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 or dinary shares in the capital of the Company to eligible executives selected by the Board. Participation will be limited to those executives wh o, in the opinion of the Board, are able to significantly influence the generation of shareholder wealth. Directors envisage the Plan applyin to up to 50 executives. Each option is a right to acquire one share, subject to adjustmen 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 ar e no voting rights attached to the unissued ordinary shares. Voting rights will be attached to the unissued ordinary shares when the option have been exercised. The exercise price of the options and other conditions, including any perf ormance hurdles, will be determined by the Board. No consideration is provided by Executives for the options. The Plan provides for option with a life of up to ten years. The ability to exercise the options is generally conditional on the Compan y achieving a prescribed performance hurdle or exercise condition. To reach the performance hurdle, the Company’s Total Shareholder Return (br oadly, growth in share price plus dividends reinvested) (“TSR Growth”) over a minimum three-year period must equal or exceed 10% per ann um calculated on a compound basis. If Total Shareholder Return does not reach the performance hurdle at the end of those respective periods, th e options may nevertheless be exercisable if the hurdle is subsequently reached within the remaining life of the options. In assessing the perform ance 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 durin g 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 option over unissued shares as set out below. The ability to exercise 200,000 of these options is generally conditional on the Company achieving the performan ce hurdle described above and the balance are subject to the forfeiture provision described in the Senior Executive Long Term Incentive section o f 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 18. Contributed Equity (continued) (d) Santos Executive Share Option Plan Annual Report 2004 65