Torotrak PLC Proposed Placing, Open Offer, Subscription, etc

TIDMTRK

RNS Number : 5842R

Torotrak PLC

30 June 2015

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES LAWS OR REGULATIONS.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. IT IS NOT A CIRCULAR, A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT SOLELY ON THE BASIS OF INFORMATION CONTAINED IN THE PROSPECTUS PUBLISHED BY TOROTRAK PLC DATED 30 JUNE 2015.

30 June 2015

Torotrak plc

("Torotrak" or the "Company")

Proposed Firm Placing of 128,571,428 New Ordinary Shares

Proposed Placing and Open Offer of 69,071,511 New Ordinary Shares

Proposed Subscription for up to 21,428,571 New Ordinary Shares by Allison Transmission, Inc.

each at an Issue Price of 7 pence per New Ordinary Share

Proposed Reorganisation of Share Capital

Proposed Related Party Transactions

and

Notice of General Meeting

Torotrak (LSE: TRK), a leading developer and supplier of emissions reduction and fuel efficiency technology for vehicles, announces a proposed Subscription, Firm Placing and Placing and Open Offer (together the "Issue") to raise approximately GBP13.8 million (before costs). The Company also announces that it has entered into a conditional agreement with the Flybrid Vendors to amend the terms of the Acquisition Agreement relating to the acquisition of Flybrid and the proposed Reorganisation of Share Capital to allow the Company to issue the New Ordinary Shares at the Issue Price. The Proposals, comprising the Flybrid Agreement, the Reorganisation of Share Capital, the Subscription, the Firm Placing, the Placing and Open Offer and the Chief Executive Officer's Proposed Remuneration, require Shareholder approval at the General Meeting to be held on 22 July 2015.

The net proceeds of the Issue will be used to finance the expenditure required to complete the productionisation and start of commercial production of the bus KERS technology, to invest in the development and testing of the Group's V-Charge technology, to finance the ongoing development of the Group's IVT/CVT technology, to settle the cash consideration due to the Flybrid Vendors under the Flybrid Agreement and to provide the Group with additional working capital.

Highlights

The Issue

-- 197,642,939 New Ordinary Shares at 7 pence per share will be issued pursuant to the Issue, of which 128,571,428 New Ordinary Shares have been placed firm with institutional investors.

--     Open Offer to Qualifying Shareholders on the basis of:

1 Open Offer Share for every 4 Existing Ordinary Shares at 7 pence per share

Qualifying Shareholders can also subscribe for Excess Shares under the Excess Application Facility, subject to availability. All of the Open Offer Shares have been conditionally placed with institutional investors pursuant to the Placing and with Allison pursuant to the Subscription, subject to claw-back to satisfy valid applications by Qualifying Shareholders under the Open Offer.

-- Allison has agreed to subscribe for up to 21,428,571 New Ordinary Shares at the Issue Price, subject to claw-back to satisfy valid applications by Qualifying Shareholders under the Open Offer. As Allison owns (as at the date of the Prospectus) Existing Ordinary Shares representing approximately 12.9 per cent. of the existing issued share capital of the Company, the Subscription is a related party transaction under the Listing Rules requiring Shareholder approval.

-- The Issue, which is subject to Shareholder approval, will raise gross proceeds of approximately GBP13.8 million (before costs).

Flybrid Agreement

-- The Flybrid Agreement is a conditional agreement between the Company and the Flybrid Vendors to amend the Acquisition Agreement, including restructuring of the rights of the Flybrid Vendors in relation to the redemption of GBP2.8 million of loan notes and the earn-out consideration of up to GBP15 million (of which not less than GBP10 million was payable in cash) payable under the Acquisition Agreement. Under the Flybrid Agreement, the loan notes will be redeemed by the payment of GBP1 million in cash from the proceeds of the Issue and through drawing down a new GBP1.8 million five year term loan from the Flybrid Vendors to the Company, and the Acquisition Agreement earn-out consideration is to be satisfied by the issue of 71,428,571 New Ordinary Shares (GBP5.0 million at the Issue Price).

-- The Flybrid Vendors, Jonathan Hilton (a Director of the Company) and Douglas Cross (a director of a subsidiary of the Company) are regarded as related parties under the Listing Rules and the Flybrid Agreement is therefore subject to Shareholder approval. If the Flybrid Agreement is approved by Shareholders, Jonathan Hilton will become Non-Executive Deputy Chairman of Torotrak and will cease to be an Executive Director. Douglas Cross will continue in his position as Chief Technology Officer and as a member of the executive team.

Reorganisation of Share Capital

-- In order for the Company to issue the New Ordinary Shares at the Issue Price, it will be necessary for the Company first to reduce the nominal value of the Existing Ordinary Shares. The Company therefore proposes to sub-divide and convert the 276,286,047 Existing Ordinary Shares of 10 pence each into the same number of Existing Ordinary Shares of 1 pence each and the same number of Deferred Shares of 9 pence each. In connection with the Reorganisation of Share Capital, the Company proposes to adopt new Articles of Association. The Reorganisation of Share Capital is conditional on Shareholder approval.

Notice of General Meeting

-- A notice convening the General Meeting, to be held at the offices of Tavistock Communications at 131 Finsbury Pavement, London EC2A 1NT at 11.00 a.m. on 22 July 2015 is contained in the Prospectus which is being posted to Shareholders (except those resident in Excluded Territories).

Further details of the Proposals, including the Issue, are set out in this announcement and in the Prospectus due to be published today.

Nick Barter, Chairman of Torotrak, said:

"These proposals, together with our refocused strategy and internal reorganisation, will deliver, we believe, a solid financial and operational platform from which to realise the value of our technology. We have made considerable progress over the last year with bus KERS, V-Charge and IVT. Adam Robson, our new CEO, has already given us a new strategic impetus and under his leadership we expect to expand our Tier 1 partnerships and licensee base as they prepare themselves to deliver our market leading products into production for automotive OEMs who we expect to adopt our new solutions to reduce emissions and fuel consumption.

"This fundraise underpins our plans to realise the value of our products and offers all shareholders the chance to participate. The Board recommends all shareholders to vote in favour of the proposals, which we believe will allow us to deliver value to our loyal shareholders."

For more information, please visit www.torotrak.com or contact:

Torotrak plc                                                +44 1772 900 931 
Adam Robson, Chief Executive Officer 
 Rex Vevers, Finance Director 
Charles Stanley Securities (Joint Financial Adviser & 
 Joint Broker)                                              +44 20 7149 6000 
Marc Milmo / Karri Vuori / Freddie Crone 
Cantor Fitzgerald Europe (Joint Financial Adviser & Joint 
 Broker)                                                    +44 20 7894 7000 
Rick Thompson / Will Goode / David Banks 
Tavistock                                                   +44 20 7920 3150 
Simon Hudson / James Collins

IMPORTANT NOTICE

This announcement is not a prospectus but an advertisement and Qualifying Shareholders should not acquire any New Ordinary Shares referred to in this announcement except on the basis of the information contained in the Prospectus.

Neither the content of the Company's website nor any website accessible by hyperlinks to the Company's website is incorporated in, or forms part of, this announcement. The distribution of this announcement, the Prospectus and any other documentation associated with the Proposals into jurisdictions other than the United Kingdom may be restricted by law. Persons into whose possession these documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws or regulations of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted, directly or indirectly, in whole or in part, in, into or from the United States, Canada, Japan or Australia or any other jurisdiction where to do so may constitute a violation of the securities laws or regulations of any such jurisdiction (each an "Excluded Territory").

No action has been taken by the Company or any other person that would permit an offer of the New Ordinary Shares or possession or distribution of this announcement, the Prospectus or any other documentation or publicity material or the Application Form in any jurisdiction where action for that purpose is required, other than in the United Kingdom.

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June 30, 2015 02:02 ET (06:02 GMT)

The New Ordinary Shares have not been and will not be registered under the US Securities Act 1933 (as amended) (the "US Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and, accordingly, may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, within the United States except in reliance on an exemption from the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.

There will be no public offer of the New Ordinary Shares in the United States. The New Ordinary Shares are being offered and sold outside the US in reliance on Regulation S under the US Securities Act. The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the US or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy or adequacy of the Application Form or this announcement. Any representation to the contrary is a criminal offence in the US.

The New Ordinary Shares have not been and will not be registered under the relevant laws of any state, province or territory of any Excluded Territory and may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, within any Excluded Territory except pursuant to an applicable exemption from registration requirements. There will be no public offer of New Ordinary Shares in Canada, Japan, or Australia.

This announcement is for information purposes only and does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in any jurisdiction and should not be relied upon in connection with any decision to subscribe for or acquire any of the New Ordinary Shares. In particular, this announcement does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States.

This announcement has been issued by, and is the sole responsibility of, the Company. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company, Charles Stanley Securities or Cantor Fitzgerald Europe. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information contained in it is correct at any subsequent date.

Charles Stanley Securities, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for the Company and no one else in connection with the Proposals and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Proposals and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Proposals or any matters referred to in this announcement.

Cantor Fitzgerald Europe, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for the Company and no one else in connection with the Proposals and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Proposals and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Proposals or any matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Charles Stanley Securities or Cantor Fitzgerald Europe by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, neither Charles Stanley Securities or Cantor Fitzgerald Europe accepts any responsibility whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification, or for any other statement made or purported to be made by them, or on their behalf, in connection with the Company or the New Ordinary Shares or the Proposals, and nothing in this announcement is or shall be relied upon as, a promise or representation in this respect whether as to the past or future. Charles Stanley Securities and Cantor Fitzgerald Europe accordingly disclaim to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this announcement or any such statement.

No statement in this announcement is intended to be a profit forecast or estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by law or by the Listing Rules the Prospectus Rules and the Disclosure and Transparency Rules, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.

This announcement should not be considered a recommendation by the Company, Charles Stanley Securities or Cantor Fitzgerald Europe or any of their respective directors, officers, employees, advisers or any of their respective affiliates, parent undertakings, subsidiary undertakings or subsidiaries of their parent undertakings in relation to any purchase of or subscription for the New Ordinary Shares. Price and volumes of, and income from, securities may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. You are advised to read this announcement and the Prospectus and the information incorporated by reference therein in their entirety for a further discussion of the factors that could affect the Group's future performance and the industry in which it operates. Persons needing advice should consult an independent financial adviser.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES LAWS OR REGULATIONS.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. IT IS NOT A CIRCULAR, A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT SOLELY ON THE BASIS OF INFORMATION CONTAINED IN THE PROSPECTUS TO BE PUBLISHED BY TOROTRAK PLC IN CONNECTION WITH THE PROPOSED FUNDRAISING.

30 June 2015

Torotrak plc

("Torotrak", the "Company" or the "Group")

Proposed Firm Placing of 128,571,428 New Ordinary Shares

Proposed Placing and Open Offer of 69,071,511 New Ordinary Shares

Proposed Subscription for up to 21,428,571 New Ordinary Shares by Allison Transmission, Inc.

each at an Issue Price of 7 pence per New Ordinary Share

Proposed Reorganisation of Share Capital

Proposed Related Party Transactions

and

Notice of General Meeting

1. Introduction

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June 30, 2015 02:02 ET (06:02 GMT)

The Company today announces the Issue (through the proposed Subscription, Firm Placing and Placing and Open Offer) to raise approximately GBP12.4 million net of costs. The net proceeds of the Issue will be used principally to finance the continued investment required for the commercial launch of the Company's first manufactured KERS product for the on-highway commercial vehicle market and to finance the on-going design, development, testing and commercialisation of Torotrak's V-Charge technology and KERS technology for the passenger car and commercial vehicle markets.

On 30 March 2015, the Company announced the appointment of Adam Robson as Chief Executive Officer (effective from 13 April 2015). Adam's experience in managing and building high growth technology businesses and commercialising new technology will help lead the Group through the next phase of its development and growth. Adam has announced that his focus is to commercialise the Group's technologies, delivering revenues and Shareholder value. The Proposals being put to Shareholders are a key part in delivering the significant value that the Directors believe is embedded in the Group's product and technology portfolio.

The Group is focused on now bringing its portfolio of products and technologies to market, offering the automotive sector potential solutions to the incoming regulatory obligations to reduce vehicle fuel consumption and emissions. In the opinion of the Directors, the prospects for monetising the Group's technologies across multiple applications through licensing and lower volume unit sales are significant. The continued tightening of global vehicle emissions regulations and the growing requirement for vehicle manufacturers to access low-cost, practical solutions are expected to continue to underpin the growing opportunities for the Group's products and technologies in both light vehicle and commercial vehicle applications.

The Proposals

The Proposals comprise the Flybrid Agreement, the Reorganisation of Share Capital, the Subscription, the Firm Placing, the Placing and Open Offer and the Chief Executive Officer's Proposed Remuneration and, if the Resolutions (other than the Chief Executive Officer's Proposed Remuneration Resolution) are passed, will result in the issue of 269,071,510 New Ordinary Shares at an Issue Price of 7 pence each.

The Flybrid Agreement sets out the terms of a conditional agreement between the Company and the Flybrid Vendors to amend the Acquisition Agreement, including restructuring the rights of the Flybrid Vendors in relation to the redemption of the GBP2.8 million of loan notes and the earn-out consideration payable under the Acquisition Agreement. As Jonathan Hilton, one of the Flybrid Vendors, is a Director of the Company and Douglas Cross, the other Flybrid Vendor, is a director of a subsidiary of the Company, they are regarded as related parties pursuant to Chapter 11 of the Listing Rules. Therefore, the Flybrid Agreement is regarded as a related party transaction which requires Shareholder approval. The Flybrid Agreement is therefore conditional on the Flybrid Agreement Resolution being passed by Shareholders.

Prior to the issue of the New Ordinary Shares, the Company intends to sub-divide and convert the 276,286,047 Existing Ordinary Shares of 10 pence each into 276,286,047 Existing Ordinary Shares of 1 pence each and 276,286,047 Deferred Shares of 9 pence each. The purpose of the Reorganisation of Share Capital is to reduce the nominal value of the Ordinary Shares from 10 pence each to 1 pence each, to allow the Company to issue the New Ordinary Shares at the Issue Price and to remove a potential restriction on the Company's ability to raise funds in the future (English company law prohibits the issue of new shares by an English company at a price below their nominal value).

Pursuant to the Subscription Agreement, Allison has agreed to subscribe for up to 21,428,571 New Ordinary Shares at the Issue Price subject to clawback by Qualifying Shareholders in order to satisfy valid applications under the Open Offer. As at 29 June 2015, Allison held 35,562,788 Existing Ordinary Shares which represent approximately 12.9 per cent. of the Company's existing issued share capital and therefore Allison is regarded as a related party pursuant to Chapter 11 of the Listing Rules. Therefore, the Subscription by Allison is regarded as a related party transaction which requires Shareholder approval. The Subscription is therefore conditional on the Subscription Resolution being passed by Shareholders.

The Firm Placees have conditionally agreed to subscribe for, in aggregate, 128,571,428 Firm Placed Shares at the Issue Price (representing gross proceeds of approximately GBP9.0 million). The Firm Placed Shares are not subject to claw-back to satisfy valid applications under the Open Offer and are not part of the Placing or the Open Offer. The Firm Placing is conditional on Shareholder approval at the General Meeting.

The Open Offer Shares will be allocated to Qualifying Shareholders under the Open Offer on a pre-emptive basis in accordance with the Articles. Charles Stanley Securities and Cantor Fitzgerald Europe have conditionally pre-placed all of the Firm Placed Shares and the Placed Shares with institutional investors at the Issue Price (subject to claw-back in respect of the Placed Shares to satisfy valid applications by Qualifying Shareholders under the Open Offer).

In addition, the Remuneration Committee is proposing, conditional on Shareholder approval, to grant Torotrak's Chief Executive Officer, Adam Robson, a one-off LTPSP award of 4,285,714 Ordinary Shares (subject to certain performance criteria). In addition, Adam Robson's service agreement includes certain provisions that will be triggered on a change of control of the Company. The LTPSP grant and change of control related provisions are not currently within the remit of the remuneration policy approved by Shareholders and are therefore subject to Shareholder approval.

The Prospectus (containing the Notice of General Meeting) is being sent to eligible Shareholders to give them the background to and reasons for the Proposals and to explain why the Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole.

Importance of Vote

The Proposals require Shareholder approval. If the Resolutions (other than the Flybrid Agreement Resolution and the Chief Executive Officer's Proposed Remuneration Resolution) are not passed, the Issue will not proceed.

If the Issue does not proceed, the Directors believe that Torotrak has sufficient financial resources to fund the business only until the end of September 2015. The Directors would therefore have a limited timeframe in which to take any remedial actions and take measures to raise further funds. If the Issue does not proceed and alternative immediate funding is not obtained in the limited timeframe available, the Directors would need to consider whether it is appropriate for the Group to cease trading and enter into a liquidation process. Accordingly, it is very important that Shareholders vote in favour of the Resolutions and that the Issue proceeds.

2. Background to and reasons for the Issue and the Group's strategy going forward

Group's Strategy

Since the acquisition of Flybrid in January 2014, the Group has invested in application engineering, product development and testing as the Company focused its attention on taking greater control of routes to market for its technology. The Directors believe that this strategy has enabled the Group to make significant progress in identifying potential market applications for the Group's technologies and crucially, developing prototype products that meet vehicle manufacturers' needs. With the level of engagement with potential customers currently being seen by the Company and the current work programmes the Group is engaged in, the focus is now firmly centred on realising the potential and monetising the value of the Group's technologies and products.

The Group's potential markets have been evolving. Automotive OEMs have in most cases been successful in meeting the 2020/21 emissions hurdles without significant innovations. However, the requirements upon them beyond 2021, combined with an expected tightening of the testing requirements under World Harmonised Light Duty Test Procedure (WLTP), mean that new technologies, such as those the Group provides, are expected to be needed. At the same time advances in electric hybrid technologies have not seen the major breakthroughs required and consequently the Directors believe that the Group's mechanical hybrid solutions are becoming increasingly attractive. Lastly, oil prices have fallen materially but to date the Group has seen no resulting changes in customers' plans for new technology take-up.

The Group's recently appointed Chief Executive Officer, Adam Robson, has a proven track record and experience of commercialising technology and of bringing new technologies to market in the automotive sector. Under his leadership, the Group will look to build on the progress made over the last year in developing and productionising the bus and off-highway KERS products and developing V-Charge and securing engagements with Tier 1/OEMs to take the technologies through into commercial production.

The Group's strategy and organisation have evolved under Mr Robson's leadership. A greater focus is being given to delivery of the key products which are most likely to secure commercial take-up and deliver near term commercial returns (notably KERS and V-Charge), to the securing of Tier 1 commercial partners and to advancing opportunities to monetise the products. At the same time, the Group's manufacturing intentions are being scaled back; the Group will manufacture initial low volumes where necessary but its preferred outcome will be to transfer this activity to Tier 1 partners and help them to develop their own capabilities. Accordingly, the Group's near term objectives are as follows:

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June 30, 2015 02:02 ET (06:02 GMT)

-- Complete the productionisation and commercial launch of the Group's bus KERS technology, working in collaboration with the Group's global Tier 1 commercial vehicle systems partner. The start of commercial production and sales, is scheduled for mid-2016;

-- In partnership with JCB, complete the production level design and testing programme for the Group's KERS product for off-highway commercial vehicles, with the aim of achieving implementation of the technology in excavators;

-- Complete the V-Charge development and evaluation programme with Ford, the University of Bath and a global Tier 1 engine boosting company and negotiate licensing arrangements to secure go--to-market programmes for passenger car applications;

-- Pursue opportunities to license the Group's KERS technology in passenger cars and commercial vehicles;

-- Progress the commercial opportunities for the Group's IVT/CVT technology in off-highway commercial vehicle markets and secure commercial partners to help exploit these opportunities; and

-- Secure engineering services programmes (e.g. feasibility, demonstration projects) targeting further opportunities to commercialise the Group's existing technology and generate commercial revenues, with a reduced focus on longer term technology development projects.

To support the Group's focus on commercialising its technologies, the Directors are implementing an internal reorganisation of the Group that will see additional resources and investment in the key near term commercial and business development areas and a reduction in resources and capital in those areas of the Group that relate to longer term research and development and volume manufacturing capabilities. The Group will focus on engineering services projects that underpin or deliver clear near term commercial opportunities.

The Group has an excellent portfolio of products and technologies that are well-positioned to help vehicle manufacturers, including manufacturers of passenger cars and commercial vehicles , address the regulatory challenges of the post 2020/21 CO2 emission targets and beyond. With OEMs' typical product development cycles of more than five years, this means that the window of opportunity for the Group is now opening. Given the ongoing engagement with, and interest from, the automotive industry and the projects currently being undertaken by the Group, the Directors are confident that the Company is well positioned to capitalise on this opportunity. The Group's focus therefore is to secure commercial uptake of the technologies during this important period.

The Group's business model remains predominantly a licensing model for the higher volume markets, as well as in applications where the Group's partners are best suited to make the up-front investments to complete the product development and productionisation programmes. This is particularly true in the passenger car market where established Tier 1 partners are the logical route to market for the Group's products. The value model in this instance includes up-front licence fees, in conjunction with engineering services fees, to support the transfer of the technology and the product development programme, followed by per unit royalties from product sales. In lower volume market applications (e.g. bus KERS), the Group is more likely to complete the initial product development and productionisation programme on a self-funded basis itself or in collaboration with partners, as the initial market entry strategy. As volumes grow or to address other markets, it is likely that the Group will also license the technology, but may if necessary remain a Tier 2 supplier of certain high value core components/assemblies.

This strategy reflects the immediate emphasis and focus on commercialising the significant investments made by the Group in developing its products and technologies to a stage where they are now being seen as a viable solution to the industry's regulatory requirements to reduce emissions. The window for OEMs to adopt new technology is now open and the Group must secure its share of this global market opportunity.

Review of the Group's technologies and products

KERS

On-highway commercial vehicles:

The Group has made progress towards commercialising its KERS technology in the bus market. The first prototype bus KERS units have been manufactured and assembled in-house and successfully integrated into Wrightbus StreetLite vehicles. In the final quarter of 2014, a KERS-enabled StreetLite vehicle completed independent testing at the Millbrook test facility, based on the standard MLTB (Millbrook London Transport Bus) test cycle, validating fuel savings and confirming operator paybacks. The Group has also completed extensive accelerated flywheel durability testing equivalent to more than 10 years' in-service operation, confirming target design life of least one million kilometres. In addition, a comprehensive programme of destructive and non-destructive tests has been successfully completed proving out the KERS safety systems, including the patented containment system.

In March 2015, a KERS-enabled StreetLite bus commenced in-service field trials with Arriva on a public bus route in Gillingham, Kent. This trial is intended to demonstrate the successful operation of the KERS unit under real-world operating conditions and target operator benefits.

The engineering team has completed a new production-intent design of the bus KERS unit reducing the weight of the unit and parts count, and targeting improvements in fuel savings and bus operator payback. The Group has been working in collaboration with its strategic partner, a global Tier 1 supplier of driveline systems to the automotive and commercial vehicle markets, to ensure the product is designed for manufacture and assembly and to meet the volume requirements of the bus sector. The Group has signed a memorandum of understanding with the Tier 1 partner which is expected to lead to a formal supply agreement. By leveraging an established Tier 1 volume supply chain with proven expertise in delivering production transmission systems, the Directors believe the target cost of the KERS unit can be met. The first units of the new production-intent design are currently being assembled at the Group's facility in Leyland and will be used as part of a comprehensive design verification test programme to validate the functional performance, reliability and improved fuel efficiency of the KERS system. Part of the proceeds of the Issue will be used to complete the development and testing of the new production-intent design and finance the future investment in production tooling in the supply chain to deliver the bill of materials volume cost targets and ensure that the Group is ready to meet the volume needs of the Group's bus OEM customers and the end-user bus operators.

The Directors believe the initial business model for bus KERS is likely to see the Group's Tier 1 partner supply to the Group critical components and sub-assemblies for bus KERS units, with Torotrak manufacturing and integrating flywheel assemblies into the KERS units and supplying the completed bus KERS units in volume to bus OEM customers.

The Group's market entry strategy is initially focused on installing KERS units into new buses manufactured by Wrightbus and for delivery to bus operators from mid-2016 onwards. The recently announced UK Government Ultra Low Emission Bus Scheme provides capital grants that will finance up to 75 per cent. of the additional cost of a low emission bus when compared to a standard vehicle. Importantly, the legislation requires bus operators to demonstrate the selected technology represents value for money and can help to reduce the need for government subsidies over the period of the scheme and beyond. The Directors believe that the Group's low-cost mechanical KERS technology can meet both of these requirements. Wrightbus has stated that encouraging results from test track assessments have confirmed their predictions that the KERS system can offer bus operators payback within five years. The Directors believe that payback will be significantly faster with initial grants (dependent on the level of fuel prices and grants). Discussions with Wrightbus indicate that there is a significant standing bus parc of StreetLite vehicles that could deliver substantial benefits to bus operators with a retrofit KERS unit. The Directors believe that this retrofit opportunity potentially offers the Group an additional addressable market. In parallel, the Group is also investigating other opportunities that could lead to sales of further KERS units for fitment to new and existing vehicles.

Flybrid was the 2014 winner of the prestigious Society of Motor Manufacturers and Traders (SMMT) Award for Automotive Innovation (AAI) for KERS for buses and commercial vehicles. The AAI recognises new UK-developed low carbon vehicle technologies which will make a lasting impression on the motor industry for years to come. Previous winners include the Ford 1.0 EcoBoost engine.

Off highway commercial vehicles:

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The Group has an on-going product development programme with JCB, part-funded by the Advanced Propulsion Centre, to design, develop and commercialise Flybrid flywheel systems for excavators. The first development units have been built and have commenced functional/performance testing. In parallel, the Group's engineering team is working closely with JCB to meet the demanding requirements of cost, durability and payback. The next phase of the programme will be to complete the design for manufacture and assembly followed by testing of validation units to demonstrate that they can meet the in-service durability targets. It is currently anticipated that the Group will manufacture the high value flywheel assemblies in-house with the final assembly of the complete unit being undertaken either by the Group or a Tier 1 partner, such as the Group's current partner for bus KERS. The Group's business development team is also working on securing another significant off-highway flywheel application. The Directors believe that the off-highway commercial vehicle market offers the potential for both lower volume unit sales and longer term licensing opportunities. In the opinion of the Directors, the off-highway commercial vehicle market opportunity could be larger than the bus market opportunity with more than 480,000 excavators and loaders sold globally each year.

Passenger cars:

The Directors believe that the passenger car market represents a significant opportunity for the Group's KERS technology. This market opportunity, and the likely take-up of the technology is probably further away than the bus and off-highway commercial vehicle markets given the time taken for the passenger car OEMs and Tier 1s to fully appraise the benefits of flywheel KERS technology, secure the necessary Tier 1 supply chain and complete the development and productionisation programmes. Accordingly, the Directors anticipate OEMs will target uptake of KERS technology in passenger cars from 2020/2021 onwards. The Directors expect the technology to be adopted initially in the premium segment of the car market and then more widely in the B to C car segments either integrated in the transmission or as a separate stand-alone unit. Key drivers for adoption of the Group's KERS technology will be a combination of efficient energy recovery, improved performance and enabling engine downsizing and advanced powertrain strategies to allow vehicle manufacturers to meet the demanding post 2020/2021 CO2 emissions targets. In the medium term, the Group's expectation is that to meet the likely emissions regulations, passenger cars will require much smaller internal combustion engines and much larger hybrid power systems. The Group has demonstrated the potential of its KERS technology to support this trend for high power hybrid systems with a Flybrid designed flywheel KERS system for motorsport.

The Directors believe there are also opportunities to install Flybrid KERS units in electric vehicles where the power-dense KERS unit can operate as a range extender and has the potential to improve battery life by avoiding the need for batteries to undergo many rapid charge and discharge events.

The Group has recently completed feasibility studies for two major European-based OEMs. Whilst these studies are early-stage feasibility studies, the Directors believe that such studies confirms the Group's view that OEMs are looking at mechanical-based energy recovery systems as a lower cost and more effective solution than battery-based hybrid solutions. The Group is in discussions with several OEMs and Tier 1s and is targeting licensing arrangements to secure adoption on the upcoming vehicle platforms. These discussions are with partners in the EU, North America and Asia and to meet the post 2020/2021 adoption timeline, OEMs will need to secure commercial access to the Group's KERS technology within the next 24 months. This will require OEMs and Tier 1s to pay the Group up-front licence fees and engineering services revenue to secure transfer of the KERS technology during the circa five year product development cycle ahead of 2020/21.

V-Charge

Passenger cars:

V-Charge is the Group's variable speed supercharger technology, enabling the level of engine boosting to be adjusted independently of engine speed and providing rapid torque response at any engine speed. The technology is a potential key enabler for downsized engines, which are recognised by the industry as critical for vehicle OEMs to meet the challenging CO2 emissions regulations in passenger cars from 2020/21 onwards in a cost-effective way.

In June 2014, the Group secured funding from Innovate UK (previously the Technology Strategy Board) to develop a production orientated version of V-Charge for a specific downsized engine application for passenger cars. The project is being conducted in collaboration with the University of Bath ("Bath"), a global Tier 1 supplier of engine boosting systems and with the participation of the Ford Motor Company ("Ford"). Ford is a class leader in efficient passenger car engines and Bath is a world-recognised centre of excellence in the field of pressure charging. The primary objective of the project is to evaluate the potential of V-Charge to improve fuel consumption and performance compared to incumbent boosting technology, through optimisation of multiple engine parameters.

The initial simulation phase of the project using Ford supplied engine models has now confirmed the potential for V-Charge to improve the performance of modern downsized engines while retaining fuel economy benefits. It is therefore anticipated that V-Charge could potentially enable more aggressive engine downsizing. The simulation results confirm V-Charge can provide better transient response (avoiding 'lag') and improved full load fuel economy when compared to competing advanced boosting technology. When configured with next generation compressor technology that fully exploits the characteristics of V-Charge, the Directors believe that further improvements in torque at low engine speed will be delivered. The Directors believe that V-Charge provides additional benefits over competing boosting solutions including simplified hardware integration and superior noise, vibration and harshness.

The next phase of the project which is now underway is targeting fitment of the Group's latest generation V-Charge hardware into two passenger cars. Installation of V-Charge to the first of these vehicles is currently in progress. In-vehicle tests are intended to validate the simulation results on a downsized gasoline engine in a vehicle demonstrating the real-world performance improvements and fuel economy and the ability for V-Charge to enable fundamental engine downsizing, and should provide valuable analysis and feedback for the next stage production-intent design.

The Group's on-going product development programme with another passenger car manufacturer has now moved to delivery of hardware in preparation for engine testing.

The Directors believe that the annual production of downsized gas boosted engines will grow from 12 million in 2014 to 25 million in 2018. The aim of the Group now is to license the V-Charge technology and secure uptake of the technology onto the next generation passenger car platforms that are being developed to meet the post 2020/21 emissions regulations. The Directors believe that the successful results from the project with the University of Bath, Ford and the global Tier 1 supplier will provide an excellent platform to demonstrate the capability of V-Charge as an enabling technology for downsized engines and to secure licensing and engineering services revenues to transfer the technology to enable OEM/Tier 1s to commence production-intent development in time for uptake by 2021.

Commercial vehicles:

The Group's strategic partner, Univance, is in discussions with potential OEM partners regarding the evaluation of the V-Charge continuously variable transmission (CVT) technology to improve fuel economy in a range of on-highway vehicle applications, including commercial vehicles. Whilst these discussions are at an early stage, the Directors anticipate that one or more of these discussions could result in a part-funded demonstrator programme as a precursor to a decision to commence a production-intent commercial programme. The Directors believe that there are also opportunities for the technology in a range of off-highway applications.

Main drive transmissions

Discussions are continuing with Allison to determine the first target product for the Group's technology. Building on the significant improvements in key component durability and lifetime achieved last year, the engineering teams are exploring the potential opportunities to maximise the benefits in terms of packaging, weight and cost.

The Group's strategic partner, Univance, is in discussions with a number of OEMs about implementing continuously variable transmissions (CVT) technology in a range of off-highway commercial vehicle applications. The Directors anticipate that one or more of these discussions could result in a part-funded demonstrator programme as a precursor to a decision to commence a production-intent commercial programme.

The Directors anticipate commencing an evaluation project with a major OEM for off-highway commercial vehicle applications. This project is expected to commence later this year. Feedback received from the OEM in terms of drivability and performance is positive and the Directors believe this has the potential to lead to a 'go-to-market' programme with the potential for annual volumes of over twenty thousand.

The Group is also seeking to monetise the technology in the off-highway market in a way that can realise value for Shareholders in markets such as China. The technology is well developed with well-proven advantages over competing solutions and the focus now is to crystalise value from the significant investments already made.

Regulatory drivers

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The law and regulations covering vehicle fuel efficiency and emissions continue to tighten in developed countries. For example, in the EU, passenger car manufacturers are now required to reduce fleetwide average vehicle CO2 emissions to 95g/km by 2020/2021, representing a 27 per cent. reduction from the 2015 level. This corresponds to fuel consumption of approximately 3.6l/100km (Diesel) and 4.1l/100km (gasoline). Penalties of EUR95 are charged for every g/km of excess CO2 emissions per vehicle. Further significant reductions are planned to be introduced by 2025, with an indicative target range of 68-78g/km. With the long lead times for vehicle manufacturers to develop and launch new vehicle platforms, the window to secure adoption onto the post 2021 models is now open.

The WLTP planned for introduction from 2017/2018 onwards will result in higher measured real-world CO2 emissions compared with those measured under the current EU type-approval driving cycle (NEDC) test protocol. As a result, it is expected to become even more challenging for vehicle manufacturers to satisfy the CO2 emissions requirements.

CO2 emissions legislation enacted in America, Japan and China requires EU equivalent CO2 emissions limits of 93g/km, 105g/km and 117g/km respectively, which is driving OEMs to seek new low cost technologies to meet these targets.

The Directors consider that the new law and regulations covering vehicle fuel efficiency and emissions, together with the planned introduction of the WLTP, will cause OEMs to accelerate the adoption of new technologies, such as those offered by the Group, in order to meet the new regulatory emissions targets.

China

The Directors believe that China offers a significant opportunity for all of the Group's products and technologies. Vehicle production in China is growing rapidly; for example, passenger car production is expected to rise from 15 million units in 2014 (24 per cent. of world production) to 40 million in 2030. Chinese vehicle manufacturers, and in particular their Tier 1 suppliers, are keen to secure access to innovative technologies which can address China's pressing environmental challenges and enable them to gain independence from their western competitors. Accordingly, early last year the Group launched an active business development programme to evaluate and address these opportunities. Awareness of the Group and its technologies is being raised and initial discussions on potential partnerships have started with a number of OEMs and Tier 1s active in China for V-Charge and KERS for both commercial vehicle and passenger car applications.

Reorganisation

As part of the strategy to re-focus the Group's activities on commercialising its technology, the Group is implementing an internal reorganisation to reduce manufacturing overheads and on-going development costs and to realign resources with the key commercial drivers for the Group. The effect of this will be to reduce engineering resources in the areas of research and development and longer term development programmes that are not linked to tangible opportunities and to only take on engineering services programmes that are clearly aligned with nearer term commercial opportunities such as licensing and lower volume product sales.

In areas such as IVT/CVT off-highway applications, the Group will seek to leverage its existing partnerships/licensees relationships (such as the partnership the Company has with Univance) to secure commercial uptake, focusing on technology transfer and ongoing support to those partners who are incentivised to roll out the technology. The reorganisation will release engineering resources from longer term engineering programmes to support the commercial teams. It will also reduce the Group's cash operating costs by an annualised equivalent of approximately 20 per cent. through a reduction in employees and other cost reduction measures.

The reorganisation will also complete the integration of the Flybrid and Torotrak organisations, bringing together the best aspects of both businesses. Jonathan Hilton will be appointed Non-Executive Deputy Chairman and will assume a part-time non-executive role, working with the Chief Executive Officer in identifying and developing new opportunities to commercialise the Group's technologies. In addition, Mr Hilton will also provide certain consultancy and advisory services to the Company. In his new role, the Group will be able to continue to benefit from Mr Hilton's engineering and sector experience and relationships. Douglas Cross will remain in his full-time executive role as Chief Technology Officer.

As part of the reorganisation, the Board intends to submit a proposed restructuring of the executive management's remuneration for Shareholder approval at the next AGM of the Company to be held in September 2015. This restructuring will involve a reduction in cash remuneration (including the elimination of cash bonuses) and a restructuring of the LTPSP scheme to more closely align the interests of executives and Shareholders. Non-Executive Directors will also participate and reduce their fees. The intention of the reorganisation is to reduce on-going cash operating costs, improve staff retention, improve staff alignment with the Shareholders and so enhance long term Shareholder value.

Summary

The Directors believe that the Group has made significant progress in developing and building the platform for commercialisation of all of its main technologies and in particular the bus KERS system and V-Charge. The Group is trialling a KERS-enabled bus in conjunction with Arriva and the Directors believe validated fuel savings at the Millbrook facility and bill of materials established in collaboration with its Tier 1 partner confirms the attractive payback to bus operators. The Issue will enable the Group, in collaboration with its global Tier 1 manufacturing partner, to invest in production tooling and commence commercial sales of bus KERS systems in mid-2016. In addition, it will allow the Group to continue the progress made with the project to develop a production oriented V-Charge unit in passenger cars that is being undertaken with the participation of Ford, a global Tier 1 supplier of engine boosting systems and the University of Bath. The Group's V-Charge technology has in simulation already demonstrated it is a potential enabler for fundamental engine downsizing and, based on simulation results, the Directors believe that it can deliver improved performance with resulting fuel economy benefits when compared to incumbent solutions. The Group is confident that it can secure V-Charge licensing arrangements building on the successful in-vehicle tests expected later in the year. In parallel, the Issue will enable the Group to continue discussions with several Tier 1 and OEM partners about the potential to license the Group's KERS technology into the passenger car and commercial vehicle markets in North America, Europe and China.

Under Adam Robson's leadership, the Group will build on the progress and achievements of the last 12 months and will focus on capitalising on the work streams and negotiations already in place in order to commercialise the Group's technologies. The Directors believe that the Issue will enable Torotrak to fully exploit the near term opportunities for the Group and enable it to finally realise its potential and deliver long term value for Shareholders.

3. Flybrid Agreement

The Company has reached a conditional agreement with the Flybrid Vendors to amend the Acquisition Agreement, including restructuring the rights of the Flybrid Vendors in relation to the redemption of the GBP2.8 million of loan notes and the earn-out consideration payable under the Acquisition Agreement. As Jonathan Hilton, one of the Flybrid Vendors, is a Director and Douglas Cross, the other Flybrid Vendor, is a director of a subsidiary of the Company, they are regarded as related parties pursuant to Chapter 11 of the Listing Rules and therefore the Flybrid Agreement is subject to approval by Shareholders at the General Meeting. The key terms of the Flybrid Agreement are, subject to the satisfaction of certain conditions, as follows:

--     The redemption of the GBP2.8 million of loan notes in the following manner: 
   -     GBP1.0 million to be paid in cash to the Flybrid Vendors from the proceeds of the Issue; and

- the entering into of a new loan agreement for a GBP1.8 million fixed term loan from the Flybrid Vendors to the Company which will be used by the Company to redeem the balance of the loan notes. The loan is repayable at the end of a 5 year term (or earlier at the Company's option) and secured against the assets of Flybrid under a new debenture and carries a fixed annual interest rate of seven per cent. payable in cash monthly in arrears (the existing loan notes do not attract any interest);

-- The Acquisition Agreement earn-out consideration of up to GBP15.0 million (of which not less than GBP10.0 million was payable in cash) is to be satisfied by the issue of 71,428,571 New Ordinary Shares (GBP5.0 million at the Issue Price), with (subject to certain exceptions) 28,571,428 of such New Ordinary Shares being subject to lock-in arrangements for a period of 12 months from the date of the General Meeting , 21,428,571 of such New Ordinary Shares being subject to lock-in arrangements for a period of 24 months from the date of the General Meeting and 21,428,571 of such New Ordinary Shares being subject to lock-in arrangements for a period of 36 months from the date of the General Meeting;

-- The Company agreeing not to proceed with any claims in respect of a breach of warranty (other than a breach of a tax warranty) under the Acquisition Agreement and confirming that it is not aware of any ther potential claims under the Acquisition Agreement;

--      The existing debenture over the assets of Flybrid is cancelled;

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-- The term of the restrictive covenants that apply to the Flybrid Vendors under the Acquisition Agreement is reduced so as to expire on the date which is 5 years after the date of completion under the Acquisition Agreement; and

-- Jonathan Hilton will, within 20 business days of the General Meeting, cease to be an Executive Director for which he will receive a severance payment of GBP174,000. Upon ceasing to be an Executive Director, Jonathan Hilton will be appointed as Non-Executive Deputy Chairman of Torotrak and will also act as a consultant to the Group working on specific business development projects as agreed with the Chief Executive Officer.

The proposed employment arrangements with Mr Hilton are not within the limits of the directors' remuneration policy approved by Shareholders at the 2014 AGM and therefore require the approval of Shareholders. In particular, the severance payment is in excess of Mr Hilton's contractual entitlements under his service agreement with the Company based on his salary and benefits and his six months' notice period. The severance payment is a negotiated settlement in respect of the termination of his executive directorship and forms part of the wider settlement represented by the Flybrid Agreement. In particular, the Board does not consider that this severance payment has any gratuitous element.

Should the Flybrid Agreement be approved by Shareholders, Jonathan Hilton will be directly or indirectly interested in 55,485,893 Ordinary Shares and Douglas Cross will be directly or indirectly interested in 23,779,668 Ordinary Shares.

The Flybrid Agreement constitutes a related party transaction under Chapter 11 of the Listing Rules. As a consequence, Shareholder approval is required for completion of the Flybrid Agreement. The Flybrid Agreement Resolution seeks, by way of ordinary resolution, the approval of Shareholders for the Flybrid Agreement. Pursuant to the requirements of Chapter 11 of the Listing Rules, the Flybrid Vendors will not vote on the Flybrid Agreement Resolution and they have undertaken to take all reasonable steps to ensure that their associates will not do so either.

The Directors believe that the Flybrid Agreement is an important step in completing the integration of the businesses, aligning the interest of all the parties to the agreement and continuing the progress being made by Flybrid and the Group as a whole. The proposed restructuring of the Acquisition Agreement significantly reduces the potential consideration for the acquisition of Flybrid and ensures that the future cash flows generated by the Flybrid technology are retained for the benefit of the Group and its Shareholders; under the previous earn-out arrangements, of the GBP15.0 million maximum earn-out consideration, up to GBP10.0 million would have been paid in cash. The Directors believe that the Flybrid acquisition has already proved to be significantly beneficial to the Group, not only from the near term commercial opportunities provided by the bus KERS unit using Flybrid's flywheel technology, but also from the engineering and commercial expertise within the Flybrid business. By simplifying the structure of the transaction, Torotrak can fully utilise this expertise across the Group and remove the potential conflicts arising with a long-term earn-out structure in place.

4. Reorganisation of Share Capital

Under English company law, a company is prohibited from issuing new shares at a price below their nominal value. As at the date of the Prospectus, the Existing Ordinary Shares have a nominal value of 10 pence each. In order for the Company to issue the New Ordinary Shares at the Issue Price (being 7 pence each), it will be necessary for the Company to first reduce the nominal value of the Ordinary Shares.

Pursuant to the Reorganisation of Share Capital and prior to the issue of the New Ordinary Shares, the Company intends to sub-divide and convert the 276,286,047 Existing Ordinary Shares of 10 pence each into 276,286,047 Existing Ordinary Shares of 1 pence each and 276,286,047 Deferred Shares of 9 pence each. The Reorganisation of Share Capital is conditional on Shareholder approval.

The Existing Ordinary Shares of 1 pence each will have the same rights and be subject to the same restrictions (save as to nominal value) as the Existing Ordinary Shares of 10 pence each, as set out in the Articles. The New Ordinary Shares of 1 pence each will have the same rights and be subject to the same restrictions as the Existing Ordinary Shares of 1 pence each, as set out in the Articles. The Deferred Shares will have the rights and be subject to the restrictions, as set out in the new Articles to be adopted by the Company pursuant to the Resolutions, but will be effectively valueless as they will not carry any rights to vote, to attend general meetings or to receive dividends. No application will be made for the Deferred Shares to be admitted to the premium listing segment of the Official List of the UK Listing Authority or to trading on the London Stock Exchange's main market for listed securities or any other exchange and the Deferred Shares will not be transferable without the prior written consent of the Board.

5. Subscription

As at 29 June 2015 (being the latest practicable date prior to the publication of the Prospectus) Allison held approximately 12.9 per cent. of the Existing Ordinary Shares. Allison has agreed to subscribe for up to 21,428,571 New Ordinary Shares at the Issue Price subject to clawback by Qualifying Shareholders in order to satisfy valid applications under the Open Offer, on the terms and subject to the conditions of the Subscription Agreement, further details of which are set out in the Prospectus. Assuming the Proposals proceed, the issue of 21,428,571 New Ordinary Shares to Allison will result in Allison holding approximately 10.5 per cent. of the Enlarged Issued Share Capital (assuming no take up of Open Offer Entitlements by Qualifying Shareholders). The Subscription will raise gross proceeds of up to approximately GBP1.5 million.

The Subscription constitutes a related party transaction under Chapter 11 of the Listing Rules. As a consequence, Shareholder approval is required for the Subscription. The Subscription Resolution seeks, by way of ordinary resolution, the approval of Shareholders for the Subscription. Pursuant to the requirements of Chapter 11 of the Listing Rules, Allison will not vote on the Subscription Resolution and has undertaken to take all reasonable steps to ensure that its associates will not do so either.

6. The Firm Placing and the Placing and Open Offer

Torotrak intends to raise gross proceeds of approximately GBP13.8 million in total through the issue of 197,642,939 New Ordinary Shares pursuant to the Subscription, the Firm Placing and the Placing and Open Offer.

Placing and the Placing Agreement

Charles Stanley Securities and Cantor Fitzgerald Europe have entered into the Placing Agreement with the Company pursuant to which they have, on the terms and conditions set out therein, procured Firm Placees and Placees to subscribe for (i) the Firm Placed Shares at the Issue Price; and (ii) the Placed Shares at the Issue Price subject to claw-back by Qualifying Shareholders in order to satisfy valid applications under the Open Offer.

Firm Placing

Pursuant to the Firm Placing and the Placing Agreement, Charles Stanley Securities and Cantor Fitzgerald Europe have conditionally placed the Firm Placed Shares, which represent approximately 47.8 per cent. of the New Ordinary Shares, at the Issue Price with institutional and other investors, conditional, amongst other things, upon Admission. The Firm Placed Shares are not subject to claw-back by Qualifying Shareholders in order to satisfy valid applications under the Open Offer. The gross proceeds of the Firm Placing are expected to be approximately GBP9.0 million.

Polar Capital is currently interested in approximately 10.7 per cent. of the Company's issued share capital and is therefore deemed to be a substantial shareholder of the Company for the purposes of the Listing Rules. As part of the Firm Placing, Polar Capital has conditionally subscribed for 13,571,428 Firm Placed Shares at the Issue Price amounting to approximately GBP950,000 at the Issue Price. Polar Capital's participation in the Firm Placing therefore constitutes a smaller related party transaction pursuant to Listing Rule 11.1.10R.

Open Offer

The Directors recognise the importance of pre-emption rights to Shareholders and consequently the 69,071,511 Open Offer Shares are being offered to existing Shareholders by way of the Open Offer. The Open Offer provides Qualifying Shareholders with an opportunity to participate in the Issue by both subscribing for their respective Basic Entitlements and by subscribing for Excess Shares under the Excess Application Facility, subject to availability.

Basic Entitlements

The Open Offer Shares will be offered to Qualifying Shareholders on the following basis:

1 Open Offer Share for every 4 Existing Ordinary Shares

held by them and registered in their names on the Record Date and so in proportion to any other number of Existing Ordinary Shares then held.

Basic Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will not be allocated but will be aggregated and made available in the Excess Application Facility.

If Qualifing Shareholders have sold or otherwise transferred all of their Existing Ordinary Shares before the ex-entitlement date, they are not entitled to participate in the Open Offer. Qualifying Shareholders are also being offered the opportunity to subscribe for Excess Shares in excess of their Basic Entitlements pursuant to the Excess Application Facility as described below.

Excess Application Facility

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Qualifying Shareholders may apply for Excess Shares using the Excess Application Facility. Qualifying Non-CREST Shareholders wishing to apply to subscribe for Excess Shares, may do so by completing the relevant sections on the Application Form.

Applications for Excess Shares will be satisfied only to the extent that corresponding applications for Basic Entitlements are not made by other Qualifying Shareholders or are made for less than their pro rata entitlements. The total number of Open Offer Shares to be issued by the Company is fixed and will not be increased in response to any applications under the Excess Application Facility. If there is an oversubscription for Open Offer Shares resulting from applications under the Excess Application Facility, allocations of Open Offer Shares in respect of such applications will be scaled down pro rata to the number of Excess Shares applied for under the Excess Application Facility by Qualifying Shareholders or allocated in such manner as the Board may, in its absolute discretion, determine. No assurances can be given that the applications by Qualifying Shareholders under the Excess Application Facility will be met in full, in part or at all.

Qualifying Shareholders should note that the Open Offer is not a rights issue and that Open Offer Shares not applied for under the Open Offer will not be sold in the market for the benefit of Qualifying Shareholders who do not apply under the Open Offer. Open Offer Entitlements are not transferable unless to satisfy a bona fide market claim and the Application Forms, not being documents of title, cannot be traded.

Further details of the Open Offer and the terms and conditions on which it is being made, including the procedure for application and payment, are contained in the Prospectus and, in respect of Qualifying Non-CREST Shareholders only, on the accompanying Application Form.

The Placing and Open Offer are not underwritten, but through the Placing and the Subscription, all of the Open Offer Shares have been pre-placed with institutional investors and Allison (subject to clawback by Qualifying Shareholders in order to satisfy valid applications made under the Open Offer). Pursuant to the Firm Placing and the Placing, Charles Stanley Securities and Cantor Fitzgerald Europe have conditionally pre-placed all of the Firm Placed Shares and the Placed Shares at the Issue Price with institutional investors (subject to claw-back by Qualifying Shareholders in order to satisfy valid applications made under the Open Offer).

General

The Board considers the Firm Placing and the Placing and Open Offer to be a suitable fundraising structure as it will allow access to a wide variety of new investors to broaden the Company's shareholder base, whilst providing existing Shareholders with the opportunity to participate in the fundraising through the Open Offer.

All elements of the Issue have the same Issue Price. The Issue Price was set based on the Directors' assessment of market conditions following discussions with a number of institutional investors and has been decided upon in order to obtain the level of new funds to be received by the Company under the Subscription, the Firm Placing and the Placing and Open Offer and in order to facilitate the introduction of new institutional investors capable of supporting the long-term development of the Company as Shareholders in Torotrak. The Issue Price represents a discount of 8.5 per cent. to the closing middle market price of 7.65 pence per Existing Ordinary Share of the Company on 29 June 2015 (being the latest practicable date prior to the publication of the Prospectus).

Under the terms of the placing letters entered into between the Firm Placees or Placees, Charles Stanley Securities and Cantor Fitzgerald Europe, each Firm Placee and Placee has agreed to subscribe for its placing commitment at the Issue Price (amounting to an aggregate of 176,214,368 New Ordinary Shares). The Issue and the Firm Placees and Placees' obligations under the placing letters are conditional upon the Placing Agreement having become unconditional in all respects and not having been terminated in accordance with its terms prior to Admission.

The Placing Agreement is conditional upon, amongst other things:

-- the passing of the Resolutions (other than the Flybrid Agreement Resolution and the Chief Executive Officer's Proposed Remuneration Resolution); and

-- Admission occurring on or before 8.00 a.m. on 23 July 2015 (or such later date as the Company, Charles Stanley Securities and Cantor Fitzgerald Europe may jointly agree, being not later than the Longstop Date).

The Placing Agreement contains warranties from the Company in favour of Charles Stanley Securities and Cantor Fitzgerald Europe in relation to, amongst other things, the accuracy of the information in the Prospectus and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify Charles Stanley Securities and Cantor Fitzgerald Europe in respect of certain liabilities which they may incur in respect of the Proposals. Each of Charles Stanley Securities and Cantor Fitzgerald Europe has the right to terminate both Charles Stanley Securities' and Cantor Fitzgerald Europe's obligations under the Placing Agreement in certain circumstances prior to Admission, including in the event of a breach of the warranties or a force majeure event.

The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares. Applications will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List of the UK Listing Authority and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and dealings for normal settlement in the New Ordinary Shares will commence at 8.00 a.m. on 23 July 2015.

Further details of the Open Offer, the terms and conditions on which it is being made and details of the procedure for application and payment for the Open Offer Shares are set out in the Prospectus and, in respect of Qualifying Non-CREST Shareholders only, in the accompanying Application Form.

Dilution

Qualifying Shareholders who take up their full Open Offer Entitlements will have their proportionate shareholdings in the Company diluted by approximately 36.7 per cent. as a consequence of the Proposals.

Qualifying Shareholders who do not take up their full Open Offer Entitlements will have their proportionate shareholdings in the Company diluted by approximately 49.3 per cent. as a consequence of the Proposals (assuming no take up of Open Offer Entitlements by Qualifying Shareholders).

Fractions

Fractions of Open Offer Shares will not be allocated to Qualifying Shareholders in the Open Offer and will instead be aggregated and made available under the Excess Application Facility.

7. Use of proceeds of the Issue

Pursuant to the Issue, the Company intends to raise net proceeds of GBP12.4 million, which the Company intends to use to fund the following:

-- the cash payment of GBP1.0 million to the Flybrid Vendors pursuant to the Flybrid Agreement;

-- GBP3.0 million of expenditure to complete the productionisation and start of commercial production of the bus KERS technology in the mid-2016, including investment in the manufacture of production tooling and other non-recurring expenditure by the Group's Tier 1 and other supply chain partners;

-- GBP2.9 million to invest in the development and testing of the Group's V-Charge technology and the KERS off-highway product and to support licensing activities for KERS and V-Charge;

-- GBP0.8 million of investment to support our licensees, Allison and Univance, with the development and productionisation of the Group's IVT/CVT technology; and

-- GBP4.7 million to help with the working capital commitments of the Group, including the costs to complete the internal reorganisation programme to reduce ongoing cash operating costs by approximately 20 per cent.

8. Current trading and prospects

On 30 March 2015, the Group announced the appointment of Adam Robson as Chief Executive Officer (effective 13 April 2015), taking over from Jeremy Deering, who announced his intention to stand down as Chief Executive Officer in November last year. Adam's experience and track record in commercialising technology in the automotive sector will prove extremely helpful to Torotrak as it looks to further its discussions and negotiations with customers and bring its technologies to market.

The Group has also made significant progress against the key objectives it set itself at the time the half year results were published in November 2014:

-- In March 2015, a Flybrid KERS-enabled Wrightbus StreetLite vehicle entered service with Arriva on a public bus route in Gillingham, Kent. Initial feedback has been positive and the trial is anticipated to continue for at least 3 months, during which time operational performance of the KERS system will be monitored through the collection and analysis of in-service data;

-- The Group has been working in close collaboration with a major global Tier 1 partner on delivering, in the volumes required by bus operators, the new lower-cost industrialised bus KERS system by leveraging the partner's experience and supply chain;

-- The first units of the latest lower-cost industrialised bus KERS system are currently being assembled at the Group's facility in Leyland and will be used as part of a comprehensive design verification test programme to validate the functional performance, reliability and improved fuel efficiency of the KERS system. Concurrently, the commercial team is working closely with Wrightbus to secure initial sales orders for the bus KERS system and ensuring the KERS system secures the available capital grants;

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-- The on-going product development programme with JCB to design, develop and commercialise Flybrid flywheel systems for excavators, is also progressing to plan. In-vehicle and rig testing of flywheel systems is encouraging. The combined engineering and procurement teams are already engaged with supply chain partners working on cost reduction activities; and

-- The next generation V-Charge hardware has been built and supplied to the Group's OEM partner in preparation for engine testing and the Group is engaged with a number of Tier 1s and OEMs about the opportunities to license both KERS and V-Charge in applications, including passenger cars.

The Group announced its unaudited preliminary results for the year ended 31 March 2015 on 30 June 2015 which showed the following financial highlights:

--    Revenue of GBP3.8 million (2014: GBP3.52 million) 
   --    Operating loss of GBP8.4 million (2014: GBP4.77 million) 
   --    Closing cash balance of GBP7.6 million (2014: GBP14.9 million)

9. Admission to trading of the New Ordinary Shares

Applications will be made to the UK Listing Authority and to the London Stock Exchange, respectively, for the New Ordinary Shares to be admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's main market for listed securities. Subject to the conditions to the Issue having been satisfied (or, if applicable, waived), it is expected that Admission will occur at 8.00 a.m. on 23 July 2015. Existing Ordinary Shares are already admitted to the premium listing segment of the Official List of the UK Listing Authority, the London Stock Exchange's main market for listed securities and to CREST. It is expected that the New Ordinary Shares, when allotted and issued, credited as fully paid, will be capable of being held and transferred by means of CREST. The New Ordinary Shares will trade under UK ISIN code GB0002922382.

The Company will announce the number of New Ordinary Shares admitted to listing and admitted to trading pursuant to the Proposals via a Regulatory Information Service by no later than 8.00 a.m. on the business day following the date of Admission.

10. Chief Executive Officer's Proposed Remuneration

As part of the process of appointing Adam Robson as Chief Executive Officer, the Remuneration Committee was keen to ensure that it balanced the need to offer a proposal that would attract individuals of the required calibre with the need to align the Chief Executive Officer's remuneration with the delivery of long term Shareholder return. As such, it was agreed with Adam Robson that, subject to Shareholder agreement, he would be granted a one-off award under the Torotrak Long Term Performance Share Plan (the "LTPSP") over 4,285,714 Ordinary Shares, being 150 per cent. of Mr Robson's annual salary divided by the Issue Price (subject to certain performance criteria set by the Remuneration Committee). In addition, Adam Robson's service agreement includes certain provisions that will be triggered on a change of control of the Company (as defined in the LTPSP rules).

Full details of Mr Robson's service agreement together with the proposed award under the LTPSP are set out in the Prospectus. The LTPSP grant and the change of control related provisions are not currently within the remit of the remuneration policy approved by Shareholders and are therefore subject to Shareholder approval.

11. Dividend Policy

The declaration and payment by the Group of any future dividends on the Ordinary Shares and the amount of any such future dividends will depend on the results of the Group's operations, its financial condition, cash requirements, future prospects, profits available for distribution and other factors deemed to be relevant at the time. However, the Directors do not envisage that the Company will pay dividends in the foreseeable future and intend to re-invest surplus funds in the development of the Group's business.

12. Directors, employees and key personnel of the Group

The average number of people employed by Torotrak in the financial years ended 31 March 2013, 31 March 2014 and 31 March 2015 was 39, 76 and 91 respectively, the increase being driven by the Flybrid acquisition and the bus KERS productionisation programme. As set out above, the Group is implementing an internal reorganisation, part of which will include reducing resources in areas of the business that are not linked to tangible near-term opportunities and realising the full synergies from the acquisition of Flybrid. This may involve a reduction in the Group's headcount through a formal redundancy process.

13. General Meeting

A notice convening the General Meeting, to be held at the offices of Tavistock Communications at 131 Finsbury Pavement, London EC2A 1NT at 11.00 a.m. on 22 July 2015, is contained at the end of the Prospectus. At the General Meeting, Resolutions will be proposed to:

--      approve the terms of the Flybrid Agreement;

-- approve the sub-division and conversion of the 276,286,047 Existing Ordinary Shares of 10 pence each into 276,286,047 Existing Ordinary Shares of 1 pence each and 276,286,047 Deferred Shares of 9 pence each;

-- approve the allotment of the Subscription Shares to Allison pursuant to Chapter 11 of the Listing Rules;

-- grant the Directors authority to allot shares in the capital of the Company generally and in connection with the issue of the New Ordinary Shares pursuant to the Proposals;

--      disapply where relevant statutory pre-emption rights set out in section 561 of the Act;

-- adopt new Articles which (among other things) will set out the rights and restrictions of the Deferred Shares;

-- delete from the Articles any provision which sets a maximum amount of shares that may be allotted by the Company; and

-- approve the LTPSP award to Adam Robson and certain change of control related provisions in his service agreement.

14. Further information

Shareholders should read the whole of the Prospectus and not just rely on the information contained in this announcement

15. Directors' intentions regarding the Issue

The Directors are fully supportive of the Issue. Adam Robson intends to subscribe for, in aggregate, a total of 428,571 Firm Placed Shares. Nick Barter, Rawdon Vevers, John Weston and John McLaren intend to apply for Open Offer Shares with an aggregate value of at least GBP91,000 under the Open Offer and the Excess Application Facility.

16. Working Capital

In the opinion of the Company, taking into account existing cash balances and the net proceeds of the Issue receivable by the Company, the Group has sufficient working capital for its present requirements, that is for at least 12 months following the date of the Prospectus.

17. Importance of vote

If the Resolutions (other than the Flybrid Agreement Resolution and the Chief Executive Officer's Proposed Remuneration Resolution) are not approved, the Issue will not proceed. In such circumstances, the Group will not receive the net proceeds of the Issue and therefore would not be able to pursue its strategy of developing its products to commercialisation and taking the Group to profitability. Should the Issue not proceed, the Group will have approximately GBP4.9 million of cash remaining as at 29 June 2015, being the latest practicable date prior to the date of the Prospectus (before the repayment of the loan notes to the Flybrid Vendors) which will be insufficient to meet its ongoing working capital needs and to deliver the current strategy beyond approximately the end of September 2015. As at the date of the Prospectus, the working capital requirements of the Company for the next 12 months are estimated by the Directors to amount to approximately GBP7.5 million (including one-off restructuring costs of approximately GBP0.8 million associated with the reorganisation).

If the Issue does not proceed, the Group would have a very limited period of time in which to take remedial measures available to address its cash flow requirements. Should the Issue not proceed, the Directors would severely reduce discretionary spend and would immediately endeavour to conserve cash and raise further funds by:

-- the rapid sale of the intellectual property relating to the Group's technologies and the associated decrease in development expenditure;

-- implementing redundancies and cutting back on all discretionary expenditure, which is likely to reduce the capabilities of the Company; and

-- attempt to source alternative forms of financing that may be on terms less attractive to Shareholders than the Issue.

In addition, the Directors would have to consider whether they could find a purchaser for the Group as a whole, or any of the individual entities therein, within the limited timeframe available. Whilst the exact timeframe available to the Group to implement these potential remedial measures is dependent on the circumstances of the Group over the coming months and therefore not definitive, as at the date of the Prospectus, the Directors believe that the Group would have until approximately the end of September 2015 to try and find a solution to address its cash flow requirements if the Issue does not proceed.

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Although these measures are potentially available to the Group, the outcome of such measures lies outside of the full control of the Group and, as a result, the Directors cannot be certain that they will be successful. In addition, the Company would have a very limited period of time in which to effect such recourses. If the Issue does not proceed and alternative immediate funding is not obtained, it would have a material adverse impact on the Group's prospects and its financial condition and the Directors would need to consider whether it is appropriate for the Group to cease trading and enter into a liquidation process. The Company is not in advanced discussions regarding alternative funding and therefore there can be no guarantee that any other funding will be available to the Group within the required period.

Accordingly, it is very important that Shareholders vote in favour of the Resolutions in order that the Issue can proceed.

18. Recommendation

The Board, which has received financial advice from Charles Stanley Securities, considers that the Proposals are in the best interests of the Group and Shareholders as a whole. In providing its advice to the Board, Charles Stanley Securities has relied upon the Board's commercial assessment of the Proposals.

The Board, which has been so advised by Charles Stanley Securities, the Company's sponsor, considers that the terms of each of the Flybrid Agreement and the Subscription are fair and reasonable so far as the Shareholders are concerned. In providing its advice to the Board, Charles Stanley Securities has taken into account the Board's commercial assessment of the Flybrid Agreement and the Subscription.

Jonathan Hilton, as a Director and a related party for the purposes of the Flybrid Agreement, has not taken part in the Board's consideration of the Flybrid Agreement. In addition, Adam Robson, as a Director, has not taken part in the Board's consideration of the Chief Executive Officer's Proposed Remuneration.

Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as it intends to do (or, as the case may be, procure) in respect of the 6,769,598 Ordinary Shares in which members of the Board or their spouses are beneficially interested, representing approximately 2.45 per cent. of the existing issued share capital of the Company (for the avoidance of doubt, Jonathan Hilton, as a related party, will abstain from voting on the resolution to approve the Flybrid Agreement and Adam Robson will abstain from voting on the resolution to approve the Chief Executive Officer's Proposed Remuneration).

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Record Date for entitlements under the               6.00 p.m. on 26 June 
  Open Offer                                                          2015 
 
 Publication and posting of Prospectus,                       30 June 2015 
  Form of Proxy and Application Form 
 
 Ex-entitlement date for the Open Offer               8.00 a.m. on 30 June 
                                                                      2015 
 
 Basic Entitlements and Excess CREST Open              as soon as possible 
  Offer Entitlements credited to stock accounts                      after 
  of Qualifying CREST Shareholders in CREST            8.00 a.m. on 1 July 
                                                                      2015 
 
 Recommended latest time and date for requesting      4.30 p.m. on 14 July 
  withdrawal of Basic Entitlements and Excess                         2015 
  CREST Open Offer Entitlements 
  from CREST 
 
 Latest time and date for depositing Open             3.00 p.m. on 15 July 
  Offer Entitlements into CREST                                       2015 
 
 Latest time and date for splitting of Application    3.00 p.m. on 16 July 
  Forms (to satisfy bona fide market claims)                          2015 
 
 Latest time and date for receipt of Forms           11.00 a.m. on 20 July 
  of Proxy and receipt of electronic proxy                            2015 
  appointments via the CREST system 
 
 Latest time and date for receipt of completed       11.00 a.m. on 20 July 
  Application Forms and payment in full under                         2015 
  the Open Offer or settlement of relevant 
  CREST instruction 
 
 General Meeting                                     11.00 a.m. on 22 July 
                                                                      2015 
 
 Record date for Reorganisation of Share              5.00 p.m. on 22 July 
  Capital                                                             2015 
 
 Admission and commencement of dealings                as soon as possible 
  in New Ordinary Shares on the main market                          after 
  of the London Stock Exchange                        8.00 a.m. on 23 July 
                                                                      2015 
 
 CREST Members' accounts credited in respect           as soon as possible 
  of New Ordinary Shares in uncertificated                           after 
  form                                                8.00 a.m. on 23 July 
                                                                      2015 
 
 Dispatch of definitive share certificates              by no later than 6 
  for New Ordinary Shares in certificated                      August 2015 
  form

ISSUE STATISTICS

Number of Existing Ordinary Shares in issue 
  as at the date of the Prospectus                                  276,286,047 
 Number of New Ordinary Shares to be issued by 
  the Company pursuant 
  to the Proposals                                                  269,071,510 
 Enlarged Issued Share Capital immediately following 
  Admission                                                         545,357,557 
 New Ordinary Shares as a percentage of the Enlarged 
  Issued Share Capital immediately following Admission                    49.3% 
 Number of Flybrid Agreement Shares to be issued 
  by the Company pursuant to the Flybrid Agreement                   71,428,571 
 Number of Deferred Shares to be issued by the 
  Company pursuant to 
  the Reorganisation of Share Capital                               276,286,047 
 Maximum number of Subscription Shares to be 
  issued by the Company 
  pursuant to the Subscription                                       21,428,571 
 Number of Firm Placed Shares to be issued by 
  the Company pursuant 
  to the Firm Placing                                               128,571,428 
 Maximum number of Open Offer Shares to be issued 
  by the Company 
  pursuant to the Open Offer                                         69,071,511 
 Basic Entitlements under the Open Offer                     1 Open Offer Share 
                                                           for every 4 Existing 
                                                                Ordinary Shares 
 Issue Price                                                            7 pence 
 Discount of Issue Price to the closing market 
  price of Existing 
  Ordinary Shares on 29 June 2015                                          8.5% 
 Estimated net proceeds of the Issue receivable 
  by the Company                                                GBP12.4 million 
 Estimated expenses of the Issue                                 GBP1.4 million

DEFINITIONS

The following definitions apply throughout this announcement unless the context otherwise requires:

"Acquisition Agreement"           the agreement entered into on 13 December 
                                    2013 between the Company and the Flybrid 
                                    Vendors pursuant to which the Company 
                                    acquired the entire issued share capital 
                                    of Flybrid 
--------------------------------  ----------------------------------------------------------------- 
 "Act"                             the Companies Act 2006 (as amended) 
--------------------------------  ----------------------------------------------------------------- 
 "Admission"                       admission of the Flybrid Agreement Shares, 
                                    the Subscription Shares, the Firm Placed 
                                    Shares, the Placed Shares and the Open 
                                    Offer Shares to the premium listing segment 
                                    of the Official List of the UK Listing 
                                    Authority in accordance with the Listing 
                                    Rules and to trading on the London Stock 
                                    Exchange's main market for listed securities 
                                    in accordance with the Admission and 
                                    Disclosure Standards 
--------------------------------  ----------------------------------------------------------------- 
 "AGM"                             annual general meeting 
--------------------------------  ----------------------------------------------------------------- 
 "Allison"                         Allison Transmission, Inc. 
--------------------------------  ----------------------------------------------------------------- 
 "Application Form"                the application form accompanying the 
                                    Prospectus on which Qualifying Non-CREST 
                                    Shareholders may apply for Open Offer 
                                    Shares under the Open Offer (including 
                                    under the Excess Application Facility) 
--------------------------------  ----------------------------------------------------------------- 
 "Articles"                        the articles of association of the Company 
--------------------------------  ----------------------------------------------------------------- 
 "Basic Entitlement"               the pro rata entitlement of Qualifying

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Shareholders to subscribe for 1 Open 
                                    Offer Share for every 4 Existing Ordinary 
                                    Shares registered in their name on the 
                                    Record Date 
--------------------------------  ----------------------------------------------------------------- 
 "Board"                           the board of directors of the Company 
--------------------------------  ----------------------------------------------------------------- 
 "Cantor Fitzgerald Europe"        Cantor Fitzgerald Europe, registered 
                                    in England and Wales with company number 
                                    02505767 
--------------------------------  ----------------------------------------------------------------- 
 "Charles Stanley Securities"      Charles Stanley Securities, a division 
                                    of Charles Stanley & Co. Limited, registered 
                                    in England and Wales with company number 
                                    01903304 
--------------------------------  ----------------------------------------------------------------- 
 "Chief Executive Officer's        the proposed remuneration payable to 
  Proposed Remuneration"            Torotrak's Chief Executive Officer, Adam 
                                    Robson, 
--------------------------------  ----------------------------------------------------------------- 
 "Company" or "Torotrak"           Torotrak plc, registered in England and 
                                    Wales with company number 03580465 
--------------------------------  ----------------------------------------------------------------- 
 "CREST"                           the relevant system (as defined in the 
                                    CREST Regulations) in respect of which 
                                    Euroclear is the operator 
--------------------------------  ----------------------------------------------------------------- 
 "CREST Member"                    a person who has been admitted to Euroclear 
                                    as a system-member (as defined in the 
                                    CREST Regulations) 
--------------------------------  ----------------------------------------------------------------- 
 "CREST Regulations"               the Uncertificated Securities Regulations 
                                    2001 (SI 2001 No. 3755) 
--------------------------------  ----------------------------------------------------------------- 
 "CVT"                             continuously variable transmission, a 
                                    type of main drive transmission 
--------------------------------  ----------------------------------------------------------------- 
 "Deferred Shares"                 deferred shares of 9 pence each in the 
                                    capital of the Company 
--------------------------------  ----------------------------------------------------------------- 
 "Directors"                       the directors of the Company at the date 
                                    of the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "Enlarged Issued Share            the issued share capital of Torotrak 
  Capital"                          at Admission, as enlarged pursuant to 
                                    the Proposals 
--------------------------------  ----------------------------------------------------------------- 
 "EU" or "European Union"          the European Union 
--------------------------------  ----------------------------------------------------------------- 
 "Euroclear"                       Euroclear UK & Ireland Limited 
--------------------------------  ----------------------------------------------------------------- 
 "ex-entitlement date"             the date on which the Ordinary Shares 
                                    trade ex-entitlement to participate in 
                                    the Open Offer 
--------------------------------  ----------------------------------------------------------------- 
 "Excess Application Facility"     the arrangement pursuant to which Qualifying 
                                    Shareholders may apply for additional 
                                    Open Offer Shares in excess of their 
                                    Basic Entitlements in accordance with 
                                    the terms and conditions of the Open 
                                    Offer 
--------------------------------  ----------------------------------------------------------------- 
 "Excess CREST Open Offer          in respect of each Qualifying CREST Shareholder, 
  Entitlement"                      the entitlement (in addition to their 
                                    Basic Entitlement) to apply for Open 
                                    Offer Shares pursuant to the Excess Application 
                                    Facility 
--------------------------------  ----------------------------------------------------------------- 
 "Excess Shares"                   Open Offer Shares which may be applied 
                                    for by Qualifying Shareholders under 
                                    the Excess Application Facility 
--------------------------------  ----------------------------------------------------------------- 
 "Excluded Territory"              the United States, Canada, Japan and 
                                    Australia and any other jurisdiction 
                                    where the making of the Open Offer would 
                                    breach the relevant securities laws or 
                                    regulations of such jurisdictions 
--------------------------------  ----------------------------------------------------------------- 
 "Executive Directors"             Adam Robson, Rawdon "Rex" Vevers and 
                                    Jonathan Hilton 
--------------------------------  ----------------------------------------------------------------- 
 "Existing Ordinary Shares"        the Ordinary Shares in issue as at the 
                                    date of the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "FCA"                             the Financial Conduct Authority in its 
                                    capacity as competent authority for the 
                                    purposes of Part VI of the FSMA 
--------------------------------  ----------------------------------------------------------------- 
 "Firm Placed Shares"              the 128,571,428 New Ordinary Shares to 
                                    be issued at the Issue Price by the Company 
                                    pursuant to the Firm Placing 
--------------------------------  ----------------------------------------------------------------- 
 "Firm Placees"                    any persons who have agreed to subscribe 
                                    for the Firm Placed Shares pursuant to 
                                    the Firm Placing 
--------------------------------  ----------------------------------------------------------------- 
 "Firm Placing"                    the conditional placing of the Firm Placed 
                                    Shares by Charles Stanley Securities 
                                    and Cantor Fitzgerald Europe as agent 
                                    for and on behalf of the Company pursuant 
                                    to the terms of the Placing Agreement 
--------------------------------  ----------------------------------------------------------------- 
 "Flybrid"                         Flybrid Automotive Limited, registered 
                                    in England and Wales with company number 
                                    06025271 
--------------------------------  ----------------------------------------------------------------- 
 "Flybrid Agreement"               the conditional agreement dated 30 June 
                                    2015 between the Company and the Flybrid 
                                    Vendors, pursuant to which, subject to 
                                    Shareholder approval and the other conditions 
                                    set out therein, disputes between the 
                                    Company and the Flybrid Vendors will 
                                    be compromised and the Acquisition Agreement 
                                    will be amended, 
--------------------------------  ----------------------------------------------------------------- 
 "Flybrid Agreement Resolution"    the resolution numbered 1 set out in 
                                    the Notice of General Meeting at the 
                                    end of the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "Flybrid Agreement Shares"        the 71,428,571 Ordinary Shares to be 
                                    issued at the Issue Price by the Company 
                                    pursuant to the Flybrid Agreement 
--------------------------------  ----------------------------------------------------------------- 
 "Flybrid Vendors"                 Jonathan Hilton and Douglas Cross 
--------------------------------  ----------------------------------------------------------------- 
 "Form of Proxy"                   the form of proxy relating to the General 
                                    Meeting being sent to Shareholders with 
                                    the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "FSMA"                            the Financial Services and Markets Act

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2000 (as amended) 
--------------------------------  ----------------------------------------------------------------- 
 "General Meeting"                 the general meeting of the Company to 
                                    be held at the Offices of Tavistock Communications 
                                    at 131 Finsbury Pavement, London EC2A 
                                    1NT at 11.00 a.m. on 22 July 2015 
--------------------------------  ----------------------------------------------------------------- 
 "Group"                           Torotrak and its subsidiary undertakings 
                                    and "Group Company" shall be interpreted 
                                    accordingly 
--------------------------------  ----------------------------------------------------------------- 
 "Issue"                           together, the Subscription, the Firm 
                                    Placing and the Placing and Open Offer 
--------------------------------  ----------------------------------------------------------------- 
 "Issue Price"                     7 pence per New Ordinary Share 
--------------------------------  ----------------------------------------------------------------- 
 "IVT"                             infinitely variable transmission, a type 
                                    of main drive transmission 
--------------------------------  ----------------------------------------------------------------- 
 "KERS"                            kinetic energy recovery systems 
--------------------------------  ----------------------------------------------------------------- 
 "Listing Rules"                   the listing rules made by the FCA pursuant 
                                    to section 73A of the FSMA 
--------------------------------  ----------------------------------------------------------------- 
 "London Stock Exchange"           London Stock Exchange plc 
--------------------------------  ----------------------------------------------------------------- 
 "Longstop Date"                   7 August 2015 
--------------------------------  ----------------------------------------------------------------- 
 "LTPSP"                           the Torotrak Long Term Performance Share 
                                    Plan 
--------------------------------  ----------------------------------------------------------------- 
 "main drive transmission"         the transmission is central to a vehicle's 
                                    powertrain as it adapts the output of 
                                    the internal combustion engine to the 
                                    drive wheel. Torotrak's IVT and CVT transmission 
                                    systems each use a system which replaces 
                                    gears with a seamless variable drive, 
                                    managing the engine at optimum speed 
                                    and maximising energy efficiency. A CVT 
                                    requires a clutch to launch the vehicle 
                                    from rest, whereas an IVT does not. 
--------------------------------  ----------------------------------------------------------------- 
 "New Ordinary Shares"             together, the Flybrid Agreement Shares, 
                                    the Subscription Shares, the Firm Placed 
                                    Shares, the Placed Shares and the Open 
                                    Offer Shares and, where the context requires, 
                                    each of them 
--------------------------------  ----------------------------------------------------------------- 
 "Non-Executive Directors"         Nicolas Barter, John Weston and John 
                                    McLaren 
--------------------------------  ----------------------------------------------------------------- 
 "Notice of General Meeting"       the notice of the General Meeting which 
                                    is set out at the end of the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "OEM"                             original equipment manufacturer 
--------------------------------  ----------------------------------------------------------------- 
 "Official List"                   the official list maintained by the UK 
                                    Listing Authority 
--------------------------------  ----------------------------------------------------------------- 
 "Open Offer"                      the conditional offer inviting Qualifying 
                                    Shareholders to subscribe for Open Offer 
                                    Shares at the Issue Price, on the terms 
                                    and subject to the conditions set out 
                                    in Part IX of the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "Open Offer Entitlements"         together, the Basic Entitlement and the 
                                    entitlement to apply for Open Offer Shares 
                                    pursuant to the Excess Application Facility 
--------------------------------  ----------------------------------------------------------------- 
 "Open Offer Shares"               the 69,071,511 Ordinary Shares which 
                                    are being offered to Qualifying Shareholders 
                                    under the Open Offer and, where the context 
                                    requires, the Excess Application Facility 
--------------------------------  ----------------------------------------------------------------- 
 "Ordinary Shares"                      either: 
                                          *    prior to the Reorganisation of Share Capital 
                                               Resolution being passed, ordinary shares of 10 pence 
                                               each in the capital of the Company; or 
 
 
                                          *    following the Reorganisation of Share Capital 
                                               Resolution being passed, ordinary shares of 1 pence 
                                               each in the capital of the Company 
--------------------------------  ----------------------------------------------------------------- 
 "Overseas Shareholders"           Qualifying Shareholders with registered 
                                    addresses in, or who are citizens, residents 
                                    or nationals of, jurisdictions outside 
                                    the United Kingdom 
--------------------------------  ----------------------------------------------------------------- 
 "Placed Shares"                   the 47,642,940 Ordinary Shares to be 
                                    issued at the Issue Price by the Company 
                                    pursuant to the Placing, subject to clawback 
                                    to satisfy valid applications by Qualifying 
                                    Shareholders under the Open Offer 
--------------------------------  ----------------------------------------------------------------- 
 "Placees"                         any persons who have agreed to subscribe 
                                    for Placed Shares pursuant to the Placing 
--------------------------------  ----------------------------------------------------------------- 
 "Placing"                         the conditional placing of the Placed 
                                    Shares by Charles Stanley Securities 
                                    and Cantor Fitzgerald Europe as agent 
                                    for and on behalf of the Company pursuant 
                                    to the terms of the Placing Agreement 
                                    subject to clawback to satisfy valid 
                                    applications by Qualifying Shareholders 
                                    under the Open Offer 
--------------------------------  ----------------------------------------------------------------- 
 "Placing Agreement"               the conditional placing agreement entered 
                                    into on 30 June 2015 between the Company, 
                                    Charles Stanley Securities and Cantor 
                                    Fitzgerald Europe relating to the Firm 
                                    Placing, the Placing and Open Offer, 
--------------------------------  ----------------------------------------------------------------- 
 "premium listing"                 a listing by the FCA of equity securities 
                                    of a company which is required to comply 
                                    with the provisions of Chapter 6 of the 
                                    Listing Rules and the other rules in 
                                    the Listing Rules that are expressed 
                                    to apply to such securities with a premium 
                                    listing 
--------------------------------  ----------------------------------------------------------------- 
 "Proposals"                       together, the Flybrid Agreement, the 
                                    Reorganisation of Share Capital, the 
                                    Subscription, the Firm Placing, the Placing 
                                    and Open Offer and the Chief Executive 
                                    Officer's Proposed Remuneration 
--------------------------------  ----------------------------------------------------------------- 
 "Prospectus"                      the combined circular and prospectus 
                                    published by the Company dated 30 June

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2015 
--------------------------------  ----------------------------------------------------------------- 
 "Qualifying CREST Shareholders"   Qualifying Shareholders holding Existing 
                                    Ordinary Shares in a CREST account 
--------------------------------  ----------------------------------------------------------------- 
 "Qualifying Non-CREST             Qualifying Shareholders holding Existing 
  Shareholders"                     Ordinary Shares in certificated form 
--------------------------------  ----------------------------------------------------------------- 
 "Qualifying Shareholders"         Shareholders on the register of members 
                                    of the Company at the Record Date except 
                                    for Overseas Shareholders with addresses 
                                    in an Excluded Territory 
--------------------------------  ----------------------------------------------------------------- 
 "Record Date"                     6.00 p.m. on 26 June 2015, being the 
                                    latest time by which transfers of Existing 
                                    Ordinary Shares must be received for 
                                    registration by the Company in order 
                                    to allow transferees to be recognised 
                                    as Qualifying Shareholders 
--------------------------------  ----------------------------------------------------------------- 
 "Regulation S"                    Regulation S under the Securities Act 
--------------------------------  ----------------------------------------------------------------- 
 "Related Party Transactions"      the Flybrid Agreement and the Subscription 
--------------------------------  ----------------------------------------------------------------- 
 "Remuneration Committee"          the remuneration committee of Torotrak 
--------------------------------  ----------------------------------------------------------------- 
 "Reorganisation of Share          the sub-division and conversion of 276,286,047 
  Capital"                          Existing Ordinary Shares of 10 pence 
                                    each into 276,286,047 Existing Ordinary 
                                    Shares of 1 pence each and 276,286,047 
                                    Deferred Shares of 9 pence each pursuant 
                                    to the Reorganisation of Share Capital 
                                    Resolution 
--------------------------------  ----------------------------------------------------------------- 
 "Reorganisation of Share          the resolution numbered 2 set out in 
  Capital Resolution"               the Notice of General Meeting at the 
                                    end of the Prospectus 
--------------------------------  ----------------------------------------------------------------- 
 "Resolutions"                     all of the resolutions set out in the 
                                    Notice of General Meeting at the end 
                                    of the Prospectus and "Resolution" shall 
                                    mean any of them 
--------------------------------  ----------------------------------------------------------------- 
 "Securities Act"                  the United States Securities Act of 1933, 
                                    as amended 
--------------------------------  ----------------------------------------------------------------- 
 "Shareholders"                    a holder of Ordinary Shares 
--------------------------------  ----------------------------------------------------------------- 
 "Subscription"                    the subscription by Allison for the Subscription 
                                    Shares pursuant to the Subscription Agreement 
--------------------------------  ----------------------------------------------------------------- 
 "Subscription Agreement"          the conditional agreement dated 30 June 
                                    2015 between Allison and the Company 
                                    pursuant to which, subject to Shareholder 
                                    approval and the other conditions set 
                                    out therein, Allison has agreed to subscribe 
                                    for the Subscription Shares at the Issue 
                                    Price, 
--------------------------------  ----------------------------------------------------------------- 
 "Subscription Resolution"         the resolution numbered 3 set out in 
                                    the Notice of General Meeting 
--------------------------------  ----------------------------------------------------------------- 
 "Subscription Shares"             the up to 21,428,571 Ordinary Shares 
                                    to be subscribed for by Allison pursuant 
                                    to the Subscription Agreement, subject 
                                    to clawback to satisfy valid applications 
                                    by Qualifying Shareholders under the 
                                    Open Offer 
--------------------------------  ----------------------------------------------------------------- 
 "Tier 1"                          the immediate or primary suppliers to 
                                    OEMs 
--------------------------------  ----------------------------------------------------------------- 
 "UK" or "United Kingdom"          the United Kingdom of Great Britain and 
                                    Northern Ireland 
--------------------------------  ----------------------------------------------------------------- 
 "UK Listing Authority"            the FCA acting in its capacity as the 
  or "UKLA"                         competent authority for the purposes 
                                    of Part VI of the FSMA 
--------------------------------  ----------------------------------------------------------------- 
 "uncertificated" or "in           recorded on the register of Ordinary 
  uncertificated form"              Shares as being held in uncertificated 
                                    form in CREST, entitlement to which, 
                                    by virtue of the CREST Regulations, may 
                                    be transferred by means of CREST 
--------------------------------  ----------------------------------------------------------------- 
 "US", "USA" or "United            the United States of America, its territories 
  States"                           and possessions, any state of the United 
                                    States of America and the District of 
                                    Columbia 
--------------------------------  ----------------------------------------------------------------- 
 "V-Charge"                        variable boost device 
--------------------------------  -----------------------------------------------------------------

All references to legislation in this announcement are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation or regulation shall include any amendment, modification, re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

-ends-

This information is provided by RNS

The company news service from the London Stock Exchange

END

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