Directors’ Report  Cardno Limited and its Controlled Entities for the year ended 30 June 2010  Long-Term Incentive Bonus  Employee Share Acquisition Plans (“ESAP”)  Performance Equity Plan (PEP)  Options  Shares are issued under the ESAP, in accordance with thresholds approved by shareholders at the 2009  AGM. It provides employees with the opportunity to acquire shares in the Company for no consideration as a  bonus component of their remuneration. Employees with 12 months service or greater who have worked an  average of 100 hours or more per month are entitled to $1,000 of shares each year and employees with 6 to  12 months service are entitled to $500 of shares each year. Employees who work part time, who have  greater than 12 months service and who have worked more than 600 hours per year are also entitled to  $500 of shares each year. Shares issued under ESAP rank equally with other fully paid ordinary shares from  the date of issue.  Shares are issued in the name of the participating employee and are subject to a restriction period. The  shares are restricted under the plan until the earlier of three years from the date of acquisition or the date  they cease to be an employee. Once the restriction period is lifted the shares can be traded as fully paid  ordinary shares. The ESAP has no conditions that could result in the recipient forfeiting ownership of shares. The number of shares still under a restriction period at 30 June 2010 are detailed in the table below:  Shares issued during the reporting period are valued at the average market price over the 5 trading days  prior to the date of the issue to employees, which approximates the fair value.  The PEP is designed to reward strong performance by individuals within the Cardno Group of companies. Options and Rights are issued under the PEP, in accordance with thresholds approved at the 2009 AGM,  which provides certain employees, as determined by the Managing Director and Remuneration Committee,  with the opportunity to acquire shares in the Company, or rights to acquire shares in the Company. The plan rules contain a restriction on removing the “at risk” aspect of the instruments granted to executives. Plan participants may not enter into any transaction designed to remove the “at risk” aspect of an instrument  before it vests.  The plan operates by granting an option to key staff to purchase a prescribed number of shares at a  pre-determined time in the future. During the 2010 financial year, options with a grant date fair value of  $1,728,573 were issued with a vesting period of three years from the grant date.  Each option is convertible to one ordinary share. The exercise price of the options, determined in  accordance with the rules of the plan, is based on the weighted average price of the Company’s shares  traded during the five days preceding the date of offering the option. All options expire on the earlier of their  expiry date or termination of the employee’s employment. The options may be exercised at any time during  a 12 month period ending thirty-six months after the date the options are issued.  There are no voting or dividend rights attached to the options. Voting rights and dividends will be attached to  the unissued ordinary shares when the options have been exercised.  No options were exercised during the 2009/10 financial year. Options with a grant date fair value of  $310,405 lapsed during the year as a result of vesting conditions not being satisfied.  Page 11 of 80  Grant Date  Issue Price Restricted at  30 June 2010  29 January 2008  $6.19 121,739  23 February 2009  $3.18 352,779  9 March 2010  $4.07 401,373 