Directors’ Report 54 Vesting schedule for Performance Rights  The Performance Rights are subject to a hurdle  that is derived for the three year vesting period  using the external performance measuring  metric, TSR Alpha™. Total Shareholder Return measures the  percentage return received by a shareholder  from investing in a company’s shares over a  period of time. Broadly, it is share price growth  plus dividends over the period. TSR Alpha™  takes into account market movement over the  vesting period and the additional return (risk  premium) that shareholders expect from the  share market performance over the vesting  period. In essence it measures whether share- holders have received a return over the period  that is consistent with their expectations (TSR  Alpha™ of zero) or more or less. The adjacent diagram provides an overview of  TSR Alpha™ performance and vesting. The Board chose this performance measure  because: 〉 it focuses on performance from an investor’s  perspective; 〉 it takes into account both market move- ments over the vesting period and the excess  return that an investor expects to receive by  investing in the underlying security;  〉 it has a focus on consistency of over-perfor- mance and under-performance relative to  market; and 〉 it provides a genuine market relevant long  term measurement. TSR Alpha™ can measure the return to share- holders in excess of expectation at the end of  the measurement period (retrospectively) and  equals the difference between ‘TSR Delivered’  and the ‘TSR Required’ by investors to preserve  value of investment over a given period.  It quantifies actual wealth created as a result of earnings on market value investment at the  beginning of each period and creates a clear  picture of the company’s consistency in perfor- mance in terms of creating shareholder wealth.  Performance vesting criteria for the measure- ment period are based on the accompanying TSR Alpha™ vesting scale: Where the TSR Alpha™ is 0%, or close to it, the Company has delivered returns that are  consistent with shareholder expectations,  whereas if the TSR Alpha™ is positive then the  performance is in excess of shareholder expecta- tions. However, if the TSR Alpha™ is negative,  then shareholder expectations have not been  met. Approximately, 50% of companies achieve  TSR Alpha™ of ≥“0” which means that it is akin  to 50th percentile performance and +20% TSR  Alpha™ will be exceeded by less than 25% of  companies meaning that it is in excess of 75th  percentile performance.  The Board will commission an independent  expert to review the operation of all remunera- tion instruments including TSR Alpha™ prior to  the conclusion of the 2014 financial year.  The previous LTI Plan involved awarding partici- pants options over shares. This Plan ceased prior  to 1 July 2012 and no options over ordinary  shares in the Company were provided as remu- neration to the KMP of the parent entity and  Group during the current or previous year. There  are no options currently on issue that were  issued under this Plan. The Board believes this Vesting Schedule is appropriate because it does not reward under-performance  but creates an ongoing incentive to perform between target and stretch measures.  Kingsgate TSR Alpha™ performance Previous LTI Plan Performance Level Kingsgate’s TSR Alpha™ over the Measurement Period Vesting Below Target TSR Alpha™ < -3% 0% Target TSR Alpha™ -3% to +3% 50% Between Target and Stretch TSR Alpha™ >+3% and < +20% Pro-rata Stretch TSR Alpha™ $_{≥}$+20% 100% Year 1 Year 2 Year 3 TSR Alpha of “20%” = >75th percentile  performance Market Movement over  Measurement Period = All Ordinaries Accumulation  Index Growth TSR Alpha of “0%” Target or Premium Return above Stock Market Stretch Return Stock Market  Return +3% TSR Alpha 50% vesting for, or  close to, TSR Alpha of “0%” 100% vesting Pro-rata  vesting Vesting Scale 0% vesting Note: Not drawn to scale -3% TSR Alpha Overview of TSR Alpha Vesting Scale - Rising Market & Beta > 1 NOTE: Approximately 50% of companies will have TSR Alpha's of "0" or higher and 50% will have TSR Alpha's of less than "0". Thus TSR Alpha is akin to 50th percentile performance. www.kingsgate.com.au