Prosus N : Remuneration report 2022 (PDF)

Improving everyday life

for billions of people through technology

Remuneration report 2022

Group overview

Sustainability review

Performance review

Governance Financial statements

Other information

02

2022 report annual Prosus

Remuneration report

Craig Enenstein

Chair: Human resources and remuneration committee

'We aim to attract, motivate and retain the best people to create sustainable shareholder value.'

Members of the committee

• CL Enenstein (chair)
• JP Bekker
• EM Choi1
• R Oliveira de Lima

Key focus areas during the year

• Reflecting the business performance in the FY22 remuneration decisions.
• Ensuring correct pay-for-performance mix is applied.
• Setting short-term incentive (STI) targets, including environmental, social and governance (ESG) goals that are measurable, sufficiently stretched and linked to the group's strategy.
• Establishing high weighting of performance share units (PSUs) in the long-term incentive (LTI) mix for executive directors, ensuring alignment between executive remuneration and shareholder outcomes.
• Improving disclosure of executive remuneration in the annual report, in a bid for greater transparency.
• Continued engagement with shareholders on remuneration topics.
• Ongoing monitoring of market developments to ensure our remuneration structure allows us to compete globally for talent, and that our offering is compelling, fair and responsible.
• Considering independent external advice on non- executive directors' fees.

Dear Shareholder

On behalf of the board, I am pleased to present our remuneration report, covering the 2022 financial year (FY22).

Despite a year of global turmoil and uncertainty, the past financial year has seen a solid operational performance at the group. We have focused on building strong momentum in our Ecommerce portfolio and investing in our businesses to capture the significant market opportunities that we see.

Business performance2

The group has delivered a solid set of financial results for FY22. Group revenue, measured on an economic-interest basis, grew 24% (24%) to US$35.6bn. The Ecommerce segment revenue grew strongly, increasing 58% (51%) to US$9.8bn. Tencent's contribution to group revenue grew 14% (16%). Group trading profit reduced 10% (6%) to US$5.0bn, reflecting investment to expand the market opportunity for each segment and strengthen the customer ecosystems of our businesses. Tencent's contribution to the group's trading profit improved 2% (4%). Consolidated free cash outflow was US$562m, a decrease on the prior year's free cash inflow of US$126m, as we stepped up operational and working capital, and capital expenditure investment across our businesses. Core headline earnings were US$3.7bn, a reduction of 23% (20%), which reflects ongoing investment in our Ecommerce portfolio and a period of slower growth at Tencent.

Major transactions

In April 2021, we trimmed our shareholding in Tencent, selling 2% of Tencent's issued share capital, raising US$14.6bn and reducing our holding to 28.9%. Proceeds were used to support our investment programme and two US$5bn share buyback programmes that enhanced our net asset value (NAV) per share.

In August 2021, Prosus completed an exchange offer for 45.8% of Naspers N ordinary shares. This transaction has created a capital structure that, over time, is designed to allow the inherent value of the group to be better reflected in the share prices of Naspers and Prosus.

Global markets

Despite a solid operational performance across our portfolio, like many technology companies, we have faced significant and growing macroeconomic and geopolitical headwinds, particularly in the second half of the year. Weakening global markets, faced with higher inflation and rising interest rates, were plunged into turmoil when Russia invaded Ukraine. The combination of the appalling war in Ukraine, slowing growth and increased global uncertainty, has led to valuations of global technology companies declining sharply as investors' risk appetite has reduced.

Discount to net asset value

On the back of a confluence of negative factors, the discount in the Prosus and Naspers trading value relative to a sum-of-the-parts valuation grew to its highest level in FY22. While we continue to believe in focusing a material portion of executive directors' incentives on the non-Tencent portions of the group over the long run, we recognise there is a critical benefit to applying attention to reduction of the discount.

2022 report annual Prosus

Group overview

Sustainability review

Performance review

Governance

Remuneration report continued

For FY23, we are materially increasing the CEO's and CFO's short-term variable compensation exposure to the reduction of the discount. Given the potential of value creation for shareholders through discount reduction, we have designed a special incentive, focused exclusively on reduction of the discount. At the same time, we have very materially reduced the balance of annual compensation in order to emphasise the importance of this discount-centric incentive and align remuneration with shareholder performance. Where this requires a change in our remuneration policy, we will present this to shareholders for review and approval.

We believe strongly that discount reduction is fundamental to maximising shareholder returns and desire to ensure the CEO's and CFO's incentives are aligned with those of our shareholders. It is in this light that the committee decided not to award LTIs for FY23.

Details of the FY23 remuneration for the executive directors can be found on page 134 of this report.

Vesting of first PSU awards

Performance share units (PSUs) were awarded for the first time in FY20 and were introduced following feedback from our shareholders, to better incentivise long-term value creation in our underlying internet businesses, as well as close the discount to NAV. The first PSU awards were due to vest in June 2022 and will be settled in Naspers shares3, based on the set number of shares at the time of grant. The performance condition as defined for the PSUs, measures the three-year CAGR valuation of the Ecommerce portfolio against a basket of global peers. Given the announcement of our intention to decouple Avito operationally from the group prior to the end of the financial year and the subsequent announcement of our intended sale of Avito, the board cannot yet determine the achievement of the PSU performance condition until the sale of that business has been concluded, even though the Avito business represents only a limited percentage of the Ecommerce valuation. We will inform shareholders as soon as practicable of the impact on the FY20 PSUs. The vesting for participants will be delayed until such time.

Disclosures

We have made considerable effort in improving disclosure of executive remuneration, in a bid for greater transparency. We have disclosed the STI goals and achievements for FY22. Showing our competitors details of the STI targets before the end of the financial year is not in the best interests of our shareholders, but from FY23 onwards, we will be disclosing these targets retrospectively.

Financial statements

Other information

03

Structure of report

In compliance with article 2:135b of the Dutch Civil Code, the European Shareholder Rights Directive (SRD II) and the Dutch Corporate Governance Code, this report is split into the following sections:

1. Background and policy: Provides a detailed overview of our approach to remuneration and information on the components of our executive pay packages.

Read more on page 115

2. Implementation of the remuneration policy: Sets out information on how we implemented our policy for FY22.

Read more on page 123

We conclude with an Additional information section on page 140.

It is noted that all remuneration is presented at 100%, including the cost that is apportioned to Naspers.

Our stakeholder engagement

We engage openly and frequently and take extensive input from our investors and advisers, including meetings directed specifically to discussing remuneration with shareholders, to clearly demonstrate the link between Prosus's strategy, business performance and our remuneration philosophy. The results of the prior year's advisory vote and the feedback from investor meetings were taken into account and debated by the remuneration committee, leading to a number of changes in remuneration design and disclosure, including adding a discount-linked STI as well as being committed to disclosing retrospective STI targets starting in 2023.

We strive for a higher level of N shareholder support for the remuneration resolutions and in that spirit, we will continue to make appropriate changes to our remuneration design and disclosures. We will continue to engage with our shareholders on a frequent basis.

I thank you for your feedback and support and look forward to our future interactions.

Craig Enenstein

Chair: Human resources and remuneration committee

25 June 2022

1. Emilie Choi resigned as member of the Prosus and Naspers board, effective 26 August 2021.
2. In presenting and discussing our performance, we use certain alternative performance measures not defined by IFRS, referred to as non-IFRS-EU financial measures, alternative performance measures or APMs. Such measures include economic-interest basis information; trading profit; adjusted EBITDA; headline earnings; core headline earnings; and growth in local currency, excluding acquisitions and disposals. Numbers included in brackets represent the equivalent measure on the basis of growth in local currency, excluding acquisitions and disposals.
3. Includes the Prosus shares linked to Naspers PSUs as a result of the Prosus capitalisation issue in 2019.

annual Prosus

Group overview

Sustainability review

Performance review

Governance Financial statements

Other information

04

Background and policy

2022 report

Our philosophy

Our remuneration philosophy underpins our group's strategy and enables us to achieve our business objectives. Our commitment to pay for performance and alignment with shareholder value creation drives all our remuneration activities and supports the ownership mentality and spirit of entrepreneurship in our teams

Five key principles to guide our remuneration approach

around the world. We believe in a level playing field for our people. We strive to pay fairly and responsibly. As much as possible, the structure of our pay is consistent, regardless of the seniority of the employee, ensuring equality of pay structures across all employees. In the committee's view, the remuneration policy achieved its stated objectives in the year under review.

Paying for		Shareholder		Incentivisation	Consistency	Attracting and
performance		alignment					retaining talent
We believe in pay		Remuneration must		Remuneration must	We are consistent:	Our reward systems
for performance: we		be aligned with		incentivise the	our reward package	must help us attract
are comfortable with		shareholder		achievement of	elements are	and retain the best
bigger rewards for		outcomes.		strategic,	broadly the same,	talent around the
those that make the				operational,	regardless of	world in a fair and
highest contribution.				sustainability and	seniority*.	responsible way.
				financial objectives,
				in both the short and
				longer term.

Fair		Responsible
• Equitable: Free from discrimination		• Independent: With oversight, top-down via the board
• Relevant: Linked to personal and company performance		• Managed: All employee pay decisions are properly
• Rational: Easy to explain		overseen
		• Considered: Judgement is applied; we shy away from
		solely formulaic appraisals that could lead to
		unacceptable outcomes
		• Sustainable: Remuneration designed with sustainability
		in mind

We strive to deliver fair and consistent remuneration across all our business operations and this includes permanent and temporary employees, contractors, consultants and trainees.

Maintaining pay equality is embedded in our ways of working, and through regular analyses we compare compensation levels of groups of people, for example women versus men,

performing in similar jobs. We conduct calibrations across the group as a standard process before (annual) reward decisions are taken, working towards closing unjustified pay gaps, should they exist.

* LTI is an important part of compensation for most employees, except those in junior roles.

annual Prosus

Group overview

Sustainability review

Performance review

Governance Financial statements

Other information

05

Background and policy continued

2022 report

Our competitive environment for talent

A global market for talent

We are a global rather than a Dutch company, operating in a highly competitive international environment. Most of our

competitors are not listed in Amsterdam or included in the AEX index. Our remuneration practices are aligned within a global technology landscape and may differ from what is customary in a Dutch context. Executive talent comes from other international, often leading US-listed companies in the consumer internet sector, which forms the basis of our executive remuneration benchmarking.

INPUTSOUR PAY PRINCIPLES

Making executive pay decisions

Pay for			Attract and
performance
		retain talent
Achieve the business
		Fair and responsible
	plan
				Market situation - benchmarking
			Willis Towers
Individual			Watson		AON Radford
	Business	(WTW) data
performance		data high-tech	Peer group
performance	high-tech
as per STI			sector
		sector and
			general industry
When making executive pay	We partner with local data	Where appropriate and
decisions, we consider the	providers in the countries in	available, we look at
individual's performance	which we operate and with	publicly disclosed data that
and the performance of the	these two global providers	are more or less
business.			of benchmarking	comparable in the
			information. Survey	ecommerce, consumer
			coverage is specifically	internet, food delivery and
			strong in the US, Western	social media sector. The
			Europe and in high-growth	peer companies for
			markets. We access its	remuneration benchmarking
			general industry and	are referenced below1.
			high-tech surveys (including
			media and technology).

Shareholder

alignment

Longer term

Scenario analysis

The committee undertakes a thorough assessment to ensure that targets on variable incentives are sufficiently stretched in the context of potential remuneration delivered, and applies judgement so that the remuneration policy continues to achieve its objectives of aligning pay with the long-term performance of Prosus and shareholder outcomes.

		Committee deliberation
	OUPUTS	Pay decision

1 Amazon, Alphabet, Meta, PayPal Holdings, Netflix, Uber, Booking Holdings, Snap, Adyen, Twitter, Doordash, eBay, Wayfair Inc, Zillow Group, Zalando SE, Expedia Group Inc, Ocado Group, IAC/ InterActiveCorp, Just Eat Takeaway.com, Adevinta and Auto Trader Group.