AGM Statement

Rolls-Royce PLC
31 May 2001


                                                                   31 May 2001


               ROLLS-ROYCE CHAIRMAN'S STATEMENT TO SHAREHOLDERS

Rolls-Royce plc Chairman, Sir Ralph Robins, speaking at the annual meeting of
shareholders today (31 May 2001), at the Queen Elizabeth II Conference Centre
in London, said:

'Rolls-Royce made good progress in 2000. We continued to develop a strong
portfolio of businesses, strengthening our market position whilst continuing
to improve productivity.

'We achieved a record order book of more than £13 billion. I am pleased to say
that the order book has continued to grow since the year-end and today stands
at a record £15 billion, reflecting significant growth in the civil aerospace
and marine market shares.

'Furthermore, we participate in many of the world's key defence aerospace
programmes and we anticipate growing success in the energy sector, as a range
of new products complete their development programmes.

'In each of these market sectors the company is exploiting its large
investment in core gas turbine technology, and developing a range of related
products and services.

'We are increasing our share of growing world markets as we introduce new
competitive products and as we exploit the aftermarket from our successful
range of established products and services.

'During 1999 we made four significant acquisitions which enhanced our position
in each sector. These acquired businesses met our expectations in 2000.

'We increased our share of the civil aerospace market to 31 per cent of all
orders placed during the year and delivered a record number of civil engines,
nearly 1,100. This year we expect to deliver more than 1,300 civil engines.

'The Trent family had an excellent year. New orders for the Trent 700 and 800
engines for the Airbus Industrie A330 and Boeing 777 aircraft were gained from
around the world. The Trent 500 for the Airbus Industrie A340-500/600 was
certificated in December, ahead of schedule. Since the year-end the A340-600
aircraft has flown for the first time - again ahead of schedule and meeting
all of its targets.

'The selection of the latest member of the Trent family, the Trent 900, by
Singapore Airlines, Virgin Atlantic, ILFC and Qantas for the new Airbus
Industrie A380 super jumbo aircraft, was particularly significant and a strong
endorsement of our Trent engine family development philosophy.

'The Trent family has now captured nearly 50 per cent of its available, global
market.

'Milestones in our defence business included the progression of the EJ200
engine programme from development to production. This engine, which powers the
Eurofighter Typhoon aircraft, will form the backbone of a strong defence
business over the coming years as it progresses towards full output. By 2003,
we expect to achieve annual deliveries of 100 engines.

'The US Joint Strike Fighter prototypes made their first flights in 2000.
Rolls-Royce continued its participation in each aircraft and engine
configuration. In Europe, we secured a leading position on the TP400 engine
for the new transport aircraft, the A400M.'

'We have developed a world-leading marine business. The acquisition of Vickers
in 1999 added a range of complementary products and services and expanded the
company's routes to market. We are now able to play an enlarged role as a full
propulsion systems supplier to both the commercial and naval sectors, enabling
us to raise our share of both of these growing markets.

'In the energy sector, our successful oil and gas pumping business had a
relatively quiet year. Order intake has, however, been strong in 2001, already
exceeding the total orders taken last year.

'Growth in the power generation market is largely dependent on the
introduction of new gas turbine and diesel engines, which are nearing
completion of their development programmes.

'Significant technical difficulty has been experienced in developing a
combustion system for the industrial Trent to meet the extremely rigorous
emissions requirements.

A £120 million provision was made in 2000 in respect of this programme. We are
continuing to make good progress and the engine is expected to achieve
significant market penetration

'Our financial services businesses are making an increasing contribution to
our performance in their own right. They also, of course, enhance the
company's ability to sell its products and services throughout the world.

'We have continued our strategic pursuit of the aftermarket.

'In 2000, we expanded our network of repair and overhaul bases and invested in
new predictive maintenance capabilities, exploiting the communication benefits
offered by the internet, to improve the visibility of future aftermarket
workload.

'Currently, nearly 40 per cent of our sales arise in the aftermarket.

'Underpinning the success of the company, is a continuous drive for greater
efficiency. In 2000, we announced rationalisation proposals involving a
fundamental review of our operations to ensure that we maintain world-class
performance in all aspects of our business.

'The company's short-term outlook is consistent with the view we gave at the
announcement of our half year results, in August 2000. We expect underlying
earnings to be unchanged in 2001 as a result of a combination of civil
aerospace business mix, delays in sales of the industrial Trent and
restructuring charges. We continue to be confident that earnings growth will
resume in 2002.

Future prospects

'We are well positioned for growth in each of our markets.

'The civil aerospace business will benefit from an improving business mix as
the growing installed base of engines matures.

'We expect our defence business to grow as a result of increasing production
of Eurofighter engines and our strong position in many of the world's new
programmes.

'Our marine business should benefit from recovery in the offshore support
sector, new opportunities for gas turbines in the commercial sector and
re-equipment in the naval market. Our ability to offer fully integrated power
systems to customers will create new opportunities in these markets.

'Our energy businesses are expected to grow as a result of increased
investment in exploration in the oil and gas sector, which will stimulate
demand for our products. This, coupled with the strong market prospects of the
industrial Trent and RB211 engines, should lead to significant benefits.

'Returns from invested capital will improve as a result of the broad business
portfolio, increasing maturity of products in service and more intensive asset
utilisation.

'The board has recommended a final dividend of 5.00p per share, making a total
for the year of 8.00p - an increase of 10.3 per cent over 1999.'

For further information please contact:

Tim Blythe

Director - Corporate Communications

Tel: [phone]

Email: [e-mail]

Website: www.rolls-royce.com