HSBC 2004 Annual Report Download - page 343

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exchangeable under such arrangements was less than 2 million shares during the year.
HSBC Finance Corporation
Options granted under HSBC Finance Corporation’ s own share option schemes prior to the announcement of the
acquisition by HSBC in November 2002 vested upon acquisition by HSBC. Options granted after the
announcement of the acquisition in November 2002 but prior to 28 March 2003 were granted at market value,
and generally vest equally over 4 years and expire 10 years from the date of grant. Upon acquisition, HSBC
Finance Corporation share options previously granted were converted to share options over HSBC ordinary
shares of US$0.50 each at a rate of 2.675 HSBC share options (the same ratio as the Exchange Offer for HSBC
Finance Corporation) for each HSBC Finance Corporation share option.
Information with respect to share options granted under the former HSBC Finance Corporation schemes is as
follows:
2004 2003
Weighted Weighted
average average
Number price Number price
(000’s) US$ (000’ s) US$
HSBC Finance Corporation share options
outstanding at 28 March 2003 .......................... ––2,784 28.52
HSBC share options at 1 January or conversion ... 7,316 10.66 7,446 10.66
Exercised in the year ............................................. (174) 10.66 (23) 10.66
Forfeited in the year .............................................. (30) 10.66 (107) 10.66
Outstanding at end of year .................................... 7,112 10.66 7,316 10.66
Of which exercisable ............................................ 4,228 10.66 1,812 10.66
The weighted average contractual life for options outstanding at the balance sheet date was 8 years.
Restricted Share Plan
Conditional awards under the Restricted Share Plan
Conditional awards under the Restricted Share Plan have been in operation since 1996. The aim of the plan is to
align the interests of executives to the creation of shareholder value. This is achieved by setting certain Total
Shareholder Return targets which must normally be attained in order for the awards to vest.
2004 2003 2002
Number Number Number
(000’s) (000’ s) (000’ s)
Outstanding at 1 January ........................................................................ 13,669 9,540 6,197
Additions during the year ...................................................................... 5,727 5,074 3,667
Released in the year ............................................................................... (2,352) (945) (261)
Forfeited in the year ............................................................................... –– (63)
Outstanding at 31 December .................................................................. 17,044 13,669 9,540
The weighted average purchase price for shares purchased by HSBC for conditional awards under the Restricted
Share Plan in 2004 was US$16.55 (2003: US$10.89; 2002: US$12.08).
The weighted average remaining vesting period as at 31 December 2004 was 2.52 years (2003: 2.82 years; 2002:
2.98 years).
The 2005 conditional awards proposed to be made to Executive Directors and certain other senior employees
from the Restricted Share Plan in respect of 2004, will have an aggregate face value at the date of award of
US$52.1 million (2004 awards in respect of 2003: US$31.6 million) and an aggregate expected value of
US$22.9 million.
Other awards made under the Restricted Share Plan
Other awards are made under the Restricted Share Plan as part deferral of annual bonus. Awards are also made
for recruitment and retention purposes. The awards generally vest from one to three years from the date of
award.