Business Rescue - Notification of schedule 13 approval and renewal of cautionary announcement Total Client Services Limited Incorporated in the Republic of South Africa (Registration number 1998/025018/06) Share code: TCS ISIN: ZAE000116208 (“TCS” or “the Company”) BUSINESS RESCUE – NOTIFICATION OF SCHEDULE 13 APPROVAL AND RENEWAL OF CAUTIONARY ANNOUNCEMENT INTRODUCTION Subsequent to the announcement released on SENS on 19 June 2014, wherein shareholders were advised that the Company submitted its Schedule 13 application to the JSE to enable the Company to raise capital through the issue of new shares, TCS is pleased to advise shareholders that such application has been approved by JSE Limited (“JSE”) As such, and as contemplated in the approved business rescue plan, 100 million ordinary shares will be issued to Slade Investments CC (CC/2011/0425) (“the Specific Issue”). The Specific Issue will be cash settled, at a price of 1 cent per TCS ordinary share, being the closing TCS share price on 23 December 2013, the date TCS voluntarily suspended trading on the JSE. PROSPECTS The Company has come through an extremely difficult trading period and cash flow remains extremely tight. The key components of the Company continuing as a going concern is the ability to win tenders for new projects as well as ensure existing contracts are profitable. The forecasts are based on the following assumptions: - There is no deterioration in the current market conditions; - Municipalities continue to outsource the administration of traffic violations; - The Company is able to cut its operational expenses in line with sales levels; - There is no deterioration in the payment and collection cycle; - The Company is able to obtain tax clearance certificates for the various new tenders; - Projected tenders are awarded to the company; and - The Company has the ongoing support of all its stakeholders. Any negative change in these assumptions would impact on the ability of the Company to continue as a going concern. The cash injection relating to the Specific Issue gives the company the best possible chance of returning to profitability by providing liquidity to commence new projects as well as pay historic creditors. SCHEDULE 13 CONSIDERATIONS The business rescue practitioner of TCS (“the Practitioner”) has provided the following confirmations to the JSE in respect of the Schedule 13 application: - negotiation does not allow time for shareholder approval; - all alternative methods of financing have been exhausted and the only option remaining is to issue shares for cash; - by taking the decision for the Specific Issue, the Board is acting in the best interests of the Company and shareholders as a whole and that, unless the Specific Issue is completed, liquidators are likely to be appointed; - the Specific Issue is not to a related party and thus no fairness opinion is required; and - the Specific Issue does not constitute an affected transaction requiring the Takeover Regulations Panel approval. WORKING CAPITAL STATEMENT Based on the current circumstances and the assumptions as detailed in the prospects, the practitioner and Board are of the opinion that the current working capital available to the Company is sufficient for the subsequent 12 months as of the date of this announcement. PRO FORMA FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT The table below sets out the pro forma financial effects of the Specific Issue on TCS’s basic and diluted loss per share, headline and diluted headline loss per share, net asset value per share and net tangible asset value per share. The pro forma financial effects have been prepared to illustrate the impact of the Specific Issue on the reported financial information of TCS for the interim period ended 31 August 2013, had the Specific Issue occurred on 1 March 2013 for statement of comprehensive income purposes and on 31 August 2013 for statement of financial position purposes. The pro forma financial effects have been prepared using accounting policies that comply with IFRS and that are consistent with those applied in the reviewed condensed consolidated results of TCS for the interim period ended 31 August 2013. The pro forma financial effects which are the responsibility of the directors are provided for illustrative purposes only and, because of their pro forma nature may not fairly present TCS’s financial position, changes in equity, results of operations or cash flow. 1 2 Before the After the Specific Specific % Issue Issue Change Basic and diluted loss per share (cents) (2.12) (1.68) 20.75 Headline and diluted headline loss per share (cents) (2.12) (1.68) 20.75 Net asset value per share (cents) (7.57) (7.31) 34.35 Net tangible asset value per share (cents) (7.59) (7.33) 34.26 Weighted average number of shares in issue 386 363 486 363 Total number of shares in issue excluding 386 363 486 363 treasury shares (‘000) Notes: 1. The “Before the Specific Issue” basic and diluted loss per share and headline and diluted headline loss per TCS share have been extracted without adjustment from the reviewed condensed consolidated results for the interim period ended 31 August 2013. The “Before the Specific Issue” net asset value and net tangible asset value per TCS share has been calculated from the financial information presented in the reviewed condensed consolidated results for the interim period ended 31 August 2013. The “After the Specific Issue” column reflects the pro forma effects of the Specific Issue on TCS. 2. The financial information included in the "After the Specific Issue" column has been prepared based on taking into account the following: - TCS issuing 100 million ordinary shares in respect of the Specific Issue; and - TCS receiving R1 million in respect of the Specific Issue. 3. There are no post reporting date events which require adjustment of the pro forma financial effects. 4. All adjustments directly attributable to the Specific Issue are expected to have a continuing effect on the financial results of TCS. 5. Shareholder are advised that immediately subsequent to the release of the Company’s year end results for the period ended 28 February 2014, a further announcement will be issued to illustrate the pro forma financial effects of the Specific Issue on these results. Subsequent to the announcements released on SENS on 22 November 2013, 20 December 2013, 20 February 2014, 4 April 2014 and 19 May 2014 whereby shareholders were advised that the Company is undergoing business rescue proceedings, that Mr Piers Marsden was appointed as the Business Rescue Practitioner and was in the process of finalising the Business Rescue Plan. Shareholders are reminded that although the Business Rescue Plan, as amended, has been adopted, the Company still remains in business rescue until such time as a notice of substantial implementation of the plan has been filed by the Business Rescue Practitioner. Accordingly, shareholders are advised to continue exercising caution when dealing in the Company’s securities, until a further announcement is made. Centurion 18 July 2014 Designated Adviser Merchantec Capital Date: 18/07/2014 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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