Stakeholder Reportalternativeprosperity.com/wp-content/uploads/2014/09/...indicators: 1. Our reach 2. The quality of our solutions 3. How we created prosperity for our shareholders

ALTERNATIVE PROSPERITY GROUP

StakeholderReport

The purpose of th is report i s to show our stakeholders how we create va lue . I t a lso prov ides an overv iew of whether, in 2018, we were a bus iness that made a pos it ive contr ibut ion to our country, whi le c reat ing va lue for our peop le and shareho lders .

CONTENTS

04 // OVERVIEW

08 // CEO'S VIEW

10 // CHAIRPERSON'S REPORT

12 // OUR PURPOSE

14 // WHAT WE DO

18 // HOW WE DO IT

20 // ORGANISATIONAL STRUCTURE

21 // OUR STRATEGIC OBJECTIVES

22 // OUR AREAS OF INFLUENCE

24 // OUR PERFORMANCE

34 // TRIBUTE TO OUR COLLEGUES

36 // KEEPING OURSELVES ACCOUNTABLE

37 // CONTACT INFORMATION

2017 was the first year in which we functioned as a proper holding and investment company.

During 2017 we worked to give better structure to a significantly larger business. This included

streamlining, setting clear targets and leadership responsibilities at each operational entity.

We believed that the improved structure would set us up to do more work with the most

influential private, public and investor organisations in the Southern and Eastern African region.

We also wanted to work across a range of related EESG1 themes, and therefore focused

on ensuring we can deliver well defined services and products in transformation/B-BBEE,

sustainable development, economic research and policy work, retirement fund trustee

development, and responsible investment.

What we said in 2017

OVERVIEW

1 Economic, Environmental, Social and Governance.2 This report relates to the financial year ending 30 September 2018. Data used covers the period 1st October 2017 to 30 September 2018.

For ease of reading we just refer to 2018 throughout the report.3 According to the Alternative Prosperity Group consolidated financial statements for year ending 30 September 2018.4 The internal valuation was completed in September 2018 and considers both 2018 results and future budgets. Please note that whereas

operating profit excludes associate and minority holdings, the valuation includes these holdings at fair value. 5 Clients in attendance include amongst others: ARC, JSE, Old Mutual Insure, Santam, Stefanutti Stocks, Energy Partners, Mergon and the JSE.

What happened in 20182

In 2018 we could see how our newly structured organisation fared in the field. As in 2017,

this document provides a view of what went well and what did not. We will again look at three

indicators:

1. Our reach 2. The quality of our solutions3. How we created prosperity for our shareholders and people

How each business contributed to our financial performance is set out in more

detail in Section 6, but in summary:

• The core transformation business (Alternative Prosperity Advisory) had a stable

performance in 2018, but is set up for expansion through the Johannesburg office in 2019.

The mandated investment product has performed exceptionally well during 2018 as a

result of good client service and substantial client value. It is worth noting that our B-BBEE

ownership work has increased significantly, providing us with a beachhead against B-BBEE

advisory competitors (due to the complexity of ownership related work).

• Although it is early days, the newly established Six Capitals, our Responsible Investment

(RI) advisory business, demonstrated an ability to attract the right profile clients from

which to grow.

• We have unlocked synergies with DNA Economics, that include work for the B-BBEE

Commission and tendering for a variety of assignments.

• The Alternative Prosperity Foundation also hosted two diversity living and leadership

workshops bringing together 33 young peer-leaders form the poorest communities and

senior people from our clients5. We also continued training labour representatives of

trustees, during 2018 four cohorts were trained.

For 2018, the Alternative Prosperity Group increased revenue year-on-year with

30.2%3, resulting in a significant improvement on our financial performance from

2017. The Group's latest valuation is R47 million4, having managed an annualised

return of 31% since 2013.

6 // Stakeholder Report 2018 Alternat ive Prosper ity // 7

What concerned us in 2018, and are therefore being actively managing in 2019 include:

• During 2018 we struggled to secure large transformation strategies with clients. These large

strategies generally provide us with significant implementation work in the following years.

This has been offset by a growth in clients that use our advice. We have also provided

substantial implementation support on historic strategy clients. We have added 45

influential clients in 2018.

• Our main challenge in 2018 was in Kenya where inability to secure sufficient work has

forced us to change the business model and scale down the office. We now work from an

associate model. Under the new model, the Kenyan business is now turning a profit. In

2019 we will need to work with AP Kenya to scale using the associate model.

• Currently in the Today’s Trustee business, in which we hold a minority interest, leadership

issues are hampering the success of the business. In 2019 we will work tirelessly to ensure

the success of a business with immense potential.

To support the underlying businesses APH is invested in, APH now offers support services that

include: a tender office, a senior sales and marketing resource, B-BBEE structuring support,

financial management and reporting, support in strategic planning and synergy events where

people from the different business can interact. The level of awareness of opportunities

amongst the different businesses in APH’s portfolio has significantly increased. It is our

philosophy that leaders in the various organisations need to take the initiative amongst each

other to work together.

We have improved the diversity of our own business, albeit that we are still challenged at board

and top management level (25% black only). We are currently 46% female and 38% black

as defined by the B-BBEE Codes of Good Practice. Two of our staff members achieved post

graduate degrees in sustainable development, and one will finish her thesis for her masters in

2018.

In summary, the business is in a better place than a year ago. Despite losing some much-loved

colleagues, our people are more focused and content. A lot of the uncertainty that came with

the structure changes of 2017 has been worked out of the system.

During 2018 we have also expanded our research and advisory work with sector and

national bodies to find better solutions to issues of diversity and responsible investment.

During 2018 we worked towards:

• An alternative finance model for agricultural enterprise development programmes

in partnership with Distell.

• A transformation index for the JSE Top 100 companies in partnership with 27four Investment

Managers.

• An online learning platform and quarterly education supplement for South African retirement

fund trustees in Today’s Trustee.

• An ESG due diligence toolkit for investors currently being used by the KZN Growth Fund

• A diversity living and leadership curriculum for organisational leadership used with,

for example the Mediclinic Southern Africa Executive team.


CEO's View

Alternative Prosperity Holdings has had a good 2018 financial year in relation to its expected

financial and impact performance. Many operational structural changes have started bearing

fruit, and improved human resource management positions the business favourably for the

new financial year. We managed to position ourselves strongly in our niche financial and impact

focus areas, moving away from the traditional BEE scorecard work. A more diversified product

offering and investments into other disciplines such as economic research and policy work

(DNA economics), responsible investment (Six Capitals), Consumer Education (Today’s Trustee)

and smaller incidental investment opportunities (the AHG group) mitigate our BEE exposure to

some extent.

Some of these successes have come at a cost and required great effort, with the loss of people

who have been part of the group for a number of years being tough on team dynamics and a

shift in focus towards our financial competency putting pressure on individuals to upskill for

our future positioning.

The 2018 financial year created the platform for a promising 2019 year, with products and

service offerings that could add substantial financial value while broadening our impact in

society in general.

We can truly say that we have grown as a business in 2018.

Christiaan van der Merwe – CEO


Chairperson's Report

In reflecting on the 2018 Financial year, we proved that we have developed certain capabilities

at holding company level, that have added value across the group. First 2018 proved that the

key acquisitions we made in prior years have added value (DNA and AHG), and second, we

proved that through working synergies in the group, we were able to successfully tender for

and execute on a number of key assignments, that none of the individual companies could

have won on their own.

At the same time, we also started the APAP JHB offering, and this has already achieved good

traction that can be scaled relatively quickly. The “build” as opposed to “buy” strategy was with

hindsight, the right decision. The same can be said of our ESG offering – Six Capitals.

It is also true, that 2018 was a year of tough decisions and during which the APAP Cape Town

as well as the Kenya business’, were scaled back quite significantly in terms of people. Despite

this, commendable growth in turnover was achieved across the Group, and a positive impact on

Operating Profit, started coming through in the third and fourth quarters. This was all achieved

in a challenging operating environment.

2019 will amongst other things, require specific focus on capitalising on the potential of the

Todays Trustee Member Education offering.

Trevor Chandler - Chairperson


OurPurpose

A challenge of our time is the role organisations should

play in addressing damaging Economic, Environmental,

Social and Governance (EESG) practices that are eroding

prosperity and enhancing inequality. In South Africa the

issue of persistent race-based inequality is an example

of such a social challenge.

In this context our purpose as a Group is to help shape organisations that contribute to a more prosperous society.

1514 // Stakeholder Report 2018

We are in the business of enabling organisations to make decisions that will build trust and

create wealth for its stakeholders. We do this through the services and products offered by the

businesses we are invested in.

WHAT WE DO

Works with South

African executives and

transformation managers

to address B-BBEE6 and

transformation in a manner

that creates shared value.

Works with asset owners

and asset managers offering

EESG advisory services.

Works with retirement fund

trustees strengthening their

ability to be effective and

active stewards of public and

workers’ capital providing

trustee education and EESG

investor information.

AP Advisory Six Capitals Today’s Trustee

Works with Government, DFIs

and other organisations on

issues of social and economic

research, social impact and

policy.

Works with private and

development institutions

on issues of sustainable

development in the

East African region.

Works with youth, women

and fiduciaries to become

transformation and diversity

leaders.

DNA Economics AP Kenya AP Foundation

The delivery of these services and products are guided by:

We cover the following themes:

A value based7 culture that constantly reassess our relevance

and impact (value based)

Creating prosperity for our own organisation and stakeholders8

6 Broad-Based Black Economic Empowerment7 Our work and governance are anchored and informed by six core values. We are people centred and our values are focused on the potential and well-

being of individuals and the environment in which they function. We believe in a pioneering spirit and the power of diversity, personal responsibility and

accountability to our clients and other stakeholders. 8 Key stakeholders include shareholders, staff and AP Foundation beneficiaries.


Our Prosperity • A much-improved financial performance at Group level compared to 2017.

• AP Advisory, Six Capitals and DNA are healthy businesses and set up for growth

• Strengthened investments through:

• APH marketing, sales representative and tender office

• Refining operational structures and people allocation across the Group

• Financial management and related back office support

• Our employees have generally adjusted well to the structural changes and loss of

team members during 2017. This can be attributed to clear operational level CEO

leadership and better role clarity and KPIs for staff.

Reach• Expanded the number and quality of our client base significantly

• Doubled B-BBEE ownership related work

• Secured substantial RI clients and contracts

• Significant increase in industry representation and research

Solutions• Development of at least 5 products for use beyond hourly based consultancy

• 33 youth peer-leaders trained through the AP Foundation programmes


We are a majority black owned holdings company (54%) that invests

in entities that assist large public and private entities to address

EESG issues. The entities in which we invest offers advisory

services, research and products to entities with a substantial EESG

footprint.

Our investments are run by highly qualified and experienced people

that understand complex societal challenges. They are typically

able to move from policy/legislative requirements to practical

implementation and are passionate to address these issues. We

can therefore offer clients a range of competencies that include

compliance, financial acumen, sustainability, strategy and project

development competencies.

To ensure we have viable and profitable businesses we appoint

and support seasoned CEO's that can run our enterprises

independently, fostering clear purpose, values and a performance

driven culture. In other words, we want to work with as many

influential organisations as we can to drive solutions that will

create prosperity for all in an unbalanced system.

HOW WE DO IT

Lowlights

Our Kenyan operations have continued to struggle, resulting in a

change to the business model and reducing the office size. Currently

the business is profitable, but not set up to scale in the short-term.

Today’s Trustee has been successful in adding a trustee/member

education business alongside the original magazine. Ineffective

leadership and operations have delayed the progress that is possible.

We see a lot of value in this investment.

We have not managed to secure the targeted pipeline of large

transformation strategies. Although the financial effect of this has

been off-set through more general advisory work.

Our own diversity is still a work in progress.

Although we have significant black shareholding,

our board and top management are still predominantly white male.

We have marginally improved performance since 2017.


ORGANISATIONAL STRUCTURE

Figure 1

Figure 1 below sets out our latest organizational structure and focus.

Group Holdings

Investments, Research, Products

Executive

65% 100% 90% 30% 26%

Alternative Prosperity Advisory

(Kenya)

FOCUS:

ESG and SustainabilityIntegrated Reporting

Alternative Prosperity Advisory

(South Africa)JHB | CPT

FOCUS:

B-BBEE and TransformationBespoke ESG

and Sustainability

Six Capitals(South Africa)

FOCUS:

Responsible and Impact Investment Advisory

Today’s Trustee(South Africa)

FOCUS:

Trustee Publishing andTrustee Training

DNA Economics (South Africa)

FOCUS:

Economic DevelopmentResearch and Policy

CLIENTS: CLIENTS: CLIENTS: CLIENTS: CLIENTS:

HEAD:

Cecilia Bjorn-Murai

HEAD:

Erosha Govender

HEAD:

Adrian Bertrand

HEAD:

Allan Greenblo

HEAD:

Matthew Stern

Government, DFI and Large Companies

Retirement Fund Fiduciaries

Asset Owners and Managers

Listed, Large and QSECompanies & Non-Profits

Kenyan Government, DFIand Large Companies

Although each underlying company in the Group has its own strategic focus, from a Group

perspective we aim to achieve our purpose through the following Holdings/Investment level

objectives.

Our Strategic Objectives at AP Investments Level

Reshape organisations

contributing to a

prosperous society

Unlocking value

through strategic

positioning of

investment portfolio in

terms of ESG

Be a preferred BEE

investment partner

(balance sheet &/or

strategic input)

Growing the

investment portfolio

by 30% per annum

OUR STRATEGIC OBJECTIVES

Reshape organisations

contributing to a prosperous

society

Being a fully empowered

player and partner, as

underscored by our charter

Achieve value growth of at

least 30% per annum for the

next five years

Diversify business – more

than advisory – targeting

investment space

Lower cost of capital

through utilisation of black

owned status

Optimise the utilization

of capital

Our Strategic Objectives at AP Holdings Level


We assessed9 our impact through the following methodologies:

Our Performance in Key Impact Areas

The adjacent table provides stakeholders with a self-assessment of our performance over

the past year. We cover three themes as per our impact framework. Under each theme

three key indicators are used for measurement.

- Business data analysis (Client; Financial; Employee)

- Client EESG performance (E.g. B-BBEE levels)

OUR PERFORMANCE

9 This assessment is not supposed to be scientific, but rather an honest reflection of our impact. Areas where we performed well or had a positive

influence is listed in the “Good” column and in the adjacent column are areas where we would need to focus (“Neutral / Bad”) in the year ahead. 10 Assessment of impact exclude DNA Economics and Today’s Trustee due to investments APH being minority shareholders. 11 For 2018 reporting we focused on Transformation/B-BBEE transformation strategies as it makes up a significant part of our work and spearheads

our ability to influence transformation. For 2019 we will change this to measure significant assignment and projects. For APAP this includes

Transformation/B-BBEE strategies as well Black ownership Strategies. For Six Capitals this includes RI Strategies/Policies, ESG Due Diligence.

THEME WHY THIS FOCUS AREA KEY INDICATORS

Greater Reach • Greater Reach of our services, research and products will lead to a broader understanding and response to the complex challenges faced around Transformation (incl. B-BBEE), Responsible Investment and Sustainable and Economic Development.

• % Growth in strategies10 delivered to influential organisations11 (Quantitative analysis).

• Strategic application of new capital (Narrative).

• Reach of our research and policy work (Narrative).

Better Solutions

• Consistently improving our solutions will ensure that clients and society can solve their problems, but not in a superficial manner that carries reputational (and in the B-BBEE context criminal fronting risk) for clients. It will also allow us to work more efficiently at the right speed and price preventing employee non-performance and burnout.

• Improvements in client transformation/ESG performance (Quantitative analysis and Narrative).

• Client Offering (Narrative). • Staff Productively and Project

profitability (Quantitative analysis).

Satisfied Stakeholders

• Satisfied Stakeholders which speaks to the value created for employees and shareholders as well as our own diversity.

• Strong performance on these aspects will ensure we stay relevant to these stakeholders ensuring the commitment and passion for the Group.

• Shareholder return (Quantitative analysis and Narrative).

• Employee return (Quantitative analysis and Narrative).

• Our Diversity (Quantitative analysis and Narrative).


REACH 2018 ACTUAL 2017 ACTUAL

Year-on-year Sales Growth 30,2% 17.5%

% of Sales budget - Group 93% 84%

New clients added 45 33

REACH 2018 ACTUAL 2018 TARGET

Number of strategies 17 36

OUR PROSPERITY 2018 ACTUAL 2017 ACTUAL

Value of the Business (Rm) R47 R36

Performance at a Glance (These numbers are explained in the tables below)

Transformation Strategy Impact

Average clients at level 4 or better

Strategies resulting in implementation support

Average clients beyond scorecard

2018 Actual 2018 Target 2017 Actual

58% 80% 66% 55% 51% 42% 44%

Employee Productivity 2018

Annualised Return Since 2013

Productivity

Group Annualised Return



57%

31%

70%

30%

56%

27%


TRIBUTE TO OUR COLLEGUES

Nomnikelo showed us what it means

to be people centred. She cared for

Thembi, AP’s previous cleaner that

passed away unexpectedly, when

she realised that Thembi did not have

any family that would look after her.

Nomnikelo Mhlauli

People Centered

Delene Taute

Delene was the first intern we hired.

Delene was always willing to go the

extra mile to get things done. She

brought a strong work ethic to work

with her every day. Dependable

Honest

Zani Malan

As one of the founders, Zani will

remain close to the business. Zani

always asked “is this right?” questions.

She was able to challenge thinking. We

wish her all the best with the time as

a full-time mom.

Ciska has a wonderful passion for life.

She introduced shared value thinking

to our business, which remains a

fundamental part of how we look at

transformation and ESG issues. Ciska

remains an associate with AP.

Ciska Kruger

Pioneering

Each of the operational entities (See Figure 1) has a dedicated executive officer and

management team who are incentivised through bonus and future employee share schemes.

Performance against impact and budgetary targets are measured through a set of KPIs

contracted annually. A back-office committee comprising leaders of each subsidiary as well as

support functions (e.g. Marketing; Strategy; IT and Finance) are in place. A risk framework is also

maintained at Group level.

Alternative Prosperity Holdings’ governing structure consists of a Board of Directors and key

committees that oversee certain aspects of governance and reports back to the board. Key

committees are; Remunerations committee and Investment committee. The AP Holdings board

will function as the main board for majority held subsidiaries. Only in the case of Today’s Trustee,

AP Kenya and DNA will boards be different.

Management Structure

Governance

KEEPING OURSELVES ACCOUNTABLE

Alternative Prosperity Holdings (Pty) Ltd

Registration nr: 2015/040144/07

Vat nr: 4120279924

Group financial director:

Dawie Malan

Tel: +27 21 851 0091

The Sanctuary, 2ND Floor,

c/o Broadway Blvd (R44) & De Beers Ave

Somerset West, 7130

Group managing director:

Christiaan van der Merwe

Tel: +27 21 851 0091

www.alternativeprosperity.com

Please direct all Stakeholder

Report queries and comments to:

[email protected]

CONTACT INFORMATION


Documents

Stakeholder Reportalternativeprosperity.com/wp-content/uploads/2014/09/...indicators: 1. Our reach 2. The quality of our solutions 3. How we created prosperity for our shareholders