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Management Declaration and Corporate Governance Report

Management Declaration

The Executive Board and Supervisory Board report on management in the Management Declaration pursuant to Section 289a of the German Commercial Code. Alongside the annual Declaration of Compliance under Section 161 of the German Stock Corporation Act, it also provides relevant information about management practices and other aspects of management such as in particular a description of the working procedures of the Executive Board and Supervisory Board.

Declaration of Compliance by the Executive Board and Supervisory Board of ProSiebenSat.1 Media AG in accordance with section 161 of the German Stock Corporation Act (AktG) regarding the “German Corporate Governance Code”

The Executive Board and Supervisory Board of ProSiebenSat.1 Media AG declare that the recommendations of the “Government Commission on the German Corporate Governance Code“ as amended on May 13, 2013 and published in the official part of the Federal Gazette on June 10, 2013, have in principle been complied with since their publication. Only the following recommendations of the Code have not been and will not be applied:

  • The Executive Board of the Company has not appointed a proxy to exercise the shareholders’ voting rights at the Annual General Meeting in accordance with instructions (item 2.3.2 of the German Corporate Governance Code). There was no need for such a proxy because of the previous shareholder structure and the limited number of shareholders entitled to vote at the Annual General Meeting. For the separate meeting of preference shareholders on July 23, 2013, however, the Company appointed a proxy for the exercise of the preference shareholders’ voting rights in accordance with instructions. Due to the changed shareholder structure, beginning with and including the fiscal year 2014, proxies of the Company will be appointed for Annual General Meetings.
  • The D&O insurance policies the Company has taken out for the members of the Executive Board and the Supervisory Board provide for a deductible for insured members of the Executive Board in compliance with the framework provided for by law (section 93 (2) Sentence 3 of the German Stock Corporation Act in conjunction with section 23 (1) of the Introductory Act to the German Stock Corporation Act) and by the employment contracts. However, neither the Executive Board nor the Supervisory Board regards a deductible as an effective way of enhancing board members’ motivation or sense of responsibility. Therefore, contrary to the recommendation in item 3.8 of the German Corporate Governance Code, currently no deductible is agreed for Supervisory Board members.
  • The stock option plan (“Long Term Incentive Plan”) first approved by the Annual General Meeting in May 2005, as part of the authorization to acquire treasury stock, and lastly renewed by resolution of the Annual General Meeting in June 2010, provides only for performance targets relating to the stock price of the Company. Additional comparison parameters relating to corporate key figures (item 4.2.3 of the German Corporate Governance Code) were not included, since, due to the particular conditions of the German TV advertising market, no comparable German or foreign companies can be identified at present. On the basis of the Long Term Incentive Plan, stock options were issued to members of the Executive Board lastly in 2009. As of the end of December 31, 2013, all stock options vested. The long-term compensation program (“Group Share Plan”) which was newly launched in 2012 and which shall replace the Long Term Incentive Plan, now also provides for performance targets relating to corporate key figures.
  • In contrast to item 4.2.3 para. 2 of the German Corporate Governance Code, the compensation of the Executive Board does not provide for a predefined cap amount with respect to fringe benefits and, therefore, does also not provide for a predefined cap amount for the overall compensation of the Executive Board. The employment contract of Dr. Wegner, however, which was amended at the end of 2013, already provides for such a cap amount.

    The aforementioned recommendation has only been applicable since the Code as amended on May 13, 2013 came into effect upon its publication in the Federal Gazette on June 10, 2013. The current employment contract of the Executive Board members, with the exception of Dr. Wegner, were concluded or amended, respectively, already before the aforementioned recommendation came into effect. The Supervisory Board, however, will follow this recommendation in the future when concluding new or amending existing employment contracts of the Executive Board members.
  • The Supervisory Board of the Company has abstained from complying with the recommendations of item 5.4.1 para. 2 and 3 of the German Corporate Governance Code. Pursuant to item 5.4.1 para. 2 and 3 of the German Corporate Governance Code, the Supervisory Board shall specify concrete objectives regarding its composition which, whilst considering the specifics of the enterprise, take into account the international activities of the enterprise, potential conflicts of interest, the number of independent Supervisory Board members within the meaning of item 5.4.2 of the German Corporate Governance Code, an age limit to be specified for members of the Supervisory Board and diversity. These concrete objectives shall, in particular, stipulate an appropriate degree of female representation. Proposals by the Supervisory Board to the competent election bodies shall take these objectives into account. The concrete objectives of the Supervisory Board and the status of implementation shall be published in the Corporate Governance Report.

    The Supervisory Board is of the opinion that such formalized targets regarding its composition are not necessary, in particular not in order to ensure compliance with the criteria with respect to the composition of the Supervisory Board as set out by the German Corporate Governance Code. In fact, the Supervisory Board is of the opinion that also absent such formalized targets, the composition of the Supervisory Board will be implemented in a way that is in the best interest of the Company.

Subject to the exceptions stated above, ProSiebenSat.1 Media AG intends to continue complying with the recommendations of the “Government Commission on the German Corporate Governance Code” as amended on May 13, 2013 and published in the official part of the Federal Gazette on June 10, 2013 also in the future.

The Executive Board and Supervisory Board of ProSiebenSat.1 Media AG further declare that, with respect to the time period since the last Declaration of Compliance of March 2013 until the publication of the recommendations of the “Government Commission on the German Corporate Governance Code”, as amended on May 13, 2013, in the Federal Gazette on June 10, 2013, the Company complied with the recommendations of the “Government Commission on the German Corporate Governance Code” as amended on May 15, 2012 and published in the Federal Gazette on June 15, 2012, also subject to the above mentioned exceptions.

March 2014
The Executive Board and Supervisory Board
of ProSiebenSat.1 Media AG

Significant Disclosures about Management Practices

The ProSiebenSat.1 Group ensures compliance with rules of conduct, laws and guidelines with a code of conduct that applies throughout the Group. This Code of Compliance lays down fundamental principles and the most important guidelines and courses of action for conduct in business life. It is intended to provide valuable assistance to employees and executives of the ProSiebenSat.1 Group, especially in situations of business, legal or ethical conflict. Adherence to the Code of Compliance is carefully monitored. The Group-wide implementation of the Code of Compliance is monitored by the Compliance Officer in close cooperation with the Human Resources, Group Controlling, and Legal Affairs departments. The Code of Compliance can be downloaded at www.prosiebensat1.com/en/company/corporate-governance/declaration-of-compliance.

Composition of the Executive Board and Supervisory Board

According to the provisions of the articles of incorporation, the Executive Board has one or more members. The number of Executive Board members is determined by the Supervisory Board. As of December 31, 2013, the ProSiebenSat.1 Media AG Executive Board consisted of five members. The Supervisory Board has nine members in accordance with the articles of incorporation, which must all be elected by the Annual General Meeting. As of December 31, 2013, the Supervisory Board had seven members due to the above-mentioned resignations of Mr. Dyke and Drs. Arp. As a company that primarily serves purposes of reporting or expressing opinions (so called “Tendenzunternehmen”), the company is not subject to co-determination.

Working Procedures of the Executive Board and Supervisory Board

Each member is responsible for his own area of responsibility and keeps his colleagues on the Board continuously up-to-date on events in that area. The cooperation and areas of authority of the Executive Board members are governed by established rules of procedure, which the Supervisory Board enacted for the Executive Board. As a rule, the full Executive Board meets weekly. The meetings are chaired by the CEO. These meetings discuss such matters as resolutions about measures and transactions that require the consent of the full Board under the Board’s rules of procedure. For resolutions to be valid, at least half of the members of the Executive Board must participate in the vote. Resolutions of the full Executive Board are adopted by simple majority vote. In the event of a tie, the vote of the CEO decides. When important events occur, any member of the Executive Board may call an extraordinary meeting of the full Executive Board; the Supervisory Board may likewise call such meetings. The Executive Board may also adopt resolutions outside meetings, via an oral, telephone or written vote and by vote in text form. Written minutes are prepared of every meeting of the full Executive Board and of every resolution adopted outside a meeting. The minutes are presented to the full Executive Board for approval at the next meeting and signed by the CEO. In addition to the regular Executive Board meetings, a strategy workshop is held at least once a year. At workshops of this kind, strategic objectives are prioritized for the whole Group and the strategy for the current financial year is developed in cooperation with managing executives from various business units.

Further details on the working procedures of the Executive Board are governed by the rules of procedure for the Executive Board defined by the Supervisory Board, which also govern the schedule of responsibilities and the matters reserved for the full Executive Board.

The Executive Board promptly and fully informs the Supervisory Board in writing, and also at the Supervisory Board’s quarterly meetings, about planning, business performance and the condition of the Company including risk management and about compliance issues. Where indicated, an extraordinary meeting of the Supervisory Board is called to address important events. The Supervisory Board is involved by the Executive Board in the Company’s strategy and planning, as well as in all matters of fundamental importance to the Company. For significant business decisions, the rules of procedure for the Executive Board involve requirements to obtain the consent of the Supervisory Board. For example, adopting the annual budget, major acquisitions or divestments, or investments in programming licenses require the consent of the Supervisory Board. More detailed information on the cooperation between the Executive Board and the Supervisory Board and important issues discussed in the 2013 financial year can be found in the Supervisory Board’s report.

The Supervisory Board holds at least two meetings per half of the calendar year. The Supervisory Board has adopted rules of procedure in addition to the provisions of the articles of incorporation to govern its work. These rules stipulate that the Chairman of the Supervisory Board coordinates the work of the Supervisory Board, chairs its meetings, and also represents the Board’s concerns to outside parties. As a rule, the Supervisory Board adopts its resolutions at meetings. However, by decision of the Chairman of the Supervisory Board, resolutions may also be adopted in conference calls or in videoconferencing sessions, or outside a meeting. Equally permissible is the adoption of resolutions by a combination of voting at meetings and voting via other forms.

Resolutions of the Supervisory Board are valid if at least half of its members participate in the vote. Resolutions by the Supervisory Board are normally adopted by simple majority of the votes cast, except where a different majority is prescribed by law. In the event of a tie, the vote of the Chairman of the Supervisory Board decides. If the Chairman does not participate, the vote of the Vice Chairman decides.

Minutes are kept of the meetings of the Supervisory Board, and are signed by its Chairman. Resolutions adopted outside meetings are also recorded in writing. A copy of the minutes, or of resolutions adopted outside a meeting, is promptly sent to all members of the Supervisory Board. The Board members who participated at the meeting or in the resolution may file written objections against the minutes with the Chairman of the Supervisory Board within one month after the minutes are sent out. Otherwise the minutes, or the resolution, are deemed approved.

Prof. Dr. Harald Wiedmann, who is also Chairman of the Audit and Finance Committee, meets the requirements of Sections 100 (5), 107 (4) of the German Stock Corporation Act and Item 5.3.2 Sentences 2 and 3 of the German Corporate Governance Code as an independent and expert member.

Every Supervisory Board member must report conflicts of interest immediately to the Supervisory Board’s Presiding Committee, particularly those that could arise from an advisory or executive function for customers, suppliers, creditors or other business partners.

In keeping with the recommendation of Item 5.6 of the German Corporate Governance Code, the Supervisory Board conducts regular efficiency reviews. The major points of examination include the Supervisory Board’s view of its own mission, the organization of its activities, the independence of its members, the handling of potential conflicts of interest, and the composition of its committees. The Supervisory Board arrived at a positive conclusion.

Committees’ Composition and Working Procedures

The Executive Board did not set up any committees, while the Supervisory Board appointed three in the 2013 financial year. Members of the Supervisory Board Committees are assigned by the Supervisory Board. In choosing committee members, Board members’ potential conflicts of interest are taken into account, as are their professional qualifications. The following shows more detailed information on the members of the Supervisory Board Committees.

Information on Committee Members

Johannes P. Huthis Partner at Kohlberg Kravis Roberts & Co. Ltd. (KKR) and is responsible for the operating business in Europe, the Middle East and Africa. Before joining KKR, he was a member of the Investcorp Group Management Committee. From 1986 to 1991, he was Vice President in the M&A departments of Salomon Brothers in London and New York. Johannes P. Huth accompanied various transactions, including Wincor Nixdorf, MTU Aero Engines, Kion Group and ProSiebenSat.1. He completed his bachelor studies at the London School of Economics with honors and attained a Master of Business Administration at the University of Chicago.
Dr. Jörg Rockenhäuserheads the German office of Permira Beteiligungsberatung GmbH in Frankfurt, where he is a member of the international Board and the Investment Committee. Jörg Rockenhäuser studied business administration at the University of Munster and holds a PhD from the University of Bochum. Before joining Permira in 2001, he was a Principal at A.T. Kearney. He is also a member of the Netafim Board of Directors, the Board of the American Chamber of Commerce in Germany e.V. and the Advisory Board of the Off Road Kids Foundation.
Stefan Dziarskihas worked at Permira Beteiligungsberatung GmbH in Frankfurt since 2007 and concentrates on the Industrials and TMT sectors. Stefan Dziarski previously worked for four years in investment banking for Salomon Smith Barney/Citigroup in New York and Hong Kong. There, he was involved in many M&A and capital market transactions in the TMT sector. Stefan Dziarski holds the German business degree of Diplom-Kaufmann from the European Business School, Oestrich-Winkel. He also spent terms abroad at the Thunderbird School of Global Management, Arizona/USA and at the National University of Singapore, Singapore.
Philipp Freiseleads the pan-European media business of KKR, where he has worked since 2001, as Partner. He began his career as a consultant at McKinsey & Co. in Frankfurt am Main and New York. Philipp Freise completed his studies at the WHU, Otto Beisheim School of Management in Koblenz. He holds the degree of Diplom-Kaufmann as well as a Master of Business Administration from the McCombs School of Business at the University of Texas.
Lord Clive Hollickhas been a member of the House of Lords since 1991 and is the founder of the Institute for Public Policy Research. He has performed various management duties, including heading operations at United Business Media as CEO from 1996 to 2005. From 2005 to 2010, he worked at KKR, most recently as Senior Advisor. Lord Clive Hollick has also held positions on the Supervisory Boards of various companies, including as Chairman at SBS Broadcasting Group and the South Bank Centre. He is currently a member of the Advisory Board at BMG Music Rights Management GmbH (Non-Executive Director) and Jefferies & Co. Inc. and holds offices at Honeywell International Inc. (Non-Executive Director), GP Bullhound LLP (Partner) and Gogo Inc. (Non-Executive Director). He holds a doctorate from Nottingham University in England.
Götz Mäuserwas a Partner at Permira Beteiligungsberatung GmbH (Permira) from 1997 to the end of 2013. During his work at Permira, his activities included establishing the Media Team and accompanying various transactions including Cognis, debitel, Jet Aviation and ProSiebenSat.1. Götz Mäuser began his career as a consultant at McKinsey & Co., working in Germany and Brazil for six years. Götz Mäuser holds the German business degree of Diplom-Kaufmann. He studied business administration in Hamburg and Cologne, and attained a Master of Business Administration at New York University, Stern School of Business in addition to his German degree.
Prof. Dr. Harald Wiedmannis of counsel at the law and tax advisory firm Gleiss Lutz Hootz Hirsch Partnergesellschaft von Rechtsanwälten, Steuerberatern. He is also Honorary Professor of International Accounting and Auditing at Berlin Technical University and at Johann Wolfgang Goethe University in Frankfurt am Main. Formerly Chairman of KPMG AG Wirtschaftsprüfungsgesellschaft and KPMG Europe; until 2007 he was President of the Accounting Standards Committee of Germany. Prof. Dr. Harald Wiedmann studied law at the Universities of Tübingen and Munich, and holds official certifications as an attorney, tax advisor and German certified public accountant

The committees of the Supervisory Board normally meet quarterly. To the extent permitted by law, the committees have been entrusted with making resolutions concerning various tasks of the Supervisory Board, especially approving certain management measures. A committee’s resolutions are valid if at least half — and in no case less than three — of its members participate in the vote. Committee resolutions are normally adopted by a simple majority vote; in the event of a tie, the vote of the committee Chairman decides. Written minutes are prepared of each committee meeting and are signed by the committee Chairman. Resolutions outside meetings are also recorded in writing. Minutes and resolutions are sent to all members of the committee concerned. They are deemed approved if no committee member who was present at the meeting, or who took part in the resolution, objects to the content within one week after delivery. The committee Chairmen report to the meetings of the Supervisory Board on the committees’ work.

The CFO and the independent auditor regularly participate in the meetings of the Audit and Finance Committee. Additionally, the Chairman of the Audit and Finance Committee invites in particular executives from finance and reporting units to provide information at meetings if required. The Audit and Finance Committee meets without the presence of Executive Board members at least once a year. The Supervisory Board has adopted rules of procedure to govern the work of the Audit and Finance Committee.

Committee Members as of December 31, 2013

Presiding CommitteeJohannes P. Huth (Co-Chairman), Dr. Jörg Rockenhäuser (Co-Chairman)1, Stefan Dziarski, Philipp Freise, Lord Clive Hollick, Götz Mäuser2
Audit and Finance CommitteeProf. Dr. Harald Wiedmann (Chairman and independent financial expert according to Sections 100 (5), 107 (4) of the German Stock Corporation Act and Item 5.3.2 Sentences 2 and 3 of the German Corporate Governance Code), Johannes P. Huth, Stefan Dziarski, Philipp Freise, Götz Mäuser
Compensation CommitteeJohannes P. Huth (Chairman) 3, Dr. Jörg Rockenhäuser 4

Corporate Governance Report

The Executive Board and Supervisory Board see good corporate governance as an essential component of responsible, transparent management and control oriented to long-term value creation.

The German Corporate Governance Code establishes a standard for transparent control and management of companies, which is particularly aligned to the interests of the shareholders. Many of the principles contained in the German Corporate Governance Code have already been practiced at ProSiebenSat.1 for a long time. Individual topics relating to corporate governance at ProSiebenSat.1 Media AG are described in more detail in the Management Declaration pursuant to Section 289a of the German Commercial Code; this includes in particular the annual Declaration of Compliance, relevant information on management practices and a description of the working procedures of the Executive Board and Supervisory Board. Additional details can be found in the following Corporate Governance Report in accordance with Item 3.10 of the German Corporate Governance Code.

Fundamentals Relating to Corporate Governance

ProSiebenSat.1 Media AG is a listed stock corporation, with its registered office located in Germany. As well as from the German Corporate Governance Code, the formal structure for Corporate Governance is therefore derived from German law, in particular the law governing stock corporations and the capital market, as well as from the articles of incorporation of ProSiebenSat.1 Media AG.

The compliance officer of ProSiebenSat.1 Media AG is in charge of implementing the principles of corporate governance, monitoring compliance with the requirements of law and documenting these processes. The officer’s duties also include keeping up to date on changes in the laws, and tracking the relevant public discussions.

The Company’s Governing Bodies

As a German stock corporation, ProSiebenSat.1 Media AG has three governing bodies: the Annual General Meeting, the Supervisory Board and the Executive Board. Their tasks and powers emerge from the German Stock Corporation Act and the articles of incorporation of ProSiebenSat.1 Media AG.

German corporate law provides for a clear separation of personnel between management and controlling bodies. The managing body is the Executive Board, which is overseen and advised by the Supervisory Board with regard to management. All transactions and decisions that are of fundamental importance to the Corporation are handled in close coordination between the Executive Board and the Supervisory Board. As such, open communication and close cooperation between bodies is of particular importance. The Management Declaration in accordance with Section 289a of the German Commercial Code reports on the working procedures of the Executive Board and Supervisory Board and their cooperation. It can be accessed online at http://en.prosiebensat1.com/en/company/corporate-governance/management-declaration and is reproduced in the Annual Report. The compensation of members of the Executive and Supervisory Boards is explained in the Compensation Report, which is part of the Group management report (see the Annual Report).

The shareholders exercise their rights of joint administration and oversight at the Annual General Meeting. Each share of common stock confers one vote at the Annual General Meeting. The former non-voting preference shares were converted into voting registered common shares by resolution of the Annual General Meeting on July 23, 2013; the conversion took effect when a corresponding change to the articles of incorporation was entered in the company’s commercial register on August 16, 2013. The invitation to the Annual General Meeting notifies the Company’s shareholders in a timely manner about the various agenda items and the resolution proposals that the Executive Board and Supervisory Board will be submitting for approval.

Communication with the Capital Market and Reporting Principles

  • Transparency: We aim to strengthen trust among shareholders and capital providers, as well as the interested public, through openness and transparency. For that reason, ProSiebenSat.1 Media AG reports regularly on important business developments and changes in the Group. In general, the company provides this information simultaneously to all shareholders, media representatives and the interested public. The information is also published in English, considering the international nature of the interested groups.

    To ensure fair communication and prompt disclosure both in Germany and in other countries, the Company particularly makes use of the internet as a channel for communication. All relevant corporate information is published on our website, www.prosiebensat1.com. Annual reports, interim reports, current stock price charts, and company presentations are available for download there any time. The group provides information about organizational and legal matters concerning all aspects of the Annual General Meeting on special pages for the event. As well as the agenda itself, the speech of the CEO and the results of votes can also be downloaded from the site following the meeting. Under the Corporate Governance heading, ProSiebenSat.1 Media AG also publishes the current Management Declaration according to Section 289a of the German Commercial Code, the annual Corporate Governance Report, the Declaration of Compliance with the German Corporate Governance Code in accordance with Section 161 of the German Stock Corporation Act, including an archive with previous Declarations of Compliance and the company’s articles of incorporation.
  • Regular reporting and ad hoc disclosures: Four times a year, as part of the Company’s annual and interim financial reporting, the ProSiebenSat.1 Group’s business performance, its financial position and its current results of operations are explained. In keeping with the requirements of law, matters that could significantly influence the stock market price are promptly publicized also outside of scheduled reporting in ad hoc disclosures, and are made available immediately on the internet.
  • Financial Calendar: The financial calendar publishes the release dates of financial reports well in advance, along with other important dates, such as the date of the Annual General Meeting. The calendar is available at the ProSiebenSat.1 website, and is also reproduced in this Annual Report.
  • Reports of equity holdings and directors’ dealings disclosures: Reports of equity holdings under Sections 21 et seq. of Germany’s Securities Trading Act (WpHG) are released as soon as they are received. Recent information is available at www.prosiebensat1.com/en/investor-relations/publications.

Directors’ dealings disclosures under Section 15a of the German Securities Trading Act are also published on the internet immediately after receipt. During the financial year 2013, the following transactions in Company stock and/or financial instruments relating to Company stock were reported to ProSiebenSat.1 by management personnel or parties related to them, in compliance with Section 15a of the German Securities Trading Act.

Directors’ Dealings Disclosures

Last name, first nameReason for notificationName of financial instrumentPurchase/ SaleDate/placeSharesPrice in EURTotal amount of transaction in EUR
Ebeling, ThomasOwn management dutiesProSiebenSat.1 preference shareSaleJanuary 30, 2013/Xetra, Frankfurt300,00025.127,536,960.00
Albert, ConradOwn management dutiesProSiebenSat.1 preference shareSaleJanuary 31, 2013/Xetra, Frankfurt4,18025.27105,628.60
Prof. Harald WiedmannOwn management dutiesProSiebenSat.1 common shareSaleDecember 3, 2013/Xetra, Frankfurt7,50033.91254,336.00
Huth, JohannesOwn management dutiesProSiebenSat.1 common shareSaleJanuary 20, 2014/Xetra, Frankfurt75,00035.022,626,399.65
Freise, PhilippOwn management dutiesProSiebenSat.1 common shareSaleJanuary 20, 2014/Xetra, Frankfurt10,00034.68346,758.14

  • Shareholdings of the Executive Board and Supervisory Board: As of December 31, 2013, members of the Executive Board held a total of 152,000 common shares of ProSiebenSat.1 Media AG, and a total of 165,000 options under the ProSiebenSat.1 Media AG stock option plan. Stock options from the Long-Term Incentive Plan (LTIP) confer the right to purchase one common share of ProSiebenSat.1 Media AG if the exercise conditions are satisfied. As of December, 31, 2013, members of the Supervisory Board held 85,000 common shares in ProSiebenSat.1 Media AG.
  • Reporting principles: The ProSiebenSat.1 Group’s financial reporting conforms to IFRS (International Financial Reporting Standards) as adopted by the European Union. The annual financial statements of ProSiebenSat.1 Media AG, as the Group’s parent company, are prepared under the accounting principles of the German Commercial Code (HGB). Both sets of financial statements are audited and certified by an independent accounting and auditing firm. The single-entity financial statements of ProSiebenSat.1 Media AG are available — separate from the Consolidated Financial Statements — at www.prosiebensat1.com.
  • Information on stock option plans and similar securities-based incentive schemes: Information about the ProSiebenSat.1 Media AG new share-based compensation plan (Group Share Plan) and the former stock option plan (Long Term Incentive Plan) can be found in the Notes to the consolidated financial statements and in the Compensation Report.