Torotrak PLC Regulatory News (TRK)

19 Jul 2007 11:34

Torotrak PLC19 July 2007 THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN ARE NOT FOR PUBLICATIONOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,AUSTRALIA, CANADA OR JAPAN OR ANY JURISDICTION IN WHICH SUCH PUBLICATION ORDISTRIBUTION IS UNLAWFUL 19 July 2007 Torotrak plc ("Torotrak" or "the Company") Firm Placing and Open Offer ("the Issue") of 26,182,153 New Ordinary Shares at 30 pence per share. Summary Further to the announcement on the 13 July 2007, Torotrak is pleased to announcethat it proposes to raise approximately £5.0 million (net of expenses) by way ofa Firm Placing of 19,182,153 New Ordinary Shares at an offer price of 30 penceper share. A further 1,151,180 New Ordinary Shares will be issued under the FirmPlacing pursuant to the EST Subscription. The total number of shares issuedunder the Firm Placing will be 20,333,333, representing 13.9 per cent. of theEnlarged Share Capital. Arbuthnot has conditionally placed firm with certainexisting Shareholders and other institutional investors the Firm Placing Sharesat the Issue Price pursuant to the Placing Agreement. Torotrak also proposes to raise up to a further £1.75 million by the issue of5,848,820 New Ordinary Shares (representing 4.0 per cent. of the Enlarged ShareCapital) at the Issue Price pursuant to the Open Offer. Qualifying Shareholderscan subscribe for Open Offer Shares on the basis of 2 Open Offer Shares forevery 41 Existing Ordinary Shares held, and may apply for any whole number ofOpen Offer Shares. Reasons for the Issue The net proceeds of the Issue will be used to fund some or all of theopportunities set out below as well as providing a greater level of workingcapital resilience to support business growth more generally. In particular, additional funding would, in the Directors' opinion, enhanceTorotrak's position in the following key areas: * Torotrak's current limited financial capacity relative to the investment and scale of opportunity for large customer prospects, is a potential inhibitor to securing an appropriate level of commercial engagement that would allow attainment of optimum longer term returns for Torotrak. This is particularly the case where the prospects are large, international customers where engineering and prototype programmes are increasing in scale. One such example is in the Truck and Bus market where Torotrak is in the early stages of commercial negotiation with a leading European truck manufacturer regarding the application of Torotrak's technology. A stronger level of working capital will underpin Torotrak's position when concluding such commercial negotiations and will provide a greater level of working capital resilience to support business growth over the next 3 years. The Directors intend that approximately two thirds of the net proceeds of the Issue will be retained to strengthen the Company's working capital position. The remaining proceeds of the issue will be used for the two key areas below. * Future earnings may be improved through investing in commercial arrangements that share ongoing earnings from sales of complete transmissions incorporating Torotrak Intellectual Property ("IP"), such as an investment in a manufacturing, sales and marketing based joint venture. This opportunity is particularly appropriate for the Agricultural vehicle market where Torotrak is in discussion with two potential joint venture partners. The formation of the Infinitrak joint venture in November 2005 and subsequent activities leading to the start of pilot production in March 2007 provides Torotrak with valuable capability and the experience of leveraging its technology. * There is an opportunity to accelerate product development within Infinitrak to capitalise on the early momentum achieved with the launch of pilot production of the Twin Toroidal Transmission. The Directors believe that an earlier launch of subsequent new products will result in higher market penetration rates being achievable in a shorter timeframe and therefore that increased funding should be made available by Torotrak to Infinitrak. This would match the funding for new product development by its partner, MTD and to ensure that Torotrak's interest in the overall opportunity is maintained. Commenting on the Issue, Dick Elsy, Chief Executive of Torotrak, said today: "The new funding signifies firstly, a growing confidence in Torotrak's futureand secondly, an appetite to invest in the acceleration of our business plan.I'm pleased that we have been able to make this opportunity to subscribe for newshares available to both institutional investors and our loyal privateshareholders". This summary should be read in conjunction with the full text of the followingannouncement. Appendix 1 contains the definitions of certain terms used in this summary andthe full announcement. Enquiries: Torotrak plc +44 (0) 1772 900 938Dick Elsy, Chief ExecutiveJeremy Deering, Finance Director PricewaterhouseCoopers LLP (Sponsor) +44 (0) 161 245 2461Colin GillespieRichard Pulford Arbuthnot (Broker) +44 (0) 207 012 2000Ian WilliamsRichard Dunn Tavistock Communications (PR adviser) +44 (0) 207 920 3150Simon HudsonLulu Bridges PricewaterhouseCoopers LLP, as sponsor, which is authorised and regulated in theUnited Kingdom by the Financial Services Authority for designated investmentbusiness, is acting exclusively for Torotrak plc and for no one else in relationto the Issue and will not be responsible to anyone other than Torotrak plc forproviding the protections afforded to clients of PricewaterhouseCoopers LLP orfor giving advice in relation to the Issue, or any other matter referred to inthis announcement. Arbuthnot Securities Limited, which is regulated in the United Kingdom by theFinancial Services Authority, is acting as corporate broker to Torotrak plc andfor no one else in relation to the Issue and will not be responsible to anyoneother than Torotrak plc for providing the protections afforded to customers ofArbuthnot nor for advising them on the contents of this announcement or anyother matter referred to in this announcement. This announcement does not constitute an offer to sell or issue or asolicitation of an offer to buy or subscribe for New Ordinary Shares in anyjurisdiction, including, without limitation, the United Kingdom, the UnitedStates or any of the other Excluded Territories. Any purchase of or applicationfor shares under or in connection with the Issue should only be made on thebasis of information contained in the Prospectus to be published in connectionwith the Issue and any supplement thereto. The distribution of this announcement and the placing and issue of the NewOrdinary Shares in certain jurisdictions may be restricted by law. Persons towhose attention this announcement has been drawn are required by the Company,PricewaterhouseCoopers and Arbuthnot to inform themselves about and to observeany such restrictions. Any failure to comply with these restrictions mayconstitute a violation of the securities laws of any such jurisdiction. This announcement and the information contained herein are not for publicationor distribution, directly or indirectly, in or into the United States,Australia, Canada or Japan or any jurisdiction in which such publication ordistribution is unlawful. This announcement (including the terms and conditions set out herein) does notconstitute an offer of securities for sale in the United States or any of theother Excluded Territories and none of the New Ordinary Shares have been or willbe registered under the United States Securities Act of 1933, as amended (the"Securities Act") or under the securities laws of any state of the United Statesor qualified for distribution under any of the relevant securities laws ofCanada or Japan nor has any prospectus in relation to the New Ordinary Sharesbeen lodged with or registered by the Australian Securities and InvestmentsCommission. The New Ordinary Shares may not be offered, sold, resold ordelivered, directly or indirectly, in or into the United States or any otherExcluded Territories absent an applicable exemption, or to, or for the accountor benefit of, US persons (as such term is defined in Regulation S under theSecurities Act) or to any national, resident or citizen of any other ExcludedTerritory. The New Ordinary Shares have not been approved or disapproved by the UnitedStates Securities and Exchange Commission, any state securities commission inthe United States or any other United States regulatory authority, nor have anyof the foregoing authorities passed upon or endorsed the merits of the offer ofthe New Ordinary Shares or the accuracy or adequacy of the Prospectus or thisannouncement. Any representation to the contrary is a criminal offence in theUnited States. Certain statements in this announcement are forward looking statements. By theirnature, forward looking statements involve a number of risks, uncertainties andassumptions because they relate to events and/or depend on circumstances thatmay or may not occur in the future and could cause actual results to differmaterially from those expressed in, or implied by, the forward lookingstatements. These include, among other factors: the Group's ability to obtaincapital/additional finance; a reduction in demand by customers; the limitationsof the Group's internal financial controls; an increase in competition; anunexpected decline in turnover; legislative, fiscal and regulatory developmentsincluding, but not limited to, changes in environmental and safety regulations;currency and interest rate fluctuations and the introduction of IFRS. These andother factors could adversely affect the outcome and financial effects of theplans and events described herein. Forward looking statements contained in thisannouncement based on past trends or activities should not be taken as arepresentation that such trends or activities will continue in the future.Subject to any requirement under the Listing Rules of the UK Listing Authority,neither the Company nor PricewaterhouseCoopers nor Arbuthnot undertakes anyobligation to update or revise any forward looking statements, whether as aresult of new information, future events or otherwise. You should not placeundue reliance on forward looking statements, which speak only as of the date ofthis announcement. The Prospectus is available to the public for inspection at the Document ViewingFacility, 25 The North Colonnade, Canary Wharf, London E14 5HS Issue statistics Number of Existing Ordinary Shares in issue as at the date of this announcement 119,900,820 Number of New Ordinary Shares available under the Issue 26,182,153 Enlarged Share Capital 1,460,829 Percentage of the Enlarged Share Capital subject to the Issue 17.9 per cent. Number of Firm Placing Shares 20,333,333 Number of Firm Placing Shares subject to the EST Subscription 1,151,180 Number of Open Offer Shares 5,848,820 Basis of Open Offer 2 Open Offer Shares for every 41 Existing Ordinary Shares Issue Price 30p Discount to the closing market price on 12 July 2007 27.7 per cent. Discount to the closing market price on 18 July 2007 15.0 per cent. Net proceeds of the Firm Placing (approximately) £5.0 million Net proceeds of the Open Offer (approximately) up to £1.75 million Expected Timetable of Principal Events Record Date for the Open Offer close of business on 18 July 2007 Posting of Prospectus and Application Forms 19 July 2007 Open Offer Entitlements credited to stock accounts ofQualifying CREST Shareholders in CREST 20 July 2007 Recommended latest time for requesting withdrawal ofOpen Offer Entitlements from CREST 4.30 p.m. on 2 August 2007 Latest time for depositing Open Offer Entitlements into CREST 3.00 p.m. on 7 August 2007 Latest time and date for splitting of white Application Forms(to satisfy bona fide market claims) 3.00 p.m. on 8 August 2007 Latest time and date for receipt of Forms of Proxy 12.00 p.m. on 11 August 2007 Latest time and date for receipt of completed whiteApplication Forms, blue Excess CREST Application Formsand payment in full under the Open Offer or settlement ofrelevant CREST instruction 11.00 a.m. on 10 August 2007 Extraordinary General Meeting 12.00 p.m. on 13 August 2007 Admission and commencement of dealings in New OrdinaryShares 8.00 a.m. 14 August 2007 CREST members' accounts credited in respect of NewOrdinary Shares in uncertificated form 14 August 2007 Despatch of definitive share certificates for New OrdinaryShares in certificated form by no later than 21 August 2007 THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN ARE NOT FOR PUBLICATIONOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,AUSTRALIA, CANADA OR JAPAN OR ANY JURISDICTION IN WHICH SUCH PUBLICATION ORDISTRIBUTION IS UNLAWFUL 19 July 2007 Torotrak plc Firm Placing and Open Offer ("the Issue") of 26,182,153 New Ordinary Shares at30 pence per share. 1. Introduction Following the announcement on 13 July 2007, Torotrak is pleased to announce thatthe Company proposes to raise approximately £5.0 million (net of expenses) byway of a Firm Placing of 19,182,153 New Ordinary Shares. A further 1,151,180 NewOrdinary Shares will be issued under the Firm Placing pursuant to the ESTSubscription. The total number of shares issued under the Firm Placing will be20,333,333, representing 13.9 per cent. of the Enlarged Share Capital. Arbuthnothas conditionally placed firm with certain existing Shareholders and otherinstitutional investors the Firm Placing Shares at the Issue Price pursuant tothe Placing Agreement. Torotrak also proposes to raise up to a further £1.75 million by the issue of5,848,820 New Ordinary Shares (representing 4.0 per cent. of the Enlarged ShareCapital) at the Issue Price pursuant to the Open Offer. Qualifying Shareholderscan subscribe for Open Offer Shares on the basis of 2 Open Offer Shares forevery 41 Existing Ordinary Shares held, and may apply for any whole number ofOpen Offer Shares. The Issue Price of 30 pence per New Ordinary Share represents a 27.7 per cent.discount to the closing middle market price of 41.5 pence on 12 July 2007 beingthe last day prior to the announcement by Torotrak of the intention to carry outthe Issue and 15.0 per cent. to the closing middle market price of 35.3 pence on18 July 2007 being the day before the date of this announcement. The Issue isconditional upon, inter alia, shareholder approval of the Resolutions which willbe sought at the Extraordinary General Meeting to be held on 13 August 2007,notice of which is set out at the end of the Prospectus which will be posted toShareholders today. The Issue is conditional, inter alia, upon: (i) the passing of the Resolutions; (ii) Admission becoming effective by not later than 8.00 am on 14 August 2007 (or such later time and/or date as Arbuthnot and the Company may agree, not being later than 9.00 am on 31 August 2007); and (iii) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms prior to Admission. Accordingly, if any of such conditions are not satisfied, or, if applicable,waived, the Issue will not proceed and any Open Offer Entitlements admitted toCREST will thereafter be disabled. 2. Background to Torotrak's technology Torotrak was admitted to the London Stock Exchange in 1998 and has developed andowns the patent rights for a next generation, highly fuel efficient and costeffective variable ratio transmission that can replace more conventionaltechnologies, for example fixed-ratio automatic or semi-automatic transmissionfor on and Off Highway vehicles. All currently available transmission technologies are either Fixed Ratio orVariable Ratio. Torotrak's technology is a Variable Ratio transmission. In aFixed Ratio transmission, as used in manual gearboxes or conventional automaticgearboxes in a car, the engine is connected to the road wheels via sets ofmeshing gears, with the selected gear-set providing a Fixed Ratio of increase,or decrease, of engine speed. In a Variable Ratio transmission, the drive ratiocan be varied continuously between the lowest and highest ratios. Thischaracteristic optimises overall economy, performance and functionality of thevehicle compared to the traditional fixed ratio alternative. Torotrak's variable ratio technology is based on its patented Full Toroidalvariator, which consists of a set of discs and rollers. The Torotrak technologycan be configured using a conventional clutch or torque convertor to deliver acontinuously variable transmission ("CVT"). In this format, the drive ratio canbe varied continuously between low and high limits in either forwards orreverse, with the clutch or torque convertor being used to launch the vehiclefrom rest. Alternatively, it can be configured as an infinitely variabletransmission ("IVT") where a 'geared neutral' capability obviates the need for aclutch or torque convertor and enables a seamless transition to be made, fromforwards through standstill and into reverse. This aspect of IVT functionalityprovides considerable benefits for off-road and commercial applications where avehicle can shuttle from forwards to reverse or hold a stationery position withprecise control and without the need to engage or disengage gears, clutches orbrakes. For example, in a tractor, a Torotrak IVT allows the vehicle to commenceploughing from a standing start and to avoid having to make gear shifts (whichcan typically be up to 36 in a tractor). The user experience of a vehicle equipped with a Torotrak transmission comparedto the current standard technology would be that it is generally more refinedand quieter, easier to control, less expensive to fuel, and in many cases itwould deliver better performance and driveability. Whilst delivering thesebenefits, the transmission itself would carry no higher maintenance costs, inmost applications being a Sealed For Life product. From a manufacturer's perspective, the transmission is based on a design that ishighly scaleable across vehicle and power ranges and uses relatively simple toproduce or source components. The transmission should cost no more than thecurrent equivalent (that is, automated) standard transmission when manufacturedin like-for-like volumes and in many cases it would be cheaper to produce. TheTorotrak transmission is comparable or lower in size and weight and reducesenvironmental impact, a feature which is of growing importance to vehicle andtransmission manufacturers as environmental legislation tightens. Torotrak's technology has been assessed and validated by leading vehicle andtransmission manufacturers and the start of pilot production for a volumeapplication incorporating Torotrak's technology for a principal market commencedin March 2007. 3. Earnings and key success factors Torotrak's earnings model, which covers the entire product life-cycle frominitial engineering activity with a new customer through to production relatedincome, is becoming more predictable and repeatable. Torotrak's revenues havegrown at a compound rate of 124 per cent. per annum over the last three years to£2.7 million for the year ended 31 March 2007 and the Company has progressivelyreduced its operating losses before non recurring items. A reduced operatingcost base is driving the reduction in losses and the Directors' expectation isthat the Group will achieve the point at which operating cash flows turnpositive during the year ended 31 March 2009. Torotrak's future prospects have been strengthened by the followingdevelopments: * Torotrak has diversified its markets and has secured leading customers in each of those markets; * start of pilot production of Torotrak's first volume application in March 2007 in the Outdoor Power Equipment market; * in the Off Highway market Torotrak has customers who intend being in production within two years; * prototype and other engineering programmes across Torotrak's principal markets are expected to lead to the opening up of significant opportunities for medium term volume applications in those markets; * production commitment and the Company's increasing prototype activity with leading players who have the potential to influence their industry peer groups is leading to considerable business development momentum; * the competitive advantages of Torotrak technology have been enhanced by recent product development targeted at commercialising Torotrak's core technology; and * increasing environmental awareness and proposed legislation should favourably impact demand for Torotrak technology which can introduce lower emissions and greater fuel economy in commercial applications. 4. Reasons for funding The Directors believe that Torotrak's cash resources at 31 March 2007 of £4.3million, whilst adequate for current working capital requirements, areinsufficient to allow the Company to exploit fully the current opportunitiesavailable to create a stronger base for future growth. The net proceeds of theIssue will be used to fund some or all of the opportunities set out below aswell as providing a greater level of working capital resilience to supportbusiness growth more generally. In particular, additional funding would, in the Directors' opinion, enhanceTorotrak's position in the following key areas: * Torotrak's current limited financial capacity relative to the investment and scale of opportunity for large customer prospects, is a potential inhibitor to securing an appropriate level of commercial engagement that would allow attainment of optimum longer term returns for Torotrak. This is particularly the case where the prospects are large, international customers where engineering and prototype programmes are increasing in scale. One such example is in the Truck and Bus market where Torotrak is in the early stages of commercial negotiation with a leading European truck manufacturer regarding the application of Torotrak's technology. A stronger level of working capital will underpin Torotrak's position when concluding such commercial negotiations and will provide a greater level of working capital resilience to support business growth over the next 3 years. The Directors intend that approximately two thirds of the net proceeds of the Issue will be retained to strengthen the Company's working capital position. The remaining proceeds of the Issue will be used for the two key areas below. * Future earnings may be improved through investing in commercial arrangements that share ongoing earnings from sales of complete transmissions incorporating Torotrak IP, such as an investment in a manufacturing, sales and marketing based joint venture. This opportunity is particularly appropriate for the Agricultural vehicle market where Torotrak is in discussion with two potential joint venture partners. The formation of the Infinitrak joint venture in November 2005 and subsequent activities leading to start of pilot production in March 2007 provides Torotrak with valuable capability and the experience of leveraging its technology. * There is an opportunity to accelerate product development within Infinitrak to capitalise on the early momentum achieved with the launch of pilot production of the Twin Toroidal Transmission. The Directors believe that an earlier launch of subsequent new products will result in higher market penetration rates being achievable in a shorter timeframe and therefore that increased funding should be made available by Torotrak to Infinitrak. This would match the funding for new product development by its partner, MTD and to ensure that Torotrak's interest in the overall opportunity is maintained. 5. Torotrak technology positioning compared to other variable drive and conventional fixed ratio technology solutions For over 40 years, users of Variable Ratio transmissions have had to utilisetraditional technologies, such as hydrostatic drives and Belt-Drive CVTs which,in the absence of superior technologies, have been accepted in a number ofmarkets. All competing Variable Ratio technologies have well known limitations: Belt and pulley, or chain and pulley CVT technology works effectively in smalland medium cars but does not generally have sufficient power capacity to handlelarge car applications. They are also configured to work mainly in front wheeldrive applications which has precluded their use in rear wheel drive vehiclesand therefore most 4X4 and SUV vehicles. This technology is also not robustenough for use in the aggressive working environment of commercial vehicles, orin Off Highway applications such as tractors or materials handling vehicles. Hydrostatic drive technology is either very expensive, complex and mechanicallyinefficient or it is low-cost, noisy, difficult to control and similarlyinefficient. Hydrostatic transmissions have found a niche in high-power top-endtractors and construction equipment where the cost and power losses can becontained. Hydrostatic technology is also used in high-volume applications wherecost has been the determining factor such as in the ride-on mower market.Significantly, there is no form of hydrostatic technology available, so far asthe Torotrak Directors are aware, which can satisfy the wide range of productsand vehicles in between these two extremes. Half Toroidal traction drive technology has achieved initial commercial launchin a Japanese automotive application, reflecting the growing interest andcommercial viability of traction-drive technologies in automotive applications.Whilst Half Toroidal and Full Toroidal technology share the benefits of fueleconomy, emissions and refinement gains, Torotrak's Full Toroidal approach issimpler to control, offers greater scalability - particularly for smaller andcheaper applications - and is more attractive in terms of it being simpler tomanufacture and costing less to produce. Further application of Half Toroidaltechnology is currently restrained by these perceived weaknesses. Competing Fixed Ratio transmissions, which are the main incumbent technologyparticularly in automotive applications, also have comparative disadvantages: Traditional Fixed Ratio automatic transmissions remain a dominant technology dueto the considerable investment already made by Tier 1 suppliers and originalequipment manufacturers ("OEM"s). The market is split into commoditytransmissions such as the 4 and 5 speed automatics and the premium transmissionscomprising the 6, 7 and now 8 speed automatics. These premium transmissions arerapidly migrating towards commodity applications leaving the Tier 1 suppliersand OEMs to look for the next premium technology. Improved driveability,refinement and environmental impact are expected to be major drivers for thenext premium technology. Double clutch transmissions are a sophisticated form of manual transmission withan automatic shifting mechanism and are emerging as a transmission technologyfor use in passenger cars. They support a Two-Pedal Drive but lack therefinement and controllability of Torotrak's transmission. Dual clutchtransmissions are, by nature, Fixed Ratio and therefore do not offer theflexibility of complete variable control offered by Torotrak's technology. Therecent rise in popularity of the dual clutch transmission is due in part to itbeing suited to the existing manufacturing infrastructure of manual gearboxes inEurope. This is not a relevant factor in emerging market economies or wheresubstantial new manufacturing investment is being made. Torotrak has a clear market opportunity to compete effectively with traditionalfixed-ratio automatic and double clutch transmissions: Torotrak Full Toroidal traction drive technology is recognised within thegrowing market for variable drives for its ability to offer a unique combinationof enhanced features and cost competitiveness. Torotrak's proposition offers acombination of some of the following features, depending on the particularapplication and market: * the Directors expect a reduced or equivalent unit cost compared to incumbent transmission technology; * improved fuel economy and reduced emissions; * a fully scaleable application (the core technology can be scaled up or down to suit a wide range of power / vehicle applications); * high power-density (containing substantial power handling performance within a small space); * high levels of refinement; * high levels of control; and * lower or equivalent maintenance costs. 6. Strategy and markets Torotrak's strategic objectives today are: * to build a cash generative business within three years from existing resources and know-how and through growth in earnings from the Infintrak JV and from two of Torotrak's Off Highway customers, who intend being in production in the next two years; * to develop existing and new business development prospects with a view to capitalising on highly valuable, volume opportunities, including those sectors with longer lead times to market; and * to drive medium to long term returns from its valuable IP. This is to be supported by earnings sourced from a range of markets, rather than being dependent on any one market. At the time of flotation, Torotrak's business and technology strategy wasfocused on mainstream and premium automotive applications with the intention ofsecuring future earnings from unit royalties on the sale of transmissionsincorporating Torotrak technology. Since flotation, considerable success hasbeen achieved in developing and validating the Company's technology and inbuilding up a bank of valuable patents. However, the significant level of marketinvestment in incumbent technologies such as Fixed Ratio automatic and dualclutch transmissions has acted to date as a barrier to entry for Torotrak'stechnology in the established automotive markets. The main barriers to earlyadoption in the market of Torotrak's technology have been the levels ofinvestment in incumbent technology and, initially, the reduced comparativeLaunch Speed in Torotrak's configuration, a feature that has now been remediedwith product development advances. Despite this, and as a result of continuedproduct development, Torotrak's Directors believe that its technology remainswell placed to address the automotive market in the medium to longer term, withdemonstrated improvements in fuel economy of up to 20 per cent. on typical NorthAmerican vehicles and gains of up to 14 per cent. for typical premium sectorEuropean or Japanese vehicles. Since flotation Torotrak has developed broader and more varied applications ofits technology. Whilst continuing to develop those markets with longer leadtimes (for example the automotive market), strategy is now additionally focusedon developing sectors and markets where earlier returns can be derived (forexample the residential lawn tractor sector). Torotrak's principal markets arenow as follows: * Outdoor Power Equipment (for example, ride on lawn mowers for domestic and commercial use) * Off Highway (for example, agricultural tractors and materials handling vehicles) * Automotive (premium car sector through to low cost cars) * Truck and Bus (distribution through to heavy haulage trucks and a range of bus applications) In addition to diversifying Torotrak's markets for applications, the Directorshave also identified the emerging economy markets as a geographical focus forautomotive and other vehicle applications. Unlike the developed marketcounterparts, car and vehicle companies in emerging economies are not encumberedwith legacy investment in conventional technology and they are open to adoptingnew technologies for their typically high volume markets. Revenues in the Company's target markets derive from engineering fees onprototype programmes through to license and option fees leading to futureearnings from the point at which volume production of transmissionsincorporating Torotrak IP begins. Earnings targeted from production oftransmissions incorporating Torotrak's IP are derived either from a unit royaltyagreement or, where appropriate, a share of earnings through other commercialarrangements, such as a joint venture with the transmission or vehiclemanufacturer. Royalty arrangements will continue to be appropriate where: * there are high volumes or high transaction values which would drive good royalty returns; * there are large Tier 1 players with significant market influence; * there are OEMs who will not source externally; and * high invested capital for production would be prohibitive for Torotrak to contribute to, for example in Automotive. The joint venture form of arrangement is particularly advantageous whereTorotrak is able to secure a greater influence over both the marketing of thetechnology and the engineering of cost improvements. The resulting earnings areshared and hence enhance the business potential compared to a pure royaltyarrangement. The additional risk of entering into manufacturing arrangements ismitigated through partnering with established manufacturing entities whichshould reduce the level of capital that the Company must invest and, whereappropriate, through entering into sub contract manufacturing arrangements inthe early stages of the joint venture's development. Torotrak has so far enteredinto one joint venture arrangement with MTD, as described further below. Torotrak's technical developments are closely aligned with customer programmeswith specific routes to market. These engineering programmes are a key part ofstrategy, not only in terms of revenue generation, but also in terms of buildingfuture revenue opportunities for license agreements or other forms of commercialengagement to commercialise Torotrak's technology. This has led to securing astrong and growing customer base with some of the leading, global Tier 1transmission manufacturers and vehicle makers in Torotrak's target markets. The Company's strategy is focused on driving returns from the cumulativeinvestment already made, before taking significant steps in any new markets orpotential new products (unless funded through customer programmes). Progress in each of the Company's key markets is as follows: Outdoor Power Equipment In March this year Torotrak achieved a major milestone with the commencement ofpilot build of IVTs by Infinitrak, the Company's joint venture with MTD. Thisbuild represents the first phase of production of Infinitrak's initial product,the Twin Toroidal Transmission for use in a lawn tractor produced in the UnitedStates by MTD. MTD is one of the leading Outdoor Power Equipment manufacturersin the USA with approximately a 30 per cent. market share of the two millionunits per annum in the ride-on mower sector. Infinitrak has been granted globalexclusive rights to apply Torotrak's technology in this sector. Infinitrak'ssales plan in its first year to April 2008 is to sell exclusively to MTD, withsales volumes being dependent upon the acceptance of the Twin ToroidalTransmission by MTD for the 2008 mowing season and upon the level of anticipateddemand for the relevant MTD lawn tractors in which the transmissions will befitted. Based on the latest information, the Directors believe it is prudent toassume a more gradual build up to the 50,000 Twin Toroidal Transmission unitsales target such that the sales impact is not fully achieved until Torotrak'sfinancial year ending 31 March 2009, with a resulting lower level of sales inthe year ending 31 March 2008. Unit sales of Twin Toroidal Transmissions in thefinancial year ending 31 March 2008 are now expected to be in the 5,000 to25,000 range, building substantially in the following year. Irrevocable ordercover for material volumes of transmissions from MTD for the first year ofInfinitrak's plan to April 2008 is not expected until towards the end ofTorotrak's second financial quarter ending 30 September 2007 when the firstyear's anticipated build volumes will be confirmed. As production ratesincrease, manufacturing efficiencies are expected to be realised, impacting thefinancial year ending 2009 and onwards. Off Highway In the Off Highway market, Torotrak's three agricultural vehicle licensees(Uzel, Carraro and Iseki) in the small to mid-sized tractor sector continue todemonstrate their commitment to progress into production, with two of thesemaintaining their ambition of being in production within 18-24 months. Thissector accounts for a total global market of around 630,000 vehicles per year.Of the 513,000 units produced by North America, Japan and Europe, Torotrak'slicensees account for around 7 per cent. This sector has been targeted as theCompany's bridgehead into the wider agricultural market. This sector has beenchosen because, so far as the Torotrak Directors are aware, there is no otherVariable Ratio transmission technology currently that is commercially viableacross this breadth of application. In addition, in the Company's preliminarystatement of 15 May 2007, Torotrak announced that an industry leader in thematerials handling sector has recently entered a significant prototype programmeto prove the capability of IVT in one of their vehicles, a Class 4 or 5 ForkLift Truck, a sector which carries around 255,000 vehicle sales per annum, outof a total fork lift truck market of 750,000 vehicle sales per annum. Thisprototype programme commenced earlier in this financial year. Automotive Torotrak announced on 15 May 2007 that the Company has agreed the principalterms of a licence agreement with a leading Asian car and commercial vehiclemanufacturer. This customer, who committed to a £0.9 million engineeringprogramme in the year ended 31 March 2007, has stated to us that their ambitionis to be amongst the very first to launch products incorporating Torotrak's FullToroidal technology in the automotive market. Torotrak has a memorandum ofunderstanding in place and is currently working with the vehicle manufacturer tofinalise a formal licence agreement, which the Directors expect to announce inthe first half of the financial year ending 31 March 2008. In the premium car sector, Torotrak's continued programme of work with industryleading transmission manufacturer, Aisin AW, has involved the Company in directdiscussions with Aisin's principal customer, a global vehicle manufacturer,progressing together the development of a transmission for their target vehicle.The Directors await confirmation of the next step in this programme, which is toprogress to a next generation of fully functioning prototype IVT transmission,and continue to be encouraged by Aisin's long-standing support and commitment toTorotrak technology. Although the Company is no longer dependent on securingshort term success in this market, the premium automotive market remains asignificant longer term goal for Torotrak. Truck and Bus In line with the Company's strategy to diversify its markets and potentialapplications for Torotrak technology, during the past financial year the Companyhas worked with a leading European Truck and Bus manufacturer to complete adetailed cost study on a proposed main-drive transmission for one of theirvehicles. The results of this study look very compelling and indicate that aTorotrak IVT, as a main transmission in a distribution truck, a heavy haulagetruck, or a bus, can offer significant technical and functional benefits at veryattractive cost levels. This has the potential to be a major breakthrough forthe Company, as this provides third party endorsement to the Directors' beliefthat Torotrak's IVT is a compelling commercial and technical proposition forboth the Truck and Bus sectors. The Truck and Bus sector accounts for approximately 3.7 million global vehiclesales per annum, with around 250,000 units of heavy trucks in Europe, whereTorotrak has begun working with a leading manufacturer. Future markets Whilst Torotrak continues to be focused on delivering value from the investmentmade in its principal markets, the Directors consider new opportunities for theapplication of Torotrak technology which have the potential to deliver futurereturns. An example of this is in Motorsport. On 5 June 2007 Torotrak announceda new licensee, Xtrac, that is a leading manufacturer of motorsporttransmissions in the UK. This commercial arrangement is intended to exploit newrules in Formula 1 racing which permit the use of energy recovery devices whichare expected to be in force from the 2009 racing season. The combination ofTorotrak's Full Toroidal variator technology combined with a high speedmechanical flywheel is seen by some Formula 1 teams as a good choice to exploitthe full benefits of the regulation change. As a licensee of Torotrak's technology in this market, Xtrac will provideengineering, manufacturing and marketing expertise to the new proposition,giving a good opportunity for Torotrak without commiting significant additionalfinancial and technical resources. Torotrak's strategy, to secure new customers across a range of markets and toapply a wider business model that extends beyond a simple royalty arrangement,is delivering continued improvement in operating performance and valuableopportunities for future growth. 7. Information on the Issue The Issue consists of the Firm Placing of 20,333,333 New Ordinary Shares(representing 13.9 per cent. of the Enlarged Share Capital) including 1,151,180New Ordinary Shares pursuant to the EST Subscription and the Open Offer of5,848,820 New Ordinary Shares (representing 4.0 per cent. of the Enlarged ShareCapital). The New Ordinary Shares are being issued at a discount of 27.7 per cent. to theclosing middle market price of 41.5 pence per Ordinary Share of the Company on12 July 2007, being the Business Day before the announcement of the principalterms of the Issue, in order to facilitate the introduction of new institutionalinvestors capable of supporting the long-term development of the Company asshareholders in Torotrak. This discount has been set based on the Directors'assessment of market conditions following discussions with a number ofinstitutional investors and has been decided upon in order to obtain the levelof new funds to be received by the Company under the Firm Placing. ExistingShareholders may subscribe for New Ordinary Shares at the Issue Price under theterms of the Open Offer. Arbuthnot has conditionally placed firm with certain existing Shareholders andother institutional investors the Firm Placing Shares at the Issue Price (whichrepresents a discount of 27.7 per cent. to the Company's share price on 12 July2007, being the Business Day before the announcement of the principal terms ofthe Issue), pursuant to the Placing Agreement. The Open Offer Shares The Open Offer Shares represent approximately 22.3 per cent. of the New OrdinaryShares and will be subscribed for by the trustee of the EST to the extent notsubscribed for pursuant to valid applications (including excess applications)from Qualifying Shareholders under the Open Offer. The trustee of the EST has agreed to subscribe for all of the Open Offer Sharesthat are not subscribed for by Qualifying Shareholders under the Open Offer. Thetrustee of the EST will subscribe for Open Offer Shares using funds loaned to itby the Company to enable it to make the EST Subscription. If the trustee of theEST is not required to subscribe for all of the Open Offer Shares it is likelyto be necessary for it to subscribe for or buy in the market additional Sharesin the Company in the future. The obligation of the trustee of the EST tosubscribe for Shares to enable it to make the EST Subscription is conditionalupon the Company complying with its obligation to lend the required sum to thetrustee. Qualifying Shareholders are being given the opportunity to subscribe under theOpen Offer for Open Offer Shares at the Issue Price payable in full onapplication and free of expense, pro rata to their existing shareholdings, onthe following basis: 2 Open Offer Shares for every 41 Existing Ordinary Shares held by them and registered in their names on the Record Date and so inproportion to any other number of Existing Ordinary Shares then held, roundeddown to the nearest whole number of Open Offer Shares. Qualifying Shareholders may apply for any whole number of Open Offer Shares.Excess applications will be satisfied only to the extent that correspondingapplications by other Qualifying Shareholders are not made or are made for lessthan their pro rata entitlements. If there is an oversubscription resulting fromexcess applications, allocations in respect of such excess applications will bescaled down according to the Directors' discretion. Further details of the Open Offer are contained in the Prospectus which will beposted today to Shareholders. The Open Offer is not being made to certain Overseas Shareholders. The Issue is conditional, inter alia, upon the following: (i) the passing of the Resolutions; (ii) Admission becoming effective on or before 8.00 a.m. 14 August 2007 (or such later date and/or time as the Company and Arbuthnot may agree, being no later than 9.00 a.m. on 31 August 2007); and (iii) the Placing Agreement having become unconditional in all other respects and not having been terminated in accordance with its terms prior to Admission. 8. Current trading and prospects The Group has a strong forward order book for engineering services, strengthenedfurther by the announcement on 27 June 2007 of a prototype programme with one ofthe largest global manufacturers of fork lift trucks. Torotrak is currently inthe process of negotiating licence agreements with customers in two of theCompany's principal markets, one of which was announced on 15 May 2007 inrelation to a Memorandum of Understanding with a major Asian car and commercialvehicle manufacturer. The timing of programmes in the year ending 31 March 2008 is expected togenerate a revenue build up weighted more towards the second half, reversing thepattern experienced in the year ending 31 March 2007. Unit sales of TwinToroidal Transmissions in the financial year ending 31 March 2008 are nowexpected to be in the 5,000 to 25,000 range, building substantially in thefollowing year, as discussed in paragraph 6 above. Continued contributions from engineering and licence agreements, plannedincreasing revenue contributions from Infinitrak, and the expected start ofroyalties from two of Torotrak's agricultural licensees, together withcontainment of the Company's operating costs, all underpin the Directors'expectation of continued improvement in year on year operating performance. TheDirectors expect that existing cash resources are sufficient to support thebusiness until operating cash flows turn positive, which is expected to be inthe financial year ending 31 March 2009, with expected cash generationthereafter. Beyond a three year period, the Directors expect to build an increasing level ofmarket share in OPE and Off Highway whilst securing additional licensees andproduction intent customers in Torotrak's other principal markets of Truck andBus and Automotive, leading to longer term royalty flow and potential newsources of joint venture earnings. 9. Extraordinary General Meeting A notice convening the Extraordinary General Meeting, to be held at the officesof Hammonds, at 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH at 12.00p.m. on 13 August 2007 is contained in the Prospectus that has been posted toShareholders today. At the Extraordinary General Meeting, Resolutions will beproposed: * to increase the authorised share capital of the Company from £20,000,000 to £25,000,000 by the creation of 50,000,000 additional Ordinary Shares. This represents an increase of 25 per cent. over the current authorised share capital of the Company. If this Resolution is passed there will be authorised but unissued Ordinary Shares following the Firm Placing and the Open Offer; * to authorise the Directors to exercise all of the powers of the Company to allot up to 74,389,530 Ordinary Shares (representing 62.0 per cent. of the Existing Ordinary Shares and 50.9 per cent. of the Enlarged Share Capital) being up to a maximum nominal amount of £7,438,953. The Directors will limit the exercise of this authority to the allotment of the New Ordinary Shares under the Issue and otherwise up to a maximum nominal amount of £4,820,737, representing just under one third of the Enlarged Share Capital. The authority will expire at the conclusion of the next Annual General Meeting of the Company after the passing of the Resolutions; * to authorise the Company in accordance with the provisions of the Listing Rules and in connection with the Firm Placing and the Open Offer, to issue the Open Offer Shares and the Firm Placing Shares at an issue price of 30 pence per share, with the issue of such Shares representing a discount of 27.7 per cent. to the closing middle market price of 41.5 pence per Ordinary Share of the Company on 12 July 2007. Save for the issue of the New Ordinary Shares, the Directors have no current intention to exercise this authority, but the Directors believe that it is in the best interests of the Company for the Board to be granted these authorities to enable the Board to take advantage of appropriate opportunities; * to disapply the statutory pre-emption rights contained in section 89(1) of the Act in respect of the allotment of up to 26,182,153 New Ordinary Shares pursuant to the Issue (representing 21.8 per cent. of the Existing Ordinary Shares and 17.9 per cent. of its Enlarged Share Capital) being up to a maximum nominal amount of £2,618,215; and * the general disapplication of the statutory pre-emption rights contained in Section 89 (1) of the Act (excluding the New Ordinary Shares) in respect of the Ordinary Shares will be approximately 12.0 per cent. of the Existing Ordinary Shares and 10.0 per cent. of the Enlarged Share Capital. Other than the issue of the New Ordinary Shares, the Directors have no current intention to exercise this authority pursuant to this disapplication. 10. Directors intentions The Directors and, where applicable, their spouses do not intend to take up anyof their entitlements under the Open Offer. However, the Directors willsubscribe in total for 333,333 New Ordinary Shares under the Firm Placing. Thiswill comprise 83,333 New Ordinary Shares for John Grant, 83,333 for RichardElsy, 83,333 for Jeremy Deering, 50,000 for James Batchelor, 16,667 for DavidMacKay and 16,667 for Nicholas Barter. Appendix 1 Glossary of Technical Terms and Definitions GLOSSARY OF TECHNICAL TERMS "Agricultural" part of the Off Highway sector. The Agricultural vehicle market is a potential growth area for Torotrak. "Automatic Transmission (AT)" an AT has the selection of the individual gears (or ratios) undertaken automatically i.e. without the direct control of the operator / driver. "Automotive" one of Torotraks' key market segments that has operaions dealing with the premium car sector through to low cost cars. "Class 4 or 5 Fork Lift Truck" a fork lift truck powered by an internal combustion engine riding on either cushion tyres (Class 4) or pneumatic tyres (Class 5). "Clutch" clutches can either used both in a transmission (to engage or disengage certain components to provide a change in ratio or gear) or external to the transmission as a launch device i.e. to connect the rotating engine eventually to the wheel to start the vehicle moving. "Continuously Variable Transmission (CVT)" an automatic transmission using a variable drive element (a variator) to provide a continually variable ratio between input and output, unlike MT's and AT's which can only provide pre defined, fixed ratios. "Control" the study and operation of the management of an engine or transmission. "Dual Clutch Transmission / Double Clutch Transmission" essentially two transmissions in one casing. Usually configured as a multiple shaft transmission with the odd gears (1, 3, 5 and maybe 7) controlled by one clutch and the even gears controlled by another. Hence one gear can be engaged and the next selected and engaged when the clutches swap over. "Emissions" the gases existing the engine or vehicle. Can be defined as "Engine Emissions" where no after treatment such as a catalyst is employed to modify the gas mixture or "Vehicle Emissions" which are measured at the exhaust pipe and do contain all after treatment operations. Gaseous emissions are measured with particular note of Nitrous Oxides, Carbon Dioxide, Carbon Monoxide, Hydrocarbons (unburnt fuel), Sulphur Dioxide and Particulate matter (small solids) "Fixed Ratio" or "Fixed Ratio Transmission" as used in manual gearboxes or conventional automatic gearboxes in a car, the gear-set provides a selected fixed ratio of increase, or decrease, of engine speed. "Full Toroidal" the definition given to the shape of the variator in a Torotrak IVT. A toroid is a ring doughnut shaped object with a hole in the centre. "Geared Neutral" the use of a three element epicyclic gearset within a vraible drive transmission to create a zero output speed (neutral) whilst the input is being driven by the engine "Hydrostatic Drive /Transmission" hydrostatic transmissions transmit all power with hydraulics; there is no solid coupling of the input and output. One half of the transmission is a variable displacement pump and the other half is a hydraulic motor. A movable "swash" plate controls the piston stroke to change the pump's displacement. "Infinitely Variable Transmission (IVT)" an automatic transmission that, similar to a CVT, provides a continually variable ratio between input and output. In addition, an IVT dispenses with a separate starting device (such as a clutch or torque converter) by utilising a three element epicyclic gearset which creates a Geared Neutral condition. "Launch Speed" the initial speed of a vehicle accelerating away from standstill "Manual Transmission (MT)" manual transmission (or gearbox) has the various individual ears (or ratios) selected by the operator / driver. "Off Highway" one of Torotrak's key market segments that contains tractors and fork lift trucks. "Outdoor Power Equipment (OPE)" the market segment that contains low power, engine driven devices for garden and ground care operations such as ride on lawn mowers. "Premium Automotive" the market segment that refers to the more luxurious or sporty standard of vehicles on the road. Epitomised by products from companies such as BMW, Mercedes and Lexus. "Sealed For Life" a product which is built and sealed at the point of manufacture and which requires no service intervention throughout its design life. "Tier 1" companies who manufacture component parts to be assembled into the final end product by another party. "Torque Converter" a modified fluid coupling used a starting device to transfer rotating power from an engine to a transmission. Smooth devices but inefficient when operating. "Traction Drive" a method of transmitting power through a device which works upon the traction or "grip" between two surfaces in a similar manner to a tyre and the road. Traction refers to the friction between the driven member and the surface it moves upon, where the friction is used to provide motion. "Transmission" or "Gearbox" a compact, enclosed unit of gears and / or related items that transmits mechanical power from a prime mover, such as an engine, to some form of useful output device, such as a road wheel. The power is transmitted with either a reduction or increase in the output speed. "Truck and Bus" one of Torotrak's key markets. Torotrak are working with a leading European Truck and Bus manufacturer. Results of work to date indicate that a Torotrak IVT can offer significant benefits at attractive cost levels. "Variable Ratio" a transmission that, in the case of a car, connects the engine to the road wheels and provides a continuously variable ratio of increase or decrease of engine speed to the speed of the road wheels. DEFINITIONS "£" pound sterling "Admission" admission of the New Ordinary Shares to (i) the Official List; and (ii) trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards. "Annual General Meeting" the annual general meeting of the Company. "Application Form" the white Application Form or the blue Excess CREST Application Form as the case may be and "Application Forms" shall mean both. "Arbuthnot" Arbuthnot Securities Limited are Torotrak's appointed broker. "blue Excess CREST Application the blue Excess CREST Application Form" Form on which Qualifying CREST Shareholders may apply for Open Offer Shares in excess of their pro rata entitlement. "BTG International" BTG International Limited. Torotrak was originally established as a subsidiary of BTG. "Capita" Capita Registrars who are Torotrak's appointed Registrar. "Certificated" or "in Certificated a share or other security which is form" not in uncertificated form (that is, not in CREST). "Companies Act" or "Act" the Companies Act 1985 (as amended). "Company" Torotrak plc. "CREST" the relevant system (as defined in the CREST Regulations) in respect of which Euroclear UK & Ireland is the operator (as defined in the CREST Regulations). "CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended. "Demerger" the demerger of the Torotrak Group from BTG International pursuant to the demerger agreement dated 8 July 1998. "Directors" or "Board" the directors of the Company. "Torotrak Employee Share Trust" the Torotrak employee share trust is a discretionary trust established for the benefit of past, present and future employees of the Group and their immediate families. The trustee is BWCI Trust Company Limited. "Enlarged Share Capital" the issued ordinary share capital of the Company, immediately following Admission. "EST" the Torotrak Employee Share Trust. "EST Subscription" the subscription by the trustee of the EST for 1,151,180 Firm Placing Shares at the Issue Price as part of the Firm Placing and up to 5,848,820 Open Offer Shares at the Issue Price if not subscribed for by Qualifying Shareholders under the Open Offer. "Euroclear UK & Ireland" Euroclear UK & Ireland Limited (formerly Crestco Limited). "Excess Application Facility" the facility to apply for Excess Shares using the blue Excess CREST Application Form or white Application Form as appropriate. "Excess Shares" Open Offer Shares which may be applied for in addition to Open Offer Entitlements. "Excluded Territories" United States, Canada, Japan and Australia. "Existing Ordinary Shares" the Ordinary Shares in issue at the date of this announcement. "Extraordinary General Meeting" or the extraordinary general meeting "EGM" of the Company convened for 12.00 p.m. on 13 August 2007. "Financial Services Authority" the competent authority for the purposes of FSMA. "Firm Placing" the conditional placing by Arbuthnot on behalf of the Company of the Firm Placing Shares at the Issue Price pursuant to the Placing Agreement. "Firm Placing Shares" 20,333,333 New Ordinary Shares which Arbuthnot has conditionally agreed to place firm on behalf of the Company pursuant to the Placing Agreement, excluding, for the avoidance of doubt, the Open Offer Shares. "FSMA" Financial Services and Markets Act 2000 (as amended). "Group" the Company, its subsidiaries and Infinitrak LLC, or in respect of the period prior to the Demerger becoming effective, Torotrak Group Limited or Torotrak (Holdings) Limited and Torotrak (Development) Limited and their respective subsidiaries. "IFRS" International Financial Reporting Standards maintained by the International Accounting Standards Board and which are in force from time to time, as adopted by the European Union. "Infinitrak" Joint Venture operation established by Torotrak and MTD Inc, operating in the Outdoor Power Equipment sector. "Intellectual Property" or "IP" being Torotrak's expertise in the specification, design and control of Full Toroidal traction drive variators, and in the specification, design and control of transmissions and other mechanical systems which incorporate Torotrak's variator technology, which are patented. "Issue" the Firm Placing and the Open Offer. "Issue Price" 30 pence per New Ordinary Share. "Joint Venture" Torotrak and MTD Inc set up a joint venture operation, Infinitrak which operates in the Outdoor Power Equipment sector. "Listing Rules" the listing rules made by the UK Listing Authority for the purpose of Part VI of FSMA. "Loan" the loan facility offered to the trustee of the EST by the Company. "London Stock Exchange" or "LSE" London Stock Exchange plc. "MTD" MTD Inc is a US business with a significant share of the North American lawn tractor market. Infinitrak is the joint venture between Torotrak and MTD Inc. "New Ordinary Shares" the Firm Placing Shares and the Open Offer Shares. "Official List" the Official List of the UK Listing Authority. "Open Offer" the conditional offer inviting Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price, on the terms and subject to the conditions set out in the Prospectus which will be posted to Shareholders today. "Open Offer Entitlements" the pro rata entitlements to subscribe for Open Offer Shares allocated to Qualifying Shareholders pursuant to the Open Offer. "Open Offer Shares" 5,848,820 New Ordinary Shares which are being made available to Qualifying Shareholders under the Open Offer. "Ordinary Shares" ordinary shares of 10 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. "Placing Agreement" the conditional agreement dated 19 July 2007 and made between the Company (1) Arbuthnot as broker to the Issue (2) and PricewaterhouseCoopers LLP as sponsor (3) relating to the Firm Placing and Admission, details of which are set out in the Prospectus which will be posted to Shareholders today. "Preliminary Statement" announcement of annual results to the stock exchange where investors are provided with an update on current trading. "Prospectus" this prospectus, prepared in accordance with the Prospectus Rules and the Listing Rules of the UKLA. "Prospectus Rules" the Prospectus Rules brought into effect on 1 July 2005 pursuant to Commission Regulation (EC) No. 809/ 2004. "Qualifying CREST Shareholders" Qualifying Shareholders holding Existing Ordinary Shares in a CREST account. "Qualifying non-CREST Qualifying Shareholders holding Shareholders" Existing 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 registered addresses in an Excluded Territory. "Record Date" the close of business on 18 July 2007 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. "Resolutions" the resolutions set out in the notice of EGM at the end of the Prospectus which will be posted to Shareholders today. "Shareholders" holders of Ordinary Shares. "Shares" or "Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company. "Sharesave Scheme" the Torotrak Savings-Related Share Option Scheme. "Torotrak Employee Share Trust" the Torotrak employee share trust is a discretionary trust established for the benefit of past, present and future employees of the Group and their immediate families. The trustee is BWCI Trust Company Limited. "Torotrak" or "Torotrak Group" or the Company, its subsidiaries and "Group" Infinitrak LLC, or in respect of the periord prior to the Demerger becoming effective, Torotrak Group Limited or Torotrak (Holdings) Limited and Torotrak (Development) Limited and their respective subsidiaries. "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland, its territories and dependencies. "UK Listing Authority" the Financial Services Authority or "UKLA" acting in its capacity as the competent authority for the purposes of FSMA. "uncertificated" recorded on the register of members or "in uncertificated form" as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST. "United States" the United States of America, its territories and dependencies. "Xtrac" a leading manufacturer of motorsport transmissions in the UK, which is also a new licensee of Torotrak in 2007. For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the meanings given by the Companies Act (but for this purpose ignoring paragraph 20(i) (b) of Schedule 4A of the Companies Act). This information is provided by RNS The company news service from the London Stock Exchange