Directors’ Report
54
www.kingsgate.com.au
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:
120
-13  -20  
 36  
 19  
 73  
 46  
 25   17   22  
 9  
 33  
 18  
ProﬁtYear 1 Year 2 Year 3
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
 21
 34 28
 75
 165
 19
2011/12
Operating Cash Flow Cash Dividend Paid
-40
-20
0
20
40
A$ Million
60
80
100
140
160
180
200
220
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
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%
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
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. 
Previous LTI Plan
The previous LTI Plan involved awarding partici-
pants options over shares. This Plan ceased prior