59 The non-market performance hurdles set for the year ending 31 July 2013 were not met and accordingly: 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: The TSR performance is calculated for the following performance periods: 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: 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: Kathmandu Holdings Limited relative TSR ranking % Vesting Below the 50th percentile 0% 50th percentile 50% 51st – 74th percentile 50% + 2% for each percentile above the 50th 75th percentile or above 100% Tranche 2013 2012 Tranche 1 24 months to 1 December 2014 24 months to 1 December 2013 Tranche 2 24 months to 1 December 2015 24 months to 1 December 2014 Tranche 3 24 months to 1 December 2016 24 months to 1 December 2015 2013 2012 Fair value of TSR rights $158,346 $165,331 Current price at issue date $1.95 $2.48 Risk free interest rate 2.92% 3.54% Expected life (years) 2-4 2-4 Expected share volatility 40% 36% Tranche 2013 Performance Period 2012 Performance Period Tranche 1 FY14 EPS relative to FY12 EPS FY13 EPS relative to FY11 EPS Tranche 2 FY15 EPS relative to FY12 EPS FY14 EPS relative to FY11 EPS Tranche 3 FY16 EPS relative to FY12 EPS FY15 EPS relative to FY11 EPS •  no expense has been recorded in the income statement; and •  all of these rights have lapsed KATHMANDU A NNUAL REPORT  2013