Bob Van Dijk

Chief Executive Officer

Naspers Ltd / Prosus NV

40 Heerengracht

Cape Town 8001

South Africa

June 11, 2021

Open letter to Mr. Bob Van Dijk, CEO

Copy to Bloomberg, Moneyweb, FT, WSJ

Dear Mr. Van Dijk,

I note with interest that a group of 35 institutional investors has written to the non-executive directors
of Prosus and Naspers arguing against the tender offer and the crazily convoluted cross-shareholding
structure that would result from it. I expect that my last open letter dated May 19 will eventually lead
to a large majority of minority shareholders in Naspers rightfully turning down the Prosus tender offer.
Prosus minority shareholders should also vote down the transaction at the EGM as it is eventually
detrimental to both companies. What an embarrassment that would be…

Prosus’ reply in its June 10 website update is wholly inadequate, and I will deconstruct your arguments
and demonstrate below that all these arguments developed to justify the tender offer are weak at best,
senseless for most.
Complexity of the proposed transaction

We agree that we must avoid friction due to complexity. After extensive work, a structure was found that
makes the end state of the transaction straightforward, through the cross-holding arrangement, with
dividend flows clear and certain. We encourage investors to review this arrangement.

A cross-shareholding structure in an already pyramidal structure is the WORST, least efficient

type of corporate structure one can think of. Capital markets were littered of such examples in
Europe and Asia as this was often the route chosen by family holding companies wanting to
exert maximum control on assets with minimum capital. Be assured you have not invented
anything original with this structure. It is one of the past, and thankfully most have been
restructured and have disappeared. It is impossible to argue that by creating a cross-
shareholding structure the discounts at Prosus and Naspers will contract as more complexity
leads to the opposite. It just won’t happen.
Alignment of management and shareholder interests

We fully concur that management and shareholder interests must be aligned.

All of management PSU and share option incentives today are in Naspers. These components represent
the vast majority of their compensation. As we move forward it is necessary to include Prosus options and
PSUs to reflect the interests of all shareholders. In our integrated annual report (to follow in a few weeks)
you will see that the intention for future allocation of long term incentives for the executive directors is to
align them with Naspers and Prosus shareholders’ free float interests as a reference (currently 72,5%
Naspers, 27,5% Prosus). Nonetheless, the Naspers component of the incentive will continue to be the
most significant component of management compensation for many years to come. Our executive
directors commit that they will not exercise their vested Naspers share options, which is where they have
most of their wealth tied up, prior to the exchange offer.

The board remains committed, and management is incentivised, to continue to take action to address the
discount to NAV in the future and the proposed transaction maintains our flexibility to do so.

If management wanted its interests to be aligned with that of shareholders, its compensation
should be based on the “stub” value of Naspers rather than its share price. Naspers’ stock price
is highly dependent on Tencent’s stock price. Yet, you have no influence whatsoever on
Tencent’s share price. It is therefore illogical that management’s compensation be based on
something it has no control on. On the other hand, you can influence the “stub” value. The
“stub” value is defined as Naspers’ market cap minus the indirect stake value in Tencent. You
can influence that stub value directly as it can be considered as the monetary value of the
discount. Given that one of the main objectives of management is supposedly to reduce the
discounts to NAV at Prosus and Naspers, it follows that compensation should be based on this
objective.

We believe that the proposed transaction is in the best interests of Naspers and Prosus shareholders:

 It could provide significant value unlock for Prosus and Naspers shareholders. It will increase the
Prosus free float materially, with expected growth in its overall trading liquidity, market index
weightings and positive trading dynamics. It will relieve pressure resulting from the too-large size
of Naspers on the JSE, which we believe has inhibited Naspers’s market valuation.

The argument above refers to flow of funds which are transitory and impossible to predict long-term.
While there may be a one-off impact due to in particular index funds (are these the shareholders you
are really courting?), there is no way to predict long-term flow of funds. Moreover, the increase
weighting/liquidity at Prosus translates into lower weighting/liquidity at Naspers. Lower liquidity is one
of the most important factors in corporate structure discounts. It is guaranteed that lower liquidity at
Naspers will lead to a higher structural discount vs. Prosus. This will be exacerbated in volatile down
markets.

In addition, the liquidity argument was already made when Prosus was created. Supposedly, with
Prosus trading in Holland and attracting a much wider investment base, we were told that Prosus would
become more liquid than Naspers, would carry a lower discount and become an investment of choice.
Fast forward after Prosus’ IPO, and 1/ Prosus’ discount expanded from less that 15% at the IPO to at
some point almost 40% (congrats!) 2/ Prosus’ discount exceeded the discount previously observed at
Naspers (congrats again!) 3/Naspers remains more liquid than Prosus.

 The exchange ratio is equitable, sharing the value created by the transaction according to the
current underlying ownership of the Prosus NAV, which is 72.5% Naspers and 27.5% Prosus.

This has to be one of the worst arguments put forward by management. The exchange ratio of 2.27443
Prosus shares for 1 Naspers implies tendering Naspers at 49% discount for Prosus 37% discount for
essentially the same underlying assets. I would like to know why anyone would want to do that,
particularly in light of the consequences post-tender. As I argued in my previous letter, if this tender
offer were to proceed, at the VERY LEAST, it should be on a discount neutral basis on a look-through
basis for Naspers. This implies a 2.83 exchange ratio at current share prices.

 This action follows the successful prior action of listing Prosus on the Euronext Amsterdam
exchange. That helped reduce Naspers’s size on the JSE and resulted in net Foreign Direct
Investment inflows into Naspers.

Who are you kidding here? Yes, the IPO may have been a success on day 1. As mentioned above, since
then, the discount on Prosus has kept increasing. Since the IPO, Prosus has underperformed Tencent by
29%. It has also underperformed the Nasdaq by 30%, Softbank by 26%, and Kinnevik by 60%. As for
Naspers, it suffers from the creation of this useless pyramidal structure which has overlayed a discount
on top of a discount.

 The group has has a track record of consistent value creation and over the past decade,
investments in the group’s e-commerce businesses have delivered a rate of return above 20%.
The track record is well placed to continue and its value will be more adequately realised in the
Group’s post transaction structure. In the first half of the year, Group revenue and profit growth
accelerated meaningfully and, as is evidenced in the Group’s trading statements published today,
operational gains have continued into the second half of the year. These figures will be updated
during our next results presentation on 21 June.

Value creation is best described by the chart below (the “stub” value I am referring above):
Whereas the discount at Naspers had stabilized in 2018-early 2019, the stub value totally collapsed with
the IPO of Prosus. The chart could not be clearer and you just can’t argue this fact. The creation of this
pyramidal structure has been extremely detrimental to Naspers’ shareholders, period.

I cannot fathom how you can talk of value creation in your e-commerce group when Prosus/Naspers have
been a value destruction machine on a grand scale. Since the Prosus’ IPO on Sept 11, 2019, Naspers
destroyed Eur 51bn of value and Prosus destroyed Eur 32bn. This can be easily calculated. At the time of
the IPO, the stake value in Tencent exceeded Prosus’ market cap by Eur 9bn. This is 41bn now, or 32bn
of value destruction. Similarly, at the time of the IPO, the stake in Prosus (taken at NAV, ie on a look
through basis) exceeded Nasper’s market cap by Eur 35bn. This number is now a staggering 86bn or 51bn
of value destruction. I estimate that since Prosus’ IPO, the value of the e-commerce group may have
increased by no more than Eur 6-9bn. Peanuts in comparison.

It must be realized that no matter how good the e-commerce group is, it is irrelevant in the context of
Naspers/Prosus because of the disproportionate size of the Tencent stake. Hence, as I have argued
before, you can spin-off a high-tech firm here, announce a share buyback there, it will only have marginal
impact on the discount, and indeed this is what has been happening in the last two years. The creation
of Prosus made a bad situation worse, and the cross-shareholding structure would make it intractable.

Given the pyramidal structure now in place, the only effective way to reduce the discount is to eliminate
it at Prosus. I will re-iterate my proposals:
1/ spin-off the e-commerce/VC group into a separately listed investment firm. Inject holdings in Mail.ru,
Delivery Hero, Trip.com and other minor listed assets. These stakes are worth about Eur 9bn and this
should prove more than enough to fund further VC investments (if not you can always inject some of the
net cash balances in Prosus). This company would have a market cap of Eur 25-35bn and would be a
unique investment asset not only in Europe but globally. The market would finally be able to properly
value the VC portfolio, and might even apply a premium rather than a discount given the prospects for
some of the companies in your portfolio. It is also obvious that the same spin-offs in a Eur 25-35bn market
cap company would have a much greater impact than in a Eur140bn market cap company.

2/ Prosus becomes a Tencent tracker. Trackers trade between fair value and 15-20% discounts to NAV.
Prosus should then take the route of Yahoo with Alibaba and unwind the structure thus realizing the
discount.

These two measures are not only possible to implement, they are highly executable and will solve the
discount at Prosus. Once this out of the way, Naspers could then in turn spin-off the VC company shares
and return to its South Africa/Africa media (and tech media) roots.

As an aside, the argument that Naspers/Prosus benefit from the Tencent stake (and seat on the board) in
terms of investment synergies with your Chinese partner is bunk. Tencent has a portfolio of over 20 listed
investments, some of which were incredibly recent successful IPOs (Meituan, Pinduoduo, Sea, JD.com to
name a few). Regrettably, Prosus/Naspers participated in none. Similarly, according to Bloomberg,
Tencent did 78 VC deals year to date, none of which Prosus/Naspers were involved with. And while
Tencent invested in 78 companies in 2021 so far (and Softbank in 69 companies), Prosus invested in 3…

Looking forward to hearing from you,

Best regards,

Albert Saporta

Director

AIM&R
La Gallery
5 rue Etienne Dumont

1204 Geneva – CH

albert@aimr.ch

+41 78 616 0780