KELLY GROUP LIMITED - Acquisition of 30% of the issued share capital of Innstaff Proprietary Limited

Acquisition of 30% of the issued share capital of Innstaff Proprietary Limited

Kelly Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/026249/06)
Share code: KEL       ISIN: ZAE000093373
("Kelly Group" or "the Group")

Acquisition of 30% of the issued share capital of Innstaff
Proprietary Limited and 30% of the issued share capital
of Inn-Staff (Swaziland) (Proprietary) Limited by
Kelly Group Limited

1. Introduction

   Shareholders are advised that Kelly Group has concluded an agreement with the current minority shareholder
   who is also the Chief Executive Officer (CEO) of Innstaff Proprietary Limited and Inn-Staff (Swaziland) (Proprietary)
   Limited, hereafter referred to as the Innstaff Companies, in terms of which the remaining 30% of the issued share
   capital of both the Innstaff Companies will be acquired by the Group. This transaction is hereafter referred to as
   "the Acquisition".

2. Rationale

   The Group recognises the strategic importance of the Innstaff Companies which are well positioned for future
   growth, and accordingly wishes to own the entire issued share capital of its significant business units.

3. Terms of the Acquisition

   i.     Kelly Group simultaneously acquires 30 of the 100 issued shares of the Innstaff Companies with an effective
          date of 1 November 2012.

   ii.    The total potential purchase price payable by Kelly Group in respect of the Acquisition is R8 million, to be
          settled in cash in three instalments payable as follows:

          a. R2.7 million  1 November 2012
          b. R2.7 million  1 November 2013
          c. R2.6 million  1 November 2014

   iii.   The second and third payments to be made in 2013 and 2014 may be adjusted downwards to take into
          consideration any shortfall in reaching the forecasted earnings before interest, tax, depreciation and
          amortisation (EBITDA) used in the valuation of the businesses for the Acquisition.

   iv.    It is expected that all payments in terms of the Acquisition will be funded from the Group's existing funding
          facilities.

4. Conditions precedent

   i.     The future payments to be made in 2013 and 2014 are conditional upon meeting the forecasted profits as used
          in the valuation of the businesses for the Acquisition.

   ii.    The CEO entering into a lock-in period to 30 September 2014. Should the CEO resign before this date, the
          CEO will forfeit all rights to any future payments not yet effected.

   iii.   The CEO must sign a restraint of trade agreement effective for a period of 24 months following the termination
          of employment with Innstaff.

   iv.    Any corporate action involving Kelly Group resulting in a takeover of the Group by a third party will trigger an
          accelerated payment of any outstanding payments due by the Kelly Group at that time, and will be based on
          the financial performance of Innstaff at the takeover date, annualised for purposes of the transaction.

5. Suspensive conditions

   The successful completion of the transaction is subject to approval by the JSE Limited.

6. Small related party transaction

   The transaction is with Peter Czakan who is the current CEO and minority shareholder holding 30% of the issued
   share capital of both the companies concerned. The Listings Requirements of the JSE require written confirmation
   from an independent professional expert, confirming that the Acquisition is fair to Kelly Group shareholders. BDO
   Corporate Finance Proprietary Limited has confirmed that the Acquisition is fair and their report is available for
   inspection at Kelly Group's registered office for a period of 28 days from the date of this announcement.

7. Pro forma financial information

   The table below sets out the unaudited pro forma financial effects of the Acquisition on the unaudited interim
   results for the six months ended 31 March 2012. The unaudited pro forma financial effects have been prepared
   in accordance with the JSE Listings Requirements. Accounting policies used to prepare the unaudited pro forma
   financial effects are consistent with those applied in the preparation of the unaudited interim results for the six
   months ended 31 March 2012.

   The unaudited pro forma financial effects are the responsibility of the directors and have been prepared for illustrative
   purposes only, in order to provide information about how the Acquisition may have affected shareholders on the
   relevant reporting date. Due to the nature of pro forma financial information, it may not give a true reflection of the
   Group's actual financial position, changes in equity, results of operations or cash flows after implementation of the
   Acquisition or of the Group's future earnings.

                                                                     Before the              After the
                                                                Acquisition (1)    Acquisition (2  4)      Change
                                                                        (cents)                (cents)          (%)
   Loss per share                                                         12.76                  12.79        (0.2)
   Headline loss per share                                                12.12                  12.14        (0.2)
   NAV per share                                                          238.9                  232.9        (2.5)
   NTAV per share                                                          55.2                   49.2       (10.8)
   Number of shares in issue                                         98 442 190             98 442 190            
   Weighted average number of shares in issue                        98 442 190             98 442 190            
   
   The pro forma loss, headline loss, NAV and NTAV per share have been prepared on the following assumptions:

   1. figures as reported are based on the published unaudited interim results of the Group for the six months ended
      31 March 2012;

   2. the pro forma loss and headline loss per share calculations assume the effective date of the Acquisition was
      1 October 2011, and the pro forma NAV and NTAV per share calculations assume the effective date was
      31 March 2012;

   3. the pro forma calculations reflect the change in accounting treatment of the investment in the Innstaff
      Companies from consolidated subsidiaries with outside shareholders' interests to wholly-owned subsidiaries; and

   4. a tax rate of 28% was applied to the pro forma adjustments.

Johannesburg
1 November 2012

Sponsor
RAND MERCHANT BANK
A Division of FirstRand Bank Limited
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