Quarterly News Update

3 July 2006

                   QUARTERLY NEWS UPDATE FROM ROLLS- ROYCE:                    

                          SECOND QUARTER REVIEW, 2006                          

During the second quarter of 2006, Rolls-Royce continued to develop its global
presence and demonstrate the value of its balanced portfolio of engines and
services.

Sir John Rose, Chief Executive of Rolls-Royce plc, said today: "This portfolio
not only maximises our market opportunity, but also makes us less prone to the
volatility which can result from individual programme decisions or market
cycles."

Sir John was speaking in Derby at the first annual Rolls-Royce Media Day,
during which presentations by senior directors covered focused investment in
technology, operational excellence and the continued development of the Group's
services capability.

The Media Day allowed visitors to experience the significant investments that
the Group has made; in technology, at the advanced technology exhibition; in
new manufacturing facilities, for turbine blades and compression components;
and in services capabilities, at the new repair and overhaul facility and the
operations room. This is the knowledge centre where technical expertise and
fleet performance intelligence are combined to create high-value engine
management services for customers.

By the end of 2007, Rolls-Royce will have invested more than £400 million in
infrastructure projects in the UK since 1999.

The Group also continued to expand its international operations:

  * Japan's National Institute for Materials Science (NIMS) is to undertake
    research into the development of high-temperature superalloys for use in
    gas turbine engines in the new Rolls-Royce Centre of Excellence in
    Aerospace Materials, based at NIMS' Tsukuba laboratories, north of Tokyo.
   
  * Construction has now begun in Germany of N3, the fifth Trent engine
    overhaul facility, following the laying of the foundation stone at Arnstadt
    in Thuringia by Federal Chancellor Angela Merkel. N3 is a joint venture
    between Lufthansa Technik and Rolls-Royce.It will be one of the largest 
    and most modern aero-engine maintenance facilities in Europe, servicing Trent 500,
    700 and 900 engines of Lufthansa as well as other European, North American and 
    African airlines.
   
  * Rolls-Royce broke ground for its new outdoor jet engine testing facility at
    the National Aeronautics and Space Administration's John C.Stennis Space
    Center in Mississippi, US. The new facility will be used to test
    development and prototype jet engines for performance, noise, validation of
    safety systems and other factors. Initially, it will test the company's
    latest, high-thrust Trent engines, the Trent 1000 and Trent 900, which are
    being developed for the Boeing 787 Dreamliner and Airbus A380 respectively.
   
  * An industry-leading aviation education programme between
    Rolls-Royce and China's Civil Aviation Authority (CAAC) celebrated its10th
    anniversary in Beijing with the signing of a 10-year extension. The
    celebrations were attended by members of the Rolls-Royce Board of
    Directors, following the Board's first meeting in China.
   
Corporate news

Rolls-Royce held its 2006 Annual General Meeting at the Excel Centre in London
on 3 May. Sir John Rose, Chief Executive, presented the Group's strategy to
shareholders and made the following comments on the Group's outlook:

"We continue to make good progress and are well positioned for long-term
growth, despite the challenges of commodity price inflation and the continuing
weakness of the US dollar."

Shareholders were informed that current trading was consistent with
expectations.

Standard & Poor's Ratings Services (S&P) confirmed that it had raised its
long-term credit rating on Rolls-Royce plc to `A-` from `BBB+'. The agency
stated that it was "reflecting progress made by Rolls-Royce in strengthening
its financial profile."

Crown Woods School in Greater London became the first winner of the prestigious
Rolls-Royce Science Prize, designed to encourage pupils to take up science and
technology by rewarding innovative new approaches to teaching.

Other business highlights during the quarter:

Civil

  * Kingfisher Airlines placed the first Indian order for the Rolls-Royce Trent
    engine series when it announced it was buying five A340-500 airliners. The
    deal, which includes a long-term TotalCare ® maintenance agreement, is
    valued at around $500 million.
   
  * The Rolls-Royce Trent 1000 is now the launch engine for all three variants
    of the Boeing 787 Dreamliner, following the Air New Zealand decision to
    convert its existing order for Boeing 787-8s into the larger 787-9 variant.
   
  * Cargolux, the European freight operator, increased its fleet of
   
Rolls-Royce RB211 powered Boeing 747-400F freighters to 11 with the addition of
two more aircraft, both of which will be included in the existing TotalCare ®
agreement, which was extended for a further five years.

  * Monarch Aircraft Engineering Ltd awarded Rolls-Royce a five-year contract
    worth up to £40 million, covering complete engine overhaul for RB211-535
    engines for Boeing 757s and IAE V2500 engines for Airbus A320 family
    aircraft operated by Monarch Airlines.
   
  * United Parcel Service Co, the world's largest package delivery company and
    a global leader in supply chain services, signed a TotalCare ® long-term
    engine services agreement with Rolls-Royce that covers the engines for UPS'
    40 RB211-535 powered Boeing 757 aircraft for 15 years.
   
Defence

  * The UK Ministry of Defence has ordered 70 Future Lynx tactical transport
    and maritime helicopters from AgustaWestland, powered by the Light
    Helicopter Turbine Engine Company (LHTEC) CTS800-4 turboshaft. LHTEC is a
    partnership between Honeywell and
    Rolls-Royce and the contract is worth £75 million.
   
  * An agreement worth more than $200 million between Alenia Aeronautica, and
    Rolls-Royce will result in up to 84 AE2100-D2 engines being provided for 42
    C-27J tactical military transport aircraft.
   
  * Rolls-Royce received an initial five-year contract worth £110 million from
    prime contractor Marshall Aerospace to ensure engine availability over the
    next five years for the UK Ministry of Defence's fleet of
   
Rolls-Royce powered C-130 Hercules transport aircraft, covering a total of 244
T56 and AE2100 engines.

Marine

  * The 100th order for the UT 755 offshore supply vessel design, first
    developed in the early 1990s, was received from Norwegian company,
    Myklebusthaug Offshore.
   
  * Rolls-Royce secured a major offshore order to supply Bergen diesel engines
    for a number of Aker Drilling semi-submersible rigs, which could include up
    to 32 B32:40 V12A type generator sets, if all options are exercised.
   
  * Rising demand for Rolls-Royce marine equipment in the Asia Pacific region
    is generating increased demand for after-sales support services. As a
    consequence, the marine workshop facilities in Tuas, Singapore, are being
    upgraded.
   
Energy

  * Two RB211-6761 Dry Low Emission (DLE) gas turbine generating sets will be
    used to power a Combined Cycle Heat and Power plant (CHP) that will provide
    electricity and heating to a new industrial park in the town of Levice in
    Slovakia. The value of the contract is more than
    $20 million
   
Operations

  * A new £7 million facility, that has been designed to manufacture a range of
    specialised aero-engine components, was opened in Barnoldswick. The
    facility was one of the four UK developments given the go-ahead in April
    2004 as part of a programme to modernise factories, reduce costs and ensure
    the Group's domestic facilities operate at world-best levels of
    competitiveness.
   
For images please go to: http://www.rolls-royce.com/media/gallery/default.jsp

For further information please contact:

Caroline Harris                        Martin Brodie
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