Shareholder value
The Group continues to subject all investments to rigorous examination of risks and future cash flows to ensure that they create shareholder value. All major investments require Board approval.

The Group has a portfolio of projects at different stages of their lifecycles. Discounted cash flow analysis of the remaining life of projects is performed on a regular basis to compute the value which underlies the Group's market capitalisation.

During the year Rolls-Royce shares fell by 7.4 per cent from 214p to 198.25p per share, compared to a 5.4 per cent fall for the aerospace and defence sector and a ten per cent fall for the FTSE 100.

The company's shares ranged in price from 161p in September to 261p in May. In September the company fell out of the FTSE 100 index but regained its place in December.

The number of shares in issue at the end of the year was 1,569 million, an increase of 24 million of which 6.6 million related to share options and 17.6 million related to scrip dividends.

The average number of shares in issue was 1,558 million (1999 1,506 million). Underlying earnings per share were 21.63p, an increase of 10.8 per cent over 1999. The proposed final dividend per share will result in a total payment of 8.00p per share, an increase of 10.3 per cent over 1999.