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## Cardno Limited and its Controlled Entities for the year ended 30 June 2010 

## 23. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED 

## Performance Equity Plan (PEP) 

The PEP is designed to reward strong performance by individuals within the Cardno Group of companies. Options and Rights are issued under the PEP (made in accordance with thresholds set in the plan 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. 

Movements in options throughout the year were as follows: 

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The options outstanding at 30 June 2010 have an exercise price in the range of $3.35 to $7.71. These options do not entitle the holder to participate in any share issue of the Company. 

The options issued prior to FY2010 are subject to a performance hurdle and will not vest unless there has been at least a 5% improvement per year (compounded) in the earnings per share of the Company over the vesting periods. 

The options issued during FY2010 are subject to a performance hurdle and to vest the Company must achieve earnings per share (EPS) growth in accordance with the following scale: 

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The fair values of options granted during the year has been calculated using the Black-Scholes model, taking into account price volatility, risk free interest rates and the dividend yield. 

The model inputs for the fair value of options granted during the year ended 30 June 2010 include share price at grant date of $4.07 (2009: $3.26), expected price volatility of the companies shares of 42% (2009: 33%), expected dividend yield of 8.00% (2009: 8.28%) and risk free interest rate of 4.61% (2009: 6.73%). 

