AGL Energy Limited Annual Report 2011 53 2011 TSR metric outcome calculation CEO LTI allocation: 2009 – 2011 2011 EBIT/Funds Employed metric outcome calculation Legacy LTI plan Maximum percentage of total target remuneration 4. Remuneration mix Opening VWAP share price – 30/6/2010 $14.58 Closing VWAP share price – 30/06/2011 $14.23 Dividends paid in 2011 $0.59 TSR for 2011 ((14.23+0.59)/14.58)–1 x 100 1.6% Award multiplier – based on TSR outcome being between  minus 4% and plus 4% zero Hurdle 1: Annual TSR 2011 A Michael Fraser SPRs notionally granted for this  hurdle (50% of 137,175 notional grant) 68,588 TSR outcome 1.6% B Award multiplier Zero C Opening SPR bank balance  (carried forward from the 2009/2010 financial  year) 50,051 D Incentive (A x B) 0 E Available (C + D) 50,051 F Annual distribution at 40% (E x 40%) 20,020 G Closing bank balance of SPRs (E – F) 30,031 EBIT/Funds employed – 30/6/2010 11.27% EBIT/Funds employed – 30/6/2011 10.45% Annual change in EBIT/Funds employed for 2011  ((10.45-11.27)/11.27) x 100 minus 7.3% Award multiplier – prorata below minus 4%  minus 0.60 Hurdle 2: Annual growth in EBIT/Funds Employed 2011 A Michael Fraser SPRs notionally granted for  this hurdle (50% of 137,175 notional grant 68,587 EBIT/Funds employed outcome minus 7.3% B Award multiplier minus 0.60 C Opening SPR bank balance (carried forward  from the 2009/2010 financial year) 18,164 D Incentive (A x B) minus 41,152 E Available (C + D) minus 22,988 F Annual distribution at 40% (E x 40%); or zero 0 G Closing bank balance of SPRs (E – F) minus 22,988 AGL’s TSR ranking relative to  comparator group Percentage of SPRs that vest TSR below 40% 0% TSR between 40% and 50% Progressive vesting on a  straight-line basis from 40% to  50% TSR between 51% and 84% Progressive vesting on a  straight-line basis from >50% to  <100% TSR equal to or greater than 85% 100% It is worth noting that the negative closing bank balance, (G) in the  above table, becomes the negative opening balance for financial  year 2012. AGL currently has two types of LTI for Senior Executives. Apart from the SPRs granted in October 2008 the old LTI plan is  no longer in operation. STI and LTI are together known as the ‘variable’ or ‘at risk’ element  of a Senior Executive’s remuneration. This increases with the level  of responsibility and/or criticality of the role. The balance between fixed and variable remuneration is regularly  reviewed for market relativity and competitiveness. In respect of the 2010/11 financial year, the maximum  remuneration mix within the Senior Executive roles in AGL was  as follows: AGL obtained shareholder approval in 2008 to issue an LTI  allocation to Mr Fraser with a face value equivalent of up to a  maximum of 100% of his TFR (total fixed remuneration) in respect  of each of the financial years ending 30 June 2009, 30 June 2010  and 30 June 2011. AGL has not exceeded this maximum LTI allocation in any of  these years. Relative TSR performance is assessed by an independent third  party provider for accuracy and independence of calculation. Vesting of SPRs commences at the 40th percentile because  independent analysis showed that the probability of vesting at the  50th percentile was quite low and in fact AGL had the lowest price  volatility of ASX 100 companies who used relative TSR as a  performance hurdle. This low probability and higher risk presented  limited incentive and retention benefit to Senior Executives  reducing the effectiveness of the LTI as a genuine performance  incentive. 1. AGLs ‘new’ LTI, which is described in the section above, covered  grants of SPRs, which were determined in September 2009,  September 2010 and September 2011, and is intended to cover  future grants (subject to periodic review by the Board). 2. Now purely as a legacy plan, AGL also has an ‘old’ LTI scheme  under which SPRs were granted in October 2008. Note: 1. This percentage may increase over time for sustained outperformance against specifi ed  hurdles over a number of years (due to the impact of the LTI multiplier). TFR STI LTI 1 Chief Executive Officer 33.3% 33.3% 33.3% Group General Managers  and CFO 50% 25% to 30% 20% to 25% Other Senior Executives 55% to 65% 25% to 30% 5% to 20% > Vesting is based on measurement of the performance hurdle,  initially three years from the date of issue, or (to the extent that  full vesting does not occur at this point) four years from the date  of issue. > Any SPRs that do not vest, after year four, automatically lapse. > The performance hurdle is relative TSR measured against a  comparator group of the ASX100 companies as at  1 October 2008. > The number of SPRs that vest is determined as follows: The old LTI plan uses relative TSR as the performance hurdle.