Other matters

At December 31, 2010

Incorporated within the UK – held by Rolls-Royce Group plc

Rolls-Royce plc

Principal trading company

Incorporated within the UK – indirectly held

Optimized Systems and Solutions Limited	Equipment health management and advanced data management services
Rolls-Royce Fuel Cell Systems Limited	Development of fuel cell systems
Rolls-Royce International Limited	International support and commercial information services
Rolls-Royce Leasing Limited	Engine leasing
Rolls-Royce Marine Electrical Systems Limited	Marine electrical systems
Rolls-Royce Marine Power Operations Limited	Nuclear submarine propulsion systems
Rolls-Royce Power Development Limited	Generation of electricity from independent power projects
Rolls-Royce Power Engineering plc	Energy and marine systems
Rolls-Royce Total Care Services Limited	Aero engine aftermarket support services
Tidal Generation Limited	Development of tidal generation systems

The above companies operate principally in the UK and the effective Group interest is 100 per cent, other than Rolls-Royce Fuel Cell Systems Limited in which it is 80 per cent.

Incorporated overseas – indirectly held

Brazil	Rolls-Royce Brasil Limitada	Industrial gas turbines and aero engine repair and overhaul, energy and marine aftermarket support services
Canada	Rolls-Royce Canada Limited	Industrial gas turbines and aero engine sales, service and overhaul
China	Rolls-Royce Marine (Shanghai) Limited	Manufacture and supply of marine equipment
Finland	Rolls-Royce OY AB	Manufacture of marine winches and propeller systems
France	Rolls-Royce Civil Nuclear SAS	Instrumentation and control systems and life-cycle management for nuclear power plants
France	Rolls-Royce Technical Support SARL	Aero engine project support
Germany	Rolls-Royce Deutschland Ltd & Co KG	Aero engine design, development and manufacture
Guernsey	Nightingale Insurance Limited	Insurance services
India	Rolls-Royce India Private Limited	Diesel engine project management and customer support
India	Rolls-Royce Operations (India) Private Limited	Engineering support services
Italy	Europea Microfusioni Aerospaziali S.p.A.	Manufacture of gas turbine engine castings
Norway	Rolls-Royce Marine AS	Design and manufacture of ship equipment
Norway	Scandinavian Electric Holding AS	Marine electrical systems
Singapore	Rolls-Royce Singapore Pte Limited	Aero engine parts manufacturing and engine assembly, energy and marine aftermarket support services
Sweden	Rolls-Royce AB	Manufacture of marine propeller systems
US	Data Systems and Solutions LLC	Instrumentation and control systems and life-cycle management for nuclear power plants
US	Optimized Systems and Solutions Inc.	Equipment health management and advanced data management services
US	Rolls-Royce Commercial Marine Inc.	Marine aftermarket support services
US	Rolls-Royce Corporation	Design, development and manufacture of gas turbine engines
US	Rolls-Royce Crosspointe LLC	Manufacturing facility for aero engine parts
US	Rolls-Royce Energy Systems Inc.	Energy turbine generator packages
US	Rolls-Royce Engine Services – Oakland Inc.	Aero engine repair and overhaul
US	Rolls-Royce Defense Services Inc.	Aero engine repair and overhaul
US	Rolls-Royce Naval Marine Inc.	Design and manufacture of marine equipment
US	Seaworthy Systems Inc.	Marine support services

The above companies operate principally in the country of their incorporation.

The effective Group interest is 100 per cent.

A list of all subsidiary undertakings will be included in the Company’s annual return to Companies House.

At December 31, 2010

Joint ventures

Incorporated within the UK – indirectly held

	Class	% of class held	% of total equity held
Airtanker Holdings Limited Strategic tanker aircraft PFI project	Ordinary	20	20
Airtanker Services Limited Provision of aftermarket services for strategic tanker aircraft	Ordinary	22	22
Alpha Partners Leasing Limited Aero engine leasing	A Ordinary B Ordinary	100 –	}	50
Composite Technology & Applications Limited Development of aero engine fan blades	A Ordinary B Ordinary	100 –	}	51
Genistics Holdings Limited Trailer-mounted field mobile generator sets	A Ordinary B Ordinary	100 –	}	50
Rolls-Royce Goodrich Engine Control Systems Limited Development and manufacture of aero engine controls	Ordinary	50	50
Rolls-Royce Snecma Limited (UK & France) Aero engine collaboration	A Shares B Shares	– 100	}	50
Rolls-Royce Turbomeca Limited (UK & France) Aero engine collaboration	A Shares B Shares	– 100	}	50
Rolls Wood Group (Repair and Overhauls) Limited Industrial gas turbine repair and overhaul	A Ordinary B Ordinary	100 –	}	50
TRT Limited Aero engine turbine blade repair services	A Ordinary B Ordinary	– 100	}	49.5
Turbine Surface Technologies Limited Aero engine turbine surface coatings	A Ordinary B Ordinary	– 100	}	50
Turbo-Union Limited (UK, Germany & Italy) RB199 engine collaboration	Ordinary A Shares	40 37.5	}	40

Joint ventures

Incorporated overseas– indirectly held

		Class	% of class held	% of total equity held
China	Xian XR Aero Components Co Limited Manufacturing facility for aero engine parts
		Ordinary	49	49
Germany	EPI Europrop International GmbH (effective interest 35.5%) A400M engine collaboration
		Ordinary	28	28
Germany	EUROJET Turbo GmbH (UK, Germany, Italy & Spain) (effective interest 39%) EJ200 engine collaboration
		Ordinary	33	33
Germany	MTU, Turbomeca, Rolls-Royce GmbH (UK, France & Germany) MTR390 engine collaboration
		Ordinary	33.3	33.3
Germany	N3 Engine Overhaul Services Verwaltungsgesellschaft mbH Aero engine repair and overhaul
		Ordinary	50	50
Hong Kong	Hong Kong Aero Engine Services Limited Aero engine repair and overhaul
		Ordinary	45	45
India	International Aerospace Manufacturing Private Limited Manufacture of compressor shrouds, compressor rings, turbine blades and nozzel guide vanes
		Ordinary	50	50
Israel	Techjet Aerofoils Limited Manufacture of compressor aerofoils for gas turbines	A Ordinary B Ordinary	50 50	} 50
Malaysia	Advanced Gas Turbine Solutions Sdn Bhd Industrial gas turbine aftermarket services
		Ordinary	49	49
Singapore	International Engine Component Overhaul Pte Limited Aero engine repair and overhaul
		Ordinary	50	50
Singapore	Singapore Aero Engine Services Private Limited (effective interest 39%) Aero engine repair and overhaul
		Ordinary	30	30
Spain	Industria de Turbo Propulsores SA Aero engine component manufacture and maintenance
		Ordinary	46.9	46.9
Switzerland	IAE International Aero Engines AG (UK, Germany, Japan & US) V2500 engine collaboration	A Shares B Shares C Shares D Shares	100 – – –	32.5
US	Alpha Leasing (US) LLC, Alpha Leasing (US) (No2) LLC, Alpha Leasing (US) (No4) LLC, Alpha Leasing (US) (No.5) LLC, Alpha Leasing (US) (No.6) LLC, Alpha Leasing (US) (No.7) LLC, Rolls-Royce & Partners Finance (US) LLC, Rolls-Royce & Partners Finance (US) (No.2) LLC Aero engine leasing	Partnerships	50	–
US	Exostar LLC Business to business internet exchange	Partnership	17.6	–
US	GE Rolls-Royce Fighter Engine Team LLC F136 development engine for the Joint Strike Fighter
		Partnership	40	–
US	Texas Aero Engine Services, LLC Aero engine repair and overhaul	Partnership	50	–
US	Williams-Rolls Inc. (UK & US) Small aero engine collaboration	Common	15	15

Unincorporated overseas – held by subsidiary undertaking

US	Light Helicopter Turbine Engine Company (LHTEC) Rolls-Royce Corporation has a 50 per cent interest in this unincorporated partnership which was formed to develop and market jointly the T800 engine

The countries of principal operations are stated in brackets after the name of the company, if not the country of incorporation.

To the members of Rolls-Royce Group plc

We have audited the financial statements of Rolls-Royce Group plc for the year ended December 31, 2010 which comprise the consolidated income statment, consolidated statement of comprehensive income, consolidated and company balance sheet, consolidated cash flow statement, consolidated and company statement of changes in equity and the related notes.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKP.

Opinion on financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at December 31, 2010 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice;
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

• the directors’ statement, in relation to going concern;
• the part of the corporate governance statement relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review; and
• certain elements of the Directors’ remuneration report.

A J Sykes (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
15 Canada Square
London
EC14 5GL
February 9, 2011

For the years ended December 31

Income statement	2010 £m	2009 £m	2008 £m	2007 £m	2006 £m
Revenue	11,085	10,414	9,082	7,435	7,156
Profit before net research and development and share of results of joint ventures and associates	1,463	1,458	1,191	827	1,016
Research and development (net) 1	(422)	(379)	(403)	(381)	(370)
Share of results of joint ventures and associates	93	93	74	66	47
Profit before financing	1,134	1,172	862	512	693
Net financing	(432)	1,785	(2,754)	221	698
Profit/(loss) before taxation 2	702	2,957	(1,892)	733	1,391
Taxation	(159)	(740)	547	(133)	(397)
Profit/(loss) for the year	543	2,217	(1,345)	600	994
Attributable to:
Ordinary shareholders	539	2,221	(1,340)	606	998
Non-controlling interests	4	(4)	(5)	(6)	(4)
Profit/(loss) for the year	543	2,217	(1,345)	600	994
1 Research and development (gross)	(923)	(864)	(885)	(824)	(747)
2 Underlying profit before taxation	955	915	880	800	705
Earnings per ordinary share:
Underlying	38.73p	39.67p	36.70p	34.06p	29.81p
Basic	29.20p	120.38p	(73.63p)	33.67p	57.32p
Payments to shareholders per ordinary share	16.0p	15.0p	14.3p	13.0p	9.59p

Balance Sheet	2010 £m	2009 £m	2008 £m	2007 £m	2006 £m
Assets	16,234	15,422	15,348	11,459	10,798
Liabilities	(12,255)	(11,640)	(13,123)	(7,910)	(8,073)
	3,979	3,782	2,225	3,549	2,725
Called-up share capital	374	371	369	364	356
Reserves	3,601	3,411	1,847	2,815	2,362
Equity attributable to ordinary shareholders	3,975	3,782	2,216	3,179	2,718
Non-controlling interests	4	–	9	12	7
	3,979	3,782	2,225	3,191	2,725

Cash flow	2010 £m	2009 £m	2008 £m	2007 £m	2006 £m
Cash inflow from operating activities	1,378	859	1,015	705	1,072
Cash outflow from investing activities	(759)	(606)	(645)	(572)	(469)
Cash (outflow)/inflow from financing activities	(743)	384	(221)	(473)	(122)
(Decrease)/increase in cash and cash equivalents	(124)	637	149	(340)	481
Net funds	1,533	1,275	1,458	888	826

Financial calendar 2011-2012

Ex entitlement to C Shares	April 20, 2011
Record date for entitlement to C Shares	April 26, 2011
AGM, Queen Elizabeth II Conference Centre, London	11.00am May 6, 2011
Record date for dividend payable on C Shares	June 3, 2011
Deadline for receipt of C Share elections	5.00pm June 6, 2011
Allotment of C Shares	July 1, 2011
Payment of C Share redemption monies	July 5, 2011
Purchase of ordinary shares for CRIP participants	By July 12, 2011
Announcement of interim results	July 28, 2011
Ex entitlement to C Shares	October 26, 2011
Record date for entitlement to C Shares	October 28, 2011
Deadline for receipt of C Share elections	5.00pm December 5, 2011
2011 Financial year end	December 31, 2011
Allotment of C Shares	January 3, 2012
Payment of C Share redemption monies	January 5, 2012
Purchase of ordinary shares for CRIP participants	By January 13, 2012
Preliminary announcement – 2011 full year results	February, 2012
2011 Annual report published	March, 2012

On February 10, 2011 the Company announced its intention to establish a new, non-trading, holding company, by way of a scheme of arrangement (Scheme). If shareholder approval is given at the Company’s AGM and subsequent Court meeting, the Scheme will come into effect on May 23, 2011 and new share certificates will be dispatched on May 31, 2011. The Company will continue to make payment to shareholders in the form of C Shares.

Registrar

Our Registrar is Computershare Investor Services PLC. When making contact with the Registrar please quote your Shareholder Reference Number (SRN). This is a 10-digit number, which usually starts with the letter ‘C’ and which can be found on the right hand side of your share certificate. You can speak to a member of the Registrar’s Rolls-Royce team by calling +44 (0)870 703 0162 between 8.30am and 5.30pm Monday to Friday or you can write to them at Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS13 8AE.

Information available on the internet

You can access copies of the Annual report, Company announcements and much more at www.rolls-royce.com.

You can also visit our Registrar’s website at www.investorcentre.co.uk to:

• view your account balance, values and history;
• view your payment history;
• update a record of your bank details;
• register to receive electronic shareholder communications;
• download forms;
• deal in Rolls-Royce shares online;
• vote online for forthcoming general meetings;
• view your holdings in all companies registered with Computershare and create a portfolio; and
• track the market value of your portfolio.

Share dealing service

Our Registrar offers both internet and telephone dealing services. You can deal over the telephone or the internet from 8.00am to 4.30pm Monday to Friday excluding Bank holidays. Real-time trading is available on the internet during market hours and there is no need to open a trading account in order to deal. The fee for the service is 0.5 per cent of the value of each sale or purchase of shares subject to a minimum fee of £15. The maximum value of shares you can trade using the internet is £25,000 for purchases and £50,000 for sales. Please note that the internet dealing service is only available to existing shareholders at www.uk.computershare.com/investor/sharedealing.asp.

The fee for the Telephone Share Dealing Service is one per cent of the value of the transaction subject to a minimum fee of £25. If you would like to use this service please call +44 (0)870 703 0084.

Stamp duty of 0.5 per cent is also payable on all purchases. Before selling your shares, via either internet or telephone dealing, you must ensure that you have a valid share certificate. If you are unsure as to the validity of your share certificate you should contact the Registrar.

Share price

You can obtain the current market price of the Company’s shares on our website at www.rolls-royce.com or the London Stock Exchange website at www.londonstockexchange.com.

American Depositary Receipts Programme (ADR)

Rolls-Royce ordinary shares are traded in the US in the form of a sponsored ADR facility with The Bank of New York Mellon as the depositary. Each ADR represents five ordinary shares.

For further information about the US ADR programme, please contact your broker or write to:

BNY Mellon
Shareholder Services
PO Box 358516
Pittsburgh PA 15252-8516
Phone: +1 888 269 2377 or +1 888 BNY ADRS (toll free within the US)
Phone outside the US: +1 201 680 6825
Email: shrrelations@bnymellon.com
Website: www.adrbnymellon.com

Unsolicited mail

Under the provisions of the Companies Act 1985 the Company was legally obliged to supply the names and addresses of its members to certain organisations on request. This provision is no longer an obligation under the Companies Act 2006. However, as a result of the Companies Act 1985, you may receive mail you have not asked for. If you want to limit the amount of personally addressed unsolicited mail you receive, and you have a UK registered address, please write to the Mailing Preference Service (MPS), DMA House, 70 Margaret Street, London, W1W 8SS or register by telephoning +44 (0)845 703 4599 or online at www.mpsonline.org.uk.

ShareGift

The Orr Mackintosh Foundation operates a charity donation scheme for shareholders with small numbers of shares which may be uneconomic to sell. Details of the scheme are available from ShareGift at www.sharegift.org or you can write to Orr Mackintosh Foundation, 17 Carlton House Terrace, London, SW1Y 5AH (telephone +44 (0)20 7930 3737).

Warning to shareholders

We are aware that some shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. Such operations are commonly known as ‘boiler rooms’. These ‘brokers’ can be very persistent and extremely persuasive and a 2006 survey by the Financial Services Authority (FSA) has reported that the average amount lost by each investor is around £20,000.

Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice:

• Make sure you get the correct name of the person and organisation
• check that they are properly authorised by the FSA before getting involved by visiting www.fsa.gov.uk/pages/register;
• report the matter to the FSA. For UK callers telephone 0845 606 1234 and for overseas callers telephone +44 20 7066 1000 or visit www.moneymadeclear.fsa.gov.uk; and
• If the calls persist, hang up.

If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.

Dividends paid on C Shares held

C Share calculation period	Dividend rate (%)	Record date for C Share dividend	Payment date
July 1, 2010 – December 31, 2010	0.381	November 19, 2010	January 4, 2011
January 1, 2010 – June 30, 2010	0.314	June 5, 2010	July 1, 2010
July 1, 2009 – December 31, 2009	1.055	November 20, 2009	January 4, 2010
January 1, 2009 – June 30, 2009	1.110	June 5, 2009	July 1, 2009

Previous C Share Issues

				Apportionment values		CGT apportionment
Issue date	No of C Shares issued per ordinary share	Record date for entitlement to C Shares	Latest date for receipt of election forms by Registrar	Price of ordinary shares on first day of trading (p)	Value of C Share issues per ordinary share (p)	Ordinary shares (%)	C Shares (%)	Date of redemption of C Shares	CRIP purchase date	CRIP purchase price (p)
January 4, 2011	64.0	October 29, 2010	December 3, 2010	634.500	6.40	99.00	1.00	January 5, 2010	January 7, 2011	661.120
July 1, 2010	90.0	April 23, 2010	June 4, 2010	534.750	9.00	98.34	1.66	July 2, 2010	July 2, 2010	548.010
January 4, 2010	60.0	October 30, 2009	December 4, 2009	486.250	6.00	98.78	1.22	January 5, 2010	January 8, 2010	491.970
July 2, 2009	85.8	April 24, 2009	June 5, 2009	366.500	8.58	97.71	2.29	July 2, 2009	July 3, 2009	367.628
January 2, 2009	57.2	October 31, 2008	December 5, 2008	343.125	5.72	98.36	1.64	January 5, 2009	January 6, 2009	362.240

Analysis of ordinary shareholders at December 31, 2010

Type of holder:	Number of shareholders	% of total shareholders	Number of shares	% of total shares
Individuals	220,219	97.52	115,152,937	6.15
Institutional and other investors	5,591	2.48	1,756,626,264	93.85
Total	225,810	100.00	1,871,779,201	100.00
Size of holding:
1 – 150	69,061	30.58	6,908,768	0.37
151 – 500	117,382	51.98	30,711,715	1.64
501 – 10,000	37,465	16.59	61,469,806	3.28
10,001 – 100,000	1,314	0.58	34,925,943	1.87
100,001 – 1,000,000	391	0.17	140,271,264	7.49
1,000,001 and over	197	0.10	1,597,491,705	85.35
Total	225,810	100.00	1,871,779,201	100.00