Annual Report 2004 65
18. Contributed Equity (continued)
(d) Santos Executive Share Option Plan
The Santos Executive Share Option Plan was approved by shareholders at the Annual General Meeting on 15 May 1997 and its continuation, with
amendment, approved at the Annual General Meeting on 5 May 2000.
The Plan provides for the grant of options to subscribe for or purchase ordinary shares in the capital of the Company to eligible executives
selected by the Board. Participation will be limited to those executives who, in the opinion of the Board, are able to significantly influence the
generation of shareholder wealth. Directors envisage the Plan applying to up to 50 executives.
Each option is a right to acquire one share, subject to adjustment in accordance with the Rules of the Plan. The options entitle the holder to
participate in any bonus issue conducted by the Company, upon exercise of the options. The exercise price of each option will be adjusted in the
event of a rights issue.
There are no voting or dividend rights attached to the options. There are no voting rights attached to the unissued ordinary shares. Voting rights
will be attached to the unissued ordinary shares when the options have been exercised.
The exercise price of the options and other conditions, including any performance hurdles, will be determined by the Board. No consideration is
provided by Executives for the options. The Plan provides for options with a life of up to ten years.
The ability to exercise the options is generally conditional on the Company achieving a prescribed performance hurdle or exercise condition. To
reach the performance hurdle, the Company’s Total Shareholder Return (broadly, growth in share price plus dividends reinvested) (“TSR Growth”)
over a minimum three-year period must equal or exceed 10% per annum calculated on a compound basis. If Total Shareholder Return does not
reach the performance hurdle at the end of those respective periods, the options may nevertheless be exercisable if the hurdle is subsequently
reached within the remaining life of the options. In assessing the performance against the hurdle, the Board may apply on a consistent basis an
averaging method over a period of three months to allow for short-term volatility.
The fair value of shares issued as a result of exercising the options during the reporting period at their issue date is the market price of shares of
the Company on the Australian Stock Exchange as at close of trading.
During the financial year, the Company granted 330,148 options over unissued shares as set out below. The ability to exercise 200,000 of these
options is generally conditional on the Company achieving the performance hurdle described above and the balance are subject to the forfeiture
provision described in the Senior Executive Long Term Incentive section of the Santos Executive Share Purchase Plan described above.
The amounts recognised in the financial statements of the Santos Group and the Company in relation to executive share options exercised during
the financial year were:
Consolidated Santos Ltd
2004 2003 2004 2003
$million $million $million $million
Issued ordinary share capital 4.1 5.7 4.1 5.7
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