## REMUNERATION REPORT (AUDITED) 

## 1. INTRODUCTION 

This report forms part of the Company’s 2013 Directors’ Report and sets out the Fairfax Group’s remuneration arrangements for ‘key management personnel’ (KMP) in accordance with the requirements of the Corporations Act 2001  and its regulations. KMP comprises Directors and members of the senior executive team who have authority and responsibility for planning, directing and controlling the activities of the Fairfax Group. 

At the 2012 Annual General Meeting the Company received a ‘first strike’ under the Corporations Act as more than 25% of votes cast in relation to the Remuneration Report were cast against the non-binding resolution. Accordingly, at the 2013 Annual General Meeting, a ‘second strike’ will cause the Company to propose a motion at that Annual General Meeting to spill the Board. 

The Board has subsequently changed the executive incentive plans as set out below. 

## 2. REMUNERATION FRAMEWORK AND GOVERNANCE 

## 2.1 ReMuneRATion PRinCiPleS And FRAMeWoRk 2013 And 2014 CHAnGeS 

## FAIRFAX MEDIA EXECUTIVE REMUNERATION FRAMEWORK 

The objectives of the Company’s executive remuneration framework are to align executive remuneration with the achievement of strategic objectives, the creation of value for shareholders, and to have regard to market so as to be able to attract and retain key people. 

The People and Culture Committee (P&CC) assists the Board to achieve the goal that the executive remuneration framework address the following: 

• attract, retain and motivate talented, qualiGLYPH<f.short>ied and experienced people in the context of industry changes over recent years, and the market in which Fairfax is currently operating; 

• fairly remunerate and reward for achievement of Group strategic milestones, with incentive payments deferred to promote alignment with shareholder interests; 

• align remuneration with achievement of business strategy; and 

• be transparent and fair. 

The executive remuneration framework  comprises a mix of GLYPH<f.short>ixed and performance-based components. 

## Fixed remuneration package 

• includes cash, superannuation and any beneGLYPH<f.short>its employees choose to salary sacriGLYPH<f.short>ice (eg motor vehicle and parking) 

• represents the total GLYPH<f.short>ixed cost to the Company including fringe beneGLYPH<f.short>its tax payable 

• in recognition of Group GLYPH<f.short>inancial performance in recent years, most senior executives’ GLYPH<f.short>ixed remuneration has been frozen 

• for 2014 executive KMP have volunteered to sacriGLYPH<f.short>ice 10% of GLYPH<f.short>ixed remuneration into restricted shares 

## Performance Incentives 

• short term incentive (STI) payments subject to annual GLYPH<f.short>inancial performance of the Company, as well as speciGLYPH<f.short>ic strategic and operational objectives relevant to the executive 

• on recommendation from the CEO, the P&CC reviews and approves STI payments and the key performance indicators for the following year 

• GLYPH<f.short>inancial gateway for FY13 STI was not met, and therefore no payments made for that year 

• for FY13 and prior, long term incentive linked to performance against total shareholder return and earnings per share conditions over 3 years 

• prior years' LTI vesting criteria were tested following end of FY13 and not met, therefore no LTI awards for prior years which have reached the vesting date will vest 

• for 2014 new incentive plan to be implemented 

