30 REMUNERATION REPORT •  the transformation journey we are on is not a short one, meaning that while we are positioning ourselves for the future,  it may take a little while for the transformation to be reflected in significantly improved shareholder returns;  •  we now have a smaller, highly dedicated and skilled team of the best people to lead Fairfax on this journey; and •  as our business evolves, our current remuneration structure has become less relevant for the Fairfax of tomorrow.  •  the vast majority of our senior executives will not receive any increase in fixed remuneration; •  our most senior executives have volunteered to sacrifice 10% of their fixed remuneration to purchase Company shares.  The shares will be restricted for two years. Further details of this are set out in the Remuneration Report;  •  Non-Executive Directors have agreed to a reduction of 10% in their base fees from 1 July 2013; •  our existing short term and long term incentive plans will be replaced with a single transformation incentive scheme. In the 2014 financial year, as the Board and management continues the hard work required to deliver on our strategy and  to transform your company:  The new scheme will comprise two components for our most senior executives in the 2014 financial year, a proportion of long  term options and a smaller proportion of deferred performance shares granted at the end of the year for achieving milestones  in the year as follows: •  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 in the following Remuneration Report;  •  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.  The Board is confident that this new remuneration structure better aligns executive rewards with our shareholders and  provides an appropriate incentive to deliver our strategy.  We hope shareholders will see that the Board has not stood idle in the face of the dramatic change in the media industry.  Our 2013 financial year remuneration outcomes, notwithstanding a lot of hard work from all of our employees, reflect our  financial performance in the year.  As shareholders will be aware, last year we received a ‘first strike’ under the Corporations Act, as more than 25 per cent of the  votes cast in relation to our Remuneration Report were against the non-binding resolution. Accordingly, this year a ‘second  strike’ would cause us to propose a motion at the AGM to spill your Board. Our 2014 financial year remuneration structure is designed to support our strategy of building the Fairfax of tomorrow.  Your Board ask that you support our remuneration policies and practices by voting in favour of this Report at our 2013 AGM. Yours faithfully Sandra McPhee, AM  Chair – People and Culture Committee