HSBC 2009 Annual Report Download - page 403

401
No fees were payable by HSBC to KPMG for the following types of services: internal audit services, valuation and
actuarial services, services related to litigation, and services related to recruitment and remuneration. The following
fees were payable by HSBC’s associated pension schemes to KPMG:
2009 2008 2007
US$000 US$000 US$000
Audit fees ................................................................................................................. 670 720 612
Tax services ............................................................................................................. – 73 14
All other services ..................................................................................................... 260 – 36
Total fees payable .................................................................................................... 930 793 662
No fees were payable by HSBC’s associated pension schemes to KPMG for the following types of services: other
services pursuant to legislation, services relating to information technology, internal audit services, valuation and
actuarial services, services related to litigation, services related to recruitment and remuneration, and services related
to corporate finance transactions.
In addition to the above, KPMG estimate they have been paid fees of US$8.1 million (2008: US$4.8 million; 2007:
US$3.4 million) by parties other than HSBC but where HSBC is connected with the contracting party and therefore
may be involved in appointing KPMG. These fees arise from services such as auditing mutual funds managed by
HSBC and reviewing the financial position of corporate concerns which borrow from HSBC.
Fees payable to KPMG for non-audit services for HSBC Holdings are not disclosed separately because such fees are
disclosed on a consolidated basis for HSBC Group.
10 Share-based payments
During 2009, US$683 million was charged to the income statement in respect of share-based payment transactions
settled in equity (2008: US$819 million; 2007: US$870 million). This expense, which was computed from the fair
values of the share-based payment transactions when contracted, arose under employee share awards made in
accordance with HSBC’s reward structures.
In April 2009, HSBC Holdings completed a rights issue, details of which are provided in Note 41. The terms of the
share plans have been adjusted based on the theoretical ex-rights price, which was considered to be the most
appropriate methodology to reflect the rights issue. These adjustments are set out in the tables below.
Calculation of fair values
Fair values of share options/awards, measured at the date of grant of the option/award, are calculated using a Black-
Scholes model. When modelling options/awards with vesting dependent on HSBC’s Total Shareholder Return
(‘TSR’) over a period, the TSR performance targets are incorporated into the model using Monte Carlo simulation.
The expected life of options depends on the behaviour of option holders, which is incorporated into the option model
on the basis of historic observable data. The fair values calculated are inherently subjective and uncertain due to the
assumptions made and the limitations of the model used.
The significant weighted average assumptions used to estimate the fair value of the options granted were as follows:
1-year savings-
related share
option plan
3-year savings-
related share
option plans
5-year savings-
related share
option plans
2009
Risk-free interest rate1 (%) ...................................................................................... 0.7 2.1 2.4
Expected life2 (years) ............................................................................................... 1 3 5
Expected volatility3 (%) ........................................................................................... 50 35 30
Share price at grant date (£) ..................................................................................... 4.65 4.65 4.65
2008
Risk-free interest rate1 (%) ...................................................................................... 4.5 4.5 4.5
Expected life2 (years) ............................................................................................... 1 3 5
Expected volatility3 (%) ........................................................................................... 25 25 25
Share price at grant date (£) ..................................................................................... 8.80 8.80 8.80
2007
Risk-free interest rate1 (%) ...................................................................................... 5.6 5.5 5.4
Expected life2 (years) ............................................................................................... 1 3 5
Expected volatility3 (%) ........................................................................................... 17 17 17
Share price at grant date (£) ..................................................................................... 9.24 9.24 9.24