HSBC 2005 Annual Report Download - page 324

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
322
Prior to its acquisition by HSBC Holdings, HSBC Finance Corporation issued 8.875 per cent Adjustable Conversion-
Rate Equity Security Units (‘Units’) which included a contract under which the holder agreed to purchase, for US$25
each, HSBC Finance Corporation common shares on 15 February 2006, with an option for early settlement. The
Units which remained outstanding following the acquisition of HSBC Finance Corporation were converted into
contracts to purchase HSBC Holdings ordinary shares. Holders of Units electing to settle early received 2.6041
HSBC Holdings ordinary shares per Unit. Units exercised at maturity, 15 February 2006, will entitle the holder to
receive a number of shares based on the market value of HSBC Holdings ordinary shares at the time, up to a
maximum of 2.6041 HSBC Holdings ordinary shares for each Unit. During 2005, 324,726 (2004: 1,590,319) HSBC
Holdings ordinary shares were issued in connection with the early settlement of 124,698 (2004: 610,700) Units.
The maximum number of Units outstanding over HSBC Holdings ordinary shares are as follows:
Number of Units
exchangeable for
HSBC Holdings
ordinary shares Period of exercise Exercise price
31 December 2005 ............................................... 1,315,140 2006 US$8.00 – US$9.60
31 December 2004 ................................................ 1,439,838 2005 to 2006 US$8.00 – US$9.60
31 December 2003 ................................................ 2,050,540 2004 to 2006 US$8.00 – US$9.60
Following the acquisition of Bank of Bermuda in 2004, all outstanding employee share options over Bank of
Bermuda shares were converted into rights to receive HSBC Holdings ordinary shares based on the consideration of
US$40 for each Bank of Bermuda share and the average closing price of HSBC Holdings ordinary shares, derived
from the London Stock Exchange Daily Official List, for the five business days preceding the closing date of the
acquisition. During 2005, options over 459,091 HSBC Holdings ordinary shares were exercised (2004: 744,727) and
delivered from the HSBC (Bank of Bermuda) Employee Benefit Trust 2004 to satisfy the exercise of these options.
During 2005, options over 744,421 (2004: 23,500) HSBC Holdings ordinary shares lapsed. At 31 December 2005,
the HSBC (Bank of Bermuda) Employee Benefit Trust 2004 held 2,796,182 HSBC Holdings ordinary shares which
may be used to satisfy the exercise of options.
Options outstanding over HSBC Holdings ordinary shares under the Bank of Bermuda share plans are as follows:
Number of HSBC
Holdings
ordinary shares Period of exercise Exercise price
31 December 2005 ............................................... 3,366,455 2006 to 2013 US$7.04 – US$18.35
31 December 2004 ................................................ 4,569,967 2005 to 2013 US$3.86 – US$18.35
The maximum obligation at 31 December 2005 to deliver HSBC Holdings ordinary shares under all of the above
arrangements, the HSBC Holdings Restricted Share Plan 2000 and The HSBC Share Plan was 486,436,966 (2004:
514,846,111). The total number of shares at 31 December 2005 held by employee benefit trusts that may be used to
satisfy such obligations to deliver HSBC Holdings ordinary shares is 130,812,676 (2004: 123,108,967).