115 AGL Energy Limited Annual Report 2011 Under the LTIP the Board has an absolute discretion to determine the performance conditions which must be satisfied before SPRs can vest  and the period over which SPRs vest. The SPRs notionally granted to Mr Fraser are subject to two performance hurdles based on annual: Mr Fraser will be awarded a number of SPRs in respect of each performance condition, determined by multiplying 50% of the number of his  initial grant of SPRs by the multiplier indicated in the tables below which corresponds with the TSR outcome and the growth in EBIT/Funds  Employed outcome for the financial year ending 30 June 2011. In the event the TSR outcome is greater than 14%, the opening share price for measuring the following year’s TSR is set at a level that would  have achieved 14%. In the event the TSR outcome is less than minus 14%, the opening share price for measuring the following year’s TSR is  set at a level that would have achieved minus 14%. In the event the growth in EBIT/Funds Employed outcome is greater than 13%, the EBIT/Funds Employed for measuring the following year’s  EBIT/Funds Employed is set at a level that would have achieved 13%. In the event the growth in EBIT/Funds Employed outcome is less than  minus 13%, the opening EBIT/Funds Employed for measuring the following year’s EBIT/Funds Employed is set at a level that would have  achieved minus 13%. SPRs awarded can be positive and negative. This means shares can only be awarded if there is a predetermined improvement on the prior  year. Importantly however, if performance falls below a predetermined level in any year, then previously awarded SPRs will be clawed back  to the extent calculated under the performance hurdles. Mr Fraser has two notional share bank accounts (one for TSR, the other for EBIT/Funds Employed) and these operate independently of the  other in determining whether a distribution is made. The SPRs awarded are deposited into a notional share bank account. An annual calculation is made as soon as practicable for the year ended  30 June to determine the number of SPRs to be added or deducted from the notional share bank accounts. If there is a positive notional share bank balance in a bank account following the calculation, 40% of that balance is distributed to Mr Fraser  during the next AGL share trading window. There is no distribution from a bank account if there is a negative notional share bank balance in that account following the calculation and  any negative balance is carried forwarded to the following year. SPRs granted on 27 October 2008 are subject to a performance condition based on TSR with the level of vesting being dependent upon  AGL’s TSR performance measured against a comparable group of the ASX100 listed companies as at 1 October 2008. The performance condition will be tested initially on 1 October 2011 and the number of SPRs that vest at that time will be determined in  accordance with the table below. To the extent that full vesting does not occur at this point, the performance condition will be retested on  1 October 2012. Annual growth in EBIT/Funds Employed  Number of SPRs awarded Equal to or greater than 13%  2 times SPRs notionally granted Greater than 2% and less than 13%  Progressive on a straight-line basis from zero times to 2 times SPRs notionally granted Between 2% and minus 4%  Zero times SPRs notionally granted Less than minus 4% and greater than minus 15%   Progressive deduction on a straight-line basis from zero times to minus 2 times SPRs notionally  granted Equal to or less than minus 15%  Minus 2 times SPRs notionally granted Annual TSR  Number of SPRs awarded Equal to or greater than 14%  2 times SPRs notionally granted Greater than 4% and less than 14%  Progressive on a straight-line basis from zero times to 2 times SPRs notionally granted Between 4% and minus 4%  Zero times SPRs notionally granted Less than minus 4% and greater than minus 14%   Progressive deduction on a straight-line basis from zero times to minus 2 times SPRs notionally  granted Equal to or less than minus 14%  Minus 2 times SPRs notionally granted – Total Shareholder Return (TSR); and – Growth in Earnings before interest and tax (EBIT)/Funds Employed