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The non-market performance hurdles set for the year ending 31 July 2013 were not met and accordingly: 

• no expense has been recorded in the income statement; and 

• all of these rights have lapsed 

The Long Term Incentive performance rights will vest in three equal tranches. In each tranche 50% of the rights are subject to a relative Total Shareholder Return (TSR) hurdle and the remaining 50% are subject to an EPS growth hurdle. 

The proportion of rights subject to the relative TSR hurdle is dependent on Kathmandu Holdings Limited’s TSR performance relative to a defined comparable group of companies in New Zealand and Australia listed on either the ASX or NZX, and with market capitalisation indicatively in a range between 300% and 45% of Kathmandu Holdings Limited market capitalisation. The percentage of TSR related rights vest according to the following performance criteria: 

<img src='content_image/187905.jpg'>

The TSR performance is calculated for the following performance periods: 

<img src='content_image/187906.jpg'>

The fair value of the TSR rights have been valued under a Monte Carlo simulation approach predicting Kathmandu Holdings Limited’s TSR relative to the comparable group of companies at the respective vesting dates for each tranche. The fair value of TSR rights, along with the assumptions used to simulate the future share prices using a random-walk process are shown below: 

<img src='content_image/187907.jpg'>

The estimated fair value for each tranche of rights issued is amortised over the vesting period from the grant date. The Company has recognised a compensatory expense in the income statement of $36,925 (2012: $54,101) which represents this amortisation. 

The proportion of rights subject to the EPS growth hurdle is dependent on the compound average annual growth in Kathmandu Holdings Limited’s EPS relative to the year ending 31 July 2010. The applicable performance periods are: 

<img src='content_image/187908.jpg'>

