FAIRFAX MEDIA  LIMITED  2013  35 REMUNERATION REPORT (AUDITED) The new scheme will comprise two components for our most senior executives in the 2014 financial year: The following diagram shows how the scheme will operate and the objectives that it aims to achieve.  1.  a proportion of long term options; and 2.  a smaller proportion of deferred performance shares granted at the end of the year for achieving milestones in the year: •  in order to align the majority of the incentive with growth in shareholder returns, options will be granted following our 2013  AGM with an exercise price set at that time. These options will only vest if the absolute total shareholder return growth  performance condition is satisfied. This condition will be tested between July 2016 and June 2017. Performance conditions  are set out below; •  a smaller percentage of incentive opportunity will be in the form of deferred performance shares. These shares will  be granted for achieving annual milestones in the transformation strategy. These milestones will be set at the start of  each year by the Board in line with the strategic plan. These milestones are set to reflect specific accountabilities for our  management including variously revenue, earnings, market share and cost reduction targets at Group and/or business  level. The specific targets are currently being finalised for 2014 and we will report on achievements against these targets  and the associated outcomes in our 2014 Remuneration Report; and •  in order to align the value of these rewards with our longer term prospects, half of the shares granted following testing  of performance in 2014 will be deferred for 12 months (i.e. until 2015) and the other half for two years (i.e. until 2016).  The shares will be forfeited if the executive resigns or is terminated for poor performance during the deferral period. July’13 July’14 July’15 July’16 Jan’17 July’17 In order to align the majority of the reward with growth in our share price, options will  be granted following our 2013 AGM with an exercise price set at that time and that  will be subject to an absolute total shareholder return growth performance condition  that must be satisGLYPH<f.short>ied before they vest. This condition will be tested between July 2016 and June 2017 In order to align the value of these  rewards with our longer term prospects,  half of the shares granted following testing  of performance in 2014 will be deferred for  12 months and the other half for two years. The shares will be forfeited if the  executive resigns or is terminated for poor  performance during the derral period. Majorit y of  aw ar d delivered  in Options Re mainder deli ve red in  Perf ormance  Shar es, subject to  achi evement of  trans formational  obje ctives Vesting subjec t to achievemen of longer term  shar eholder wealth  object ives 50% become unrestricted If transformational  objectives met,  Performance  shares granted,  subject to deferral 50% become unrestricted In order to provide a degree of market competitive remuneration to our key people, deferred performance shares will be granted for  achieving annual milestones in transformation strategy. These milestones will be: •  set at the start of each year by the Board in line with the long range strategy (and any reGLYPH<f.short>inement of that strategy) •  set in line with speciGLYPH<f.short>ic accountabilities for our management and reGLYPH<f.short>lect variously revenue, earnings, market share and cost  reduction targets at Group and/or business level •  reported (both targets and the associated outcomes) in our 2014 Remuneration Report •  under the new plan the KMP participants have an opportunity to earn up to the equivalent of 200% of their GLYPH<f.short>ixed remuneration  in allocations of a combination of options and deferred performance shares.  70% 30% 1S TEST 2ND TEST 3RD TEST