Rolls-Royce Regulatory News (RR.)

6 June 2019

ROLLS-ROYCE INSURES BENEFITS TO PENSIONERS WITH TRANSFER OF LIABILITIES TO LEGAL & GENERAL

Rolls-Royce announces its UK pension trustee has completed a deal to transfer certain pension risk liabilities to Legal & General Assurance Society Limited ("Legal & General").

The deal covers the transfer of assets and liabilities relating to approximately 33,000 pensioners who are members of the Rolls-Royce UK Pension Fund out of a total of 76,000 members. The transaction will fully insure benefits payable from the fund and provide permanent security for pensioners, while reducing the Group's post-retirement obligations by around £4.1 billion. The residual obligations, which remain well funded, will be smaller with less risk for the Trustee and Rolls-Royce to manage in the future.

Pensioners included in the transfer will have their benefits handled by one of the largest and most highly-rated insurance companies in the world, with expertise in insuring and administering pensions.

Joel Griffin, Head of Global Pensions & Benefits, Rolls-Royce, said: "This agreement will result in increased security for Rolls-Royce pensioners and reduced risk for our business. Legal & General is one of the world's leading insurance companies and as a result of this deal the provision of benefits will be governed by stringent funding requirements, resulting in a secure pension environment for our pensioners."

Stephen Daintith, CFO, Rolls-Royce said: "This is a significant transaction which represents another step on our journey to simplify, de-risk and strengthen the company. Rolls-Royce and the Trustees of the Rolls-Royce UK Pension Fund have worked intensely to ensure that the fund continues to have the resources it requires to meet its obligations. This agreement is a further step towards ensuring benefits for our pensioners."

The deal will see Rolls-Royce make an exceptional cash contribution of around £30m. Free cash flow guidance for the Full Year remains unchanged. Alongside the transfer of around £4.1bn of liabilities to Legal & General, the Rolls-Royce trustee will also transfer around £4.6bn of assets. This results in a reduction in net assets of around £0.5bn though funding levels remain unchanged.

About Rolls-Royce Holdings plc

1. Rolls-Royce pioneers cutting-edge technologies that deliver clean, safe and competitive solutions to meet our planet's vital power needs.

2. Rolls-Royce has customers in more than 150 countries, comprising more than 400 airlines and leasing customers, 160 armed forces, 70 navies, and more than 5,000 power and nuclear customers.

3. Annual underlying revenue was £15 billion in 2018, around half of which came from the provision of aftermarket services.

4. In 2018, Rolls-Royce invested £1.4 billion on research and development. We also support a global network of 29 University Technology Centres, which position Rolls-Royce engineers at the forefront of scientific research.

5. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills.

For further information, please contact:

jennifer.ramsey@rolls-royce.com

Richard Wray

Director of External Communications

Rolls-Royce plc

Tel: +44 (0) 20 7227 9163

richard.wray@rolls-royce.com

Teresa Towner

External Corporate Communications Manager

Rolls-Royce plc

Tel: +44 (0) 20 7227 9036

teresa.towner@rolls-royce.com

www.Rolls-Royce.com