DIRECTORS’ AND SENIOR EXECUTIVES’ REMUNERATION The Remuneration Committee is responsible for reviewing the remuneration policies and practices of the Company including: the compensation arrangements for the Managing Director and senior management; the Company’s superannuation arrangements; employee share and option plans; executive and senior management performance review, succession planning, and, within the aggregate amount approved by shareholders, the fees for non- executive Directors. The role of the Remuneration Committee is documented in a Charter, approved by the Board, which Charter prescribes that the Committee must consist of at least three non-executive Directors. The Committee has access to independent advice and comparative studies on the appropriateness of remuneration arrangements.  The current members of the Remuneration Committee, all of whom are independent non- executive Directors, are: Professor J Sloan (Chairperson), Mr S Gerlach and Mr P C Barnett.  Within the aggregate amount (being $1,500,000 per year) approved by shareholders at the Annual General Meeting of the Company held on 7 May 2004,  the fees of the Chairman and  non-executive Directors are set  at levels which represent the responsibilities of and the time commitments provided by those Directors in discharging their duties. Regard is also had to  the level of fees payable to  non-executive Directors of comparable companies.  As previously announced, His remuneration comprises a base salary reviewed annually and an Mr J C Ellice-Flint has an executive service agreement with the Company which continues until terminated by either party in accordance with the agreement. Termination arrangements relating to the Managing Director were agreed in advance of his appointment, and those relating to the equity component of his remuneration were notified at the time of the appointment.  EXECUTIVE DIRECTORS  The Managing Director, Mr J C Ellice-Flint, is currently the only Executive Director, he being appointed a Director on 19 December 2000.  The Directors determined to cease retirement allowances to non- executive Directors effective from 30 June 2004. Non-executive Directors appointed before 1 January 2004 are entitled to receive benefits accrued to that date, payable upon ceasing to hold office as a Director. The retirement payment (inclusive of superannuation guarantee charge entitlements) is made pursuant to an agreement entered into with each non-executive Director on terms approved by shareholders at the 1989 Annual General Meeting. These benefits have been fully provided for by the Company.  non-executive Directors’ fees were increased effective 1 July 2004. Non-executive Directors, other than the Chairman, who are members of Board Committees receive additional fees. Non- executive Directors may not participate in any of the Company’s bonus, share or  option plans.  annual bonus calculated on a formula that includes components to measure the growth of profitability, exploitable reserves and share price.  He also has an entitlement to 1,000,000 Restricted Shares, details of which are described in note 18(h) to the financial statements and holds 3,000,000 options under the Santos Executive Share Option Plan.  If the Company terminates Mr J C Ellice-Flint’s appointment without cause, the Company may at its option, in lieu of part or all of the notice period of 24 months, pay to him an amount equal to a proportion or multiple of his annual base salary and the current year’s potential bonus (excluding the application of any performance condition) at the time at which notice is given.  The objectives of the Company’s remuneration policy are to attract, retain and motivate appropriately qualified and experienced executives capable of discharging their respective responsibilities to enable the Company to achieve its business strategy.  The principles underlying the remuneration policy are: to realistically reflect the responsibilities of executives and other employees; to be industry competitive and reasonable; that a significant portion of remuneration be at risk against individual and company performance and shareholder wealth creation; that performance, not failure, be rewarded so that the Company’s best performers LTI: in relation to executive remuneration includes a long term performance based component in the form of equity participation through the Santos Executive Share Option Plan (SESOP) and the Santos Employee Share Purchase Plan (SESPP). Participation is determined by the Board, on recommendation of the Remuneration Committee, and only applies to executives who are STI is represented as a percentage of base remuneration which is “at risk”. The STI consists of an annual cash bonus paid to reward performance based on a mix of Company performance and individual performance measured against annual scorecards with target and stretch performance criteria determined in advance each year.  FAR: comprises salary, superannuation and benefits; is quantified by reference to role and experience; and is industry benchmarked.  The Company’s remuneration structure for its non-award employees is based upon Target Total Remuneration (TTR), the components of which comprise:  receive more; and to encourage executives to manage from the perspective of the shareholders by rewarding them for aligning Company and shareholder returns.  (b) Remuneration Structure SENIOR EXECUTIVES  (a) Remuneration Objectives and Principles NON-EXECUTIVE DIRECTORS  37 Annual Report 2004 • a fixed component called Fixed Annual Remuneration (FAR); and  • the Short Term Incentive (STI) and  • the Long Term Incentive (LTI).  two variable components, called: 