55 AGL Energy Limited Annual Report 2012 AGL currently has two types of LTI for Executives. 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 ASX100 companies who used relative TSR as a  performance hurdle. This low probability and higher risk presented  limited incentive and retention benefit to Executives reducing the  effectiveness of the LTI as a genuine performance incentive. Relative TSR performance is assessed by an independent third  party provider for accuracy and independence of calculation. Apart from a balance of 4,048 SPRs, granted in October 2008, the  old LTI plan is no longer in operation. This plan will cease to operate  entirely from September 2012. 1. AGL’s ‘new’ LTI, which is described in the section above, covered  grants of SPRs, which were determined in September for each  year between 2009 and 2012, 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. Old LTI plan CEO LTI allocation: 2012 – 2014 4.  Remuneration mix > 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. AGL obtained shareholder approval in 2011 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 2012, 30 June 2013  and 30 June 2014. STI and LTI are together known as the ‘variable’ or ‘at risk’ element  of an 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 2011/12 financial year, the maximum  remuneration mix within the Executive roles in AGL was as follows: 1 This percentage may increase over time for sustained outperformance against specified hurdles  over a number of years (due to the impact of the LTI multiplier). 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% Note:  Maximum percentage of total target remuneration TFR STI LTI 1 Chief Executive Officer 33.3% 33.3% 33.3% Group General Managers  and CFO 47% 29% 24% Other Executives 55% to 65% 20% to 30% 5% to 20%