | 
|                                     |           |       |  |       | 

|There
        were no capital commitments by The BOC Group plc at either 30 September
    2005 or 30 September 2004. | 
|-------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                     | 
|The
        Groups share of its joint ventures and associates capital
    commitments was:                        | 
|                                                                                                                     | 
|                                                                                                                     | 
|                                                                                                                     | 
|                                                                                                                     | 
|Against which orders had been placed                                                                                 | 
|Authorised but not committed                                                                                         | 
|                                                                                                                     | 
|                                                                                                                     | 
|                                                                                                                     | 

---



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| | Notes
    to the financial statements | 115
| | ------------------------------------- | ---
| |                                       |    

|13. Fixed
         assets  investments |              
|--------------------------------------- | -------------
|a) Group summary                        |              
|                                        |              
|                                        |              
|share of                                | Negative     
|Goodwill                                | net assets of
|of associates                           | associates   
|£ million                               | £ million    
|                                        |              
|At 1 October 2004                       |              
|Exchange adjustment                     |              
|Acquisitions/additions1                 |              
|(Charged)/credited to profit            |              
|Disposals/repayments/transfers          |              
|Increase in net assets                  |              
|Japan Air Gases capital restructuring   |              
|                                        |              
|At 30 September 2005                    |              
|                                        |              

|1. | The increase in the Group share of net assets of associates relates principally to the Afrox hospitals business becoming an associate during the year. The increase in
the Group share of net assets of joint ventures and loans to joint ventures relates principally to Compania de Nitrogeno de Cantarell in Mexico.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                        

|i)
    Joint ventures                                                                                                                                                                         |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|The
      cost of investment
in joint ventures was £262.2 million (2004: £259.5 million) and the
attributable profit before tax was £81.8 million (2004: £79.5 million,
2003: £60.4 million). |          
|The
        Groups share of net assets of joint ventures at 30 September 2005
    can be analysed as follows:                                                                                |          
|                                                                                                                                                                                              |          
|                                                                                                                                                                                              |          
|net assets                                                                                                                                                                                    | goodwill 
|£ million                                                                                                                                                                                     | £ million
|                                                                                                                                                                                              |          
|Share of fixed assets                                                                                                                                                                         |          
|Negative goodwill                                                                                                                                                                             |          
|Share of current assets                                                                                                                                                                       |          
|                                                                                                                                                                                              |          
|                                                                                                                                                                                              |          
|                                                                                                                                                                                              |          
|Share of liabilities due within one year                                                                                                                                                      |          
|Share of liabilities due after more than one year                                                                                                                                             |          
|                                                                                                                                                                                              |          
|                                                                                                                                                                                              |          
|                                                                                                                                                                                              |          
|Share of net assets                                                                                                                                                                           |          
|                                                                                                                                                                                              |          

|The negative
        goodwill represents the excess of the fair value of the net assets over
        the fair value of the purchase consideration and is being amortised over
    17 years. |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------
|                                                                                                                                                                                            |           
|The Groups share of the borrowings of joint ventures at 30 September 2005 was:                                                                                                             |           
|                                                                                                                                                                                            |           
|                                                                                                                                                                                            |           
|borrowings                                                                                                                                                                                  | borrowings
|                                                                                                                                                                                            |           
|Compania de Nitrogeno de Cantarell1                                                                                                                                                         |           
|Japan Air Gases                                                                                                                                                                             |           
|Elgas                                                                                                                                                                                       |           
|Other joint ventures                                                                                                                                                                        |           
|                                                                                                                                                                                            |           
|Total                                                                                                                                                                                       |           
|                                                                                                                                                                                            |           

|1. | Excluding
    loans from joint venture partners.
|-- | ------------------------------------------------

Of the net borrowings, £230.0
    million was non-recourse.

ii) Associates
The cost of investment
in associates was £45.8 million (2004: £23.9 million) and the attributable profit before tax was £16.5 million (2004: £12.2 million, 2003:
£10.4 million).      The
Groups share of the net borrowings of associates was £45.4 million (2004: £6.9 million), all of which was non-recourse. This includes
£41.6 million for the Groups South African subsidiarys share
of the net borrowings of Life Healthcare Group (Pty) Limited.

---



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|116 | The
          BOC Group plcAnnual
          report and accounts 2005 |  | Notes
        to the financial statements
|--- | -------------------------------------------------------------------- |  | -----------------------------------------



13. Fixed
  assets  investmentscontinued

|b) Valuation                                        |           |       |  |       | 
|--------------------------------------------------- | --------- | ----- |  | ----- | 
|                                                    |          
|                                                    |           | 2005  |  | 2004  | 
|£ million                                           | £ million
|                                                    |           |       |  |       | 
|Listed on stock exchanges in the UK and overseas    |           | 28.6  |  | 34.7  | 
|Unlisted  equity                                   |           | 356.8 |  | 300.6 | 
| other                                             |           | 228.5 |  | 212.9 | 
|                                                    |           |       |  |       | 
|Total book value                                    |           | 613.9 |  | 548.2 | 
|                                                    |           |       |  |       | 
|All investments are stated at cost less provisions. |           |       |  |       | 
|                                                    |           |       |  |       | 
|Market value of listed investments                  |           | 80.2  |  | 85.8  | 
|                                                    |           |       |  |       | 

|                                                  |           |           |  |      |  |      | 
|------------------------------------------------- | --------- | --------- |  | ---- |  | ---- | 
|c) Income                                         |           |           |  |      |  |      | 
|                                                  |          
|                                                  |           | 2005      |  | 2004 |  | 2003 | 
|£ million                                         | £ million | £ million
|                                                  |           |           |  |      |  |      | 
|Listed securities                                 |           | 3.0       |  | 9.9  |  | 4.7  | 
|Unlisted securities                               |           | 48.2      |  | 69.4 |  | 32.0 | 
|                                                  |           |           |  |      |  |      | 
|                                                  |           | 51.2      |  | 79.3 |  | 36.7 | 
|Less:Dividends
    receivable from joint ventures |           | 47.8      |  | 69.0 |  | 31.7 | 
|Dividends
       receivable from associates       |           | 3.3       |  | 10.1 |  | 3.3  | 
|                                                  |           |           |  |      |  |      | 
|Income from other fixed asset investments         |           | 0.1       |  | 0.2  |  | 1.7  | 
|                                                  |           |           |  |      |  |      | 

|                                                                                                                                                                                             |              |             |            |           |  |      |   |       |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ----------- | ---------- | --------- |  | ---- | - | ----- | - | ------- | -
|d) Parent                                                                                                                                                                                    |              |             |            |           |  |      |   |       |   |         |  
|                                                                                                                                                                                             |             
|                                                                                                                                                                                             |              |             |            | Amounts   |  |      |   |       |   |         |  
|Investments                                                                                                                                                                                  | due from    
|in subsidiary                                                                                                                                                                                | subsidiary   | Other      
|undertakings                                                                                                                                                                                 | undertakings | investments | Provisions | Total    
|£ million                                                                                                                                                                                    | £ million    | £ million   | £ million  | £ million
|                                                                                                                                                                                             |              |             |            |           |  |      |   |       |   |         |  
|At 1 October 2004                                                                                                                                                                            |              | 2,137.7     |            | 857.9     |  | 7.8  |   | (20.8 | ) | 2,982.6 |  
|Additions                                                                                                                                                                                    |              | 19.3        |            |          |  |     |   |      |   | 19.3    |  
|Charged to profit                                                                                                                                                                            |              |            |            |          |  |     |   | (1.0  | ) | (1.0    | )
|Advances/repayments (net)                                                                                                                                                                    |              |            |            | 172.3     |  | (7.4 | ) |      |   | 164.9   |  
|                                                                                                                                                                                             |              |             |            |           |  |      |   |       |   |         |  
|At 30 September 2005                                                                                                                                                                         |              | 2,157.0     |            | 1,030.2   |  | 0.4  |   | (21.8 | ) | 3,165.8 |  
|                                                                                                                                                                                             |              |             |            |           |  |      |   |       |   |         |  
|Provisions
      relate to investments in subsidiary undertakings (£17.9 million),
      amounts due from subsidiary undertakings (£3.5 million) and other
      investments (£0.4
million). |             
|                                                                                                                                                                                             |             

|14. Stocks                                                                                                                                                                                                                                      |           |       |   |       |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----- | - | ----- | -
|                                                                                                                                                                                                                                                |          
|                                                                                                                                                                                                                                                |           | Group |  
|                                                                                                                                                                                                                                               
|2005                                                                                                                                                                                                                                            |           | 2004 
|£ million                                                                                                                                                                                                                                       | £ million
|                                                                                                                                                                                                                                                |           |       |   |       |  
|Raw materials                                                                                                                                                                                                                                   |           | 87.8  |   | 89.5  |  
|Work in progress                                                                                                                                                                                                                                |           | 75.4  |   | 68.0  |  
|Gases and other finished goods                                                                                                                                                                                                                  |           | 174.0 |   | 162.3 |  
|Payments on account                                                                                                                                                                                                                             |           | (30.9 | ) | (35.4 | )
|                                                                                                                                                                                                                                                |           |       |   |       |  
|                                                                                                                                                                                                                                                |           | 306.3 |   | 284.4 |  
|                                                                                                                                                                                                                                                |           |       |   |       |  
|Amounts
      relating to long-term contracts included in work in progress were £0.7
      million (2004: £0.4 million). There were no stocks on the balance
      sheet of The BOC Group plc at
either 30 September 2005 or 30 September 2004.
|                                                                                                                                                                                                                                                |           |       |   |       |  

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| |  |  | Notes
        to the financial statements | 117
| |  |  | ----------------------------------------- | ---



15. Debtors

|a) Debtors falling due within one year                                                                                 |           |           |           |        |      |       |  |       | 
|---------------------------------------------------------------------------------------------------------------------- | --------- | --------- | --------- | ------ | ---- | ----- |  | ----- | 
|                                                                                                                       |          
|                                                                                                                       |           | Group     |           | Parent |     
|                                                                                                                       |          
|2005                                                                                                                   |           | 2004      | 2005      |        | 2004
|£ million                                                                                                              | £ million | £ million | £ million
|                                                                                                                       |           |           |           |        |      |       |  |       | 
|Trade debtors                                                                                                          |           | 541.6     |           | 561.5  |      |      |  |      | 
|Amounts due from subsidiaries                                                                                          |           |          |           |       |      | 136.7 |  | 286.5 | 
|Amounts due from joint ventures and associates                                                                         |           | 5.7       |           | 7.6    |      | 5.7   |  | 5.7   | 
|Other debtors                                                                                                          |           | 125.4     |           | 106.4  |      | 10.6  |  | 28.2  | 
|Prepayments and accrued income                                                                                         |           | 37.7      |           | 30.1   |      |      |  |      | 
|                                                                                                                       |           |           |           |        |      |       |  |       | 
|                                                                                                                       |           | 710.4     |           | 705.6  |      | 153.0 |  | 320.4 | 
|                                                                                                                       |           |           |           |        |      |       |  |       | 
|Trade
      debtors are shown net of provisions for bad and doubtful debts of £26.2
    million (2004: £29.8 million). |          
|                                                                                                                       |          

|b) Debtors falling
    due after more than one year                                                                                                              |           |       |  |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----- |  | ---- | 
|                                                                                                                                                                 |          
|                                                                                                                                                                 |           | Group | 
|                                                                                                                                                                
|2005                                                                                                                                                             |           | 2004 
|£ million                                                                                                                                                        | £ million
|                                                                                                                                                                 |           |       |  |      | 
|Deferred tax                                                                                                                                                     |           | 6.3   |  | 5.8  | 
|Other debtors                                                                                                                                                    |           | 10.7  |  | 10.5 | 
|                                                                                                                                                                 |           |       |  |      | 
|                                                                                                                                                                 |           | 17.0  |  | 16.3 | 
|                                                                                                                                                                 |           |       |  |      | 
|There
      were no debtors falling due after more than one year on the balance sheet
    of The BOC Group plc at either 30 September 2005 or 30 September 2004. |          
|                                                                                                                                                                 |          

|16. Current
         asset investments                                                                                                        |           |       |  |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----- |  | ---- | 
|                                                                                                                                              |          
|                                                                                                                                              |           | Group | 
|                                                                                                                                             
|2005                                                                                                                                          |           | 2004 
|£ million                                                                                                                                     | £ million
|                                                                                                                                              |           |       |  |      | 
|Listed investments                                                                                                                            |           | 16.4  |  | 20.8 | 
|                                                                                                                                              |           |       |  |      | 
|Total current asset investments                                                                                                               |           | 16.4  |  | 20.8 | 
|                                                                                                                                              |           |       |  |      | 
|Market value of listed investments                                                                                                            |           | 16.4  |  | 20.8 | 
|                                                                                                                                              |           |       |  |      | 
|There were
      no current asset investments on the balance sheet of The BOC Group plc
    at either 30 September 2005 or 30 September 2004. |          
|                                                                                                                                              |          

|17. Cash
    at bank and in hand |           |           |           |        |      |      |  |      | 
|-------------------------------- | --------- | --------- | --------- | ------ | ---- | ---- |  | ---- | 
|                                 |          
|                                 |           | Group     |           | Parent |     
|                                 |          
|2005                             |           | 2004      | 2005      |        | 2004
|£ million                        | £ million | £ million | £ million
|                                 |           |           |           |        |      |      |  |     
|Deposits                         |           | 13.2      |           | 26.5   |      |     |  |     | 
|Cash at
    bank and in hand     |           | 177.8     |           | 201.7  |      | 44.3 |  | 80.8 | 
|                                 |           |           |           |        |      |      |  |      | 
|                                 |           | 191.0     |           | 228.2  |      | 44.3 |  | 80.8 | 
|                                 |           |           |           |        |      |      |  |      | 
|                                 |           |           |           |        |      |      |  |      | 

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|118 | The
          BOC Group plcAnnual
          report and accounts 2005 |  | Notes
        to the financial statements
|--- | -------------------------------------------------------------------- |  | -----------------------------------------



18. Creditors:
amounts falling due within one year

|a) Borrowings and finance leases1                                    |           |           |           |        |      |         |  |         |  
|-------------------------------------------------------------------- | --------- | --------- | --------- | ------ | ---- | ------- |  | ------- | -
|                                                                     |          
|                                                                     |           | Group     |           | Parent |     
|                                                                     |          
|2005                                                                 |           | 2004      | 2005      |        | 2004
|£ million                                                            | £ million | £ million | £ million
|                                                                     |           |           |           |        |      |         |  |         |  
|Bank loans and overdrafts                                            |           | 110.2     |           | 80.1   |      | 107.2   |  | 83.2    |  
|Loans other than from banks                                          |           | 146.5     |           | 179.4  |      |        |  | 168.9   |  
|Finance leases                                                       |           | 2.5       |           | 2.6    |      |        |  |        |  
|                                                                     |           |           |           |        |      |         |  |         |  
|                                                                     |           | 259.2     |           | 262.1  |      | 107.2   |  | 252.1   |  
|                                                                     |           |           |           |        |      |         |  |         |  
|1.    Details of borrowings and finance leases are given in note 20. |           |           |           |        |      |         |  |         |  
|                                                                     |           |           |           |        |      |         |  |         |  
|b) Other creditors                                                   |           |           |           |        |      |         |  |         |  
|Deposits and advance payments by customers                           |           | 63.6      |           | 55.0   |      |        |  |        |  
|Trade creditors                                                      |           | 313.8     |           | 329.2  |      |        |  |        |  
|Amounts due to subsidiary undertakings                               |           |          |           |       |      | 951.3   |  | 949.7   |  
|Payroll and other taxes, including social security                   |           | 32.1      |           | 32.4   |      |        |  |        |  
|Taxation                                                             |           | 154.5     |           | 139.2  |      |        |  |        |  
|Other creditors                                                      |           | 180.4     |           | 159.9  |      | 1.6     |  | 0.9     |  
|Accruals and deferred income                                         |           | 153.9     |           | 156.9  |      | 52.5    |  | 53.5    |  
|                                                                     |           |           |           |        |      |         |  |         |  
|                                                                     |           | 898.3     |           | 872.6  |      | 1,005.4 |  | 1,004.1 |  
|                                                                     |           |           |           |        |      |         |  |         |  
|                                                                     |           |           |           |        |      |         |  |         |  
|19. Creditors:
         amounts falling due after more than one year |           |           |           |        |      |         |  |         |  
|                                                                     |           |           |           |        |      |         |  |         |  
|a) Borrowings and finance leases1                                    |           |           |           |        |      |         |  |         |  
|                                                                     |          
|                                                                     |           | Group     |           | Parent |     
|                                                                     |          
|2005                                                                 |           | 2004      | 2005      |        | 2004
|£ million                                                            | £ million | £ million | £ million
|                                                                     |           |           |           |        |      |         |  |         |  
|Bank loans                                                           |           | 35.8      |           | 88.5   |      | 0.2     |  | (2.7    | )
|Loans other than from banks                                          |           | 729.1     |           | 834.5  |      | 676.8   |  | 677.2   |  
|Finance leases                                                       |           | 6.6       |           | 5.5    |      |        |  |        |  
|                                                                     |           |           |           |        |      |         |  |         |  
|                                                                     |           | 771.5     |           | 928.5  |      | 677.0   |  | 674.5   |  
|                                                                     |           |           |           |        |      |         |  |         |  
|1.    Details of borrowings and finance leases are given in note 20. |           |           |           |        |      |         |  |         |  
|                                                                     |           |           |           |        |      |         |  |         |  
|b) Other creditors                                                   |           |           |           |        |      |         |  |         |  
|Deposits and advance payments by customers                           |           | 10.7      |           | 22.2   |      |        |  |        |  
|Other creditors                                                      |           | 18.0      |           | 6.7    |      |        |  |        |  
|Accruals and deferred income                                         |           | 2.1       |           | 5.8    |      | 0.2     |  | 3.2     |  
|                                                                     |           |           |           |        |      |         |  |         |  
|                                                                     |           | 30.8      |           | 34.7   |      | 0.2     |  | 3.2     |  
|                                                                     |           |           |           |        |      |         |  |         |  
|                                                                     |           |           |           |        |      |         |  |         |  

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| | Notes
    to the financial statements | 119
| | ------------------------------------- | ---
| |                                       |    

20. Net borrowings
and finance leases

a) Analysis

|                                                                                              |           |           |           |           |      |       |      |        |  
|--------------------------------------------------------------------------------------------- | --------- | --------- | --------- | --------- | ---- | ----- | ---- | ------ | -
|                                                                                              |           |           |           | Group     |      |       |      | Parent
|                                                                                              |           |           |           |           |      |       |     
|                                                                                              | 2005      |           | 2004      |           | 2005 |       | 2004
|                                                                                              | £ million | £ million | £ million | £ million
|                                                                                              |           |           |           |           |      |       |      |        |  
|Secured                                                                                       |           |           |           |           |      |       |      |        |  
|Finance
        leases                                                                        |           | 9.1       |           | 8.1       |      |      |      |       |  
|Other secured
        borrowings                                                              |           | 13.4      |           | 55.2      |      |      |      |       |  
|Unsecured                                                                                     |           |           |           |           |      |       |      |        |  
|121/4%
        Unsecured Loan Stock 2012/2017                                                 |           | 100.0     |           | 100.0     |      | 100.0 |      | 100.0  |  
|7.45% Guaranteed
        Notes 2006                                                           |           | 141.2     |           | 138.1     |      |      |      |       |  
|Pollution
        Control and Industrial Bonds                                                |           | 10.8      |           | 16.7      |      |      |      |       |  
|European
        Investment Bank loans                                                        |           | 17.4      |           | 15.7      |      |      |      |       |  
|1.00% Euroyen
        Bond 2006                                                               |           | 124.7     |           | 125.4     |      | 124.7 |      | 125.4  |  
|57/8%
        Bonds 2009                                                                      |           | 200.0     |           | 200.0     |      | 200.0 |      | 200.0  |  
|6.50% Bonds
        2016                                                                      |           | 200.0     |           | 200.0     |      | 200.0 |      | 200.0  |  
|Medium-term
        notes                                                                     |           | 54.8      |           | 224.1     |      | 54.8  |      | 224.1  |  
|Commercial
        paper                                                                      |           |          |           | 5.5       |      |      |      |       |  
|Other borrowings                                                                              |           | 159.3     |           | 101.8     |      | 104.7 |      | 77.1   |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|Total borrowings
        and finance leases                                                   |           | 1,030.7   |           | 1,190.6   |      | 784.2 |      | 926.6  |  
|Less:      Cash at bank and in hand                                                           |           | 191.0     |           | 228.2     |      | 44.3  |      | 80.8   |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|Net borrowings
        and finance leases                                                     |           | 839.7     |           | 962.4     |      | 739.9 |      | 845.8  |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|A reconciliation
        of net cash flow to the movement in net debt is given in note 27 b). |           |           |           |           |      |       |      |        |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|b) Maturity                                                                                   |           |           |           |           |      |       |      |        |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|                                                                                              |           |           |           | Group     |      |       |      | Parent |  
|                                                                                              |           |           |           |           |      |       |     
|                                                                                              | 2005      |           | 2004      |           | 2005 |       | 2004
|                                                                                              | £ million | £ million | £ million | £ million
|                                                                                              |           |           |           |           |      |       |      |        |  
|Long
          and medium-term bank loans                                                     |           |           |           |           |      |       |      |        |  
|Repayable  beyond
        five years                                                         |           |          |           | 17.0      |      |      |      |       |  
| two
        to five years                                                                   |           | 7.5       |           | 26.1      |      | (1.5  | )    | 0.2    |  
| one
        to two years                                                                    |           | 28.3      |           | 45.4      |      | 1.7   |      | (2.9   | )
|Loans
          other than from banks                                                         |           |           |           |           |      |       |      |        |  
|Repayable  beyond
        five years                                                         |           | 302.8     |           | 303.5     |      | 298.5 |      | 298.3  |  
| two
        to five years                                                                   |           | 279.2     |           | 383.6     |      | 253.6 |      | 378.9  |  
| one
        to two years                                                                    |           | 147.1     |           | 147.4     |      | 124.7 |      |       |  
|Finance
          leases  repayable beyond one year                                          |           | 6.6       |           | 5.5       |      |      |      |       |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|Borrowings
        and finance leases (note 19 a))                                            |           | 771.5     |           | 928.5     |      | 677.0 |      | 674.5  |  
|Short-term  repayable
          within one year                                              |           |           |           |           |      |       |      |        |  
|Bank loans
        and overdrafts                                                             |           | 110.2     |           | 80.1      |      | 107.2 |      | 83.2   |  
|Loans other
        than from banks                                                           |           | 146.5     |           | 179.4     |      |      |      | 168.9  |  
|Finance
        leases                                                                        |           | 2.5       |           | 2.6       |      |      |      |       |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|Total borrowings
        and finance leases                                                   |           | 1,030.7   |           | 1,190.6   |      | 784.2 |      | 926.6  |  
|Less:
          Cash at bank and in hand                                                      |           | 191.0     |           | 228.2     |      | 44.3  |      | 80.8   |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|Net borrowings
        and finance leases                                                     |           | 839.7     |           | 962.4     |      | 739.9 |      | 845.8  |  
|                                                                                              |           |           |           |           |      |       |      |        |  
|                                                                                              |           |           |           |           |      |       |      |        |  

|                                                   |           |            |           |           |            |           |  |       |  |       |  |       | 
|-------------------------------------------------- | --------- | ---------- | --------- | --------- | ---------- | --------- |  | ----- |  | ----- |  | ----- | 
|                                                   |           |            |           |           |            | 2005      |  |       |  |       |  | 2004 
|                                                   |           |            |           |           |            |           |  |       |  |      
|                                                   | Finance   |            | Other     |           |            | Finance   |  | Other |  |      
|                                                   | leases    | borrowings | Total     | leases    | borrowings | Total    
|                                                   | £ million | £ million  | £ million | £ million | £ million  | £ million
|                                                   |           |            |           |           |            |           |  |       |  |       |  |       | 
|Repayment profile of borrowings and finance leases |           |            |           |           |            |           |  |       |  |       |  |       | 
|Long-term repayable                                |           |            |           |           |            |           |  |       |  |       |  |       | 
| beyond five years                                |           | 1.1        |           | 302.8     |            | 303.9     |  |      |  | 320.5 |  | 320.5 | 
| four to five years                               |           | 0.8        |           | 0.1       |            | 0.9       |  | 0.1   |  | 201.4 |  | 201.5 | 
| three to four years                              |           | 1.0        |           | 200.3     |            | 201.3     |  | 0.8   |  | 58.6  |  | 59.4  | 
| two to three years                               |           | 1.5        |           | 86.3      |            | 87.8      |  | 2.6   |  | 149.7 |  | 152.3 | 
| one to two years                                 |           | 2.2        |           | 175.4     |            | 177.6     |  | 2.0   |  | 192.8 |  | 194.8 | 
|                                                   |           |            |           |           |            |           |  |       |  |       |  |       | 
|Total                                              |           | 6.6        |           | 764.9     |            | 771.5     |  | 5.5   |  | 923.0 |  | 928.5 | 
|                                                   |           |            |           |           |            |           |  |       |  |       |  |       | 

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|120 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------
|    |                                                                |                                      

20. Net borrowings and finance leasescontinued

c) Short-term
interest
ratesThe average interest rate on commercial paper for the year to 30 September 2005 was 4.4 per cent (2004: 3.3 per cent) and on other short-term borrowings was 8.2 per cent (2004: 9.3 per
  cent).

d) FacilitiesThe
Group maintains a number of short and medium-term committed lines of credit. The
main medium-term facilities are multi-currency agreements with a group of relationship
banks, under
which the Group may borrow up to US$450 million (£254 million) (2004: US$450 million (£249
million)) for general corporate purposes. These facilities were undrawn both at
30 September 2005 and 30 September 2004. The following table shows the maturity
profile of these facilities.

|                    |           |           |  |       | 
|------------------- | --------- | --------- |  | ----- | 
|                    |           | 2005      |  | 2004  | 
|                    | $ million | $ million
|                    |           |           |  |       | 
|Four to five years  |           |          |  |      | 
|Three to four years |           |          |  | 450.0 | 
|Two to three years  |           | 450.0     |  |      | 
|One to two years    |           |          |  |      | 
|Within one year     |           |          |  |      | 
|                    |           |           |  |       | 
|                    |           | 450.0     |  | 450.0 | 
|                    |           |           |  |       | 

In October 2005, these facilities were replaced with US$600 million (£339 million) of committed multi-currency facilities maturing in 2010. Additional committed facilities are
maintained by the principal operating units in the Group.

e) SecurityThe secured loans,
maturing between 30 September 2005 and 2019, are principally secured by charges
over the property, plant and machinery, stocks and trade debtors of certain overseas

subsidiaries.

21. Financial
instruments

a) Interest rate, currency and counterparty exposureThe
Groups approach to managing currency and interest rate risk and its use of swaps in that process is described on page 56 in the financial review under the heading
management of financial risks.

Interest rate swaps
At 30 September
2005, the Group had entered into five interest rate swap agreements (2004: five)
with its main relationship banks with notional principal amounts of £286.4 million
(2004: £285.3 million). The swaps underlying currencies are sterling,
US dollars and Japanese yen. The following table shows the maturity profile and
weighted average interest rates payable and receivable on interest rate swaps
at 30
September:

|                                                                                                                                                                                                                                                                                                          |  |           |  |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- |  | --------- | 
|                                                                                                                                                                                                                                                                                                          |  | 2005      |  | 2004      | 
|Maturity profile                                                                                                                                                                                                                                                                                          |  | £ million |  | £ million | 
|                                                                                                                                                                                                                                                                                                          |  |           |  |           | 
|Beyond five years                                                                                                                                                                                                                                                                                         |  |          |  |          | 
|Four to five years                                                                                                                                                                                                                                                                                        |  |          |  | 200.0     | 
|Three to four years                                                                                                                                                                                                                                                                                       |  | 200.0     |  | 85.3      | 
|Two to three years                                                                                                                                                                                                                                                                                        |  | 86.4      |  |          | 
|One to two years                                                                                                                                                                                                                                                                                          |  |          |  |          | 
|Within one year                                                                                                                                                                                                                                                                                           |  |          |  |          | 
|                                                                                                                                                                                                                                                                                                          |  |           |  |           | 
|                                                                                                                                                                                                                                                                                                          |  | 286.4     |  | 285.3     | 
|                                                                                                                                                                                                                                                                                                          |  |           |  |           | 
|                                                                                                                                                                                                                                                                                                          |  | %         |  | %         | 
|Weighted average receivable swap rate                                                                                                                                                                                                                                                                     |  | 4.1       |  | 3.8       | 
|Weighted average payable swap rate                                                                                                                                                                                                                                                                        |  | 4.8       |  | 4.5       | 
|                                                                                                                                                                                                                                                                                                          |  |           |  |           | 
|The
      weighted average receivable/payable swap interest rate is calculated by
      applying the notional swap interest received or paid, using rates applicable
      at the financial year end, to the notional principal of outstanding swaps
    at the financial year end.                      
|During
      2004, the Group also entered into four interest rate swap agreements that
      are due to commence in 2006 and 2007 for a period of five years. The notional
      principal amounts of these swaps are £106.4 million and their underlying
    currencies are US dollars and Japanese yen.

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| | Notes
          to the financial statements | 121
| | ------------------------------------------- | ---
| |                                             |    

21. Financial instrumentscontinued

Currency swaps
At 30 September
2005, the Group had entered into 12 currency swap agreements (2004: 25) with
its main relationship banks with notional principal amounts of £341.7 million (2004:
£593.1 million). The maturity dates range between one month and 36 months from the balance sheet date (2004: between one month and 48 months). The following table illustrates the impact of the currency swaps on the Groups
net debt at 30
September:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           |             |           |             |  |                    |   |        |   |                    |  |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | --------- | --------- | ----------- | --------- | ----------- |  | ------------------ | - | ------ | - | ------------------ |  | ------ | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           |             |           |             |  |                    |   | 2005   |   |                    |  | 2004  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           |             |           |             |  |                    |   |        |   |                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           | Cash at     |           |             |  | Net
    borrowings |   |        |   | Net
    borrowings
|Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Gross      | bank and  | Currency  | and finance | Capital   | and finance
|employed                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | borrowings | in hand   | swaps     | leases      | employed  | leases     
|£ million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | £ million  | £ million | £ million | £ million   | £ million | £ million  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           |             |           |             |  |                    |   |        |   |                    |  |        |  
|Sterling                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            | 552.7     |           | (505.5      | )         | 38.4        |  | 313.9              |   | (153.2 | ) | 593.6              |  | (104.6 | )
|US dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |            | 1,034.8   |           | (154.9      | )         | 30.4        |  | (123.0             | ) | (247.5 | ) | 918.9              |  | (352.4 | )
|Australian dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |            | 317.7     |           | (6.7        | )         | 15.2        |  | (99.1              | ) | (90.6  | ) | 298.7              |  | (76.0  | )
|South African rand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            | 182.1     |           | (46.6       | )         | 14.7        |  |                   |   | (31.9  | ) | 314.0              |  | (99.6  | )
|Japanese yen                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            | 168.1     |           | (179.0      | )         | 12.1        |  | 23.5               |   | (143.4 | ) | 186.7              |  | (154.1 | )
|Canadian dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |            | 121.2     |           | (5.8        | )         | 1.3         |  | (39.0              | ) | (43.5  | ) | 104.2              |  | (40.0  | )
|Thai baht                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |            | 105.4     |           | (35.8       | )         | 1.8         |  |                   |   | (34.0  | ) | 121.0              |  | (52.0  | )
|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            | 802.4     |           | (96.4       | )         | 77.1        |  | (76.3              | ) | (95.6  | ) | 683.3              |  | (83.7  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           |             |           |             |  |                    |   |        |   |                    |  |        |  
|Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            | 3,284.4   |           | (1,030.7    | )         | 191.0       |  |                   |   | (839.7 | ) | 3,220.4            |  | (962.4 | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |           |           |             |           |             |  |                    |   |        |   |                    |  |        |  
|The
      weighted average receivable interest rate on currency swaps was 4.4 per
      cent (2004: 3.9 per cent) and the weighted average payable interest rate
      was 4.3 per cent (2004: 4.1 per cent). The weighted average receivable/payable
      swap interest rate is calculated by applying the notional swap interest
      received or paid, using rates applicable at the financial year end, to
      the notional principal of outstanding swaps at the financial
year end.
     The
currency and interest rate exposure of the net borrowings of the Group at 30
September, after taking into account interest rate and currency swaps entered
into by the Group, is given in the table below.

|                   |           |               |           |           |           |            |  |               |  |        |   |       | 
|------------------ | --------- | ------------- | --------- | --------- | --------- | ---------- |  | ------------- |  | ------ | - | ----- | 
|                   |           |               |           |           |           | 2005       |  |               |  |        |   | 2004  | 
|                   |           |               |           |           |           |            |  |               |  |       
|Fixed rate         |           | Floating rate |           | Total     |           | Fixed rate |  | Floating rate |  | Total 
|£ million          | £ million | £ million     | £ million | £ million | £ million
|                   |           |               |           |           |           |            |  |               |  |        |   |       | 
|Sterling           |           | 297.9         |           | (144.7    | )         | 153.2      |  | 296.8         |  | (192.2 | ) | 104.6 | 
|US dollar          |           | 222.8         |           | 24.7      |           | 247.5      |  | 279.1         |  | 73.3   |   | 352.4 | 
|Australian dollar  |           | 0.2           |           | 90.4      |           | 90.6       |  | 0.1           |  | 75.9   |   | 76.0  | 
|South African rand |           | 46.6          |           | (14.7     | )         | 31.9       |  | 38.0          |  | 61.6   |   | 99.6  | 
|Japanese yen       |           | 125.6         |           | 17.8      |           | 143.4      |  | 151.7         |  | 2.4    |   | 154.1 | 
|Canadian dollar    |           | 25.6          |           | 17.9      |           | 43.5       |  | 22.8          |  | 17.2   |   | 40.0  | 
|Thai baht          |           | 35.8          |           | (1.8      | )         | 34.0       |  | 54.9          |  | (2.9   | ) | 52.0  | 
|Other              |           | 48.6          |           | 47.0      |           | 95.6       |  | 44.4          |  | 39.3   |   | 83.7  | 
|                   |           |               |           |           |           |            |  |               |  |        |   |       | 
|Total              |           | 803.1         |           | 36.6      |           | 839.7      |  | 887.8         |  | 74.6   |   | 962.4 | 
|                   |           |               |           |           |           |            |  |               |  |        |   |       | 

Counterparty risk
The Group is exposed
to credit-related losses in the event of non-performance by counterparties to
financial instruments, but does not expect any counterparties to fail to meet
their
obligations. There are procedures and policies in place limiting the Groups
exposure to concentrations of credit or country risk.

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|122 | The
          BOC Group
plcAnnual
report and accounts 2005 | Notes to
    the financial statements
|--- | ---------------------------------------------------------- | -------------------------------------
|    |                                                            |                                      
|    |                                                            |                                      

|21. Financial
    instrumentscontinued                                                                                                                                                                                                                                                                                                 |            |           |            |   |          |   |          |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | --------- | ---------- | - | -------- | - | -------- | - | -------- | -
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|b)
        Fair value informationi) Fair values of financial instruments Set out below is
a comparison of the carrying amount and the fair value of the Groups financial
instruments (excluding short-term debtors and creditors) at 30 September 2005.
Further details of the Groups financial instruments are given in note 21
d).
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   | 2005     |   |          |   | 2004     |  
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|                                                                                                                                                                                                                                                                                                                                       | Notes      |           | Carrying   |   |          |   | Carrying |   |          |  
|amount                                                                                                                                                                                                                                                                                                                                 | Fair value | amount    | Fair value
|£ million                                                                                                                                                                                                                                                                                                                              | £ million  | £ million | £ million 
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|Primary financial instruments                                                                                                                                                                                                                                                                                                          |            |           |            |   |          |   |          |   |          |  
|Loans to joint ventures and associates                                                                                                                                                                                                                                                                                                 | 1          |           | 227.1      |   | 209.3    |   | 202.6    |   | 202.6    |  
|Other fixed asset investments                                                                                                                                                                                                                                                                                                          | 2          |           | 14.6       |   | 14.6     |   | 34.5     |   | 41.8     |  
|Current asset investments                                                                                                                                                                                                                                                                                                              | 3          |           | 16.4       |   | 16.4     |   | 20.8     |   | 20.8     |  
|Cash at bank and in hand                                                                                                                                                                                                                                                                                                               | 4          |           | 191.0      |   | 191.0    |   | 228.2    |   | 228.2    |  
|Borrowings and finance leases (excluding swap agreements)                                                                                                                                                                                                                                                                              | 5          |           | (1,024.4   | ) | (1,098.9 | ) | (1,218.5 | ) | (1,286.9 | )
|Other creditors: amounts falling due after more than one year                                                                                                                                                                                                                                                                          | 6          |           | (17.0      | ) | (17.0    | ) | (26.8    | ) | (26.8    | )
|Provisions for liabilities and charges                                                                                                                                                                                                                                                                                                 | 6          |           | (7.7       | ) | (7.7     | ) | (10.5    | ) | (10.5    | )
|Derivative financial instruments                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|Foreign currency and interest rate swap agreements                                                                                                                                                                                                                                                                                     | 7          |           | (6.3       | ) | (11.2    | ) | 27.9     |   | 18.4     |  
|Forward foreign exchange and other contracts                                                                                                                                                                                                                                                                                           | 8          |           | –          |   | 7.1      |   | –        |   | 7.5      |  
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|Net financial instruments                                                                                                                                                                                                                                                                                                              |            |           | (606.3     | ) | (696.4   | ) | (741.8   | ) | (804.9   | )
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|Financial assets                                                                                                                                                                                                                                                                                                                       |            |           | 449.1      |   |          |   | 486.1    |   |          |  
|Financial liabilities                                                                                                                                                                                                                                                                                                                  | 9          |           | (1,055.4   | ) |          |   | (1,227.9 | ) |          |  
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  
|Net financial instruments                                                                                                                                                                                                                                                                                                              |            |           | (606.3     | ) |          |   | (741.8   | ) |          |  
|                                                                                                                                                                                                                                                                                                                                       |            |           |            |   |          |   |          |   |          |  

|1. | For
       those bearing either no interest or a floating rate of interest it is
       deemed that the carrying amount approximates to the fair value. For those
       bearing a fixed rate of interest an assessment of the interest rate at
       which the Group could make the same loan under current market conditions
       has been made. Unless this differs significantly from the fixed rate it
       is also deemed that the carrying amount
approximates to the fair value. Where this does differ significantly, the fair
    value is based on the discounted value of future cash flows.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | For equity instruments listed on a recognised stock exchange the fair value is the quoted market price. For other equity instruments it is deemed that the carrying
amount approximates to the fair value.                                                                                                                                                                                                                                                                                                                                                                                                   
|3. | The
       fair value is the quoted market price. Where no quoted market price exists,
    it is deemed that the carrying amount approximates to the fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4. | As all bear either no interest or a floating rate of interest it is deemed that the carrying amount approximates to the fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | For those bearing a floating rate of interest it is deemed that the carrying amount approximates to the fair value. For those bearing a fixed rate of interest the fair
value is either the quoted market price where a liquid market exists or has been calculated using well established pricing models.                                                                                                                                                                                                                                                                                                   
|6. | The carrying amount is deemed to approximate to the fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|7. | The fair value is based on market valuations at the balance sheet date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|8. | This category of derivative financial instruments includes: the fair value of forward foreign exchange contracts of £0.2 million (2004: £7.5 million) and
the fair value of natural gas futures contracts of £6.9 million (2004: £nil). The fair values are based on market prices and forward exchange rates at the balance sheet date.                                                                                                                                                                                                                                                                     
|9. | Includes foreign currency and interest rate swap agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ii)
          Hedges As explained
      on
page 56 of the financial review under the heading management of financial
risks, the Groups policies are to use forward foreign exchange contracts
to hedge transactional currency exposures (principally arising through anticipated
sales and purchase transactions) and swap agreements to manage interest rate
risks and hedge structural
currency exposures. Currency
swaps are only held to change the currency of the Groups borrowings to
match better its net investments in its overseas subsidiaries. In
accordance with
the Groups accounting policies,the assets and liabilities arising from
these swap agreements are translated into sterling at the spot rate ruling at
the balance sheet date. The resulting exchange gains or losses are recognised
in the statement of total recognised gains and losses (to match the exchange
gains or losses on the net investments in the overseas subsidiaries). 
     The
carrying amount of the swap agreements (as shown in note 21 b) i)) is the result
of the exchange gains and losses recognised in the statement of total recognised
gains and losses, and is analysed in the deferred gains and losses table shown
below.

|                                                                                                             |  |                 |   |           |  
|------------------------------------------------------------------------------------------------------------ |  | --------------- | - | --------- | -
|                                                                                                             |  | Swap agreements |  
|                                                                                                             |  |                 |   |           |  
|                                                                                                             |  | Gains           |   | Losses    |  
|                                                                                                             |  | £ million       |   | £ million |  
|                                                                                                             |  |                 |   |           |  
|Deferred gains and losses                                                                                    |  |                 |   |           |  
|Deferred gains and losses on hedges at 1 October 2004                                                        |  | 34.9            |   | (7.0      | )
|Gains and losses on hedges maturing in 2005                                                                  |  | (31.7           | ) | 6.9       |  
|Deferred gains and losses on hedges recognised in the statement of total recognised gains and losses in 2005 |  | (0.8            | ) | (8.6      | )
|                                                                                                             |  |                 |   |           |  
|Deferred gains and losses on hedges at 30 September 2005                                                     |  | 2.4             |   | (8.7      | )
|                                                                                                             |  |                 |   |           |  

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| | Notes
    to the financial statements | 123
| | ------------------------------------- | ---
| |                                       |    
| |                                       |    

|21.Financial
    instrumentscontinued
    The unrecognised difference between the carrying amount and the fair value
    of the forward foreign exchange and other contracts and the swap agreements
    (as shown in note 21 b) i)) is analysed in the unrecognised gains and losses
    table below.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---------------------------------------------------------------- | --------- | ------------------- | - | ----- | -
|                                                                                                                                      |           | Forward
        foreign
        exchange
    and other contracts |           | Swap
    agreements |   |       |  
|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|                                                                                                                                      |           | Gains                                                            |           | Losses              |   | Gains |  
|£ million                                                                                                                             | £ million | £ million                                                        | £ million | £ million          
|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|Unrecognised gains and losses                                                                                                         |           |                                                                  |           |                     |   |       |  
|Unrecognised gains and losses on hedges at 1 October 2004                                                                             |           | 8.4                                                              |           | (0.9                | ) | 1.2   |  
|Gains and losses arising in previous years that were recognised in 2005                                                               |           | (7.9                                                             | )         | 0.7                 |   | (0.6  | )
|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|Gains and losses arising before 2004 that were not recognised in 2005                                                                 |           | 0.5                                                              |           | (0.2                | ) | 0.6   |  
|Gains and losses arising in 2005 that were not recognised in 2005                                                                     |           | 9.2                                                              |           | (2.4                | ) | 1.6   |  
|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|Unrecognised gains and losses on hedges at 30 September 2005                                                                          |           | 9.7                                                              |           | (2.6                | ) | 2.2   |  
|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|Of which                                                                                                                              |           |                                                                  |           |                     |   |       |  
|Gains and losses expected to be recognised in 2006                                                                                    |           | 8.1                                                              |           | (2.1                | ) | 0.1   |  
|Gains and losses expected to be recognised in 2007 or later                                                                           |           | 1.6                                                              |           | (0.5                | ) | 2.1   |  
|                                                                                                                                      |           |                                                                  |           |                     |   |       |  
|Under
      US GAAP, hedge accounting is not used in respect of the derivative financial
    instruments included in the table above.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|c) Currency
          exposuresAs outlined
      on page 56 in the financial review under the heading currency risk,
      it is the Groups policy to hedge against the potential impact on
      its profit and loss account of the currency gains and losses arising from
      monetary assets and liabilities not denominated in the operating or functional
      currency of the operating unit involved.
      After
taking account of the hedging transactions, there was no significant net profit
and loss account exposure to currency gains and losses arising from monetary
assets and liabilities at 30 September 2005.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|d) Financial
          instrumentsi) Financial assets The interest rate
and currency profile of the Groups financial assets (excluding short-term
debtors) at 30 September 2005 is shown below. The categories of the Groups
financial assets are shown in note 21 b) i).                                                                                                                                                                                                                                                                                                                                                             

|                   | 
|------------------ | 
|                   | 
|                   | 
|                   | 
|                   | 
|                   | 
|                   | 
|                   | 
|                   | 
|                   | 
|Sterling           | 
|US dollar          | 
|Australian dollar  | 
|South African rand | 
|Japanese yen       | 
|Canadian dollar    | 
|Thai baht          | 
|Other              | 
|                   | 
|Total              | 
|                   | 
|                   | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  |                                 |  | 2005                        |  |               |  | 2004       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  |  |  | ------------------------------- |  | --------------------------- |  | ------------- |  | ---------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  | Fixed
    rate financial assets |  | Fixed rate financial assets | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  |                                 |  |                             | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  |                                 |  | Weighted                    |  |               |  | Weighted   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  |                                 |  | average                     |  |               |  | average    | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  | Weighted                        |  | period for                  |  | Weighted      |  | period for | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  | average                         |  | which rate                  |  | average       |  | which rate | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  | interest rate                   |  | is fixed                    |  | interest rate |  | is fixed   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  |  | %                               |  | years                       |  | %             |  | years      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  | 
|US dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |  |  |  |  |  |  |  | 6.8                             |  | 2.5                         |  | 8.2           |  | 3.5        | 
|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |  |  |  |  |  |  |  |  | –                               |  | –                           |  | 5.2           |  | 0.3        | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |  |  |  |  | 
|Financial
      assets on which no interest is received comprise £13.2 million (2004: £24.3
      million) of non-redeemable equity instruments in other companies and £5.1
      million
(2004: £15.2 million) of loans to joint ventures and associates which have
no fixed date of repayment. 
     
The floating rate
financial assets, which principally comprise cash and deposits, current asset
investments and loans to joint ventures and associates, carry interest based
on different benchmark rates depending on the currency of the balance. 
     
The principal benchmark
rates for floating rate financial assets are LIBOR for sterling balances, US
LIBOR for US dollar balances,Australian bank bill rate for Australian dollar
balances, South African prime rate for South African rand balances and Japanese
yen LIBOR for Japanese yen balances.

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|124 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------
|    |                                                                |                                      
|    |                                                                |                                      

|21. Financial
    instrumentscontinued                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                    
|ii)
        Financial liabilitiesThe
  interest rate
and currency profile of the Groups financial liabilities including swaps
(excluding short-term creditors) at 30 September 2005 is shown below. The categories
of the
Groups financial liabilities are shown in note 21 b) i).
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                    
|Sterling                                                                                                                                                                                                                                                                            
|US dollar                                                                                                                                                                                                                                                                           
|Australian dollar                                                                                                                                                                                                                                                                   
|South African rand                                                                                                                                                                                                                                                                  
|Japanese yen                                                                                                                                                                                                                                                                        
|Canadian dollar                                                                                                                                                                                                                                                                     
|Thai baht                                                                                                                                                                                                                                                                           
|Other                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                    
|Total                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                    

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|Sterling                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|US dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Australian dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|South African rand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 
|Japanese yen                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
|Canadian dollar                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 
|Thai baht                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|The
      floating rate financial liabilities principally comprise debt which carries
      interest based on different benchmark rates depending on the currency of
      the balance. 
         
    The principal
    benchmark rates for floating rate financial liabilities are LIBOR for sterling
    balances, US LIBOR for US dollar balances,Australian bank bill rate for Australian
    dollar balances, South African prime rate for South African rand balances
    and Japanese yen LIBOR for Japanese yen balances. 
     
The maturity profile
of borrowings is set out in note 20 b). Floating rate financial liabilities other
than borrowings are mainly employee incentive provisions. These are expected
to be utilised over the period to 2016 depending on the future choices of the
relevant
employees. Financial liabilities on which no interest is paid principally relate
to creditors due after more than one year. The majority of the amount relates
to deposits for cylinder rentals. It is not anticipated that this balance will
reduce significantly in the short to medium term. The remaining balances falling
due after more than one year are expected to be paid or
utilised by 2009.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|22. Provisions
    for liabilities and charges | 
|---------------------------------------------- | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|                                               | 
|At 1 October 2004                              | 
|Exchange adjustment                            | 
|Provided in the year                           | 
|Released in the year                           | 
|Utilised in the year                           | 
|Other movements1                               | 
|                                               | 
|At 30 September 2005                           | 
|                                               | 

|1. | The other
    movements in deferred tax relate mainly to transfers to current tax.
|-- | ----------------------------------------------------------------------------------

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| | Notes
    to the financial statements | 125
| | ------------------------------------- | ---
| |                                       |    

22. Provisions for liabilities and chargescontinued

Incentive and other employee provisions include long-term share incentive awards and deferred compensation plans. Note 7 contains further details of the long-term share incentive
units.      Provision
for uninsured losses covers third party liabilities or claims. Due to the time
frame that is often involved in such claims, a significant part of this provision
is subject to actuarial valuation. Where this is not appropriate, other external
assessments are used.     

Environmental
provisions have been set aside to cover the costs of remediation for a number
of hazardous waste sites. The costs are expected to be incurred between 2006
and
2030. Due to the period over which this expenditure is likely to be incurred,
the provision has been discounted at a rate of four per cent. The effect of discounting
is £5 million. Management expects that payments will be
approximately £7 million in 2006, approximately £3 million each year
for the next four years and £12
million in total thereafter. Management uses its judgement and experience to
make an appropriate provision. Management believes that there is no reasonable
possibility of a loss materially in excess of the amounts provided.     During
the year, the provision for de-commissioning costs was reviewed. As a result of
revising previous estimates, an amount of £20.2 million was
recognised for future obligations with a corresponding increase in the carrying value of tangible fixed assets. Due to the period over which this expenditure is likely to be incurred, between 2006 and 2054, and the different regions in which it will
be incurred, the provision has been discounted at rates of between four and six per cent. The effect of discounting is £32
million. The timing of actual expenditure will vary depending on contractual supply
arrangements with customers.Further information on deferred tax is disclosed in note 4.

|23. Share capital                                                      |                  |                  |                    |                    |  |       |  |       | 
|---------------------------------------------------------------------- | ---------------- | ---------------- | ------------------ | ------------------ |  | ----- |  | ----- | 
|                                                                       |                  |                  |                    |                    |  |       |  |      
|                                                                       | Number of shares |                  |                    |                    | 
|i) Analysis at 30 September                                            |                  |                  |                    |                   
|2005
    million                                                       |                  | 2004
    million | 2005
    £ million | 2004
    £ million
|                                                                       |                  |                  |                    |                   
|                                                                       |                  |                  |                    |                    |  |       |  |       | 
|Equity capital:                                                        |                  |                  |                    |                    |  |       |  |       | 
|Issued capital  Ordinary shares of 25p each, called up and fully paid |                  | 502.5            |                    | 498.8              |  | 125.6 |  | 124.7 | 
|Unissued capital  unclassified shares of 25p each                     |                  | 87.5             |                    | 91.2               |  | 21.9  |  | 22.8  | 
|                                                                       |                  |                  |                    |                    |  |       |  |       | 
|Authorised                                                             |                  |                  |                    |                    |  | 147.5 |  | 147.5 | 
|                                                                       |                  |                  |                    |                    |  |       |  |       | 

|                                                            | 
|----------------------------------------------------------- | 
|ii) Share issues                                            | 
|                                                            | 
|                                                            | 
|Issues of Ordinary shares of 25p each during the year were: | 
|Under the savings related share option scheme               | 
|Under the senior executives share option scheme             | 
|                                                            | 

24. Reserves

|a) Group                                       | 
|---------------------------------------------- | 
|                                               | 
|                                               | 
|                                               | 
|At 1 October 2004                              | 
|Total recognised gains and losses for the year | 
|Transfers in relation to pensions              | 
|Reversal of goodwill on disposal of            | 
|a business                                     | 
|Consideration paid for the purchase of own     | 
|shares held in an ESOP trust                   | 
|Consideration received for the sale of own     | 
|shares held in an ESOP trust                   | 
|Credit in respect of employee share schemes    | 
|Dividends                                      | 
|Premium on share issues (net)                  | 
|                                               | 
|At 30 September 2005                           | 
|                                               | 

i) The undistributed profits of Group undertakings may be liable to overseas and/or UK tax (after allowing for double tax relief) if distributed as dividends. There are no material
exchange control restrictions on the remittance of funds to the UK.
ii) Goodwill written off against reserves in respect of continuing businesses acquired prior to 30 September 1998 amounts to £160.4 million (2004: £154.0 million).
iii)
In accordance with the Groups accounting policy, exchange losses (net of gains) on net borrowings charged to reserves in the year amounted to £5.8 million (2004: £59.7 million gain).
iv) There are no non-equity shareholders
interests in the share capital and reserves of the Group.
v) The amount of the pensions reserves is equivalent to the net pensions
liabilities (see note 8) adjusted for current tax of £42.1 million (2004: £22.0
million, 2003:
£nil).vi)
Own shares
At 30 September 2005, 5.3 million shares in the company were held
pending
    the exercise of share options. Based on the companys
  share price at 30 September 2005 of 1153p, the market value of own shares held
  was
£61.4 million. This compares with the acquisition cost above. The amount
  paid for the shares reduces profit available for distribution.
     Information on share option schemes appears in the report on remuneration and in notes 7 and 23.

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|126 | The BOC
          Group
plcAnnual
report and accounts 2005 | Notes to
    the financial statements
|--- | ---------------------------------------------------------- | -------------------------------------
|    |                                                            |                                      

24. Reservescontinued

|b) Parent company                                                                                                                                 
|--------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|At 1 October 2004                                                                                                                                 
|Profit for the financial year                                                                                                                     
|Dividends                                                                                                                                         
|Premium on share issues (net)                                                                                                                     
|Credit in respect of employee share schemes                                                                                                       
|Net increase in investment in own shares                                                                                                          
|                                                                                                                                                  
|At 30 September 2005                                                                                                                              
|                                                                                                                                                  
|The
      premium on share issues represents amounts paid to The BOC Group plc for
    the issue of shares under the Groups share option schemes.

25. Financial
      commitments

|a)
    Annual operating lease commitments | 
|----------------------------------------- | 
|                                          | 
|                                          | 
|                                          | 
|                                          | 
|                                          | 
|On leases expiring:                       | 
|Within one year                           | 
|Between one and two years                 | 
|Between two and five years                | 
|Over five years                           | 
|                                          | 
|                                          | 
|                                          | 

|                                            | 
|------------------------------------------- | 
|                                            | 
|                                            | 
|Rentals are due under operating leases from | 
|1 October 2005 to completion as follows:    | 
|Year to 30 September 2006                   | 
|Year to 30 September 2007                   | 
|Year to 30 September 2008                   | 
|Year to 30 September 2009                   | 
|Year to 30 September 2010                   | 
|Thereafter                                  | 
|                                            | 
|                                            | 
|                                            | 

b) Other commitmentsThe Group is committed to make future purchases under take-or-pay contracts. The main commitments at 30 September 2005 relate to the purchase of raw materials, principally helium, where
the price of the product is linked to the prevailing market prices of that product. Obligations under such contracts in effect at 30 September 2005 are as follows:

|                                                                                                                                                                            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Year ending 30 September                                                                                                                                                    | 
|                                                                                                                                                                            | 
|2006                                                                                                                                                                        | 
|2007                                                                                                                                                                        | 
|2008                                                                                                                                                                        | 
|2009                                                                                                                                                                        | 
|2010                                                                                                                                                                        | 
|Thereafter                                                                                                                                                                  | 
|                                                                                                                                                                            | 
|                                                                                                                                                                            | 
|                                                                                                                                                                            | 
|For the
      year ended 30 September 2005 total purchases made relating to these contracts
      amounted to £54.3 million (2004: £55.0 million, 2003: £65.8
    million). | 

---



Back to Contents

| | Notes
        to the financial statements | 127
| | ----------------------------------------- | ---
| |                                           |    

26. Contingent
liabilities and legal proceedings



|a)
    Contingent liabilities                | 
|-------------------------------------------- | 
|                                             | 
|                                             | 
|                                             | 
|                                             | 
|                                             | 
|Guarantees of joint
    ventures borrowings | 
|Guarantees of subsidiaries borrowings       | 
|Other guarantees1                            | 
|                                             | 
|                                             | 
|                                             | 

|1. | Other guarantees
    are mainly performance guarantees issued in the ordinary course of business.
|-- | -------------------------------------------------------------------------------------------------

b) Legal proceedingsBOC Group companies are parties to various legal proceedings in the ordinary course of business, including some in which claims for damages in large amounts have been asserted.The
outcome of litigation to which BOC Group companies are party cannot be readily
foreseen, but the directors believe that such litigation should be disposed of
without material adverse effect on the Groups financial condition or profitability.

Welding fumes litigationA US subsidiary of BOC,The BOC Group, Inc., currently is party to a number of
lawsuits in the US for alleged injuries resulting from exposure to manganese, asbestos and/or toxic fumes in connection with the welding process. The BOC Group, Inc. has not manufactured welding rods in the US since 1986 when the welding electrodes
business was sold. The BOC Group, Inc. ceased selling welding rods in the US manufactured by others when the sale of the US packaged gas business, including the operations that distributed packaged gases and welding equipment, was completed in July
2004.

Manganese
litigationAt
30 September 2005, there were a total of approximately 8,574 claimants
(Total Claimants) in pending manganese related cases in both US federal
and state courts that name The BOC Group, Inc. as a defendant, a net decrease
of approximately 1,100 claimants from 30 September 2004. The BOC Group, Inc. is
 typically one of several defendants in these cases that claim compensatory and
punitive damages, in most cases for unspecified amounts, for alleged neurological
injury, including Parkinsons disease, through exposure to manganese in
welding  fumes. Of the Total Claimants, approximately 4,607 claimants have filed
in, or been transferred for pre-trial purposes to, the federal district court
in the Northern District of Ohio, where a multi-district litigation (MDL) proceeding
has been
commenced, and approximately 50 claimants are in process to be transferred to
or from the MDL. The MDL proceeding is a vehicle for coordinating pre-trial proceedings
in cases pending in different federal district courts in the US. It is currently
 contemplated that the MDL court will try three cases during the MDL proceeding. The
first such case is currently scheduled for February 2006. In addition to the
cases in federal court,The BOC Group, Inc. is a defendant in a number of similar
cases
pending in state courts, which are in different stages of procedural development,
and certain cases are scheduled for trial from time to time. The BOC Group, Inc.
has been a co-defendant in other manganese related claims that have been resolved
as  follows. From 1 January 1997 to 30 September 2005, 3,965 claims were dismissed.
Through 30 September 2005, seven cases were tried to final jury verdicts in favour
of
the defendants, including The BOC Group, Inc., and one case was tried to a final

jury verdict in favour of the plaintiffs, which is being appealed.

Asbestos
litigationAt
30 September 2005, there were a total of approximately 15,966 claimants in pending
asbestos related cases that name The BOC Group, Inc. as a defendant, a net decrease
of approximately 600 from 30 September 2004. The BOC Group, Inc. is typically
one of a large number of defendants in these cases that claim compensatory and
punitive
damages, in most cases for unspecified amounts, for alleged injuries, including
cancer, through exposure to asbestos in welding fumes or from welding consumables.
A very small number of these claimants allege injuries from exposure to asbestos
in non-welding rod products and premises. The BOC Group, Inc. has been a co-defendant
in other asbestos related claims that have been resolved as follows. From 1 January
1997 to 30 September 2005, 11,776 claims were dismissed and 75 claims were
dismissed on summary judgments. Through 30 September 2005, nine cases were tried
to final jury verdicts in favour of the defendants, including The BOC Group,
Inc., and one case was tried to a final jury verdict in favour of the plaintiffs,
which is
being appealed.

The BOC Group,
Inc. believes that it has strong defences to the claims asserted in all of the
various manganese and asbestos related cases and intends to defend vigorously
such claims. In the manganese related claims,The BOC Group, Inc. believes that
recent relevant scientific literature, based on epidemiological studies, strongly
supports its defence of such claims. Based on its experience to date, together
with its current
assessment of the merits of the claims being asserted and applicable insurance,
BOC believes that continued defence and resolution of the welding fumes litigation
will not have a material adverse effect on its financial condition or profitability
and no provision has been made. Nonetheless, it is not possible to predict either
the number of future claims or the number of claimants that any future claims
may present. In addition, the outcome of welding fume cases, either involving
BOC or
other defendants, is inherently uncertain and always difficult to predict, and
BOC cannot provide any assurances that any future resolutions of these types
of claims will necessarily be consistent with its experience to date. In the
event of an adverse outcome to any of the proceedings, a liability would be recognised
if it was considered likely that it would give rise to an outflow of future economic
benefits. Where there is applicable insurance, this would be recognised when
its
recoverability was virtually certain.

Fluorogas litigationThe Fluorogas litigation is now settled and is no longer the subject of any legal
proceedings. More details are given on page 59.

---



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|128 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes
    to the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------
|    |                                                                |                                      

|27.Cash
    flow                                     
|-----------------------------------------------------
|a)Net
          cash inflow from operating activities

|                                                            |       |  |                   |   |                    |   |               |  
|----------------------------------------------------------- | ----- |  | ----------------- | - | ------------------ | - | ------------- | -
|                                                            | Notes |  | 2005£     million |   | 2004£

    million |   | 2003£ million |  
|                                                            |       |  |                   |   |                    |   |               |  
|Total operating profit before exceptional items             |       |  | 564.2             |   | 576.9              |   | 505.6         |  
|Depreciation and amortisation                               |       |  | 301.9             |   | 324.0              |   | 333.4         |  
|Net retirement benefits charge less contributions           |       |  | (14.4             | ) | (15.9              | ) | 5.6           |  
|Operating profit before exceptional items of joint ventures |       |  | (107.1            | ) | (99.4              | ) | (86.8         | )
|Operating profit before exceptional items of associates     |       |  | (20.5             | ) | (13.1              | ) | (11.4         | )
|Change in stocks                                            |       |  | (21.0             | ) | (25.0              | ) | (16.6         | )
|Change in debtors                                           |       |  | (58.9             | ) | (35.1              | ) | 2.5           |  
|Change in creditors                                         |       |  | 35.8              |   | 44.0               |   | 10.8          |  
|Exceptional cash flows                                      |       |  | (16.9             | ) | (11.9              | ) | (28.3         | )
|Other                                                       |       |  | 2.4               |   | 14.0               |   | (14.7         | )
|                                                            |       |  |                   |   |                    |   |               |  
|Net cash inflow from operating activities                   |       |  | 665.5             |   | 758.5              |   | 700.1         |  
|                                                            |       |  |                   |   |                    |   |               |  
|b) Reconciliation of net cash flow to movement in net debt  |       |  |                   |   |                    |   |               |  
|Decrease/(increase) in cash                                 |       |  | 50.2              |   | (150.1             | ) | 102.5         |  
|Decrease in debt                                            | 27(d) |  | (165.7            | ) | (180.7             | ) | (128.7        | )
|Decrease/(increase) in liquid resources                     |       |  | 14.3              |   | (20.8              | ) | 16.2          |  
|                                                            |       |  |                   |   |                    |   |               |  
|Change in net debt resulting from cash flows                |       |  | (101.2            | ) | (351.6             | ) | (10.0         | )
|Net borrowings assumed at acquisition                       |       |  | 6.2               |   | 4.7                |   | 0.8           |  
|Net (borrowings)/liquid resources eliminated on disposal    |       |  | (40.9             | ) |                   |   | 31.0          |  
|Inception of finance leases                                 |       |  | 7.1               |   | 0.2                |   |              |  
|Exchange adjustment                                         |       |  | 6.1               |   | (59.0              | ) | 20.7          |  
|                                                            |       |  |                   |   |                    |   |               |  
|Movement in net debt in the year                            |       |  | (122.7            | ) | (405.7             | ) | 42.5          |  
|Net debt at 1 October                                       |       |  | 962.4             |   | 1,368.1            |   | 1,325.6       |  
|                                                            |       |  |                   |   |                    |   |               |  
|Net debt at 30 September                                    |       |  | 839.7             |   | 962.4              |   | 1,368.1       |  
|                                                            |       |  |                   |   |                    |   |               |  
|                                                            |       |  |                   |   |                    |   |               |  

|c)Analysis
          of net debt
|--------------------------------

|                                                  |  |                                         |   |                     |   |                                                                               |  |                                        |   |                                  |   |                                |  
|------------------------------------------------- |  | --------------------------------------- | - | ------------------- | - | ----------------------------------------------------------------------------- |  | -------------------------------------- | - | -------------------------------- | - | ------------------------------ | -
|                                                  |  | At
   1 October
   2004
   £
   million |   | Cash flow
£ million |   | Acquisitions/
   disposals
   (excluding
   cash and
   overdrafts)
£ million |  | Other
   non-cash
   changes
£ million |   | Exchange
   adjustment
£ million |   | At30 September2005£
   million |  
|                                                  |  |                                         |   |                     |   |                                                                               |  |                                        |   |                                  |   |                                |  
|Cash at bank and in hand due within one year      |  | 228.2                                   |   | (36.9               | ) |                                                                              |  |                                       |   | (0.3                             | ) | 191.0                          |  
|Borrowings and finance leases due within one year |  | (262.1                                  | ) | 205.8               |   | 11.4                                                                          |  | (193.9                                 | ) | (20.4                            | ) | (259.2                         | )
|Borrowings and finance leases due beyond one year |  | (928.5                                  | ) | (67.7               | ) | 23.3                                                                          |  | 186.8                                  |   | 14.6                             |   | (771.5                         | )
|                                                  |  |                                         |   |                     |   |                                                                               |  |                                        |   |                                  |   |                                |  
|Net borrowings and finance leases                 |  | (962.4                                  | ) | 101.2               |   | 34.7                                                                          |  | (7.1                                   | ) | (6.1                             | ) | (839.7                         | )
|                                                  |  |                                         |   |                     |   |                                                                               |  |                                        |   |                                  |   |                                |  
|                                                  |  |                                         |   |                     |   |                                                                               |  |                                        |   |                                  |   |                                |  

|d) (Decrease)/increase
    in debt
|----------------------------------

|                               |  |                   |   |                |   |                    |  
|------------------------------ |  | ----------------- | - | -------------- | - | ------------------ | -
|                               |  | 2005£     million |   | 2004
£ million |   | 2003
£     million |  
|                               |  |                   |   |                |   |                    |  
|6.75% Bonds 2004               |  |                  |   | (125.0         | ) |                   |  
|61/4% Notes
2002               |  |                  |   |               |   | (38.2              | )
|Medium-term notes              |  | (168.6            | ) | 74.8           |   | 93.7               |  
|European Investment Bank loans |  |                  |   |               |   | (72.4              | )
|Repayment of commercial paper  |  | (5.5              | ) | (42.6          | ) | (90.7              | )
|Other (net)                    |  | 8.4               |   | (87.9          | ) | (21.1              | )
|                               |  |                   |   |                |   |                    |  
|Decrease in debt               |  | (165.7            | ) | (180.7         | ) | (128.7             | )
|                               |  |                   |   |                |   |                    |  

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|Notes to
    the financial statements | 129
|------------------------------------- | ---

|28.Acquisitions
    and disposals
|---------------------------------
|a)Cash
          flow            

|                                                                |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  
|--------------------------------------------------------------- |  | --------------------- | - | ---------------------- | - | -------------------------- | - | ------------------- | - | ---------------------- | - | ------------------- | -
|                                                                |  | 2005                  |   | 2004                   |   | 2003                       |  
|                                                                |  |                       |   |                        |   |                            |  
|                                                                |  | Acquisitions£ million |   | Disposals£     million |   | Acquisitions
£     million |   | Disposals
£ million |   | Acquisitions
£ million |   | Disposals
£ million |  
|                                                                |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  
|Cash flow arising on the acquisition and disposal of businesses |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  
|Goodwill                                                        |  |                      |   | 24.7                   |   |                           |   | 4.6                 |   |                       |   |                    |  
|Intangible fixed assets                                         |  | (1.3                  | ) | 0.1                    |   |                           |   |                    |   | (2.4                   | ) |                    |  
|Tangible fixed assets                                           |  | (17.2                 | ) | 167.7                  |   | (3.7                       | ) | 102.3               |   | (61.5                  | ) | 0.8                 |  
|Joint ventures, associates and other investments                |  | (30.3                 | ) | 14.7                   |   | (80.6                      | ) | 10.2                |   | (4.8                   | ) | 1.1                 |  
|Stocks                                                          |  | (1.5                  | ) | 12.9                   |   | (0.5                       | ) | 16.2                |   | (2.7                   | ) | 0.1                 |  
|Debtors                                                         |  | (11.4                 | ) | 84.2                   |   | (5.3                       | ) | 25.2                |   | (15.3                  | ) | 0.1                 |  
|Cash at bank and in hand                                        |  | (2.3                  | ) | 23.3                   |   | (2.8                       | ) |                    |   |                       |   | 0.2                 |  
|Creditors including taxation                                    |  | 11.7                  |   | (72.6                  | ) | 2.5                        |   | 3.8                 |   | 7.8                    |   | (0.1                | )
|Borrowings                                                      |  | 6.2                   |   | (40.9                  | ) | 4.7                        |   |                    |   | 0.8                    |   |                    |  
|Minorities                                                      |  | (0.7                  | ) | (75.2                  | ) | (0.8                       | ) | 0.2                 |   | (2.2                   | ) | 0.3                 |  
|                                                                |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  
|Net assets (acquired)/disposed of                               |  | (46.8                 | ) | 138.9                  |   | (86.5                      | ) | 162.5               |   | (80.3                  | ) | 2.5                 |  
|Goodwill on acquisitions of subsidiaries                        |  | (16.8                 | ) |                       |   | (2.9                       | ) |                    |   | (46.7                  | ) |                    |  
|Goodwill on acquisitions of joint ventures and associates       |  |                      |   |                       |   | 41.5                       |   |                    |   | (8.0                   | ) |                    |  
|Goodwill in reserves written off on disposals                   |  |                      |   | 1.0                    |   |                           |   | 15.3                |   |                       |   |                    |  
|Surplus/(deficit) over book value on disposals                  |  |                      |   | 84.2                   |   |                           |   | (79.5               | ) |                       |   | (0.7                | )
|                                                                |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  
|(Acquisition)/disposal price                                    |  | (63.6                 | ) | 224.1                  |   | (47.9                      | ) | 98.3                |   | (135.0                 | ) | 1.8                 |  
|Deferred payments and receipts1                                 |  | 6.5                   |   |                       |   | (3.0                       | ) |                    |   | (0.5                   | ) | 2.1                 |  
|                                                                |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  
|                                                                |  | (57.1                 | ) | 224.1                  |   | (50.9                      | ) | 98.3                |   | (135.5                 | ) | 3.9                 |  
|                                                                |  |                       |   |                        |   |                            |   |                     |   |                        |   |                     |  

|1. | Deferred
        payments and receipts include amounts for current years and payments
    and/or receipts in respect of prior years.
|-- | ------------------------------------------------------------------------------------------------------------------------------------

In September
    2005, BOC acquired G Van Dongen Holding BV, expanding Gists primary
    business into Europe.     In March 2005, BOC acquired 50 per cent of Maanshan BOC-Ma Steel Gases Co Limited, the joint venture formed to supply the industrial gases needs of Ma Steel
in China.     During 2005, BOC made an additional equity investment in Compania de Nitrogeno de Cantarell (CNC) in proportion to its 65 per cent equity shareholding.     In
March 2005, BOCs South African subsidiary,African Oxygen Limited (Afrox)
completed the sale of its majority shareholding in Afrox Healthcare Limited
to a consortium led by two major black empowerment groups. Profit on disposal
of this business amounted to £84.9
million. Afrox has retained a significant interest in the hospitals business
through a 20 per cent holding in the new company. Following this disposal, Afrox
accounts
for its share of the business on an equity basis, taking its share of operating
profit and net interest into account.     In
2005, the Group also recognised a further £13.2 million profit on disposal
of the US packaged gas business. The additional proceeds, received in November
2005, had been subject to certain conditions at the time of disposal in July
2004.     In
December 2004, BOC, through its subsidiary Thai Industrial Gases Public Co Limited,
sold its shares in Unique Gas and Petrochemicals Public Co
Limited.

|b)Fair
          value of acquisitions                         
|---------------------------------------------------------------
|Provisionally
    there were no fair value adjustments in 2005.

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|130                                              | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes
    to the financial statements
|------------------------------------------------ | -------------------------------------------------------------- | -------------------------------------
|                                                 |                                                                |                                      
|28.                                              | Acquisitions
    and disposalscontinued                        |                                      
|The
    fair value of acquisitions in 2004 were:

|                                                          |  |                                   |   |                                     |   |                                                            |  
|--------------------------------------------------------- |  | --------------------------------- | - | ----------------------------------- | - | ---------------------------------------------------------- | -
|                                                          |  | CNC
   book value
   £
   million |   | Other
   book value
   £
   million |   | Total book
   value of
   businesses
   acquired
£ million |  
|                                                          |  |                                   |   |                                     |   |                                                            |  
|Tangible fixed assets                                     |  |                                  |   | (3.7                                | ) | (3.7                                                       | )
|Joint ventures, associates and other investments          |  | (74.1                             | ) | (6.5                                | ) | (80.6                                                      | )
|Stocks                                                    |  |                                  |   | (0.5                                | ) | (0.5                                                       | )
|Debtors                                                   |  |                                  |   | (5.3                                | ) | (5.3                                                       | )
|Cash at bank and in hand                                  |  |                                  |   | (2.8                                | ) | (2.8                                                       | )
|Creditors including taxation                              |  |                                  |   | 2.5                                 |   | 2.5                                                        |  
|Borrowings                                                |  |                                  |   | 4.7                                 |   | 4.7                                                        |  
|Minorities                                                |  |                                  |   | (0.8                                | ) | (0.8                                                       | )
|                                                          |  |                                   |   |                                     |   |                                                            |  
|Net (assets) acquired                                     |  | (74.1                             | ) | (12.4                               | ) | (86.5                                                      | )
|                                                          |  |                                   |   |                                     |   |                                                            |  
|Payment                                                   |  | 32.6                              |   | 18.3                                |   | 50.9                                                       |  
|Deferred payment                                          |  |                                  |   | (3.0                                | ) | (3.0                                                       | )
|                                                          |  |                                   |   |                                     |   |                                                            |  
|Consideration                                             |  | 32.6                              |   | 15.3                                |   | 47.9                                                       |  
|Goodwill on acquisitions of subsidiaries                  |  |                                  |   | (2.9                                | ) | (2.9                                                       | )
|Goodwill on acquisitions of joint ventures and associates |  | 41.5                              |   |                                    |   | 41.5                                                       |  
|                                                          |  |                                   |   |                                     |   |                                                            |  
|                                                          |  | 74.1                              |   | 12.4                                |   | 86.5                                                       |  
|                                                          |  |                                   |   |                                     |   |                                                            |  

There were no fair value adjustments in 2004.

|The
    fair value of acquisitions in 2003 were:         
|---------------------------------------------------------
|                                                         
|                                                         
|                                                         
|Intangible assets                                        
|Tangible fixed assets                                    
|Joint ventures, associates and other investments         
|Stocks                                                   
|Debtors                                                  
|Creditors including taxation                             
|Borrowings                                               
|Minorities                                               
|                                                         
|Net (assets) acquired                                    
|                                                         
|Payment                                                  
|Deferred payment                                         
|                                                         
|Consideration                                            
|Goodwill on acquisitions of subsidiaries                 
|Goodwill on acquisitions of joint ventures and associates
|                                                         
|                                                         
|                                                         

The fair value adjustments were all in respect of the acquisition of the Canadian packaged gases business of Air Products.

c)
        Exchange of business
        In January 2003,
    the Group combined its Japanese gases business Osaka Sanso Kogyo KK (OSK)
    with part of Air Liquide Japan to form Japan Air Gases Ltd. The net effect
    of the transaction was to exchange 55 per cent of the OSK business for a
    45 per cent equity share in Japan Air Gases Ltd. This transaction was accounted
    for in accordance with UK GAAP (UITF31  Exchange of businesses
    or other non-monetary assets for an  interest in a subsidiary, joint venture
    or associate).The unrealised profit of £8.2
    million on the disposal of OSK was recognised in the statement of total recognised
    gains and losses.

---



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| | Notes
    to the financial statements | 131
| | ------------------------------------- | ---



|28. Acquisitions and disposalscontinued              |  |                                                       |  
|---------------------------------------------------- |  | ----------------------------------------------------- | -
|                                                     |  |                                                       |  
|                                                     |  | Total
  book value
  of business
  disposed
£ million |  
|Value of assets disposed                             |  |                                                       |  
|                                                     |  |                                                       |  
|Tangible fixed assets                                |  | 169.3                                                 |  
|Joint ventures, associates and other investments     |  | 3.0                                                   |  
|Stocks                                               |  | 10.3                                                  |  
|Debtors                                              |  | 69.2                                                  |  
|Net liquid resources                                 |  | 30.9                                                  |  
|Creditors including taxation                         |  | (86.5                                                 | )
|Minorities                                           |  | (3.1                                                  | )
|                                                     |  |                                                       |  
|                                                     |  | 193.1                                                 |  
|Adjustment to reflect retention of 45 per cent share |  | (86.9                                                 | )
|                                                     |  |                                                       |  
|Net assets disposed                                  |  | 106.2                                                 |  
|                                                     |  |                                                       |  
|                                                     |  |                                                       |  

|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  
|------------------------------------------------ |  | -------------------------------------------------------------------------------------------------- | - | ----------------------------------- |  | ----------------------------------------------------------------------------------------------------- | - | ----------------------------------------------------------------- | - | ----------------------------------------------------------------------------------------------- | -
|Value of assets acquired                         |  | Air
           Liquide
           Japan
     assets
     contributed
     book
    value
£ million |   | Valuation
     adjustments£ million |  | Air
           Liquide
           Japan
     assets
     contributed
     at
    fair value
£ million |   | OSK
     assets
     contributed
     at
    fair value
£ million |   | Total
           fair
           value
           of
           combined
    business
£ million |  
|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  
|Tangible fixed assets                            |  | 185.0                                                                                              |   | 40.8                                |  | 225.8                                                                                                 |   | 169.3                                                             |   | 395.1                                                                                           |  
|Joint ventures, associates and other investments |  | 10.7                                                                                               |   |                                    |  | 10.7                                                                                                  |   | 3.0                                                               |   | 13.7                                                                                            |  
|Stocks                                           |  | 19.4                                                                                               |   |                                    |  | 19.4                                                                                                  |   | 10.3                                                              |   | 29.7                                                                                            |  
|Debtors                                          |  | 141.6                                                                                              |   |                                    |  | 141.6                                                                                                 |   | 69.2                                                              |   | 210.8                                                                                           |  
|Net (borrowings)/liquid resources                |  | (37.9                                                                                              | ) |                                    |  | (37.9                                                                                                 | ) | 30.9                                                              |   | (7.0                                                                                            | )
|Creditors including taxation                     |  | (129.0                                                                                             | ) | 0.2                                 |  | (128.8                                                                                                | ) | (86.5                                                             | ) | (215.3                                                                                          | )
|Minorities                                       |  | (9.2                                                                                               | ) |                                    |  | (9.2                                                                                                  | ) | (3.1                                                              | ) | (12.3                                                                                           | )
|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  
|                                                 |  | 180.6                                                                                              |   | 41.0                                |  | 221.6                                                                                                 |   | 193.1                                                             |   | 414.7                                                                                           |  
|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  
|BOC Group share of assets (45 per cent)          |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   | 186.6                                                                                           |  
|Value of OSK retained by the Group (45 per cent) |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   | (86.9                                                                                           | )
|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  
|Fair value of assets acquired                    |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   | 99.7                                                                                            |  
|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  
|                                                 |  |                                                                                                    |   |                                     |  |                                                                                                       |   |                                                                   |   |                                                                                                 |  

|The
         following fair value adjustments were made to the book value of the
    assets and liabilities of the Air Liquide Japan business acquired:
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|Valuations                                                                                                                                             
|Tangible fixed assets                                                                                                                                  
|Provisions                                                                                                                                             
|Alignment of accounting policies                                                                                                                       
|Pension liabilities                                                                                                                                    
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|Unrealised gain on disposal                                                                                                                            
|                                                                                                                                                       
|Consideration, fair value of assets acquired                                                                                                           
|Net assets disposed                                                                                                                                    
|                                                                                                                                                       
|                                                                                                                                                       
|Negative goodwill credited on disposal of a subsidiary                                                                                                 
|                                                                                                                                                       
|Unrealised profit on disposal of a subsidiary                                                                                                          
|                                                                                                                                                       

29. Related party transactions
During the year,
interest income of £13.8 million (2004: £7.3 million, 2003: £7.6
million) was received from the Cantarell joint venture in Mexico.During
the year, the Group was invoiced £45.9 million in respect of purchases of production plants from Linde BOC Process Plants in the US. At 30
September 2005, £1.9 million was payable in respect of these invoices.
No material purchases were made in 2004 or 2003.The Group had no other material related party transactions that might reasonably be expected to influence decisions made by the users of these
accounts.

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|132 | The
          BOC Group
plcAnnual
report and accounts 2005 | Notes to
    the financial statements
|--- | ---------------------------------------------------------- | -------------------------------------



30. US accounting information

a) Summary of differences between UK and US generally accepted accounting principles and other US accounting informationThe financial statements of The BOC Group plc are prepared in accordance with accounting principles generally accepted in the UK (UK GAAP), which differ in certain significant respects
from accounting principles generally accepted in the US (US GAAP).Set
out below is a summary of the more significant adjustments which would be required
if US GAAP had been applied, together with reconciliations of net profit and
shareholders funds from a UK GAAP to a US GAAP basis. Also presented on a US GAAP basis are a movement in shareholders funds,
a consolidated cash flow statement, information on earnings per share, information
on stock based
compensation and details of recently issued US accounting pronouncements.

Goodwill and other intangible assets
Under UK GAAP,
goodwill arising on acquisitions before 1998 accounted for under the purchase
method has been eliminated against shareholders funds. Additionally, UK GAAP requires
that on subsequent disposal or closure of a business, any goodwill previously taken directly to shareholders funds
is then charged against income. The Group adopted FRS10 in 1999, which requires
goodwill on subsequent acquisitions to be capitalised and amortised over a period
not exceeding 20 years.Under
UK GAAP the Group has recognised negative goodwill on certain acquisitions. Under
US GAAP, the excess of the amounts assigned to the assets acquired and liabilities
assumed over the acquisition cost is adjusted against the values of the acquired
long-lived assets in accordance with SFAS 141. This does not result in a difference
between the shareholders funds under UK GAAP and US GAAP,
although there is a difference in the classification between tangible and intangible
assets.Under US GAAP (SFAS142) goodwill continues to be capitalised, although no amortisation is charged to the income statement. Instead, an annual impairment test
is carried out, with any identified impairment loss recorded in the income statement.Other
intangible assets with a finite life continue to be amortised under both UK and
US GAAP. UK GAAP is highly prescriptive with regard to the recognition  of intangible
assets, although US GAAP rules result in the recognition of a greater amount
of intangible assets. Therefore, differences arise in the classification of some
intangible assets and goodwill between UK and US GAAP. Amortisation that has

been charged against goodwill under UK GAAP is added back in the reconciliation
to net income on a US GAAP basis.The average life
of other intangible assets is ten years and the annual amortisation charge under
US GAAP is expected to be approximately £1 million.

Impairment of goodwill
Under UK GAAP, goodwill impairment reviews are carried out at the end of the first financial year following an acquisition, and also when an indicator of impairment exists. The impairment
is measured by comparing the carrying value of the goodwill with the higher of the net realisable value and the value in use.Under US GAAP, goodwill impairment reviews are also conducted when an indicator of impairment exists, in addition to an annual goodwill impairment test, as
required by SFAS142. The impairment is measured by comparing the carrying value of a reporting unit to its fair value. Where the carrying value is greater than the fair value, the impairment loss is based on the excess of the carrying value of
goodwill in the reporting unit over the implied fair value of the goodwill.

Profit or loss on the partial disposal of Group companies
Under UK GAAP (UITF 31), gains on the partial disposal of Group companies involving non-monetary consideration are recorded in the statement of total recognised gains and losses. Under US
GAAP, such gains and losses are recorded in the income statement.

Deferred tax
Under UK GAAP, full provision for deferred tax is recognised in the financial statements. Under US GAAP, deferred tax is recognised on a similar basis. In addition, however, US GAAP
requires provision for deferred tax on the unremitted earnings of overseas businesses that are not deemed to be permanently reinvested. This is not permitted under UK GAAP except in respect of any dividends that have been accrued as
receivable.

Revaluation of fixed assets
UK GAAP allowed
for the periodic revaluation of land and buildings with depreciation then being
calculated on the revalued amount. Any surplus or deficit (to the extent that
the revaluation reserve was in surplus) on the revaluation was then taken directly
to shareholders funds. With the Groups adoption of FRS15 in 2000,
the Group no longer revalues fixed assets. Under US GAAP, revaluations of fixed
assets are not permitted and, as a result, the reconciliation restates fixed
assets to historical cost. The depreciation charge and any write downs of previously
revalued assets are adjusted accordingly.

Impairment of tangible fixed assets
Under UK GAAP, a tangible fixed asset is reviewed for impairment if an indication exists that the asset may be impaired. If necessary, an impairment loss is recorded. A value in use
calculation is carried out, based on discounted pre-tax future cash flows from the asset (or income generating unit to which the asset belongs).Under
US GAAP, a preliminary review of the tangible fixed asset is carried out using
undiscounted future cash flows. If the undiscounted future cash flows are less
than the assets carrying value, an impairment loss is required. The impairment loss will be calculated using discounted future cash flows, or the assets
market value.Under US GAAP, the reversal of previously recognised impairment losses is not permitted.

Provisions
Under UK GAAP, general requirements for liabilities and charges are contained in FRS 12 which states that provisions are made when a present obligation exists in respect of a past event,
where it is probable that a transfer of economic benefits will be required and where the amount of the obligation can be reliably estimated. Under US GAAP the general requirements for loss contingencies of SFAS 5 require that, a provision is made
when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. The UK GAAP policy is substantially the same as the US GAAP policy and no adjustment is required.

Restructuring costs
Under UK GAAP, when a decision has been taken to restructure, supported by a detailed formal plan and the creation of a valid expectation in those affected that the restructuring will
take place, the necessary provisions are made for impairment of asset values together with severance and other costs.Under US GAAP (SFAS146), the requirements for charging restructuring costs to income are more prescriptive and all significant actions arising from the
restructuring plan and their completion dates must be identified by the balance sheet date.

Pensions
For UK GAAP reporting
(FRS17  Retirement benefits), the pension asset or liability in the balance
sheet represents the difference between the market value of pension scheme assets
at the balance sheet date and the present value of pension scheme liabilities
at that date, net of deferred tax.Under US GAAP (SFAS87), plan assets are valued by reference to market-related value at the date of the financial statements. Liabilities are assessed using
the rate of return obtainable on fixed or inflation-linked bonds.FRS17 requires that past service costs are recognised in full in the period in which they become vested. SFAS87 requires past service costs to be amortised
over the remaining service lives of the employees to whom the amendments relate.

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| | Notes
    to the financial statements | 133
| | ------------------------------------- | ---



30. US accounting informationcontinuedThere is a significant difference in the treatment of actuarial gains and losses arising during the accounting period. UK GAAP recognises the actuarial gains and losses in full in the
year in which they arise in the statement of total recognised gains and losses. Under US GAAP, the actuarial gains and losses which exceed ten per cent of the value of the assets or liabilities at the start of the accounting period are amortised
over the remaining service lives of scheme members.Where an additional minimum liability exists under US GAAP, (ie where the amount provided for any scheme does not cover the unfunded accumulated benefit
obligation for that scheme), this must be recognised in the balance sheet under SFAS87. The adjustment resulting from the recognition of an additional minimum liability is reported as an intangible asset to the extent of the unrecognised prior
service cost, after eliminating amounts previously shown as a prepaid benefit cost. Any excess above these amounts is reported in comprehensive income.Where
surpluses exist in pension schemes under UK GAAP, a company should recognise
the associated asset only to the extent that it is able to recover that surplus
either through reduced contributions or through refunds from the scheme. Regulations
in South Africa concerning surpluses (as set out in the Pension Funds Second
Amendment Act 2001) specify that recognition of any surpluses in a retirement
fund cannot be made by a company unless it is either as a result of a surplus
apportionment exercise, or if a funds rules allow it. As a result, any surpluses
in South Africa are not recognised under UK GAAP and are written off in the statement
of total recognised gains and losses.There is no specific requirement under US GAAP relating to the treatment of irrecoverable surpluses. As a result, the associated surplus is retained under US
GAAP in line with SFAS 87.

Post retirement medical costs
For UK GAAP reporting
(FRS17  Retirement benefits), the post retirement medical liability is
discounted using the bond yield on suitable high quality corporate bonds, and
disclosed
net of related deferred tax.
For
US GAAP (SFAS106), the liabilities are assessed and discounted using the rates
of return obtainable on high quality fixed income investments.
     Differences between
the UK and US GAAP  figures arise largely from the treatment of actuarial gains
and losses.

Securities investments
Under UK GAAP,
current asset investments (of all types) are stated at the lower of cost and
net realisable value. Fixed asset investments are stated at cost, or alternatively,
at market
value or at directors valuation.Under
US GAAP, securities which are determined to be available-for-sale are stated at fair value and any unrealised gains or losses included as a
separate component of shareholders funds. The deferred tax consequences of unrealised gains or losses are also charged or credited to shareholders funds.

Contingent consideration
Under UK GAAP, contingent consideration is provided for as a liability when the likelihood of payment is considered to be probable.Under
US GAAP, contingent consideration is not recognised until the liability is determined
beyond reasonable doubt. The elimination of contingent consideration for US GAAP
purposes also impacts on the value of goodwill arising on acquisitions, therefore
there is no net impact on shareholders funds.

Financial instruments
The Group enters into a number of currency swaps, interest rate swaps and forward foreign exchange contracts to hedge its exposure to currency and interest rate risks. Under UK GAAP, such
instruments are shown at their carrying value.Under US GAAP, these instruments are marked to market and any change in value is recognised in either the income statement or through comprehensive income in
accordance with SFAS133 depending on whether a derivative is designated as part of a hedge transaction, and if it is, the type of hedge transaction.

Accounting for swaps
Under UK GAAP,
gains or losses on closing out interest rate swap contracts taken to hedge the
Groups fixed/floating interest rate position can be taken to profit immediately.US GAAP requires any gain or loss to be deferred over the remaining hedge period.

Share of results and net assets of joint ventures and associates
The Groups share of the results and net assets of its joint ventures and associates (as calculated under UK GAAP) is shown within fixed asset investments. For the purposes of the
reconciliations set out below, the Groups share of the results and net
assets of its joint ventures and associates has been adjusted to recognise a
difference in the method of reporting profits under US GAAP.

Leasing
Under US GAAP (EITF
018) certain arrangements with customers (modified or entered into since 1 October 2003) concerning the use of some items of the Groups plant and machinery
are deemed to contain leases. Where such arrangements qualify as finance leases under SFAS13, an appropriate adjustment is made to net income and shareholders funds
under US GAAP. UK GAAP does not contain this same requirement.

Sale and leaseback transactions
Under UK GAAP,
any profit or loss on the sale and operating leaseback of fixed assets can generally
be taken to profit immediately.
US GAAP requires any gain or loss to be deferred over the contract lease period.

Comprehensive income
Under US GAAP,
SFAS130 establishes requirements for the reporting of comprehensive income and
its components (revenue, expenses, gains and losses) in a full set of general
purpose financial statements. Components of comprehensive income for the Group
determined on a UK GAAP basis include profit for the financial year, pension
actuarial gains and losses, and foreign currency translation gains and losses.
Information regarding
the Groups foreign currency translation gains and losses is included in
the statement of total recognised gains and losses under UK GAAP on page 89.

|b)
        Selected financial information under US GAAPIn addition
    to the Group five year record on page 12, for SEC reporting the Group is
    required to disclose, on a US GAAP basis, certain key selected financial
    information under
item 3.A.2.
of form 20F.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                            
|Revenue                                                                                                                                                                                                                                                                     
|Net operating income                                                                                                                                                                                                                                                        
|Net income                                                                                                                                                                                                                                                                  
|Total assets                                                                                                                                                                                                                                                                
|Net assets                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                            

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|134 | The
          BOC Group plcAnnual
    report and accounts 2005 | Notes to
    the financial statements
|--- | -------------------------------------------------------------- | -------------------------------------

30. US accounting
informationcontinued

|                                           |  |         |  |         |  |         |  |         |  |         | 
|------------------------------------------ |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- | 
|                                           |  | 2005    |  | 2004    |  | 2003    |  | 2002    |  | 2001    | 
|                                           |  | pence   |  | pence   |  | pence   |  | pence   |  | pence   | 
|                                           |  |         |  |         |  |         |  |         |  |         | 
|Earnings per share  basic                 |  | 66.0    |  | 60.4    |  | 53.7    |  | 52.1    |  | 48.1    | 
|Earnings per share  diluted               |  | 65.8    |  | 60.3    |  | 53.6    |  | 51.9    |  | 47.9    | 
|                                           |  |         |  |         |  |         |  |         |  |         | 
|                                           |  |         |  |         |  |         |  |         |  |         | 
|                                           |  |         |  |         |  |         |  |         |  |         | 
|                                           |  | 2005    |  | 2004    |  | 2003    |  | 2002    |  | 2001    | 
|                                           |  | million |  | million |  | million |  | million |  | million | 
|                                           |  |         |  |         |  |         |  |         |  |         | 
|Weighted average ordinary shares  basic   |  | 495.0   |  | 493.0   |  | 492.5   |  | 490.4   |  | 486.9   | 
|Weighted average ordinary shares  diluted |  | 496.6   |  | 493.8   |  | 492.7   |  | 492.2   |  | 488.6   | 
|                                           |  |         |  |         |  |         |  |         |  |         | 

c) Income statement in US GAAP formatThe
  Group profit and loss account on page 86 complies with UK GAAP. For SEC reporting
  purposes this presentation would be considered non GAAP and therefore
  disclosed below is the income statement which meets the SEC reporting format
  set forth in Item 10 of Regulation S-X. The financial numbers disclosed within
the income statement below are prepared under UK GAAP.

|                              |  |           |   |           |   |           |  
|----------------------------- |  | --------- | - | --------- | - | --------- | -
|                              |  | 2005      |   | 2004      |   | 2003      |  
|                              |  | £ million |   | £ million |   | £ million |  
|                              |  |           |   |           |   |           |  
|Revenue                       |  | 3,754.7   |   | 3,885.4   |   | 3,718.3   |  
|Operating expenses            |  |           |   |           |   |           |  
|Payroll costs                 |  | (951.9    | ) | (1,015.6  | ) | (1,037.8  | )
|Depreciation and amortisation |  | (301.9    | ) | (324.0    | ) | (333.4    | )
|Other operating expenses      |  | (1,848.8  | ) | (2,060.9  | ) | (1,908.5  | )
|                              |  |           |   |           |   |           |  
|Total operating expenses      |  | (3,102.6  | ) | (3,400.5  | ) | (3,279.7  | )
|                              |  |           |   |           |   |           |  
|Net operating income          |  | 652.1     |   | 484.9     |   | 438.6     |  
|Other income, net             |  | 18.2      |   | 15.8      |   | 9.4       |  
|Net interest expense          |  | (76.7     | ) | (88.4     | ) | (96.1     | )
|Income taxes                  |  | (159.9    | ) | (101.7    | ) | (96.4     | )
|Minority interests            |  | (66.7     | ) | (46.6     | ) | (36.4     | )
|                              |  |           |   |           |   |           |  
|Net income                    |  | 367.0     |   | 264.0     |   | 219.1     |  
|                              |  |           |   |           |   |           |  
|Earnings per share  basic    |  | 74.1      | p | 53.5      | p | 44.5      | p
|Earnings per share  diluted  |  | 73.9      | p | 53.5      | p | 44.5      | p
|                              |  |           |   |           |   |           |  

|                                                                          |       |  |           |   |           |   |           |  
|------------------------------------------------------------------------- | ----- |  | --------- | - | --------- | - | --------- | -
|d) Reconciliation of net profit                                           |       |  |           |   |           |   |           |  
|                                                                          |       |  |           |   |           |   |           |  
|                                                                          |       |  | 2005      |   | 2004      |   | 2003      |  
|Years ended 30 September                                                  | Notes |  | £ million |   | £ million |   | £ million |  
|                                                                          |       |  |           |   |           |   |           |  
|Net profit as reported in the Group profit and loss account under UK GAAP |       |  | 367.0     |   | 264.0     |   | 219.1     |  
|Pensions                                                                  |       |  | (0.8      | ) | 7.5       |   | 62.5      |  
|Post retirement medical costs                                             |       |  | 0.1       |   | (2.4      | ) |          |  
|Revaluations realised on asset disposals                                  |       |  | 7.2       |   |          |   | 1.1       |  
|Depreciation of revalued fixed assets                                     |       |  | 0.5       |   | 0.2       |   | 0.1       |  
|Non-amortisation of goodwill under SFAS142                                |       |  | 12.6      |   | 14.0      |   | 13.9      |  
|Goodwill adjustment relating to disposals                                 |       |  | (3.4      | ) |          |   |          |  
|Consolidation of variable interest entity under FIN46                     |       |  | 0.5       |   |          |   |          |  
|Amortisation of other intangibles                                         |       |  | (0.6      | ) | (0.5      | ) | (0.5      | )
|Unrealised profit on disposal of subsidiary                               |       |  |          |   |          |   | 8.2       |  
|Other adjustments on profit on disposal of subsidiary                     | 1     |  |          |   |          |   | (20.7     | )
|Share of results of joint ventures and associates                         |       |  | (3.5      | ) | 0.3       |   | 0.6       |  
|Termination of interest rate swaps                                        |       |  | 1.5       |   | 1.6       |   | 1.7       |  
|Financial and other derivative instruments                                |       |  | (1.1      | ) | (15.7     | ) | (2.8      | )
|Adjustment on disposal of the US packaged gas business                    | 2     |  | (9.6      | ) | 39.9      |   |          |  
|ESOPs and other share options                                             |       |  | (1.5      | ) | 3.5       |   | 1.7       |  
|Sale and leaseback                                                        |       |  | 0.1       |   | 0.1       |   | 0.1       |  
|Restructuring provisions                                                  |       |  | 1.0       |   |          |   |          |  
|Goodwill impairments                                                      |       |  | (16.3     | ) |          |   |          |  
|Taxation adjustments                                                      | 3     |  | (27.0     | ) | (14.8     | ) | (20.7     | )
|                                                                          |       |  |           |   |           |   |           |  
|Net income under US GAAP                                                  |       |  | 326.7     |   | 297.7     |   | 264.3     |  
|                                                                          |       |  |           |   |           |   |           |  

|1. | The adjustment on profit of disposal of subsidiary of £(20.7) million in 2003 relates to differences relating to the combination of the Groups Japanese
gases business with part of Air Liquide Japan. It comprises £(11.7) million relating to the difference in the net book value of tangible assets and £(9.0) million relating to the difference in the net book value of intangible assets
recognised in the Groups Japanese business.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The adjustment on disposal of the US packaged gas business of £39.9 million in 2004 comprised £13.4 million relating to asset impairments, £19.9
million relating to goodwill and £6.6 million relating to restructuring provisions. In 2005, the adjustment relates to timing differences on restructuring provisions and expenses between UK GAAP and US GAAP.                                                                              
|3. | During 2005 the deferred tax provision in respect of undistributed earnings of subsidiaries and joint ventures was reviewed. In connection with this, the amount of
taxation adjustments includes a charge of £28.5 million (2004: £nil, 2003: £nil).                                                                                                                                                                                         
|4. | All net income arose from continuing operations.                                                                                                                                                                                                                                                                                                                                                                                              

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| | Notes to
    the financial statements | 135
| | ------------------------------------- | ---

30. US accounting
informationcontinued

|                                      |  |         |  |         |  |         | 
|------------------------------------- |  | ------- |  | ------- |  | ------- | 
|                                      |  | 2005    |  | 2004    |  | 2003    | 
|Average number of 25p Ordinary shares |  | million |  | million |  | million | 
|                                      |  |         |  |         |  |         | 
|Basic                                 |  | 495.0   |  | 493.0   |  | 492.5   | 
|Diluted                               |  | 496.6   |  | 493.8   |  | 492.7   | 
|                                      |  |         |  |         |  |         | 
|                                      |  |         |  |         |  |         | 
|                                      |  |         |  |         |  |         | 
|                                      |  | 2005    |  | 2004    |  | 2003    | 
|                                      |  | pence   |  | pence   |  | pence   | 
|                                      |  |         |  |         |  |         | 
|Earnings per share                    |  |         |  |         |  |         | 
|Basic                                 |  | 66.0    |  | 60.4    |  | 53.7    | 
|Diluted                               |  | 65.8    |  | 60.3    |  | 53.6    | 
|                                      |  |         |  |         |  |         | 

|                                                                      |  |           |   |           |  
|--------------------------------------------------------------------- |  | --------- | - | --------- | -
|e) Reconciliation
    of shareholders funds                          |  |           |   |           |  
|                                                                      |  |           |   |           |  
|                                                                      |  | 2005      |   | 2004      |  
|At 30 September                                                       |  | £ million |   | £ million |  
|                                                                      |  |           |   |           |  
|Shareholders funds reported in the Group balance sheet under UK GAAP |  | 1,942.0   |   | 1,675.3   |  
|UK minority interests                                                 |  | 111.1     |   | 202.8     |  
|                                                                      |  |           |   |           |  
|                                                                      |  | 2,053.1   |   | 1,878.1   |  
|Pensions                                                              |  | 107.8     |   | 154.7     |  
|Post retirement medical costs                                         |  | (16.8     | ) | (12.2     | )
|Revaluations of fixed assets                                          |  | (30.3     | ) | (36.8     | )
|Goodwill previously charged to reserves                               |  | 64.1      |   | 62.7      |  
|Non-amortisation of goodwill under SFAS142                            |  | 40.1      |   | 31.4      |  
|Amortisation of other intangibles                                     |  | (1.1      | ) | (1.0      | )
|Interest rate swaps                                                   |  | (1.2      | ) | (2.7      | )
|Share of net assets of joint ventures and associates                  |  | 14.1      |   | 17.6      |  
|Securities investments                                                |  |          |   | 7.3       |  
|Consolidation of variable interest entity under FIN46                 |  | (12.8     | ) | (29.7     | )
|Goodwill on disposal of subsidiary                                    |  | 5.5       |   | 4.4       |  
|Fixed asset impairments                                               |  | 8.1       |   | 13.3      |  
|Restructuring provisions                                              |  | 4.0       |   | 6.5       |  
|Financial and other derivative instruments                            |  | (3.1      | ) | (2.0      | )
|Provision for executive share schemes                                 |  | 0.5       |   | 0.9       |  
|Sale and leaseback                                                    |  | (1.8      | ) | (1.9      | )
|Goodwill impairments                                                  |  | (16.3     | ) |          |  
|Deferred tax                                                          |  | 6.2       |   | 10.2      |  
|Minority interests                                                    |  | (97.9     | ) | (180.7    | )
|                                                                      |  |           |   |           |  
|Shareholders funds under US GAAP                                     |  | 2,122.2   |   | 1,920.1   |  
|                                                                      |  |           |   |           |  
|                                                                      |  |           |   |           |  
|f) Movements
    in shareholders funds on a US GAAP basis            |  |           |   |           |  
|Shareholders funds at 1 October                                      |  | 1,920.1   |   | 1,872.5   |  
|Net income for the year                                               |  | 326.7     |   | 297.7     |  
|Dividends                                                             |  | (204.1    | ) | (197.3    | )
|Shares issued                                                         |  | 32.6      |   | 8.7       |  
|Movement in treasury stock                                            |  | (4.2      | ) | 2.5       |  
|Pensions                                                              |  | (54.5     | ) | 53.3      |  
|Exchange adjustment                                                   |  | 99.3      |   | (98.1     | )
|Other movements                                                       |  | 6.3       |   | (19.2     | )
|                                                                      |  |           |   |           |  
|Shareholders funds at 30 September                                   |  | 2,122.2   |   | 1,920.1   |  
|                                                                      |  |           |   |           |  

g) Consolidated cash flow statement
The Group cash flow statement on page 88 has been prepared in accordance with UK accounting standard FRS1, the objectives and principles of which are similar to those set out in US
accounting principle SFAS95, Statement of Cash Flows. The principal differences between the standards relate to classification of items within the cash flow statement and with regard to the definition of cash and cash equivalents.      Under FRS1, cash flows are presented separately for: a) operating activities; b) dividends from joint ventures and associates; c) returns on investments and
servicing of finance; d) tax paid; e) capital expenditure and financial investment; f) acquisitions and disposals; g) equity dividends paid; h) management of liquid resources; and i) financing. Under SFAS95, however, only three categories of cash
flow activity are reported: a) operating activities; b) investing activities; and c) financing activities. Dividends from joint ventures and associates, cash flows from returns on investments and servicing of finance (excluding dividends paid to
minorities) and tax paid under FRS1 would be included in operating activities under SFAS95; capital expenditure and acquisitions and disposals would be included in investing activities under SFAS95; equity dividends would be included as a financing
activity under SFAS95.      Under FRS1, cash is defined as cash in hand and deposits repayable on demand with any qualifying financial institution, less overdrafts from any qualifying
financial institution repayable on demand. Under SFAS95, cash is defined as cash in hand and deposits but also includes cash equivalents which are short-term, highly liquid investments. Generally only investments with original maturities of three
months or less come within this definition.

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|136 | The
          BOC Group plcAnnual
          report and accounts 2005 | Notes to
        the financial statements
|--- | -------------------------------------------------------------------- | -----------------------------------------



30. US accounting informationcontinued
Set out below, for illustrative purposes, is a summary consolidated statement of cash flows under SFAS95.

|                                                     |  |           |   |           |   |           |  
|---------------------------------------------------- |  | --------- | - | --------- | - | --------- | -
|                                                     |  | 2005      |   | 2004      |   | 2003      |  
|                                                     |  | £ million |   | £ million |   | £ million |  
|                                                     |  |           |   |           |   |           |  
|Net cash provided by operating activities            |  | 577.7     |   | 673.5     |   | 562.4     |  
|Net cash used by investing activities                |  | (235.2    | ) | (45.2     | ) | (389.2    | )
|Net cash used by financing activities                |  | (405.7    | ) | (413.0    | ) | (292.7    | )
|                                                     |  |           |   |           |   |           |  
|Net (decrease)/increase in cash and cash equivalents |  | (63.2     | ) | 215.3     |   | (119.5    | )
|Cash and cash equivalents at 1 October               |  | 289.7     |   | 76.4      |   | 181.9     |  
|Exchange and other movements                         |  | (1.4      | ) | (2.0      | ) | 14.0      |  
|                                                     |  |           |   |           |   |           |  
|Cash and cash equivalents at 30 September            |  | 225.1     |   | 289.7     |   | 76.4      |  
|                                                     |  |           |   |           |   |           |  

h) Stock-based compensationFor US reporting purposes the company applies APB Opinion 25,Accounting for Stock Issued to Employees and related interpretations, in accounting for its share option plans.      

Prior
to 2005, by applying this statement, the employee share schemes were deemed non-compensatory
since share options were granted at a discount of ten per cent to market price.
Accordingly, grants under these schemes did not result in an expense under US
GAAP. In 2005,
share options under the companys employee share schemes were granted at
a discount of 20 per cent to the market  price. Accordingly, they are deemed
compensatory,
which has resulted in a charge of £0.2 million (£0.1 million net
of related tax) in 2005 (2004: £nil, 2003: £nil).

     Grants of executive
share options are made at the market price of the companys shares at the
time of grant and are therefore deemed non-compensatory.     
The Long-Term Incentive
Plan schemes are deemed compensatory and a charge is recognised when certain
performance conditions are met.

This has resulted
in a charge of £6.1 million (£4.3 million net of related tax) in 2005 (2004: £nil, 2003: £nil).      If
compensation cost for the Groups share option plans had been determined based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS123,Accounting for Stock-Based Compensation, the Groups
net income under US GAAP would have been:

|                                                                                             |  |           |   |           |   |           |  
|-------------------------------------------------------------------------------------------- |  | --------- | - | --------- | - | --------- | -
|                                                                                             |  | 2005      |   | 2004      |   | 2003      |  
|                                                                                             |  | £ million |   | £ million |   | £ million |  
|                                                                                             |  |           |   |           |   |           |  
|Reported net income                                                                          |  | 326.7     |   | 297.7     |   | 264.3     |  
|Add stock compensation expense recognised in accordance with APB25 (net of related tax)      |  | 4.4       |   |          |   |          |  
|Deduct stock compensation expense determined in accordance with SFAS123 (net of related tax) |  | (9.7      | ) | (5.7      | ) | (7.1      | )
|                                                                                             |  |           |   |           |   |           |  
|Pro forma net income                                                                         |  | 321.4     |   | 292.0     |   | 257.2     |  
|                                                                                             |  |           |   |           |   |           |  
|                                                                                             |  |           |   |           |   |           |  
|                                                                                             |  |           |   |           |   |           |  
|                                                                                             |  | 2005      |   | 2004      |   | 2003      |  
|                                                                                             |  | pence     |   | pence     |   | pence     |  
|                                                                                             |  |           |   |           |   |           |  
|Earnings per share:                                                                          |  |           |   |           |   |           |  
|Basic  as reported                                                                          |  | 66.0      |   | 60.4      |   | 53.7      |  
|Basic  pro forma                                                                            |  | 64.9      |   | 59.2      |   | 52.2      |  
|                                                                                             |  |           |   |           |   |           |  
|Diluted  as reported                                                                        |  | 65.8      |   | 60.3      |   | 53.6      |  
|Diluted  pro forma                                                                          |  | 64.7      |   | 59.1      |   | 52.2      |  
|                                                                                             |  |           |   |           |   |           |  

The Black-Scholes
model was used to measure the compensation expense under SFAS123. The assumptions
used for grants in 2005 included a dividend yield of 4.5 per cent (2004: 4.5
per cent,  2003: 4.5 per cent), expected share price volatility of 27.2 per cent
(2004: 29.5 per cent, 2003: 30.6 per cent), a weighted average expected life
of 4.9 years (2004: 4.9 years, 2003: 5.0 years) and a weighted average interest
rate of 4.6 per cent
(2004: 4.8 per cent, 2003: 4.0 per cent). The weighted average interest rate
is based on UK Gilts on the date of grant with a maturity similar to the related
options.

i) GoodwillFor US reporting purposes the company applies SFAS142 in accounting for goodwill. The changes in the carrying value of goodwill for the year ended 30 September 2005 are as follows:

|                        |  |               |   |             |   |           |   |           |   |           |  |           |  |           |  
|----------------------- |  | ------------- | - | ----------- | - | --------- | - | --------- | - | --------- |  | --------- |  | --------- | -
|                        |  |               |   | Industrial  |   |           |   |           |   |           |  |           |  |           |  
|                        |  | Process       |   | and Special |   | BOC       |   | Afrox     |   |           |  |           |  |           |  
|                        |  | Gas Solutions |   | Products    |   | Edwards   |   | hospitals |   | Gist      |  | Corporate |  | Total     |  
|                        |  | £ million     |   | £ million   |   | £ million |   | £ million |   | £ million |  | £ million |  | £ million |  
|                        |  |               |   |             |   |           |   |           |   |           |  |           |  |           |  
|Balance at 1 October    |  | 55.8          |   | 79.1        |   | 109.0     |   | 15.0      |   | 0.7       |  | 2.5       |  | 262.1     |  
|Acquired during year    |  | 1.0           |   | 2.6         |   |          |   | 0.5       |   | 5.1       |  |          |  | 9.2       |  
|Disposals during year   |  | (0.6          | ) | (15.7       | ) |          |   | (14.5     | ) |          |  |          |  | (30.8     | )
|Impairments in year     |  |              |   |            |   | (31.1     | ) |          |   |          |  |          |  | (31.1     | )
|Exchange adjustment     |  | 3.6           |   | 5.2         |   | (0.2      | ) | (1.0      | ) | 0.3       |  |          |  | 7.9       |  
|                        |  |               |   |             |   |           |   |           |   |           |  |           |  |           |  
|Balance at 30 September |  | 59.8          |   | 71.2        |   | 77.7      |   |          |   | 6.1       |  | 2.5       |  | 217.3     |  
|                        |  |               |   |             |   |           |   |           |   |           |  |           |  |           |  

Under US GAAP the fair values of the business for impairment testing purposes have been calculated using a discounted cash flow method. See note 2 b) for further information.

j) Operating leases  lessorsThe following table provides information required in respect of owned assets which qualify as operating leases under SFAS13.

|                         |  |           |  
|------------------------ |  | --------- | -
|                         |  | £ million |  
|                         |  |           |  
|At 30 September 2005     |  |           |  
|Gross book value         |  | 138.7     |  
|Accumulated depreciation |  | (81.1     | )
|                         |  |           |  
|Net book value           |  | 57.6      |  
|                         |  |           |  

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| | Notes
    to the financial statements | 137
| | ------------------------------------- | ---

30. US accounting
informationcontinued

|                                  |  |           | 
|--------------------------------- |  | --------- | 
|                                  |  | £ million | 
|                                  |  |           | 
|Revenue recognised in 2005        |  | 31.2      | 
|                                  |  |           | 
|Contractually receivable amounts: |  |           | 
|Year to 30 September 2006         |  | 32.5      | 
|Year to 30 September 2007         |  | 33.7      | 
|Year to 30 September 2008         |  | 30.8      | 
|Year to 30 September 2009         |  | 28.5      | 
|Year to 30 September 2010         |  | 27.3      | 
|Thereafter                        |  | 4.1       | 
|                                  |  |           | 
|Minimum future rentals            |  | 156.9     | 
|                                  |  |           | 

|1. | Contractually
        receivable amounts include amounts in respect of maintenance, safety
    and other operational costs.
|-- | ---------------------------------------------------------------------------------------------------------------------------

k) Recently issued
      accounting pronouncements implemented in the yearEITF041  Accounting
      for Pre-existing relationships between the Parties to a Business CombinationIn
      October 2004, the Emerging Issues Task Force (EITF) reached a consensus
      on EITF issue 041. Issue 041 applies when two parties that have a pre-existing contractual
relationship enter into a business combination. If it is determined that assets of an acquired entity are related to a pre-existing contractual relationship, thus requiring accounting separate from the business combination, management will evaluate
whether the acquiring entity of the Group should recognise contractual relationships as assets separate from goodwill in that business combination. EITF 041 did not have a material impact on the Groups
results and financial position in
the year.

l) Recently issued
accounting pronouncements not yet implementedSFAS151  Inventory
costsSFAS151
was issued in November 2004 and is effective for all inventory costs incurred
during fiscal years beginning after 15 June 2005. This statement amends ARB 43
and requires all idle facility expense, excessive spoilage, double freight and
re-handling costs to be recognised as current-period charges regardless of whether
they meet the criterion of so abnormal (as previously stated in ARB 43). In addition, ARB 43
requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Unallocated overheads are recognised as an expense in the period in which they are incurred.
Management does not believe that this statement will have a material effect on the Groups
results and financial position under US GAAP in future periods.

SFAS153  Exchanges of non-monetary assetsSFAS153
was issued in December 2004 and is effective for all non-monetary asset exchanges
occurring in fiscal periods beginning after15 June 2005. This statement amends
APB Opinion 29, which is based on the principle that exchanges of non-monetary
assets should be measured based on the fair value of the assets exchanged. SFAS153
provides a general exception for exchange transactions that do not have commercial
substance 
that is, transactions that are not expected to result in significant changes in the cash flows of the reporting entity. Management does not believe that this statement will have a material effect on the Groups
results and financial position
under US GAAP in future periods.

SFAS123(R)  Share-based payment (revised 2004)SFAS123(R)
was issued in December 2004 and is effective for the first annual reporting period
that starts after 15 June 2005. It supersedes APB Opinion 25,Accounting for Stock
Issued to Employees. SFAS123(R) is concerned with how to account for transactions
in which an entity exchanges its equity instruments for goods or services. It
also addresses transactions in which an entity incurs liabilities in exchange
for goods or services
that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments. The main effect of this revised standard is a move from an intrinsic value method to a fair value based
method. It will therefore result in an additional charge relating to the fair value of share options in the Groups income statement. Management does not believe that this will have a material effect on the Groups
results and financial
position under US GAAP in future periods.

SFAS154  Accounting changes and error corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3.SFAS154
was issued in May 2005 and is effective for fiscal years beginning after 15 December
2005. This statement replaces APB Opinion 20,Accounting Changes, and SFAS 3, Reporting
Accounting Changes in Interim Financial Statements. This Statement requires voluntary
changes in accounting principles to be reported via retrospective application,
unless impracticable. Previous guidance given in APB Opinion 20 for reporting
the
correction of an error in previously issued financial statements or a change
in accounting estimates is unchanged in SFAS154. Management does not believe
that this statement will have a material effect on the Groups results and
financial
position under US GAAP in future periods.

FIN47  Accounting for conditional asset retirement obligationsFIN47
was issued in August 2005 and is effective for fiscal years ending after 15 December
2005. This interpretation clarifies the term conditional asset retirement obligation
as used in SFAS143,Accounting for asset retirement obligations. FIN47 requires an entity to recognise a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair
value of a liability for the conditional asset retirement obligation should be recognised when incurred - generally upon acquisition, construction, or development and/or through the normal operation of the asset. Uncertainty about the timing and/or
method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. Management does not believe that this interpretation will have a material effect on the
Groups results and financial position under US GAAP in future periods.

m) Other informationUse of estimatesThe
preparation of financial statements in conformity with generally accepted accounting
principles requires management to make significant estimates and assumptions
that affect the  reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from
those estimates.

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|138 | The BOC
        Group plcAnnual
    report and accounts 2005
|--- | ------------------------------------------------------------

Group undertakings

A list of the Groups major operating undertakings, certain financing undertakings and undertakings in which the Group has a material interest is detailed below. All holdings shown
are Ordinary shares. Undertakings are held either by The BOC Group plc directly (where indicated by*) or through other operating undertakings or through undertakings formed for the convenient holding of shares in certain subsidiaries, joint ventures
or associates. The Group holding percentages shown below represent the ultimate interest of The BOC Group plc. All companies are incorporated and registered in the country in which they operate as listed below.

Principal
   
   Group holdingactivity
   
   %ArubaBOC Gases Aruba NV
   
   
   100AustraliaBOC Ltd3
   
   
   100Elgas Ltd5
   
   
   50BangladeshBOC Bangladesh Ltd
   
   
   60
   *BelgiumSA BOC Edwards NV
   
   
   100BermudaPriestley Company Ltd
   
   
   100The Hydrogen Company of Paraguana Ltd
   
   
   100BrazilBOC Edwards Brasil Ltda
   
   
   100BOC Gases do Brasil Ltda
   
   
   100BruneiBrunei Oxygen Sdn Bhd(a),5
   
   
   25CanadaBOC Canada Ltd3
   
   
   100Hibon Inc
   
   
   100ChileCompania de Hidrogeno de Talcahuano Ltda5
   
   
   100Indura S.A.,
       Industriay Comercio5
   
   
   41ColombiaGases Industriales de Colombia SA5
   
   
   74Czech RepublicBOC Edwards s.r.o.
   
   
   100Gist Czech Republic s.r.o.
   
   
   100EnglandBOC Edwards ChemicalManagement Europe Ltd
   
   
   100
   *BOC Holdings1, 3
   
   
   100
   *BOC Ltd
   
   
   100BOC Netherlands Holdings Ltd
   
   
   100
   *BOC Overseas Finance Ltd
   
   
   100
   *Edwards High Vacuum International Ltd
   
   
   100Fluorogas Ltd
   
   
   100
   *Gist Ltd
   
   
   100Leengate Welding Group Ltd
   
   
   100Welding Products Holdings Ltd
   
   
   100
   *FijiBOC Fiji Ltd
   
   
   90




Principal
   
   Group holdingactivity
   
   %FranceCryostar SAS
   
   
   100Edwards SAS
   
   
   100Hibon International SA
   
   
   100Hibon SAS
   
   
   100Société de Mécanique Magnétique
   
   
   87GermanyBOC Edwards GmbH
   
   
   100BOC Gase Deutschland GmbH
   
   
   100Wilhelm Klein GmbH
   
   
   100GuernseyBOC No 1 Ltd
   
   
   100BOC No 2 Ltd
   
   
   100Hong KongHong Kong Oxygen & Acetylene Co Ltd
   
   
   50The BOC Group Ltd
   
   
   100IndiaBOC India Ltd5
   
   
   55
   *IndonesiaPT BOC Gases Indonesia
   
   
   100PT Gresik Gases Indonesia
   
   
   90PT Gresik Power Indonesia
   
   
   90IrelandBOC Gases Ireland Ltd
   
   
   100Priestley Dublin Reinsurance Company Ltd
   
   
   100ItalyBOC Edwards SpA
   
   
   100JapanBOC Japan Ltd
   
   
   99BOC Edwards Japan Ltd
   
   
   100Japan Air Gases Ltd5,8
   
   
   44KenyaBOC Kenya Ltd
   
   
   65KoreaBOC Gases Korea Co Ltd
   
   
   100Songwon Edwards Ltd
   
   
   97MalawiBOC Malawi Ltd(c)
   
   
   42MalaysiaMalaysian Oxygen Bhd(a),4
   
   
   23MOX Gases Sdn Bhd
   
   
   23MauritiusLes Gaz
       Industriels Ltee(b)
   
   
   21MexicoBOC Gases de Mexico, SA de CV5
   
   
   100Compania de Nitrogeno de Cantarell,SA de CV5,9
   
   
   65


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| | Group
    undertakings | 139
| | ---------------------- | ---





Principal
   
   Group holdingactivity
   
   %MozambiquePetrogas Ltda
   
   
   27NamibiaIGL Properties (Pty) Ltd
   
   
   56NetherlandsBOC Edwards Pharmaceutical Systems BV
   
   
   100Gist BV
   
   
   100G Van Dongen Holding BV
   
   
   100The BOC Group BV3
   
   
   100Netherlands AntillesBOC Gases Curaçao NV
   
   
   100New ZealandBOC Ltd3
   
   
   100South Pacific Welding Group (NZ) Ltd
   
   
   100NigeriaBOC Gases Nigeria plc
   
   
   60PakistanBOC Pakistan Ltd
   
   
   60
   *Papua New GuineaBOC Papua New Guinea Pty Ltd
   
   
   74Peoples Republic of ChinaBOC (China) Holdings Co Ltd3,5
   
   
   100BOC Gases (North) Co Ltd5
   
   
   100BOC Gases (Shanghai) Corporation Ltd5
   
   
   100BOC Gases (Suzhou) Co Ltd5
   
   
   100BOC Gases (Tianjin) Co Ltd5
   
   
   100
   *BOC Gases (Wuhan) Co Ltd5
   
   
   100BOC TISCO Gases Co Ltd5
   
   
   50
   *BOC Trading (Shanghai) Co Ltd5
   
   
   100EdwardsTianli (Beijing)Pharmaceutical Systems Co Ltd5
   
   
   50Maanshan BOC-Ma Steel Gases Co Ltd5
   
   
   50Nanjing BOC-YPC Gases Co Ltd5
   
   
   50Shanghai BOC Industrial Gases Co Ltd5
   
   
   100
   *PhilippinesConsolidated Industrial Gases Inc
   
   
   100Southern Industrial Gases Philippines Inc
   
   
   100PolandBOC Gazy Sp. z o.o.
   
   
   98SamoaBOC Samoa Ltd
   
   
   96SingaporeBOC Gases Pte Ltd
   
   
   100
   *Singapore Oxygen Air Liquide Pte Ltd
   
   
   50Solomon IslandsBOC Gases Solomon Islands Ltd
   
   
   100




Principal
   
   Group holdingactivity
   
   %South AfricaAfrican Oxygen Ltd3
   
   
   56Afrox Ltd
   
   
   56BOC Edwards South Africa (Pty) Ltd
   
   
   100Life Healthcare Group (Pty) Ltd
   
   
   11SpainLogistica Dotra S.L.5
   
   
   100Logistica van Trans S.L.5
   
   
   100Trans Fresca S.L.5
   
   
   100SwitzerlandBOC AG
   
   
   100TaiwanAsia Union Electronic Chemical Corporation5
   
   
   50BOC Edwards HTC Ltd
   
   
   50BOC Lienhwa Industrial Gases Co Ltd
   
   
   50ThailandMIG Production Company Ltd
   
   
   54Thai Industrial Gases Public Co Ltd3
   
   
   99TIG HyCO Ltd
   
   
   99United Arab EmiratesBOC Helium M.E. FZCO
   
   
   100USBOC Americas(PGS), Inc
   
   
   100BOC Energy Services, Inc
   
   
   100BOC Global Helium, Inc
   
   
   100BOC Hydrogen, Inc
   
   
   100BOC, Inc
   
   
   100Environmental Management Corporation
   
   
   100Linde BOC Process Plants LLC(a), 5
   
   
   30The BOC Group, Inc3
   
   
   100US Virgin IslandsBOC Gases Virgin Islands Inc5
   
   
   100VenezuelaBOC Gases de Venezuela, C.A.
   
   
   100VietnamNorth Vietnam Industrial Gases Ltd5
   
   
   40ZambiaBOC Gases Zambia plc(c)
   
   
   39ZimbabweBOC Zimbabwe (Pvt) Ltd
   
   
   100 1.
    Unlimited
        company having share capital with registered office at the same address
        as The BOC Group plc.2.
    Businesses
        where the Group percentage ownership is 50 per cent or less are accounted
        for as joint ventures, except as follows: (a) accounted for as associates,
        (b) accounted for as investment or (c) accounted for as subsidiary (controlled
        through partly owned intermediate undertaking). See also accounting policies
        on pages 91 and 92.3.
    Group
        undertakings which made acquisitions or investments during the year.4.
    Group
        holding for dividend purposes is 28 per cent.5.
    Group
        undertakings with financial year ends other than 30 September.6.
    The
        principal activity of each undertaking is indicated as follows:Process
        Gas SolutionsIndustrial
        and Special ProductsBOC
        EdwardsAfrox
        hospitalsGistCorporate/holding
        company7.
    *
    Indicates
      where investment is held directly byThe BOC Group plc.8.
    BOC
        Japan Ltd holds 45 per cent of Japan Air Gases Ltd.9.
    Accounted
        for as joint venture.


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140 The BOC Group plcAnnual report and accounts 2005

Shareholder information

Dividends

Ordinary sharesThe
company has paid cash dividends on its Ordinary shares in every year since 1899.
Since 1988, the dividend policy has been to pay two interim dividends, one in
February and one in  August. The dividends are reported in the accounts in the
year in which they are paid.     Two dividends were paid in 2005. A first interim dividend of 15.9p per share was paid in February and a second interim dividend of 25.3p per share was paid in
August. Future dividends of the company will be dependent upon future earnings, the financial position of the company and other factors. A first interim dividend of 16.3p per share has been declared for payment on 1 February 2006.

|The
      table below sets out, in UK pence, the total of the cash amounts of the
    dividends per share. |             
|---------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                           |             
|                                                                                                           |             
|                                                                                                           |             
|First                                                                                                      |             
|interim paid                                                                                               | interim paid
|                                                                                                           |             
|2001                                                                                                       |             
|2002                                                                                                       |             
|2003                                                                                                       |             
|2004                                                                                                       |             
|2005                                                                                                       |             
|                                                                                                           |             

|1. | The dollar
        equivalents of the dividend per Ordinary share are based on the exchange
        rate at the date of
payment of the dividend.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------

121/4% Unsecured Loan Stock
2012/2017Interest payments are made twice each year on 2 April and 2 October at such amounts as will result in an annual rate of 121/4per cent.

American Depositary SharesThe cash amount of the dividends applicable to an American Depositary Share representing two Ordinary shares, is set out below:

|               |   |      |   |      |  |      |  |      |  |      | 
|-------------- | - | ---- | - | ---- |  | ---- |  | ---- |  | ---- | 
|               |   | 2005 |   | 2004 |  | 2003 |  | 2002 |  | 2001
|$              | $ | $    | $ | $   
|               |   |      |   |      |  |      |  |      |  |      | 
|First interim  |   | 0.60 |   | 0.56 |  | 0.51 |  | 0.44 |  | 0.45 | 
|Second interim |   | 0.89 |   | 0.89 |  | 0.75 |  | 0.70 |  | 0.61 | 
|               |   |      |   |      |  |      |  |      |  |      | 

Nature of trading marketThe
companys Ordinary shares and 121/4% Unsecured Loan Stock 2012/2017 are listed on the London Stock Exchange.     The
company listed American Depositary Shares (ADS) on the New York Stock Exchange
(NYSE) on 18 September 1996 trading under the symbol BOX. Each ADS  represents
two Ordinary shares and is evidenced by an American Depositary Receipt (ADR).
The ADR depositary, JPMorgan Chase Bank N.A., holds Ordinary shares in the company
through Guaranty Nominees Limited.     At
12 November 2005, there were 242 US registered holders who held 160,480 of the
companys Ordinary shares and 67 registered ADS holders representing
39,122 ADSs. In addition, 3,400,742 ADSs were held by and through the Depository
Trust Company.     The
table below sets out the reported highest and lowest middle market quotations
for the companys Ordinary shares on the London Stock Exchange as
notified by the companys stockbrokers for the periods indicated.

|               |        |       |        |       |       |       |       |       |        |       |        |     |        |  |        |  |           |  |         | 
|-------------- | ------ | ----- | ------ | ----- | ----- | ----- | ----- | ----- | ------ | ----- | ------ | --- | ------ |  | ------ |  | --------- |  | ------- | 
|               | 2005   |       | 2004   |       | 2003  |       | 2002  |       | 2001  
|               |        |       |        |       |       |       |       |       |        |       |        |     |        | 
|Financial year | High   |       | Low    | High  |       | Low   | High  |       | Low    | High  |        | Low | High   |  | Low   
|quarter        | pence  | pence | pence  | pence | pence | pence | pence | pence | pence  | pence
|               |        |       |        |       |       |       |       |       |        |       |        |     |        |  |        |  |           |  |         | 
|First quarter  | 995.0  |       | 870.0  |       | 906.5 |       | 791.5 |       | 947.0  |       | 818.0  |     | 1108.0 |  | 907.0  |  | 1050.0    |  | 850.5   | 
|Second quarter | 1035.0 |       | 969.0  |       | 948.0 |       | 841.0 |       | 904.0  |       | 670.0  |     | 1100.0 |  | 988.0  |  | 1076.0    |  | 909.0   | 
|Third quarter  | 1073.0 |       | 965.0  |       | 949.0 |       | 875.5 |       | 828.5  |       | 755.0  |     | 1088.0 |  | 999.0  |  | 1114.0    |  | 928.0   | 
|Fourth quarter | 1173.0 |       | 1025.0 |       | 943.0 |       | 867.0 |       | 912.5  |       | 767.5  |     | 1035.0 |  | 836.0  |  | 1060.0    |  | 780.0   | 
|               |        |       |        |       |       |       |       |       |        |       |        |     |        |  |        |  |           |  |         | 
|               |        |       |        |       |       |       |       |       |        |       |        |     |        |  |        |  |           |  |         | 
|2005           |        |       |        |       |       |       |       |       | May    |       | June   |     | July   |  | August |  | September |  | October | 
|               |        |       |        |       |       |       |       |       |        |       |        |     |        |  |        |  |           |  |         | 
|High pence     |        |       |        |       |       |       |       |       | 1010.0 |       | 1073.0 |     | 1082.0 |  | 1074.0 |  | 1173.0    |  | 1160.0  | 
|Low pence      |        |       |        |       |       |       |       |       | 965.0  |       | 1004.0 |     | 1025.0 |  | 1036.0 |  | 1084.0    |  | 1045.0  | 
|               |        |       |        |       |       |       |       |       |        |       |        |     |        |  |        |  |           |  |         | 



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|Shareholder
    information | 141
|--------------------------- | ---



The table below
      sets out the highest and lowest reported sales prices for the companys
      ADSs as reported on the NYSE as notified by the depositary for the periods
      indicated.

|                   |            |           |            |           |            |           |            |           |            |           | 
|------------------ | ---------- | --------- | ---------- | --------- | ---------- | --------- | ---------- | --------- | ---------- | --------- | 
|                   |            | 2005      |            | 2004      |            | 2003      |            | 2002      |            | 2001     
|                   |            |           |            |           |            |           |            |           |            |           | 
|Financial
    year |            |           |            |           |            |           |            |           |            |           | 
|quarter            | High
    $ | Low
    $ | High
    $ | Low
    $ | High
    $ | Low
    $ | High
    $ | Low
    $ | High
    $ | Low
    $
|                   |            |           |            |           |            |           |            |           |            |           | 
|First quarter      |            | 38.80     |            | 31.34     |            | 31.09     |            | 27.60     |            | 29.11     | 
|Second quarter     |            | 39.95     |            | 36.40     |            | 36.15     |            | 31.00     |            | 29.31     | 
|Third quarter      |            | 39.40     |            | 36.21     |            | 35.13     |            | 31.15     |            | 27.30     | 
|Fourth quarter     |            | 42.72     |            | 35.80     |            | 34.95     |            | 31.67     |            | 29.63     | 
|                   |            |           |            |           |            |           |            |           |            |           | 
|2005               |            |           |            |           |            |           |            |           |            | May       | 
|                   |            |           |            |           |            |           |            |           |            |           | 
|High $             |            |           |            |           |            |           |            |           |            | 38.11     | 
|Low $              |            |           |            |           |            |           |            |           |            | 36.55     | 
|                   |            |           |            |           |            |           |            |           |            |           | 

Analysis of
shareholdings

a) Substantial
      holdings  at
12 November 2005

|                                              |             |        |  |      | 
|--------------------------------------------- | ----------- | ------ |  | ---- | 
|                                              |             | Number |  |     
|of shares                                     | % of issued
|million                                       | capital    
|                                              |             |        |  |      | 
|Ordinary shares of 25p each                   |             |        |  |      | 
|Barclays PLC                                  |             | 15.70  |  | 3.14 | 
|Legal & General Investment Management Limited |             | 15.00  |  | 3.02 | 
|UBS AG                                        |             | 17.50  |  | 3.49 | 
|                                              |             |        |  |      | 

At 12 November
2005 no person or company is known to hold more than five per cent of the Ordinary
shares.
     The company is not directly or indirectly owned or controlled by any other company
or any government.

b) By size of holding  at
30 September 2005

|                  |            |             |  |                            |  |           |  |     | 
|----------------- | ---------- | ----------- |  | -------------------------- |  | --------- |  | --- | 
|Number ofaccounts |            | % of        |  | Size of holding 25p shares |  | Number of |  | %  
|total number      | 25p shares | of ordinary
|of accounts       | million    | capital    
|                  |            |             |  |                            |  |           |  |     | 
|17,338            |            | 46          |  | 1  500                    |  | 4.3       |  | 1   | 
|9,556             |            | 26          |  | 501  1,000                |  | 7.1       |  | 1   | 
|8,995             |            | 24          |  | 1,001  5,000              |  | 17.7      |  | 4   | 
|1,107             |            | 3           |  | 5,001  50,000             |  | 15.5      |  | 3   | 
|478               |            | 1           |  | 50,001  1,000,000         |  | 120.4     |  | 24  | 
|88                |            | 0           |  | Over 1,000,000             |  | 337.5     |  | 67  | 
|                  |            |             |  |                            |  |           |  |     | 
|37,562            |            | 100         |  |                            |  | 502.5     |  | 100 | 
|                  |            |             |  |                            |  |           |  |     | 

c) By investor
    type  at 30 September 2005

|                            |                           |                            |         |                                    |  |                          |  |     | 
|--------------------------- | ------------------------- | -------------------------- | ------- | ---------------------------------- |  | ------------------------ |  | --- | 
|Number
         ofaccounts  |                           | %
               of        |         |                                    |  | Number
               of |  | %  
|total
               number | 25p
               shares | of
               ordinary
|of
               accounts  | Type
         of investor | million                    | capital
|                            |                           |                            |         |                                    |  |                          |  |     | 
|29,683                      |                           | 79                         |         | Individuals                        |  | 26.2                     |  | 5   | 
|6,966                       |                           | 19                         |         | Institutional
         investors   |  | 467.3                    |  | 93  | 
|913                         |                           | 2                          |         | Other
         corporate investors |  | 9.0                      |  | 2   | 
|                            |                           |                            |         |                                    |  |                          |  |     | 
|37,562                      |                           | 100                        |         |                                    |  | 502.5                    |  | 100 | 
|                            |                           |                            |         |                                    |  |                          |  |     | 

d) Close company status
The company is not a close company within the meaning of the Income and Corporation Taxes Act 1988. There has been no change in that status since 30 September 2005.

e) Stock ownership of managementThe interests of the directors and officers of the company in the shares and options of the company are given in the report on remuneration on pages 79 to 82.

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|142 | The
          BOC Group
plcAnnual
report and accounts 2005 | Shareholder
    information
|--- | ---------------------------------------------------------- | ---------------------------

TaxationA
summary of the principal tax consequences for certain beneficial holders of Ordinary
shares of BOC and ADSs representing Ordinary shares is set out below. This summary
applies to citizens or residents of the UK or US, or otherwise who are subject
to UK tax or US federal income tax on a net income basis in respect of such securities.
It is not intended to be a comprehensive analysis of all of the potential tax
consequences of
holding Ordinary shares or ADSs and does not purport to deal with persons who
hold their Ordinary shares or ADSs in special circumstances, such as financial
institutions, tax exempt organisations, insurance companies, dealers in securities,
persons who own, directly or indirectly or by attribution, ten per cent or more
of the outstanding share capital or voting stock of BOC, persons holding Ordinary
shares or ADSs as part of a hedge,straddle or other risk
reduction transaction, or who acquired such Ordinary shares or ADSs through the
exercise of an employee stock option or otherwise as compensation. All holders
and investors are advised to consult their tax advisors on the tax implications
of their particular
holdings, including the consequences under applicable state and local law.     The statements of tax laws set out below are based on the laws in force at the date of this report unless otherwise noted, and are subject to any subsequent
changes in UK and US law, or in any double tax convention between the UK and the US.

UK shareholdersThe following information applies to individuals who hold Ordinary shares and who are resident or ordinarily resident in the UK for UK tax purposes (UK resident holders).

Taxation
of capital gainsA UK resident holder will be liable to UK tax on the gain from the disposal of Ordinary shares. For the purposes of calculating the gain from the disposal of Ordinary shares, a UK
resident holder who held Ordinary shares prior to 31 March 1982 may substitute the market value of such shares as at that date for the original cost of such shares. The market value of Ordinary shares on 31 March 1982 was 168.75p per Ordinary
share.     A
UK resident holder may also be entitled to indexation relief and taper relief
when selling shares. Indexation relief is calculated on the market value of shares
held at 31 March 1982 and on the cost of any subsequent purchases from that date.
Indexation relief is not available for periods after 1 April 1998. Taper relief
provides UK resident holders with relief from tax on gains accrued on the
disposal of Ordinary shares held or acquired after 5 April 1998. The amount of
taper relief available depends on the length of time such shares have been held
and on the UK resident holders individual facts and circumstances.

Taxation of dividendsA UK resident holder is entitled to a tax credit on receipt of a cash dividend. The tax credit is a fixed proportion of the dividend and is currently1/9th of the cash dividend received.     The income subject to UK income tax is the sum of the dividend and the attached tax credit, with the tax credit being available as a deduction against any
resulting tax liability.     Special
rates of tax apply to dividend income: the ordinary rate is ten per cent and applies to individuals liable to tax at the basic or lower
rates of tax; the upper rate is 32.5 per cent which applies to the
extent that income exceeds the basic rate band.     For
a UK resident holder liable to income tax only at the basic or lower rates of
tax, there will thus be no further tax liability in respect of the dividend received.
If, however, the UK resident holder is subject to income tax at the higher rate
there will be a further tax liability on the sum of the cash dividend received
and the associated tax credit. Where a UK resident holders tax liability
is
less than the associated tax credit, no refund is available.     By
way of example, the payment by BOC of a cash dividend of £90 would have an associated tax credit of £10 and a UK resident holder is treated as
receiving a gross dividend of £100. The upper rate tax of 32.5 per cent on the gross dividend is £32.50. Therefore the UK resident holder liable to tax at the upper rate will have a tax liability of £22.50, being the tax liability on
the gross dividend of £32.50 less the tax credit of £10.

Stamp duty
Stamp duty or stamp duty reserve tax at the rate of 0.5 per cent of consideration payable is normally payable on the purchase price of shares.

Inheritance
taxIndividual
shareholders may be liable to inheritance tax on the transfer of Ordinary shares.
Inheritance tax may be charged on the amount by which the value of a shareholders
estate is reduced as a result of any transfer by way of gift or other gratuitous
transaction made by them or treated as made by them.

US holdersFor the purposes of this summary, a US holder is a beneficial owner of ADSs who is an individual citizen or resident of the US, a corporation or other entity organised under the laws of
the US or any state thereof, an estate the income of which is subject to US federal income taxation regardless of its source, or a trust if a court within the US is able to exercise primary supervision over the administration of the trust and one or
more US persons have the authority to control all substantial decisions of the trust.     US holders of ADSs are treated as owners of underlying Ordinary shares for the purposes of the convention relating to estate and gift tax (the Estate Tax
Convention) and for the purposes of the US Internal Revenue Code of 1986, as amended (the Code).

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| | Shareholder
    information | 143
| | --------------------------- | ---
| |                             |    



Taxation
      of dividendsUnder current UK tax legislation, no tax will be withheld from dividend payments made by BOC.Dividends
        received by a US holder will be foreign source income for US federal
income tax purposes in the amount equal to the US dollar value of the dividend
        on the date of such payment. Generally, dividends will not be eligible
        for the dividends
received deduction allowed to US corporations under the Code.The
      US dollar amount of any dividends received by a non-corporate US holder prior
      to 1 January 2009 that constitute qualified dividends will be taxable to
      the holder at a maximum rate of 15 per cent, provided that certain holding
      periods are met. BOC currently believes that dividends paid with respect
      to its ADSs should be treated as qualified dividends for the 2005 taxable
      year and BOC intends to report its dividends as qualified dividends on Forms
      1099-DIV delivered to US holders. US holders are urged to consult their own
      tax advisers regarding the availability of the reduced dividend tax rate
      in light of their own particular situations.
           The
    US Treasury has expressed concern that parties to whom ADSs are released
    may be taking actions that are inconsistent with the claiming of deductions
    in respect of qualified dividends by US holders of ADSs. Accordingly, the
    analysis of the availability of qualified dividend treatment could be affected
by future actions that may be taken by the US Treasury with respect to ADSs.

Taxation of capital gainsGenerally, a US holder who is not resident or ordinarily resident in the UK for tax purposes should not be subject to UK tax on any gain from the disposal of ADSs, but will be subject to
US tax on any capital gain realised on the sale or other disposal of ADSs.

US information reporting and backup withholdingDividend payments made with respect to ADSs and proceeds from the sale or other disposal of ADSs may be subject to information reporting to the US Internal Revenue Service and backup
  withholding at a current rate of 28 per cent. Holders should consult their own advisors as to the application to them of the information reporting and backup withholding rules.

Stamp
dutyIn
  practice no UK stamp duty is payable on the transfer of an ADS, provided that
  the separate instrument of transfer is not executed in, and always remains outside
  of, the UK. No stamp  duty reserve tax is payable on an agreement to transfer
ADSs.

Estate and gift taxUnder the Estate Tax Convention, a US holder generally is not subject to UK inheritance tax.

Exchange
controls and other limitations affecting security holdersThere are currently no exchange controls or other limitations in the UK affecting security holders.

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| | Shareholder
        information | 145
| | ------------------------------- | ---



Payment of dividendsOrdinary
    shareholders and loan stock holders may arrange to have their dividends or
    interest paid directly into a bank or building society account through the
    Bankers Automated Clearing System (BACS). Mandate forms are available on
    the companys website (www.boc.com) or from Lloyds TSB Registrars whose
    details appear on the previous page. Alternatively you can set up a new,
    or change an existing, dividend mandate via the Lloyds TSB Registrars shareview
    website at www.shareview.co.uk In February of each year a consolidated tax
    voucher relating to Ordinary dividend payments made via BACS during the financial
    year, will be mailed to the registered address of the
shareholder. Loan stock holders will receive tax vouchers at the time of each
    interest payment in April and October, mailed directly to their registered
    address.

Overseas dividend paymentsPrivate
shareholders in 36 countries may now have their dividends paid directly into
their local bank accounts in their local currency. There is a small fixed fee
for the service,
currently £2.50 per dividend. The dividend payment, less the fee, is normally received within five working days of the dividend payment date. For more information, please contact Lloyds TSB Registrars whose details appear on the previous page
or visit the companys website (www.boc.com).

Share dealing servicesFor Internet and telephone share dealing services contact Lloyds TSB Registrars by either logging on to www.shareview.co.uk/dealing or by calling 0870 850 0852 between 8.30 am and 4.30 pm
on any business day (excluding bank holidays).You will need your shareholder reference number shown on your share certificate.

Lloyds TSB Registrars also offer a postal share dealing service. For further information contact:

Share Dealing Services
Lloyds TSB
Registrars
PO Box 1357
The Causeway,Worthing
West Sussex, BN99 6UB
England

American Depositary SharesThe BOC Group plc American Depositary Shares (ADS) are listed on the New York Stock Exchange and trade under the symbol BOX. One ADS represents two The BOC Group plc Ordinary shares.
JPMorgan Chase Bank N.A. is the depositary and their address for enquiries is:

JPMorgan Chase
Bank N.A.
JPMorgan Service Center,PO Box 3408, South Hackensack, NJ 07606-3408, USATelephone,
toll free: US and Canada +1 800 990 1135 or from outside the US +1 201 680 6630
Website:
www.adr.com/shareholder

A dividend reinvestment plan is available through JPMorgan Chase Bank N.A. as depositary for holders of ADSs. All enquiries regarding this plan should be addressed to:

Global Invest Direct,
JPMorgan
Chase Bank N.A.PO Box 3408, South Hackensack, NJ 07606-3408, USATelephone, toll free: JPMorgan Service Center on +1 800 428 4237 or from outside the US +1 201 680 6630

US report filingsAll
reports and other information filed with the US Securities and Exchange Commission
(SEC) may be inspected at the public reference facilities maintained by the SEC
at 100 F Street, NE,Washington DC 20549, USA. These reports may also be accessed
via the SECs website at www.sec.gov

Agent in the USCT Corporation System111 Eighth Avenue, NewYork, NewYork 10011, USA

ShareGiftShareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to the charity ShareGift (registered charity number
1052686). A ShareGift donation form can be obtained from Lloyds TSB Registrars whose details appear on the previous page.  Further information about ShareGift is available at www.sharegift.org or by writing to: ShareGift,The Orr Mackintosh Foundation,
46 Grosvenor Street, London W1K 3HN, England. Telephone: 020 7337 0501.

Unsolicited mailThe
company is obliged by law to make its share register publicly available and as
a consequence some shareholders may receive unsolicited mail. If you wish to
limit the amount of  unsolicited mail you receive, contact:The Mailing Preference
Service, FREEPOST 29 (LON.20771), London W1E 0ZT, England. Telephone: 0845 703
4599 or register on-line at www.mpsonline.org.ukThe Mailing
    Preference Service is an independent
  organisation which offers a free service to the public. Registering with them
will reduce most unsolicited consumer advertising material.

Special needsIf you would like to receive this report in an appropriate alternative format, such as large print, Braille, or audio cassette, please contact Lloyds TSB Registrars on 0870 600 3958 or
for shareholders with hearing difficulties on Teltex 0870 600 3950.

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|146                              | The
          BOC Group plcAnnual
    report and accounts 2005
|-------------------------------- | --------------------------------------------------------------
|Cross
    reference to Form 20-F

The information in this document that is referred to in the following table shall be deemed to be filed with the US Securities and Exchange Commission for all purposes.

Item
   
   Page1
   Identity of directors, senior management and advisers
   n/a2
   Offer statistics and expected timetable
   n/a3
   Key informationSelected financial data
   12-13,
    62-63, 133-137, 140Capitalization and indebtedness
   n/aReasons for the offer and use of proceeds
   n/aRisk factors
   38-39, 56-574
   Information on the companyHistory and developmentof the company
   1,
    14-21, 40-54, 145, outside back coverBusiness overview
   1, 14-22, 26-37, 40-54Organizational structure
   138-139Property, plants and equipment
   14-21, 113-1145
   Operating and financial review and prospectsOperating results
   1, 40-63Critical accounting policies
   60-61Liquidity andcapital resources
   42,
    55-58, 63, 114, 119-126, 135-136Research and development, patentsand licenses, etc
   36-37Trend information
   22, 42-54Off-balance sheet arrangements
   58, 127Tabular disclosure of contractual obligations
   57-58, 1266
   Directors, senior management and employeesDirectors and senior management
   8-11Compensation
   72-83Board practices
   8-11, 64-71, 72-83Employees
   13, 23, 101Share ownership
   25, 73-837
   Major shareholders
    and related party transactionsMajor shareholders
   140-141Related party transactions
   62, 131Interests of experts and counsel
   n/a8
   Financial informationConsolidated statements and otherfinancial information
   58-59,
    86-137, 140,see
    Item 18 of the companysForm
    20-F filing with the Securitiesand
    Exchange CommissionSignificant changes
   n/a




Item
   
   Page9
   The offer and
       listingOffer and listing details
   140-141Plan of distribution
   n/aMarkets
   140Selling shareholders
   n/aDilution
   n/aExpenses of the issue
   n/a10
   Additional informationShare capital
   n/aMemorandum and articles of association
   see Item 10 of thecompanys Form 20-Ffiling with the Securities andExchange CommissionMaterial contracts
   n/aExchange controls
   143Taxation
   142-143Dividends and paying agents
   n/aStatement by experts
   n/aDocuments on display
   145Subsidiary information
   n/a11
   Quantitative and qualitative disclosuresabout market risk
   56-57, 92, 120-12412
   Description of securities other than equity securities
   n/a13
   Defaults, dividend arrearages and delinquencies
   n/a14
   Material modifications to the rights of security holdersand use of proceeds
   n/a15
   Controls and procedures
   69-7016A
   Audit committee financial expert
   6716B
   Code of ethics
   23, 2616C
   Principal accountant fees and services
   9716D
   Exemptions from the Listings Standards for audit committees
   n/a16E
   Purchases of equity securities by the issuerand affiliated purchasers
   see Item 16E of thecompanys Form 20-Ffiling with the Securities andExchange Commission17
   Financial statements
   n/a18
   Financial statements
   86-137,see Item 18 of thecompanys Form 20-Ffiling with the Securities andExchange Commission19
   Exhibits
   n/a


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|                      |  |  | 147
|--------------------- |  |  | ---
|Glossary
    of terms
|                     

|                                     
|-------------------------------------
|Terms used in the report and accounts
|                                     
|Acquisition accounting               
|Associate                            
|Capital allowances                   
|Cash at bank                         
|Creditors                            
|Debtors                              
|Finance lease                        
|Financial year                       
|Foreseeable losses                   
|Freehold                             
|Interest receivable                  
|Interest payable                     
|Joint venture                        
|Net asset value                      
|Own shares                           
|Profit                               
|Profit and loss account              
|Profit and loss account reserves     
|Profit for the financial year        
|Provisions                           
|Called up share capital              
|Scrip dividend                       
|Secured loan                         
|Shareholders funds                  
|Share premium account                
|Shares issued                        
|Stocks                               
|Tangible fixed assets                
|Turnover                             
|                                     

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|148   | The BOC
          Group plcAnnual
    report and accounts 2005
|----- | --------------------------------------------------------------
|Index
|     

Item
  PageAAccounting policies
   91Acquisitions
   129American Depositary Shares (ADSs)
   140Annual General Meeting
   71Auditors remuneration
   97Auditors report
   85Audit committee
   67BBalance sheets
   87, 90Board committees
   67Board of directors
   8Borrowings facilities
   56, 120CCapital expenditure
   42Cash flow statement
   88Cautionary statement
   1Chairmans
    statement
   4Charitable donations
   34Chief
    executives review
   6Commitments
   58, 126Contact information
   144Contingent liabilities
   58, 127Corporate governance
   64Creditors
   118Critical accounting policies
   60Cross reference to Form 20-F
   146DDebtors
   117Depreciation
   113Directors interests
   79Directors remuneration
    (see Remuneration)
   78, 101Directors report
   2Directors responsibilities
    statement
   84Directors service
    contracts
   76Disposals
   129Dividend reinvestment plan (DRIP)
   144Dividends
   111Donations (see Charitable donations)
   34EEarnings per share
   111Employees
   23, 101Employment policies
   23Environment (see Social, environmental and ethical performance)
   30Exceptional items
   40, 55, 97Exchange rates
   62Executive management board
   10FFair value of acquisitions
   129Financial calendar
   144Financial highlights
   2Financial instruments
   120Financial review
   55Five year record
   12GGlossary of terms
   147Going concern
   63Goodwill
   111Group profile
   14Group undertakings
   138HHealth (see Social, environmental and ethical performance)
   30




Item
    PageIInformation management
   37Intangible fixed assets
   111Interest
   98Internal controls
   69JJoint ventures and associates
   115LLeases
   113, 126Legal proceedings
   58, 127Liquid resources
   88MMinority interests
   86, 87Movement
    in shareholders funds
   89NNotes to the financial statements
   93OOperating review
   40Operating
    review  Process Gas Solutions
   42Operating
    review  Industrial and Special Products
   44Operating
    review  BOC Edwards
   46Operating
    review  Afrox hospitals
   47Operating
    review  Gist
   47PPensions and retirement benefits
   103Profit and loss account
   86Provisions for liabilities and charges
   124RRatios
   55Registered office
   outside back coverRegistrars
   144Related party transactions
   62, 131Remuneration
   101Report on remuneration
   72Research and development
   36Reserves
   125Risk
   38, 56, 69SSafety (see Social, environmental and ethical performance)
   28Segmental information
   93Share option and incentive schemes
   102Share price
   140Shareholder analysis
   141Shareholder information
   140Social, environmental and ethical performance
   26Statement of total recognised gains and losses
   89Stocks
   116Strategy
   22Substantial shareholdings
   141Supplier payment policy
   63TTangible fixed assets
   113Taxation
   98Total shareholder return
   73UUS GAAP information and reconciliations
   132US investor information
   142WWebsite
   144


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©The BOC Group plc 2005.
Designed and produced by Radley Yeldar (London) using RingMaster®.
Photography by Keith Waldegrave.
Printed by Royle Corporate Print.

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|The BOC Group plc                
|---------------------------------
|Registered office:               
|Chertsey
       Road, Windlesham,
|Surrey GU20 6HJ, England         
|Tel: 01276 477222                
|Fax: 01276 471333                
|Registered in England No. 22096  
|Website: www.boc.com             

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