Scheme Circular - Rolls-Royce

PART I
LETTER FR O M THE CHAIRMAN
Registered Office:
Rolls-Royce Group plc
65 Buckingham Gate
London, SW1E 6AT
United Kingdom
:
22 March 2011
Dear Shareholder,
Recommended Proposals in respect of the introduction of Rolls-Royce Holdings as a new holding company of the Group and related matters
1. INTRODUCTION
On 10 February 2011, Rolls-Royce Group announced its intention to put in place a new holding company for the Group, being Rolls-Royce Holdings.
It is intended that this new corporate structure will be implemented by means of a scheme of arrangement under Part 26 of the Companies Act
involving the cancellation of most of the capital of Rolls-Royce Group. Upon the Scheme taking effect, it is proposed that the capital of Rolls-Royce
Holdings be reduced to create distributable reserves.
We have prepared the summary on pages 8 to 11 to help you understand what is involved. You should nevertheless read the whole of this document
and not rely solely on the summary.
The purpose of this letter is to explain why the Board considers the Proposals to be in the best interests of Rolls-Royce Group and its shareholders as
a whole. Your Board is unanimously recommending that you vote in favour of the Proposals. A summary of the action recommended to be taken
is set out on page 13 of this document and on the Forms of Proxy accompanying this document.
2. REASONS FOR THE PROPOSA LS
The Board believes that the Proposals, which provide for the introduction of an additional new, non-trading, holding company and a subsequent
reduction of capital of the new holding company, are the most effective way to provide flexibility to the capital structure of the Group and to
create distributable and merger reserves. A benefit of the creation of these reserves is that they will allow for the continued issue and redemption
of C Shares by the Group. Shareholders will be familiar with the benefits to the Group of payments being made to them in the form of redeemable
C Shares rather than cash dividends, to help the recovery of the Group’s £182m of historic advance corporation tax. These Proposals will not affect the
commercial operations of Rolls-Royce in any way.
3. EFFECTS OF THE SCHEME
The effects of the implementation of the Scheme will be as follows:
(a)
(b)
(c)
instead of owning a given number of Rolls-Royce Group Ordinary Shares, each Rolls-Royce Group Shareholder will own the same number
of Rolls-Royce Holdings Ordinary Shares;
Rolls-Royce Holdings will be the new holding company of the Group; and
instead of having its ordinary share capital owned by the Rolls-Royce Group Shareholders, Rolls-Royce Group will become a wholly-owned
subsidiary of Rolls-Royce Holdings with its entire issued share capital owned by Rolls-Royce Holdings.
Immediately following the Scheme becoming effective, the only material asset of Rolls-Royce Holdings will be the ordinary share capital of Rolls-
Royce Group.
12