The following discussion and analysis of our financial condition and results of operations should be read together with the Selected Financial Data and our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those under the headings "Risk Factors" and "Forward-Looking Information."

Introduction

The Consolidated Financial Statements include the consolidated results of Tyco International Ltd., a company organized under the laws of Bermuda, and its subsidiaries (hereinafter collectively referred to as "we," the "Company" or "Tyco") and have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States ("GAAP").

The Company operates in the following business segments:

º •
º ADT Worldwide designs, sells, installs, services and monitors electronic security systems for residential, commercial, industrial and governmental customers.

º •
º Flow Control designs, manufactures, sells and services valves, pipes, fittings, valve automation and heat tracing products for the water and wastewater markets, the oil, gas and other energy markets along with general process industries.

º •
º Fire Protection Services designs, sells, installs and services fire detection and fire suppression systems for commercial, industrial and governmental customers.

º •
º Electrical and Metal Products designs, manufactures and sells galvanized steel tubing, armored wire and cable and other metal products for non-residential construction, electrical, fire and safety and mechanical customers.

º •
º Safety Products designs, manufactures and sells fire protection, security and life safety products, including fire suppression products, breathing apparatus, intrusion security, access control and video management systems. In addition, Safety Products manufactures products installed and serviced by ADT Worldwide and Fire Protection Services.

We also provide general corporate services to our segments and these costs are reported as Corporate and Other.

References to the segment data are to the Company's continuing operations. Prior period amounts have been reclassified to exclude the results of discontinued operations.

Overview and Outlook

Fiscal year 2008 was a year of progress for Tyco, as revenue increased by 9% and income from continuing operations significantly improved compared to 2007. We also made significant progress in executing our business strategies. Looking forward to fiscal 2009, like most businesses, we expect market conditions to negatively affect our results. First, because over 50% of our revenue is generated outside of the U.S., the recent significant appreciation of the U.S. dollar against most major currencies could negatively impact our revenue in 2009. Specifically, the value of the local currencies used in our non-U.S. operations has declined relative to the U.S. dollar by approximately 20%, mostly during the fourth fiscal quarter and into October of 2008. If exchange rates remained at these levels, our non-U.S. revenue would likely decline by a similar magnitude in fiscal 2009. Second, we expect the operating margins in our Electrical and Metals segment to decline in 2009 as a result of declining steel and

copper prices. As noted in our Critical Accounting Policies, we account for our inventory on a first-in, first-out basis. As a result, in a declining price environment like the one we are in today, operating margins are likely to contract as higher priced inventory is processed and sold at lower prices. Third, we have recently seen a decline in commercial construction activity, both in the United Kingdom and the U.S. We expect continued weakness in the commercial construction market to negatively impact our results in the ADT Worldwide segment.

Operationally, in 2009, we expect to continue our initiatives to improve our efficiency, manage our working capital effectively, refine our portfolio and prudently allocate our capital. We expect internal investments to fund growth and productivity in our businesses to continue to be our first priority. As in prior years, we expect to remain active in making bolt-on acquisitions as we continually assess the strategic fit and value of businesses that have potential for success within our existing framework. During 2008, our ADT Worldwide segment acquired FirstService Security to strengthen its systems integration capabilities. In addition, during 2008, ADT acquired two Sensormatic franchisees: Winner Security Services LLC and Sensormatic Security Corp. At the same time that we selectively pursue acquisitions, we will consider divestitures where businesses do not align with our long term strategy. In fiscal 2008, as part of our portfolio refinement efforts, we sold a subsidiary that makes and sells fire protection products in Japan, a European manufacturer of building products for the construction industry, a European manufacturer of public address and acoustic systems, and substantially all of our Infrastructure Services business. These divestitures resulted in cash proceeds of approximately $1.0 billion. The results of these businesses are included in discontinued operations for all periods presented.

In addition to using cash flow to fund internal investments and make selective acquisitions, we expect to have excess cash to return to our shareholders. During 2008, we completed the $1.0 billion share repurchase program approved by the Board of Directors in September 2007, which resulted in the purchase of approximately 5% of our outstanding shares during the program. In addition, during 2008, we paid dividends of $292 million to shareholders, and on September 9, 2008 our Board of Directors approved an increase in the quarterly dividend on our common shares to $0.20 per share from $0.15 per share, which was paid on November 3, 2008 to shareholders of record on October 1, 2008. On July 10, 2008, our Board of Directors approved a new $1.0 billion share repurchase program, which we intend to use to repurchase additional shares depending on credit market conditions, macroeconomic factors and our expectations regarding future cash flows.

Finally, we continue to focus on operational execution to drive earnings growth. To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all of our segments, including the corporate organization, designed to streamline some of our businesses and reduce our operational footprint. Since the inception of this program through the end of fiscal 2008, we have incurred charges of approximately $395 million. We have identified additional opportunities for cost savings from restructuring activities in fiscal 2009 and expect to incur restructuring charges of approximately $50 million in fiscal 2009. We believe this restructuring activity will strengthen our competitive position over the long term.

Legal Settlements

In connection with the settlement of litigation related to our outstanding public debt, on June 3, 2008 we, along with our finance subsidiary TIFSA, Tyco International Finance S.A. ("TIFSA"), a wholly-owned subsidiary of the Company and successor company to Tyco International Group S.A. ("TIGSA"), a wholly-owned subsidiary of the Company organized under the laws of Luxembourg, consummated consent solicitations and exchange offers related to certain series of debt issued under the Company's consent payments totaling $250 million, and we recorded a $222 million charge to other expense, net as a loss on extinguishment of debt. We also terminated our unsecured bridge loan facility entered into on November 27, 2007 in connection with the settlement of the Indenture Trustee

Litigation and recorded a $36 million charge to other expense to write-off unamortized debt issuance costs.

During the third quarter of 2008, the Company signed a definitive agreement with the plaintiff to settle the lawsuit entitled New Jersey v. Tyco International Ltd., et al. In connection with the settlement, the Company made a payment of $73.25 million to the plaintiffs on June 2, 2008. Pursuant to the Separation and Distribution Agreement, the Company's share of the settlement amount was approximately $20 million, with Covidien and Tyco Electronics responsible for approximately $30 million and $23 million, respectively. The Company recorded the settlement and related receivable from each of Covidien and Tyco Electronics for their respective shares of the settlement amount in the second quarter of 2008 resulting in a net charge to selling, general and administrative expenses for its share of the settlement of approximately $20 million.

Also in the third quarter of 2008, the Company settled the lawsuit entitled Ballard v. Tyco International Ltd. Pursuant to the settlement, the Company made a payment of $36 million to the plaintiffs, which was subject to the sharing formula contained in the Separation and Distribution Agreement and resulted in the Company recording a net charge to selling, general and administrative expenses of approximately $10 million and recording receivables from Tyco Electronics and Covidien of approximately $11 million and $15 million, respectively, in the third quarter.

Also in the third quarter of 2008, the Company settled the matter entitled The Bank of New York v. Tyco International Group S.A., a lawsuit related to the Separation brought by the indenture trustee of certain of Tyco's public debt. In connection with the settlement, Tyco exchanged approximately $422 million principal amount of notes due 2028 and $707 million principal amount of notes due 2029 for an equal principal amount of notes due 2019 and 2021, respectively. The terms of the exchange notes are substantially the same as the terms of the notes for which they were exchanged. In addition, each series of notes issued under Tyco's indentures dated June 9, 1998 and December 31, 2003 (including the exchange notes) were amended to provide noteholders with the right to require Tyco to repurchase their notes for a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, in the event that a ratings downgrade occurs in connection with certain change of control transactions.

Also in the third quarter of 2008, the Company settled the matter entitled Sensormatic Security Corp. v. Sensormatic Electronics Corp., ADT Security Services, Inc. and Wallace Computer Services, Inc. in connection with its purchase of the Sensormatic franchisee's Maryland, Virginia and District of Columbia franchise. As part of the settlement and the franchise acquisition, the Company paid a total of approximately $86 million to the franchisee which includes $20 million for the reacquisition of franchise rights that were deemed unfavorable to the Company when compared to pricing for current market transactions for similar arrangements and $6 million related to a legal settlement.

In the second quarter of 2008, the Company settled a contract dispute arising under its former Infrastructure Services business relating to the City of Phoenix's 91st Avenue Wastewater Treatment Plant. The settlement included a general release of all claims by each party to the litigation without any party making any payment to any other party. In connection with the settlement, the Company assessed its assets under the original contract with the City of Phoenix and concluded the assets were no longer recoverable, resulting in a $51 million charge to discontinued operations in the second quarter of 2008.

In 2007, the Company settled 32 purported securities class action lawsuits arising from actions alleged to have been taken by prior management for $2.975 billion. Of this amount, the Company contributed $803 million, representing its share under the Separation and Distribution Agreement, to a $2.975 billion escrow account established in connection with the settlement. All legal contingencies that could have affected the final order approving the settlement expired on February 21, 2008, and the claims administrator is currently processing claims. The settlement did not purport to resolve all securities cases, and several of such cases remain outstanding. In addition, the settlement did not

release claims arising under ERISA and the lawsuits arising thereunder. As of the opt-out deadline, Tyco had received opt-out notices from individuals and entities totaling approximately 4% of the shares owned by class members. A number of these individuals and entities have filed claims separately against Tyco. Any judgments resulting from such claims or from claims that are filed in the future would not reduce the settlement amount. Generally, the claims asserted by these plaintiffs include claims similar to those asserted by the settling defendants; namely, violations of the disclosure provisions of federal securities laws. Tyco intends to vigorously defend any litigation resulting from opt-out claims. It is not possible to predict the final outcome or to estimate the amount of loss or range of possible loss, if any, that might result from an adverse resolution of the asserted or unasserted claims from individuals that have opted-out or from any other legacy securities litigation. Should any of these cases result in an adverse judgment or be settled for a significant amount, they could have a material adverse effect on our financial position, results of operations or cash flows.

Under the terms of the Separation and Distribution Agreement, each of Tyco, Covidien and Tyco Electronics are jointly and severally liable for the full amount of any legacy securities action settlement (including ERISA claims) and any judgments resulting from opt-out claims. Additionally, under the Separation and Distribution Agreement, the companies shared in the liability and escrow accounts related to the class action settlement, with Tyco assuming 27%, Covidien 42% and Tyco Electronics 31% of the settlement amount.

As a result, Tyco incurred a charge to expense, for which no tax benefit is available, and a current liability of $2.975 billion in the third quarter of 2007. Tyco borrowed under its unsecured bridge and credit facilities to fund the liability and placed the proceeds in escrow for the benefit of the class. In connection with the Separation, Covidien and Tyco Electronics assumed their portion of the related borrowing. The Company has also recovered certain of these costs from insurers. As a result, the Company recorded $113 million of recoveries in connection with the class action settlement in its Consolidated Statements of Operations for 2007. Based on the Separation and Distribution Agreement, the Company recorded payables to Covidien and Tyco Electronics for their portion of the 2007 recoveries with an offset to shareholders' equity. The Company recovered an additional $38 million of costs from insurers during 2008. The Company recorded payables to Covidien and Tyco Electronics for their respective shares of the 2008 recoveries resulting in a net $10 million credit recorded to class action settlement, net in the Consolidated Statement of Operations.

Since all legal contingencies that could have affected the settlement were exhausted on February 21, 2008, the administration and distribution of the settlement funds in escrow has been managed by the counsel of the certified class and Tyco is not subject to any further liability related to the class action settlement. As a result, Tyco has extinguished the class action liability and no longer has claim to the escrow account. The escrow accounts earned interest that was payable to the class. As a result, interest was also accrued on the class action settlement liability. On February 21, 2008, the class action liability and escrow account balances including interest were each $3.02 billion.

Based on the Separation and Distribution Agreement, Tyco had a receivable from Covidien and Tyco Electronics for their portion of the liability of $1,257 million and $927 million, respectively at September 28, 2007 and corresponding payables to Covidien and Tyco Electronics for their interest in the escrow accounts. Receivables and payables that pertain to the class action settlement and related escrow accounts with the same counterparty were presented net in the Consolidated Balance Sheet. Tyco's portion of the liability was $808 million at September 28, 2007. These amounts were extinguished during the second quarter of 2008.

Operating Results

    Net revenue, operating income (loss) and net income (loss) for the years
ended September 26, 2008, September 28, 2007 and September 29, 2006 were as
follows ($ in millions):

                                                  2008       2007       2006
          Revenue from product sales            $ 13,064   $ 11,816   $ 10,731
          Service revenue                          7,135      6,661      6,335

          Net revenue                           $ 20,199   $ 18,477   $ 17,066

          Operating income (loss)               $  1,941   $ (1,732 ) $  1,355
          Interest income                            110        104         46
          Interest expense                          (396 )     (313 )     (279 )
          Other expense, net                        (224 )     (255 )        -

          Income (loss) from continuing
          operations before income taxes and
          minority interest                        1,431     (2,196 )    1,122
          Income taxes                              (335 )     (324 )     (304 )
          Minority interest                           (1 )       (4 )       (1 )

          Income (loss) from continuing
          operations                               1,095     (2,524 )      817
          Income from discontinued
          operations, net of income taxes            458        782      2,787

          Income (loss) before cumulative
          effect of accounting change              1,553     (1,742 )    3,604
          Cumulative effect of accounting
          change, net of income taxes                  -          -        (14 )

          Net income (loss)                     $  1,553   $ (1,742 ) $  3,590

Net revenue increased $1.7 billion, or 9.3%, for 2008 as compared to 2007 as a result of growth in all of our segments led by solid year over year increases in Flow Control, ADT Worldwide and Electrical and Metal Products. The increase in net revenue in Flow Control resulted from volume growth due to continued strength in most industrial end markets with significant project growth in the valves business. In addition, net revenue growth in ADT Worldwide was attributable to growth in all geographic regions, as well as growth in its North American recurring revenue base. Electrical and Metal Products experienced growth primarily due to selling price increases partially offset by a decrease in volume. Foreign currency exchange rates positively affected 2008 by $772 million while the net impact of acquisitions, divestitures and other activity positively affected 2008 by $35 million.

Operating income increased $3.7 billion for 2008. Operating loss in 2007 included the class action settlement charge of $2.862 billion while 2008 operating income included a class action benefit of $10 million. Strong year over year income growth in all segments led by Flow Control, ADT Worldwide and Electrical and Metal Products, as well as lower corporate expenses contributed to the increase in operating income. Operating income was also favorably impacted as a result of lower Separation related costs and goodwill impairment charges. Separation related costs impacted operating income by $4 million and $105 million and goodwill impairment charges impacted operating income by $9 million and $46 million in 2008 and 2007, respectively. Additionally, operating income was negatively impacted by restructuring, asset impairment and divestiture charges, net of $248 million for 2008 and $210 million for 2007.

Net revenue increased $1.4 billion, or 8.3%, for 2007 as compared to 2006 as a result of growth in all of our segments. The increase in net revenue was largely driven by Flow Control as a result of volume growth from continued strength in most industrial end markets. In addition, ADT Worldwide had strong growth in Asia and Latin America, as well as growth in its recurring revenue base and systems installation and service in North America. Fire Protection Services experienced continued growth in electronic and mechanical contracting. Foreign currency exchange rates positively affected 2007 by $580 million while the net impact of acquisitions and divestitures negatively affected 2007 by $48 million.

Results by Geographic Area

    Net revenue by geographic area for the years ended September 26, 2008,
September 28, 2007 and September 29, 2006 was as follows ($ in millions):

                                               2008       2007       2006
            Net revenue(1):
            United States                    $  9,661   $  8,884   $  8,617
            Other Americas                      1,537      1,445      1,354
            Europe, Middle East and Africa      5,749      5,338      4,707
            Asia-Pacific                        3,252      2,810      2,388

                                             $ 20,199   $ 18,477   $ 17,066

Segment Results

The segment discussions that follow describe the significant factors contributing to the changes in results for each of our segments included in continuing operations.

ADT Worldwide

    Net revenue, operating income and operating margin for ADT Worldwide for the
years ended September 26, 2008, September 28, 2007 and September 29, 2006 were
as follows ($ in millions):

                                              2008      2007      2006
                Revenue from product sales   $ 2,821   $ 2,734   $ 2,546
                Service revenue                5,196     4,914     4,659

                Net revenue                  $ 8,017   $ 7,648   $ 7,205

                Operating income             $   910   $   842   $   907
                Operating margin                11.4 %    11.0 %    12.6 %

                                                2008      2007      2006
              North America                    $ 4,218   $ 4,094   $ 3,985
              Europe, Middle East and Africa     2,641     2,574     2,344
              Rest of World                      1,158       980       876

                                               $ 8,017   $ 7,648   $ 7,205

Net revenue for ADT Worldwide increased $369 million, or 4.8%, during 2008, with product revenue up 3.2% and service revenue up 5.7%, as compared to 2007. Revenue from product sales includes sales and installation of electronic security and other systems. Service revenue is comprised of electronic security services and maintenance, including the monitoring of burglar alarms, fire alarms and other life safety systems as well as services related to retailer anti-theft systems. Approximately 50% of ADT's total net revenue is contractual and is considered recurring revenue. Overall, recurring revenue grew 6.1% during 2008 while systems installation and service revenue grew 3.7%. Geographically, North America grew 3%, resulting largely from growth in recurring revenue which was partially offset by weakness in the retailer end market. The North America net revenue increase also includes the impact of acquisitions, which contributed $53 million. Although we experienced year-over-year net revenue increase in North America, this was partially offset by the retailer end market which continued to show signs of weakness during the fourth quarter of 2008. We will continue to monitor these market conditions as well as the current economic environment as we enter fiscal year 2009. Revenue in the EMEA region increased $67 million, or 2.6%, as a result of foreign currency exchange rates which had a favorable impact of $151 million. This increase was partially offset by a decline in systems installation and service revenue due to weakness in the retailer end market as well as commercial softness primarily in the United Kingdom. The 18.2% revenue growth in the Rest of World geographies was primarily driven by growth in both recurring revenue and contracting across all regions. The Rest of the World increase included the favorable impact of changes in foreign currency exchange rates of $30 million. Overall, the ADT Worldwide net revenue increase included the favorable impact of changes in foreign currency exchange rates of $213 million. The net impact of acquisitions, divestitures, and other activity positively affected revenue by $27 million.

Operating margin in ADT Worldwide increased to 11.4% in 2008 from 11.0% in 2007. North America is one of the most profitable geographic areas for ADT Worldwide with 2008 and 2007 operating margin of 15.8% and 16.9%, respectively. Margins in North America were negatively impacted by $58 million of restructuring and asset impairments in 2008 compared to $8 million in 2007. Restructuring charges in 2008 include $58 million relating to the reacquisition of certain franchise rights that were deemed to be unfavorable to the Company. There were no charges related to the reacquisition of franchise rights in 2007. . . .