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## REMUNERATION REPORT (AUDITED) 

## oPTionS HuRdleS: ABSoluTe TSR 

Following consideration of the likely forms by which shareholder wealth may be generated by Fairfax over the next three years (share price growth, ‘ordinary’ dividends and potentially ‘special’ distributions in the form of dividend or capital returns), the performance hurdle to apply to the vesting of the options is absolute total shareholder return growth (“Absolute TSR”). Absolute TSR will measure growth in shareholder wealth over the applicable performance period as it measures both share price growth as well as dividends to shareholders. 

The applicable compound annual growth rates hurdles for the Absolute TSR are set out in the table below. 

<img src='content_image/209795.jpg'>

The Board has discretion to deem the performance conditions not met if vesting would otherwise only occur as a result of extraneous factors, for example the effect of sustained speculation regarding a takeover bid for the Company on the share price, which are not, in the reasonable opinion of the Board, reflective of the quality of the Company’s performance. 

## HuRdleS FoR deFeRRed PeRFoRMAnCe SHAReS 

Proposed metrics aligned with the business transformation strategy during 2014 are designed to drive financial growth for shareholders over time. 

By the end of 2016/17 the Company should effectively be through most of the transformation work. It should have achieved a smaller and more variable cost base; significant transition to a predominantly digital future for major mastheads; a viable digital business in regional; established revenue adjacencies; Domain and Radio should be substantially larger businesses; and we should have optimised our portfolio of digital and transactional businesses. The specific initiatives set as the target for each of the 2014, 2015 and 2016 years will be different and will have potentially different weighting between the years. The intention is that the delivery of each of the targets in each year should deliver the overall transition by 2016/17. 

Appropriate metrics will be set at the start of each new financial year. This aims to ensure that, as the transition develops, there will be enough flexibility to respond along the way and moderate, change or introduce new measures that will give confidence that the plan will operate effectively. All measures will be clearly defined and measurable. 

## FACiliTy FoR kMP SAlARy SACRiFiCe inTo SHAReS 

Executive KMP members have voluntarily agreed to salary sacrifice 10% of their fixed remuneration for the purchase of Company shares in 2014. 

In order to recognise that executives who elect to participate in the salary sacrifice have given up some of their cash remuneration entitlement to have ‘skin in the game,’ the Company provides a part matching offer. 

Pursuant to this offer, at the end of two years, assuming that the participant in the salary sacrifice plan is still employed by Fairfax, the Company would provide 1 additional ‘bonus’ share for every 5 shares acquired under the salary sacrifice arrangements. 

## 5. KEY MANAGEMENT PERSONNEL(KMP) 

During the financial year, the business undertook an organisational restructure which resulted in a number of changes to roles and responsibilities. This resulted in a change in the people having authority and responsibility for planning, directing and controlling the organisation. 

The key management personnel (KMP) for the financial year are set out in Table 3. 

