5.28(a) Statement

STOCK EXCHANGE ANNOUNCEMENT

Under arrangements approved at the Annual General Meeting on 5th May 2004,

Rolls-Royce Group plc (the 'Company') will issue B shares to ordinary

shareholders in place of a final dividend. These B Shares can be redeemed

for cash or converted into ordinary shares in the Company. The Conversion Share

Value, being the value at which shareholders may have their B Shares converted

into Ordinary Shares, has been set at 253p. The full statement to ordinary

shareholders under rule 5.28 (a) of the Listing Rules is reproduced below.

For further information please contact Peter Barnes-Wallis, Director, Financial

Communications, Rolls-Royce plc, tel. no. 020 7227 9141 or John Warren, Deputy

Company Secretary, Rolls-Royce Group plc, tel. no. 01332 245878.

Date: 17 March 2005

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. When
considering what action you should take, you are recommended to seek your own
financial advice from your stockbroker, bank manager, solicitor, accountant or
other independent financial adviser duly authorised under the Financial
Services and Markets Act 2000.

If you have sold or otherwise transferred all of your Rolls-Royce Group plc
Ordinary Shares on or before March 11, 2005, please send this document to the
purchaser or transferee or to the stockbroker, bank or other agent through whom
the sale or transfer was effected for transmission to the purchaser or
transferee.

Application will be made to the competent authority in the UK for the B Shares
to be admitted to the Official List and for admission to trading on the London
Stock Exchange. It is expected that Admission of the B Shares will become
effective on July 1, 2005.

                             Rolls-Royce Group plc                             

                               ISSUE OF B SHARES                               

                            RULE 5.28(a) STATEMENT                             

To be valid, Redemption/Conversion Mandates must be returned in the prescribed
manner to Computershare Investor Services PLC, The Pavilions, Bridgwater Road,
Bristol, BS13 8FA or by hand (during normal business hours) to Computershare
Investor Services PLC, 2nd Floor, Vintners Place, 68 Upper Thames Street,
London, EC4V 3BJ so as to be received by no later than 5.00 p.m. on June 3,
2005.

If you have any queries in relation to this proposal or the completion of the
Redemption/Conversion Mandate, you may call Computershare Investor Services PLC
on 0870 703 0162 between 8.30 a.m. and 5.30 p.m. on any Business Day.
Computershare Investor Services PLC will not provide advice on the merits of
the proposals set out in this document or give any financial or taxation
advice.

This document is issued in accordance with Rule 5.28(a) of the Listing Rules of
the UK Listing Authority. A copy of the original circular issued in relation to
B Shares on March 22, 2004 can be found in the Investors section on the Group's
website www.rolls-royce.com or may be requested from the Company during normal
office hours.

PART 1: DETAILS OF B SHARES AND THE PROPOSED REDEMPTION AND CONVERSION OFFER

1. Allotment of B Shares and Admission

The sum of £200 million standing to the credit of the Company's merger reserve
is to be capitalised and applied in paying up the B Shares with a nominal value
of 0.1 pence each. On July 1, 2005 B Shares will be issued to Shareholders who
appear on the Company's register of members on the Record Date on the basis of
50 B Shares for each Ordinary Share then held. As fractions of B Shares cannot
be issued, the total number of B Shares to be issued to you will be rounded
down to the nearest whole B Share. The last date on which transfers of Ordinary
Shares will be accepted for registration for participation in this issue of
B Shares is March 9, 2005.

These B Shares are referred to as the July 2005 B Shares. The total number of
July 2005 B Shares to be issued will be 86,808,218,900 which will bring the
total amount of the B Shares in issue to 91,581,111,796. None of the July 2005
B Shares will be marketed or made available in whole or in part to the public.

Application will be made for the July 2005 B Shares to be admitted to the
Official List and dealings are expected to commence on the London Stock
Exchange on July 1, 2005. The B Shares previously issued by the Company (which
have not been redeemed or converted), are listed on the Official List and
traded on the London Stock Exchange.

2. Features of B Shares

B Shares are non-cumulative redeemable convertible preference shares with a
nominal value of 0.1 pence (one tenth of a penny) each. The following is a
brief summary of the rights and restrictions of B Shares, the full terms of
which are reflected in the articles of association of the Company:

(a) Income

(i) Out of the profits available for distribution, the holders of the B Shares
shall be entitled, in priority to any payment of a dividend to the holders of
Ordinary Shares, to be paid a non-cumulative preferential dividend per B Share
at such rate on the nominal value thereof (exclusive of any associated tax
credit relating thereto or withholding tax deductible therefrom) as calculated
in accordance with sub-paragraph (ii) below, such dividend to be paid
half-yearly in arrears in respect of Calculation Periods (as defined below) on
January 2 and July 1 in each year or, if any such date is not a Business Day,
on the next day which is a Business Day (without any interest or payment in
respect of such delay) (each a ``Payment Date''). The first dividend on the
July 2005 B Shares will be paid on January 3, 2006 in respect of the dividend
Calculation Period commencing on July 1, 2005.

(ii) Each of the periods commencing on January 1 and ending on June 30 and
commencing on July 1 and ending on December 31 (as applicable) is called a
``Calculation Period''. The rate per annum of the B preferential dividend for
each Calculation Period shall be 75 per cent of LIBOR on the first Business Day
immediately preceding the relevant first day of the Calculation Period.

(iii) Payments of B preferential dividends in respect of the Calculation Period
commencing on July 1, 2005 shall be made to holders on the register of
B Shareholders on November 25, 2005

iv. The holders of the B Shares shall not be entitled to any further right of
    participation in the profits of the Company.
   
(v) All B preferential dividends which are unclaimed for a period of 12 years
from the date when the dividend became due for payment shall be forfeited and
shall revert to the Company.

(b) Capital

The B Shares will not rank pari passu with the existing Ordinary Shares. On a
return of capital on a winding-up, the holders of the B Shares shall be
entitled, in priority to any payment to the holders of Ordinary Shares, to the
repayment of the nominal capital paid up or credited as paid up on the B Shares
held by them, together with a sum equal to the outstanding preferential
dividend which will have accrued but not been paid until the date of the return
of capital. The aggregate amount due to each B Shareholder on the return of
capital on a winding-up will be rounded down to the nearest whole penny.

The holders of the B Shares shall not be entitled to any further right of
participation in the profits or assets of the Company. If, on a return of
capital, the amounts available for payment are insufficient to cover in full
the amounts payable on the B Shares, the holders of such shares will share pro
rata in the distribution of assets (if any) in proportion to the full
preferential amounts to which they are entitled.

(c) Voting and general meetings

The B Shares will carry limited voting rights. The holders of B Shares shall
not be entitled in respect of their holdings of such shares to receive notice
of any general meeting of the Company or to attend, speak or vote at any such
general meeting except any general meeting at which a resolution to wind up the
Company is to be considered in which case the holders of the B Shares shall
have the right to attend the general meeting and shall be entitled to speak and
vote only on such resolution. Where the holders of B Shares are entitled to
vote at a general meeting of the Company upon any such resolution being
proposed at such general meeting, on a show of hands every holder of B Shares
who (being an individual) is present in person or (being a corporation) is
present by representative will have one vote and on a poll every B Shareholder
present in person or, being a corporation, by representative or by proxy will
have one vote for every 200 B Shares held by such holder.

(d) Redemption and Conversion Rights

The B Shares are redeemable for cash in accordance with the Redemption Offer or
Future Redemption Offer or can be converted into Ordinary Shares in accordance
with the Conversion Offer or Future Conversion Offer as set out below in
paragraphs 5 and 6 respectively.

(e) Transfers

The B Shares will be transferable by instrument of transfer in usual or common
form. The B Shares already issued and not redeemed or converted are
transferable in CREST if held in uncertificated form.

3. Form in which B Shares will be issued and Shareholders to whom they will be
issued

All Shareholders holding Ordinary Shares on the Record Date will have their
names entered into the Company's B Share register on July 1, 2005, to reflect
their holding of the July 2005 B Shares. B Shares will be in registered form.
B Shares issued in certificated form may be dematerialised and held through
CREST.

Shareholders who have made an Evergreen Election to redeem or convert B Shares
will receive cash or Ordinary Shares (in accordance with their election) as set
out below in paragraphs 5 and 6 respectively and also paragraph 9. Shareholders
who wish to change or cancel their election should contact the Registrar on
0870 703 0162 between 8.30 a.m. and 5.30 p.m. on a Business Day prior to the
Prescribed Time to request a form to effect such change or cancellation.

Unless they complete and return the Redemption/Conversion Mandate by the
Prescribed Time, those Shareholders who have not previously made an Evergreen
Election will be sent a B Share certificate or (where they currently hold
B Shares through CREST) will have their CREST accounts credited with B Shares
as more fully set out in paragraph 9 below.

4. Holders of Existing B Shares

Shareholders who currently hold B Shares should note that their election in the
Redemption/Conversion Mandate applies to this issue of B Shares and to any
future issues of B Shares but not to their existing holding of B Shares.

(a) Holders of existing B Shares in certificated form

Existing holders of B Shares in certificated form must complete the election
mandates printed on the reverse side of their existing B Share certificates and
return them to the Registrar as set out in paragraphs 5 and 6 below in order to
redeem or convert their existing B Shares. This mandate must be returned to the
Registrar by the Prescribed Time to be valid.

Any Shareholder who currently holds certificated B Shares will therefore have
to complete both the Redemption/Conversion Mandate and make an election on the
reverse of their B Share certificate if they wish to redeem or convert both
this issue of B Shares (the July 2005 B Shares) and any currently held
certificated B Shares.

(b) Holders of existing B Shares in uncertificated form (i.e. in CREST)

Existing holders of B Shares in uncertificated form will be given a separate
option to redeem or convert those shares via a CREST notification. This CREST
notification will not apply to the July 2005 B Shares but only to the B Shares
in CREST on the Record Date ("Crest Currently Held B Shares"). Any Shareholder
who has CREST Currently Held B Shares will therefore have to complete both the
Redemption/Conversion Mandate and make an election through CREST as set out
below if they wish to redeem or convert both this issue of B Shares (the
July 2005 B Shares) and any CREST Currently Held B Shares.

CREST Currently Held B Shares should be redeemed or converted by following the
procedure set out below.

(i) The prescribed form of redemption or conversion is an Unmatched Stock Event
Instruction (USE instruction) which, on its settlement, will have the effect of
crediting a stock account of the Registrar, under the participant ID and member
account ID specified below, with the number of CREST Currently Held B Shares to
be redeemed or converted.

(ii) The USE instruction must be properly authenticated in accordance with
CRESTCo Limited's specifications and must contain, in addition to the other
information that is required for settlement in CREST, the following details:

1. the number of CREST Currently Held B Shares to be redeemed or converted;

2. the participant ID of the holder of the CREST Currently Held B Shares;

3. the member account ID of the holder of the CREST Currently Held B Shares
from which the CREST Currently Held B Shares are to be debited;

4. the participant ID of the Registrar, i.e. 3RA53;

5. the member account ID of the Registrar, i.e. to redeem = "REDEEM"; and to
convert = "CONVERT";

6. the corporate action number (which will be allocated by CRESTCo Limited and
can be found by viewing the relevant corporate action details);

7. the corporate ISIN, i.e. GB0034223551; and

8. the intended settlement date which must be on or before 5p.m. on June 3,
2005.

In order for an uncertificated redemption or conversion to be valid, the USE
instruction must comply with the requirements as to authentication and contents
set out above.

CREST members and (where applicable) their CREST sponsors should note that the
latest time at which a USE instruction may settle is 3.00 p.m. GMT (the CREST
deadline for settlement).

Redemption proceeds or Ordinary Shares are expected to be credited to CREST
accounts on July 4, 2005.

5. Redemption Offer

The Company offers to redeem for cash all B Shares currently in issue and all
the July 2005 B Shares, in accordance with the provisions of this paragraph 5
and paragraph 9 below.

(a) Circumstances under which B Shares can be redeemed

During the Election Period or a Future Election Period, and in accordance with
the terms and conditions of the Redemption Offer or the relevant Future
Redemption Offer (as the case may be), holders of B Shares may elect to
exercise their Redemption Right. The Company expects to set Future Election
Periods twice a year and may at any other time, by notifying Members in any way
it deems appropriate, allow B Shareholders to elect to have their B Shares
redeemed at their 0.1 pence nominal value (subject to rounding in the manner
the Company deems appropriate) and on the terms and conditions announced by the
Company at those times (or to have their B Shares converted into Ordinary
Shares at the Conversion Share Value determined by the Company in accordance
with paragraph 6 below).

In addition, the Company may, at its discretion, redeem all unredeemed B Shares
remaining in issue in the following circumstances:

(i) at any time, if the aggregate number of B Shares in issue is less than 10%
of the aggregate number issued; or

(ii) at the Company's option, at any time, in the following circumstances:

(aa) a proposed capital restructuring of the Company by way of a creation and/
or issue of new or existing securities (other than B Shares); or

(bb) a new holding company being inserted above the Company; or

(cc) an acquisition of the Company; or

(dd) a demerger from the Group.

All B Shares which are redeemed will be cancelled and will not be reissued.

(b) Manner in which Members may redeem their B Shares

Members who have made an Evergreen Election to redeem will have their July 2005
B Shares redeemed automatically and will have cash sent to them in accordance
with paragraph 9 below unless they change or cancel their election in
accordance with paragraph 3 above.

All other Members (including those who have made an Evergreen Election but
change it in accordance with paragraph 3 above) may elect during the Election
Period to redeem the July 2005 B Shares and any B Shares that may be issued in
the future, for cash by completing the Redemption/Conversion Mandate in the
prescribed manner and ensuring that it is received by the Registrar by the
Prescribed Time (mandates received after this time will not be processed
except, in exceptional circumstances, at the discretion of the Company).

Holders of B Shares may also elect to redeem for cash the B Shares currently
held by them in certificated form by completing the election mandates printed
on the reverse side of their existing B Share certificates and ensuring that
they are received by the Registrar by the Prescribed Time (mandates received
after this time will not be processed except, in exceptional circumstances, at
the discretion of the Company).

Members holding existing B Shares in CREST should note the provisions of
paragraph 4 regarding steps to be taken for the redemption of existing holdings
of B Shares in CREST.

The Company reserves the right at its sole discretion to reject any Redemption/
Conversion Mandates or other election mandates if redemption pursuant to them
would be illegal.

6. Conversion offer

The Company offers to convert into Ordinary Shares all B Shares currently in
issue and all the July 2005 B Shares, in accordance with provisions of this
paragraph 6 and paragraph 9 below.

(a) Manner in which Members may convert their B Shares

Members who have made an Evergreen Election to convert will have their
July 2005 B Shares converted automatically into Ordinary Shares and have
certificates in respect of these Ordinary Shares sent to them or have their
CREST accounts credited in accordance with paragraph 9 below, unless they
change or cancel their election prior to the Prescribed Time and in accordance
with paragraph 3 above.

All other Members (including those who have made an Evergreen Election but
change it in accordance with paragraph 3 above) may elect during the Election
Period to convert their July 2005 B Shares and any B Shares that may be issued
in the future, into Ordinary Shares by completing the Redemption/Conversion
Mandate and ensuring it is received by the Registrar by the Prescribed Time
(mandates received after this time will not be processed except, in exceptional
circumstances, at the discretion of the Company).

Holders of B Shares may also elect to convert into Ordinary Shares the B Shares
currently held by them in certificated form by completing the election mandate
printed on the reverse side of their existing B Share certificate and ensuring
that they are received by the Registrar by the Prescribed Time (mandates
received after this time will not be processed except, in exceptional
circumstances, at the discretion of the Company).

Members holding existing B Shares in CREST should note the provisions of
paragraph 4 regarding steps to be taken for the conversion of existing holdings
of B Shares in CREST.

The Company reserves the right at its sole discretion to reject any Redemption/
Conversion Mandates or other election mandates if conversion pursuant to them
would be illegal.

(b) Manner in which the conversion will be performed and calculated

During the Election Period or a Future Election Period, and in accordance with
the terms and conditions of the Conversion Offer or the relevant Future
Conversion Offer (as the case may be), holders of B Shares may elect to
exercise their Conversion Right.

Article 6A(e) of the Company's articles of association provides that holders of
B Shares exercising their Conversion Right, subject to the terms and conditions
of the Conversion Offer or any Future Conversion Offer (as the case may be),
will be entitled to the number of Ordinary Shares as are calculated by
reference to the following formula:

NO = (NB ÷ 10) ÷ CSV

where:

NO is the number of Ordinary Shares a holder of B Shares is entitled to on
conversion, on the basis that fractions are rounded down to the nearest whole
number;

NB is the number of B Shares which the holder of B Shares has elected to
convert; and

CSV is the Conversion Share Value in pence.

The Conversion Share Value in respect of this Election Period will be 253
pence.

The Company will, at its discretion, perform or procure the performance of the
conversions in any manner permitted in Article 6A(e) of the Company's articles
of association.

No Member shall be entitled to a fraction of an Ordinary Share on conversion of
B Shares; as a result all fractional entitlements (namely, the balance of the
B Shares held by any Shareholder which were insufficient to convert into
Ordinary Shares) shall be consolidated with those B Shares of other Members
which also constitute fractional entitlements, and the shares so resulting
shall be converted into Ordinary Shares as set out in Article 6A(e) of the
Company's articles of association. The Ordinary Shares resulting from the
consolidation of such fractional entitlements will then be sold and the net
proceeds of the sale will be held on account for the Members (the Proceeds) by
the Registrar in proportion to each Member's respective entitlements. Unless
Members request the return of their proportion of the Proceeds, they will be
rolled over to be used (when sufficient and at such time as the Board deems
appropriate), together with all fractional entitlements rolled forward from
previous scrip dividends currently held by the Registrar on the Members'
behalf, to obtain Ordinary Shares for such Members in the future. Should the
Proceeds (net of expenses) due to any Member be £3.00 or less, the Company
shall be entitled to retain such sums.

7. Number of B Shares that may be redeemed or converted and Evergreen Elections

The Redemption/Conversion Mandate allows an Evergreen Election to be made
either to redeem for cash or convert into Ordinary Shares the July 2005
B Shares and all B Shares that may be issued by the Company in the future. In
addition, when sufficient funds are available in a Shareholder's account and
the Shareholder has made an election to convert B Shares, those funds will also
be converted into Ordinary Shares.

Shareholders who wish to redeem and/or convert only some of the B Shares
currently held by them and/or some of the July 2005 B Shares to be issued to
them, or who wish to redeem or convert either part of the B Shares currently
held by them and/or all or part of the July 2005 B Shares to be issued to them
only (not future issues of B Shares) should contact the Registrar by calling
0870 703 0162 between 8.30 a.m. and 5.30 p.m. on any Business Day before the
Prescribed Time to obtain the necessary form which is to be completed and
received by the Registrar by the Prescribed Time.

8. Retention of B Shares, future redemption and conversion opportunities, and
future B Share issues

Holders of B Shares who wish to retain their current holding of B Shares and
the July 2005 B Shares should take no action. Shareholders who have previously
completed an Evergreen Election in relation to B Shares but who now wish to
retain their July 2005 B Shares should cancel their election pursuant to
paragraph 3 (above) prior to the Prescribed Time.

As long as there is a tax benefit in doing so, the Company expects to offer
B Shares rather than dividends on an ongoing basis. Future Election Periods are
expected to be set to allow redemptions and conversions in the months of
January and July on a yearly basis. Shareholders will on such occasions be able
to redeem or convert any retained B Shares.

9. Dealings and despatch of documents and method of redemption payments

Shareholders who have not previously made an Evergreen Election and who do not
complete a Redemption/Conversion Mandate prior to the Prescribed Time will, as
a condition of issue of the July 2005 B Shares, be sent a B Share certificate
on or within five Business Days of July 4, 2005, or will have their CREST
accounts credited with B Shares on July 1, 2005 depending on whether or not
they hold any B Shares through CREST on the Record Date. Those Members with
CREST Currently Held B Shares will have their B Shares issued directly into
CREST if they have not previously made an Evergreen Election and do not
complete a Redemption/Conversion Mandate.

Shareholders who have elected to redeem their B Shares in accordance with the
terms and conditions of the Redemption Offer will be sent redemption payment
cheques or have their CREST accounts credited with the redemption payment on
July 4, 2005 depending on whether they hold their Ordinary Shares in CREST on
the Record Date.

Shareholders who do not hold their Ordinary Shares in CREST and who have
previously instructed the Company to pay dividends to them directly into
designated accounts and if these instructions are still valid (``Standing
Instructions'') redemption payments will be made to them in accordance with
their Standing Instructions. Shareholders who have not established Standing
Instructions and who wish to receive their redemption payment in an account or
in a specified manner should contact the Registrar by calling 0870 703 0162
between 8.30 a.m. and 5.30 p.m. on any Business Day to request a Standing
Instructions form or alternatively should visit the Investors section on the
Group's website www.rolls-royce.com to obtain the form. This form must be
completed and received by the Registrar no later than five Business Days before
the Prescribed Time in order to be effective for this issue of B Shares.

As a condition of issue, Shareholders who have elected to convert their
B Shares in accordance with the terms and conditions of the Conversion Offer
will have sent to them share certificates in respect of their Ordinary Shares
on or within five Business Days of July 4, 2005, or will have their CREST
accounts credited with the Ordinary Shares on July 4, 2005 depending on whether
they hold their Ordinary Shares in certificated or uncertificated form on the
Record Date. The number of Ordinary Shares sent or credited to the Shareholder
will be based upon the number of July 2005 B Shares to be issued to them
together with the number of B Shares currently held by such Shareholder which
the Shareholder elects to convert in accordance with paragraph 4.

All certificates, cheques and other documents in relation to the B Shares will
be dispatched to Members at their risk and any B Share and/or Ordinary Share
certificates sent by the Company to Members will be dispatched at the Members'
own risk. In the case of joint Members, all documents will be posted to the
registered address of the first named Member (as applicable) on the Company's
register of Members.

Temporary documents of title will not be issued and the documents of title
issued are not renounceable.

Pending dispatch of definitive share certificates or crediting of CREST
accounts, transfers of B Shares which have not been redeemed or converted will
be certified against the B Shareholder register held by the Registrar.

10. General

All questions as to validity, form and eligibility in relation to the
Redemption/Conversion Mandate, the mandate on the reverse of B Share
certificates and CREST USE instructions, will be determined by the Company
(which may delegate this power in whole or part to the Registrar) and such
determination shall be final and binding.

No authority conferred by or agreed to by execution of the Redemption/
Conversion Mandate, the mandate on the reverse of B Share certificates and
CREST USE instructions, shall be affected by, and all such authority shall
survive, the death or incapacity of the Shareholder executing such form. All
obligations of such Shareholders shall be binding upon the heirs, personal
representatives, successors and assignees of such Shareholders.

The expenses of, or in connection with, the issue of the July 2005 B Shares are
estimated to amount to approximately £80,000 (excluding value added tax, if
any).

B Shares will be in registered form and may be settled through CREST if in
uncertificated form. Future redemptions and conversions of B Shares may take
place via CREST.

11. Non-United Kingdom resident Shareholders

Shareholders who are not resident in the United Kingdom should consult their
professional advisers to ascertain whether the effect of the Redemption and
Conversion Offer or subsequent disposal of B Shares by them will be subject to
any restrictions or require compliance with any formalities imposed by the laws
or regulations of, or any body or authority located in, the jurisdiction in
which they are resident or to which they are subject. In particular, it is the
responsibility of any Shareholder not resident in the United Kingdom wishing to
redeem B Shares or otherwise dispose of any shares in the Company to satisfy
himself or herself fully as to observance of any government, exchange control
or other consents which may be required or the compliance with other necessary
formalities needing to be observed and the payment of any issue, transfer or
other taxes or duties in such jurisdiction. The distribution of this document
in certain jurisdictions may be restricted by law. Persons into whose
possession this document comes should inform themselves about and observe any
such restrictions. Neither this document nor any other document issued or to be
issued by or on behalf of the Company in connection with the redemption or
conversion of B Shares constitutes an invitation or offer to redeem or convert
B Shares in any jurisdiction in which such invitations or offers are unlawful.

In the event that the Board is advised that the allotment and/or issue of
B Shares would or might infringe the laws of any jurisdiction outside the
United Kingdom, or would or might require the Company to obtain governmental or
other consent, or effect any registration, filing or other formality with
which, in the opinion of the Company, it would be unable to comply or which it
regards as unduly onerous, the Company will have the right to issue the
B Shares to which such Shareholders are entitled, to a nominee on behalf of
such Shareholders which nominee shall be entitled to sell or redeem such
B Shares for cash with the net proceeds of such sale or redemption (as the case
may be) being remitted to such Shareholders. Any remittance of the net proceeds
of sale or redemption shall be at the risk of the relevant Shareholder.

In particular, but without prejudice to the generality of the foregoing, the
B Shares, and the Ordinary Shares into which they may be converted, have not
been and will not be registered under the US Securities Act of 1933 (as
amended) or the state securities laws of any state of the United States and
such shares may not be offered or sold in the United States except pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of such laws.

This document is not a Securities Sales Prospectus within the meaning of the
German Securities Sales Prospectus Act of September 9, 1998 as amended and has
not been filed or approved by the German Federal Financial Services Supervisory
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) or any other
competent German authority under the relevant laws.

Prices and values of, and income from, shares may go down as well as up. It
should be noted that past performance is not a guide for future performance.
Persons needing advice should consult an independent professional adviser.

12. Shareholder Authority

The B Shares are proposed to be issued pursuant to resolution 11 of the notice
of the AGM dated March 9, 2005.

13. Future Payments to Shareholders

The Company expects that any future payments to Shareholders will be made
either through the issue of further B Shares or in the form of dividends. The
Company will revert to paying dividends when it considers that it is
appropriate to do so.

14. PEPs and ISAs

The B Shares will be qualifying investments for the purposes of the relevant
PEP and ISA regulations and any Ordinary Shares issued on conversion will be
qualifying investments.

15. ADR Holders

On behalf of the ADR holders, the Bank of New York, as depositary, has advised
the Company that, in accordance with the terms of the Deposit Agreement, it
will effectively sell the B Shares to be issued to it back to the Company, by
electing to redeem all these B Shares. The Bank of New York will distribute the
proceeds of the redemption to the ADR holders.

16. US Registration

The B Shares, and the Ordinary Shares into which they may be converted, have
not been and will not be registered under the US Securities Act of 1933 (as
amended) or the state securities law of any state of the United States and such
shares may not be offered or sold in the United States except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of such laws.

PART 2: TAXATION

United Kingdom Taxation

The following paragraphs, which are intended as a guide only, are based on
current UK legislation and published Inland Revenue practice at the date of
this document and are therefore subject to change. They only summarise certain
limited aspects of the UK taxation treatment of the proposed issue of B Shares.
They relate only to the position of Shareholders who are resident or ordinarily
resident in the UK for tax purposes, who will hold their B Shares as an
investment and are the absolute beneficial owners of the B Shares. This section
is not intended to be, and should not be construed to be, legal or taxation
advice to any particular Shareholder. If you are in any doubt as to your
taxation position, you are recommended to seek your own taxation advice
immediately from an independent professional adviser.

The issue of B Shares

1. The allotment and issue of B Shares will not itself create any charge to UK
income tax or UK taxation of chargeable gains.

2. For the purposes of UK taxation of chargeable gains, the allotment and issue
of B Shares by the Company will be treated as a reorganisation of its share
capital. Accordingly:

(a) a Shareholder receiving an entitlement to B Shares will not be treated as
making a disposal of all or part of that Shareholder's existing holding of
Ordinary Shares by reason thereof;

(b) the B Shares will be treated as the same asset as, and as having been
acquired at the same time as, the Shareholder's existing holding of Ordinary
Shares. Accordingly the new combined holding of B Shares and Ordinary Shares
(together the ``New Holding'') will have the same aggregate base cost as the
existing holding of shares in the Company immediately before this issue; and

(c) on a subsequent disposal (including a redemption) of the whole or part of
the New Holding, the Shareholder's base cost in respect of the New Holding will
be apportioned between the Ordinary Shares and the B Shares by reference to
their respective market values on the first day after issue on which prices are
quoted or published for both classes of shares, as derived from the Official
List.

Redemption of B Shares

3. The payment by the Company of the nominal value of the B Shares on their
redemption will not constitute an income distribution for UK tax purposes.
Accordingly:

(a) no part of the proceeds received by a Shareholder pursuant to the
redemption will be an income receipt in that Shareholder's hands for UK tax
purposes. Those proceeds will not carry any entitlement to a tax credit and, in
the hands of a corporate Shareholder, will not constitute franked investment
income; and

(b) a Shareholder who disposes of the whole or part of that Shareholder's
holding of B Shares pursuant to the Redemption Offer may, depending on that
Shareholder's circumstances, be charged to capital gains tax or (in the case of
a company) corporation tax on the amount of any chargeable gain realised. In
computing such gain, the base cost of the B Shares is calculated in the manner
described at paragraph (2)(c) above.

4. Where the Shareholder is an individual:

(a) no tax will be payable on any gain realised on the redemption if the amount
of the chargeable gain, when aggregated with any other chargeable gains
realised by the Shareholder in the year of assessment in question, does not
exceed the annual allowance of tax-free gains; and

(b) if a Shareholder acquired his existing Ordinary Shares on June 23, 2003, as
a result of the Company being introduced as the new holding company of the
Group in place of the previous holding company Rolls-Royce plc, and that
Shareholder had acquired the Ordinary Shares in Rolls-Royce plc (which were
cancelled and replaced with his existing Ordinary Shares) prior to April 1,
1998, indexation allowance will be available in respect of part of the base
cost in the existing Ordinary Shares (apportioned to the B Shares in the manner
described in paragraph (2)(c) above) until the end of April 1998 (save to the
extent that this creates or increases a capital loss). No indexation allowance
will be available where an individual Shareholder acquired his Rolls-Royce plc
shares after March 31, 1998 or acquired his existing Ordinary Shares after
June 23, 2003. In either of these cases taper relief may apply so that the
effective rate of capital gains tax on any gain on a redemption of B Shares by
an individual will be reduced the longer existing Ordinary Shares (and any
prior holding of shares in Rolls-Royce plc) and then the B Shares are held, up
to a maximum of ten years.

5. Set out below are two examples of the capital gains tax computation on a
redemption of B Shares by an individual. However, the actual calculation would
depend on the tax position of each Shareholder and Shareholders should consult
their professional advisers. The examples are for illustrative purposes only
and the prices used are not intended to relate to the actual price of the
Ordinary Shares.

In the examples, it is assumed that fifty B Shares (issued in respect of one
Ordinary Share) are held. It is also assumed that the market quotation of the
Ordinary Shares immediately after the bonus issue of B Shares is 350 pence each
and that the market quotation of the B Shares at the same time is 0.1 pence
each.

Example 1

If the historic cost for capital gains tax purposes of the Ordinary Shares was
275 pence each, then ignoring indexation and taper relief:

                                                                     Pence   
                                                                             
Proceeds from redemption of fifty B Shares = (50 x 0.1)              5.00    
                                                                             
Cost of fifty B Shares = 275 x ((50 x 0.1)/(350 + (50 x 0.1))        3.87    
                                                                             
Unindexed gain before any indexation allowance or taper relief       1.13    
                                                                             
Example 2                                                                    
                                                                             
If the historic cost for capital gains tax purposes of the Ordinary          
Shares was 450 pence each, then:                                             
                                                                             
                                                                     Pence   
                                                                             
Proceeds from redemption of fifty B Shares = (50 x 0.1)              5.00    
                                                                             
Cost of fifty B Shares = 450 x ((50 x 0.1)/(350 + (50 x 0.1))        6.34    
                                                                             
Allowable loss                                                       (1.34)  

Conversion of B Shares

6. A Shareholder who elects to convert his B Shares into Ordinary Shares
pursuant to the Conversion Option will not be treated as making a disposal of
his B Shares. Instead ``roll-over'' treatment should apply, which means the
Ordinary Shares will be treated for the purposes of taxation on chargeable
gains as the same asset as the B Shares and as having been acquired at the same
time as the B Shares were treated as acquired.

7. If a Shareholder becomes entitled to receive a further Ordinary Share
pursuant to the Company's proposed method of dealing with fractional
entitlements to Ordinary Shares arising on conversion (i.e. the Shareholder has
sufficient cash held by the Registrar to entitle him to an Ordinary Share),
such additional share is likely, in practice, to be treated as receiving the
``rollover'' treatment discussed above, rather than being treated as a separate
cash subscription for an Ordinary Share.

8. No charge to income tax should arise in relation to the conversion of
B Shares pursuant to the Conversion Option. If, in relation to a Shareholder's
entitlement in respect of fractions, the Registrar pay to him the cash held on
his behalf (rather than issuing him with an Ordinary Share once he has a
sufficient cash entitlement - as discussed above), in practice the amount of
that cash is likely to be treated not as the proceeds of a part disposal but as
reducing the base cost of the Shareholder's Ordinary Shares by an amount equal
to the cash received.

9. A Shareholder who subsequently disposes of Ordinary Shares may, depending on
that Shareholder's circumstances, be charged to capital gains tax or (in the
case of a company) corporation tax on the amount of any chargeable gain
realised.

Stamp duty and stamp duty reserve tax

10. No stamp duty or stamp duty reserve tax should arise on the issue,
redemption or conversion of B Shares.

Dividends

11. The United Kingdom tax treatment of dividends paid on the B Shares will be
the same as the tax treatment of dividends paid on the Ordinary Shares.
Accordingly under current tax law, the Company will not be required to withhold
tax at source from dividend payments it makes on the B Shares and will
therefore not assume responsibility for the withholding of tax at source.

(a) Individuals

An individual shareholder who is resident in the UK for tax purposes and who
receives a dividend from the Company on a B Share will be entitled to a tax
credit which may be set off against his total income tax liability on the
dividend. Such an individual shareholder's liability to income tax is
calculated on the aggregate of the dividend and the tax credit (the ``gross
dividend'') which will be regarded as the top slice of the individual's income.
The tax credit will be equal to 10% of the ``gross dividend'' (i.e. the tax
credit will be one-ninth of the amount of the dividend).

Shareholders who are not liable to income tax in respect of the gross dividend
will not be entitled to reclaim any part of the tax credit.

A UK resident shareholder who is liable to income tax at the lower or basic
rate will be subject to income tax on the dividend at the rate of 10% of the
gross dividend so that the tax credit will satisfy in full such shareholder's
liability to income tax on the dividend. A UK resident individual shareholder
liable to income tax at the higher rate will be subject to income tax on the
gross dividend at 32.5%. After taking into account the tax credit, such a
shareholder will have to account for additional tax equal to 22.5% of the gross
dividend (an effective tax rate of 25% of the net cash dividend received).

(b) Companies

A corporate shareholder resident in the UK for tax purposes will not normally
be subject to corporation tax on any dividend received from the Company on a
B Share. Such corporate shareholders will not be able to claim repayment of the
tax credit attaching to any dividend.

(c) Pension funds and charities

UK pension funds and charities will not be entitled to reclaim the tax credit
attaching to any dividend paid by the Company on a B Share.

Section 703 of the Income and Corporation Taxes Act 1988 (ICTA)

12. There is an anti-avoidance provision, section 703 ICTA, which the Inland
Revenue may apply where they have reason to believe that a person obtains a tax
advantage in consequence of certain transactions in securities. Were the Inland
Revenue to seek to apply section 703 ICTA to the B Share proposals, one
possible effect would be to tax the redemption proceeds as income. However, in
the opinion of the Company and its taxation advisers, the B Share proposals are
such that section 703 ICTA should not apply to Shareholders.

United States Taxation

The following paragraphs contain a summary based on present law of the material
US federal income tax consequences relevant to the receipt and ownership of
B Shares and, following a conversion, Ordinary Shares. The discussion addresses
only beneficial owners that are US persons (within the meaning of section 701
(a)(30) of the Internal Revenue Code) that will hold B Shares and Ordinary
Shares as capital assets and use the US dollar as their functional currency
(``US Holders''). The discussion does not consider the circumstances of holders
subject to special rules. Shareholders should consult their own tax advisers
regarding their specific circumstances.

Taxation on receipt, redemption or conversion of B Shares

1. The receipt of the B Shares by a US Holder will be taxable as a dividend in
an amount equal to the fair market value of the B Shares received whether or
not the B Shares are immediately redeemed or converted. The dividend generally
will be included in the gross income of a US Holder as ordinary income from
foreign sources and generally will constitute ``qualified dividend income'' to
eligible non-corporate US Holders subject to tax at the favourable rates
generally applicable to long-term capital gains. A US Holder's tax basis in
B Shares will equal the US dollar amount included as a dividend.

A US Holder who elects for immediate redemption of B Shares will have no
additional US tax consequences.

2 A US Holder who receives B Shares and elects for the Company to redeem them 
at a later date may be treated as receiving a further dividend in an amount
equal to the redemption proceeds (converted into US dollars at the spot rate on
the date of receipt) unless the redemption results in a meaningful reduction of
such holders proportionate interest in the Company. If redemption proceeds are
included in gross income as a dividend, a US Holder's tax basis in the redeemed
B Shares would be added to such shareholder's remaining B Shares and/or
Ordinary Shares. If a redemption of B Shares results in sale treatment, the US
Holder would be subject to the same rules as are described in ``Sale or other
disposition of B Shares and Ordinary Shares'' below. It is not possible to say
which treatment will apply as this depends, amongst other things, on the
elections to redeem or convert B Shares made by other Shareholders. US Holders
are urged to consult their own tax advisers regarding the specific tax
consequences of tendering issued and outstanding B Shares for redemption.

3. Conversion of B Shares into Ordinary Shares, either at the time of issue or
at a later date, should have no consequences for a US Holder. The tax basis of
Ordinary Shares received on conversion of B Shares will equal the US Holder's
adjusted tax basis in the converted B Shares (less any basis in respect of
B Shares attributable to a fraction of an Ordinary Share). A US Holder's
holding period in the Ordinary Shares will include the holding period of the
converted B Shares.

Dividends paid on B Shares

4. Cash dividends paid in respect of outstanding B Shares generally will be
included in the gross income of a US Holder (converted into US dollars at the
spot rate on the date of receipt) as ordinary income from foreign sources and
will constitute ``qualified dividend income'' to non-corporate US Holders.

Sale or other disposition of B Shares and Ordinary Shares

5. A US Holder generally will recognise capital gain or loss arising from US
sources on the sale or other disposition of B Shares or Ordinary Shares equal
to the difference between the US dollar value of the amount realised from such
sale or other disposition (generally converted at the spot rate on the date of
receipt) and the US Holder's adjusted tax basis (determined in US dollars) for
such B Shares or Ordinary Shares. The deductibility of capital losses is
subject to limitations.

Foreign exchange gain or loss

6. Dividends and proceeds of redemption or sale that are paid in pounds
sterling generally will be taken into account for tax in a US dollar amount
based on the exchange rate in effect on the date of receipt whether or not the
payment is converted into US dollars at that time. A US Holder's tax basis in
pounds sterling will equal such US dollar amount. Any gain or loss realised on
a subsequent conversion of the pounds sterling for a different amount will be
US source ordinary income or loss.

Backup withholding and information reporting

7. Backup withholding and information reporting may apply to dividends paid in
respect of B Shares and Ordinary Shares (including the initial distribution of
B Shares) or the proceeds received on the sale or exchange of B Shares or
Ordinary Shares by non-corporate US Holders.

Other overseas Shareholders

This summary only considers UK and US taxation. Any other overseas Shareholders
should seek tax advice in their jurisdiction of residency.

PART 3: DEFINITIONS

The following terms apply throughout this document unless the context otherwise
requires.

ACT                   means advance corporation tax;                         
                                                                             
Admission             means admission of the B Shares to the Official List   
                      becoming effective in accordance with the Listing Rules
                      of the UK Listing Authority and to trading on the      
                      London Stock Exchange;                                 
                                                                             
ADR                   means American Depositary Receipt;                     
                                                                             
ADR Programme         means the American Depositary Receipt Programme between
                      The Bank of New York, the Company and the owners and   
                      holders of depository receipts, set up pursuant to a   
                      deposit agreement dated May 1990;                      
                                                                             
AGM or Annual General means the Annual General Meeting of the Company to be  
Meeting               held at 11.30 a.m. on May 4, 2005;                     
                                                                             
B preferential        means the non-cumulative preferential dividend to be   
dividend              paid to holders of the B Shares more fully set out in  
                      paragraph 2 of Part 1 of this document;                
                                                                             
B Shares              means the non-cumulative redeemable convertible        
                      preference shares of 0.1 pence each in the capital of  
                      the Company issued from time to time on the terms and  
                      conditions set out in this document;                   
                                                                             
B Shareholder         means a holder of B Shares on the date of this         
                      document;                                              
                                                                             
Board or Directors    means the directors of the Company as at the date of   
                      this document and from time to time;                   
                                                                             
Business Day          means a day upon which pounds sterling deposits may be 
                      dealt in on the London interbank market and commercial 
                      banks are generally open in London;                    
                                                                             
Calculation Period    means each six-monthly period ending on the last day in
                      June and December each year by reference to which the B
                      preferential dividend is calculated;                   
                                                                             
Companies Act         means the Companies Act 1985 (as amended);             
                                                                             
Company               means Rolls-Royce Group plc;                           
                                                                             
Conversion Offer      means the offer made by the Company in paragraph 6 of  
                      Part 1 of this document to convert any or all of the   
                      B Shares in issue and July 2005 B Shares into Ordinary 
                      Shares on the terms and conditions set out in this     
                      document;                                              
                                                                             
Conversion Right      means the right of holders of B Shares to convert their
                      B Shares into Ordinary Shares when the Company makes   
                      the Conversion Offer or a Future Conversion Offer, more
                      fully set out in paragraph 6 of Part 1 of this         
                      document;                                              
                                                                             
Conversion Share      means the arithmetical mean (rounded down to the       
Value                 nearest whole number) of the middle market quotations  
                      expressed in pence as derived from the daily Official  
                      List for one Ordinary Share for the period of any five 
                      consecutive dealing days chosen by the Company to end  
                      before the commencement of the Election Period or any  
                      Future Election Period (as applicable);                
                                                                             
CREST                 means the relevant system (as defined in the           
                      Uncertificated Securities Regulation 1995) in respect  
                      of which CRESTCo Limited is the operator;              
                                                                             
CREST Currently Held  means B Shares that are held in CREST on the Record    
B Shares              Date;                                                  
                                                                             
Election Period       means the period during which all holders of B Shares  
                      may elect for any of the B Shares (including the       
                      July 2005 B Shares) issued to them to be redeemed for  
                      cash or converted into Ordinary Shares in accordance   
                      with the terms and conditions of the Redemption and    
                      Conversion Offer commencing on March 11, 2005, and     
                      ending at the Prescribed Time;                         
                                                                             
Evergreen Election    means an election made by Shareholders to either redeem
                      or convert all B Shares issued to them from time to    
                      time, until such time as the Shareholder cancels that  
                      election in the prescribed manner;                     
                                                                             
Future Conversion     means any offer (other than the Conversion Offer) made 
Offer                 by the Company after the expiry of the Conversion      
                      Offer, to convert B Shares into Ordinary Shares;       
                                                                             
Future Redemption     means any offer (other than the Redemption Offer) made 
Offer                 by the Company after the expiry of the Redemption      
                      Offer, to redeem B Shares for cash;                    
                                                                             
Future Election       means any period or periods after the Election Period  
Period or Periods     when the Company gives holders of B Shares an          
                      opportunity to redeem and/or convert B Shares;         
                                                                             
Group                 means the Company and its subsidiary undertakings (as  
                      defined in the Companies Act) from time to time;       
                                                                             
July 2005 B Shares    means the B Shares to be issued on July 1, 2005 to     
                      Shareholders holding Ordinary Shares on the Record     
                      Date;                                                  
                                                                             
Members               means Shareholders and holders of B Shares;            
                                                                             
LIBOR                 means London inter-bank offered rate for six month     
                      deposits in pounds sterling per annum which appears on 
                      the display designated as page 3750 on the Telerate    
                      Monitor (or such other page or service as may replace  
                      it for the purpose of displaying LIBOR of leading banks
                      for pounds sterling deposits) at or about 11.00 a.m.   
                      (London time) on the relevant date;                    
                                                                             
London Stock Exchange means London Stock Exchange plc;                       
                                                                             
Official List         means the Official List of the UK Listing Authority;   
                                                                             
Ordinary Shares       means ordinary shares of 20 pence each in the share    
                      capital of the Company;                                
                                                                             
Prescribed Time       means no later than 5.00 p.m. on June 3, 2005;         
                                                                             
Proceeds              means the net proceeds of the sale of the Ordinary     
                      Shares resulting from the consolidation of fractional  
                      entitlements only on the conversion of B Shares;       
                                                                             
Record Date           means March 11, 2005, being the record date for the    
                      proposed bonus issue of B Shares to take place in      
                      July 2005;                                             
                                                                             
Redemption/Conversion means the form that allows Shareholders to elect to    
Mandate               either redeem all their B Shares or convert all their  
                      B Shares (other than their existing holding) during the
                      Election Period subject to the conditions referred to  
                      therein;                                               
                                                                             
Redemption Offer      means the offer made by the Company in paragraph 5 of  
                      Part 1 of this document to redeem any or all of        
                      B Shares currently in issue and the July 2005 B Shares 
                      for cash on the terms and conditions set out in this   
                      document;                                              
                                                                             
Redemption Right      means the right of holders of B Shares to redeem their 
                      B Shares for cash when the Company makes the Redemption
                      Offer or a Future Redemption Offer, more fully set out 
                      in paragraph 5 of Part 1 of this document;             
                                                                             
Redemption and        means the Redemption Offer and the Conversion Offer;   
Conversion Offer                                                             
                                                                             
Registrar             means Computershare Investor Services PLC, or such     
                      other agent as the Company may appoint from time to    
                      time;                                                  
                                                                             
Shareholder           means a holder of Ordinary Shares;                     
                                                                             
UK orUnited Kingdom   means the United Kingdom of Great Britain and Northern 
                      Ireland; and                                           
                                                                             
US or United States   means the United States of America and its territories 
                      and possessions, any state of the United States of     
                      America and the District of Columbia.                  

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