CSF : CSFG - Announcement re Proposed Cancellation and AGM

26 September 2016

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR")

CSF Group plc

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

Proposed cancellation of admission of the Company's ordinary shares to trading on AIM and Proposed extraordinary general meeting

The Board of CSF announces that the Company intends to seek Shareholders' approval to cancel the admission of the Company's ordinary shares of 10p each ("Ordinary Shares") to trading on AIM (the "Proposal" or the "Cancellation").

Under the AIM Rules for Companies (the "AIM Rules"), it is a requirement that the cancellation of admission to trading on AIM must be approved by not less than 75 per cent. of Shareholders voting in general meeting. Under the AIM Rules, the Cancellation also requires a notice period of not less than 20 business days from the date on which notice of the intended Cancellation is notified via a Regulatory Information Service and is given to the London Stock Exchange.

The Company intends to send a circular (the "EGM Circular") to Shareholders, which will also contain a notice of an extraordinary general meeting (the "Extraordinary General Meeting"), which is intended to take place immediately following the conclusion or the adjournment (as the case may be) of the Company's 7th Annual General Meeting which will take place at 7:00 a.m. British Summer Time ("BST") / 2:00 p.m. Malaysia Time ("MYT") on 18 October 2016 at the Business Centre, Mezzanine Floor, CSF Computer Exchange 5, Jalan Cyber Point 2, Cyber 12, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia.

The Extraordinary General Meeting is to be held for the purpose of considering, and if thought fit, passing the following resolution (the "Resolution"), to take effect as a resolution of the Company requiring 75 per cent. of the votes cast (in person or by proxy) to be in favour: THAT, the admission of the ordinary shares of 10p each in the capital of the Company to trading on AIM, a market operated by the London Stock Exchange plc, be cancelled and that the directors of the Company be authorised to take all steps which they consider to be necessary or desirable in order to effect such cancellation.‌

Certain of the Directors, members of the Company's senior management team and the Company's employee benefit trust, whose shareholdings in aggregate represent 11.02 per cent. of the issued share ordinary capital of the Company, have given irrevocable undertakings to vote in favour of the Resolution.

Subject to the passing of the Resolution at the proposed Extraordinary General Meeting on 18 October 2016, Cancellation will occur no earlier than 5 business days after the proposed Extraordinary General Meeting and it is therefore expected that trading in the Ordinary Shares on AIM will cease at the close of business on 25 October 2016, with Cancellation expected to take effect at 7:00 a.m. (BST) / 2.00 p.m. (MYT) on 26 October 2016.

Pursuant to Rule 41 of the AIM Rules, the Directors have notified the London Stock Exchange of the date of the proposed Cancellation.

The EGM Circular will set out the following, details of which can also be found further below within this announcement:

• the background to the Proposal;

• why the Board has decided to proceed with the Proposal, subject to Shareholders' approval; and

• why the Directors believe that the Proposal is in the best interests of the Company and Shareholders as a whole and why the Board recommends that Shareholders vote in favour of the Resolution at the forthcoming Extraordinary General Meeting.

Should Cancellation be approved by Shareholders at the Extraordinary General Meeting, the Company intends to put in place a matched bargain settlement facility which should facilitate Shareholders buying and selling Ordinary Shares on a matched bargain basis following Cancellation. The Board is reviewing several matched bargain settlement facilities and the Company intends to make an announcement in respect of such a facility ahead of the date of Cancellation.

It is anticipated that the EGM Circular and the notice of the Company's 7th Annual General Meeting will be posted to Shareholders on 30 September 2016 and the Company will make a further announcement once these documents have been posted and are available to view and download from the Company's website at www.csf-group.com, in accordance with Rule 26 of the AIM Rules.

Background to, and reasons for, the Proposal

Level of trading in the Ordinary Shares and lack of institutional demand

The Board considers that the total trading volumes in the Company's Ordinary Shares over the period from 1 January 2016 to 23 September 2016 were effectively negligible, representing less than

1. per cent. of the Company's issued ordinary share capital. The Board does not believe that there are currently any likely circumstances that would reverse this trend, and believes that the level of liquidity in the market for the Ordinary Shares is effectively meaningless.

   Despite efforts to attract investors, the Board is of the view that there has been a relatively low demand for the Ordinary Shares, especially from institutional investors.

   The Board also has certain reservations regarding the practical value of institutional investors. The Directors remain cognizant of the fact that meaningful amounts of additional working capital would be useful to the smooth-running of the Company's data centre infrastructure management business, given the expenses associated with capital and operating expenditure. However, the Board is also mindful that institutional investors may require shorter-term levels of return, which may be incompatible with the long-term nature of the data centre business and the Board's long-term strategy and business model. In any event, the Board is of the belief that the aversion to risk by institutional investors means that the illiquidity in the market for the Ordinary Shares acts as a further deterrent.

   Inability to raise capital

   At the beginning of 2015, the Company's share price plateaued and since then has never risen above a level of 3.5p, which represents a 65 per cent. discount to the Ordinary Shares' par value of 10p. As at 23 September 2016, being the latest practicable closing price prior to this announcement regarding the Company's intention to seek Shareholder approval for the Cancellation, the closing middle market price of an Ordinary Share on AIM was 1p. The Board views the continuing low share price as being a significant hindrance to the Company and partially as a consequence of this, despite significant efforts, the Directors have not been able to secure additional capital, especially by way of equity financing.

   The Company's main reason for having its Ordinary Shares admitted to trading on AIM in 2010 was to access capital and the Board has now concluded that it is no longer possible for the Company to raise equity capital on AIM.

   The cost of the Company's listing

   It is estimated by the Board that the total costs directly related to the maintenance of the admission of the Ordinary Shares to trading on AIM are over £200,000 per annum. This includes fees payable to the London Stock Exchange, nominated adviser fees, shareholder communication time and costs, and other professional fees. Given that the Company's operations are principally based in Malaysia, a country currently facing declining economic growth, the fact that a significant number of these expenses are payable in currencies other than the Malaysian Ringgit exacerbates the costs to the Company of maintaining the admission to trading on AIM of the Ordinary Shares.

   The Directors therefore believe that Cancellation will, accordingly, reduce the Company's recurring administrative costs, allowing the funds currently spent on such expenses to be better spent in running the business in a private capacity.

   Conclusion

   After careful consideration of the matters laid out above, the Directors have therefore concluded that the commercial disadvantages and costs of maintaining the admission to trading on AIM of the Ordinary Shares at this time in the Company's development outweigh the potential benefits, and that it is therefore no longer in the Company's or its Shareholders' best interests to maintain the admission to trading on AIM of the Ordinary Shares. Particular consideration has been given by the Directors to the very low liquidity in the Ordinary Shares, the lack of financing opportunities available to the Company, and the relative expense of the Company's quotation on AIM.

   Potential consequences if the Cancellation is not approved

   Shareholders should be aware that there may be potential consequences if the Cancellation is not approved at the Extraordinary General Meeting, which may include:

   • The Company's non-executive Board members considering their position and potentially resigning. This would lead to Company's nominated adviser considering the suitability of the Company to be a Company with shares admitted to a public market in the UK.

   • In the event that the Company's nominated adviser believes that the Company is not suitable to be a Company with shares admitted to a public market in the UK, then the nominated adviser will resign.

   • Following the resignation of the Company's nominated adviser taking effect, in the absence of the appointment of a new nominated adviser, trading in the Company's Ordinary Shares on AIM will be suspended.

   • If the Company cannot appoint a replacement nominated adviser within one month of such suspension, the admission of the Company's Ordinary Shares to trading on AIM will be cancelled.

Cancellation of admission of ordinary shares to trading on AIM

Cancellation

Under the AIM Rules, it is a requirement that the cancellation of admission to trading on AIM must be approved by not less than 75 per cent. of Shareholders voting in general meeting. Under the AIM Rules, the Cancellation also requires a notice period of not less than 20 business days from the date on which notice of the intended Cancellation is notified via a Regulatory Information Service and is given to the London Stock Exchange. Pursuant to Rule 41 of the AIM Rules, the Directors have notified the London Stock Exchange of the date of the proposed Cancellation.

Subject to the passing of the Resolution at the proposed Extraordinary General Meeting on 18 October 2016, Cancellation will occur no earlier than 5 business days after the proposed Extraordinary General Meeting and it is therefore expected that trading in the Ordinary Shares on AIM will cease at the close of business on 25 October 2016, with Cancellation expected to take effect at 7:00 a.m. (BST) / 2.00 p.m. (MYT) on 26 October 2016.

Trading in the Ordinary Shares after Cancellation

Whilst the Board believes that the Cancellation is in the interests of Shareholders as a whole, it recognises that the Cancellation will make it more difficult for Shareholders to buy and sell Ordinary Shares should they wish to do so. Following the Cancellation, although the Ordinary Shares will remain transferable they will no longer be tradable on AIM.

Accordingly, the Board intends, following the Cancellation, to put in place a matched bargain settlement facility (the "Proposed Facility") which should facilitate Shareholders buying and selling Ordinary Shares on a matched bargain basis following Cancellation. The Board is reviewing several matched bargain settlement facilities and the Company intends to make an announcement in respect of such a facility ahead of the date of Cancellation. However, it is likely that the Proposed Facility will offer a substantially lesser degree of liquidity and potentially less attractive share prices than are currently available via the Company's quotation on AIM.

The Board's choice of matched bargain settlement facility provider will determine whether the Company's existing CREST facility will remain in place following Cancellation and therefore whether Shareholders will be able to elect to hold their Ordinary Shares in dematerialised form. If the Company's CREST facility is ceased, then it is likely that Shareholders will be issued share certificates in respect of their Ordinary Shares.

Following the implementation of the Proposed Facility, the Board intends to monitor its popularity amongst Shareholders and will review it at regular intervals to consider whether it remains cost effective.

Effects of Cancellation on shareholders

Market for the Company's Ordinary Shares

The principal effect of the proposed Cancellation is that there would no longer be a formal market mechanism enabling Shareholders to trade their Ordinary Shares on AIM or any other recognised market or trading exchange. The underlying liquidity in the Ordinary Shares is low and, in the opinion of the Directors, is likely to remain that way for the foreseeable future. As described above, the Company intends to, shortly following Cancellation, put in place the Proposed Facility to serve as a