HSBC 2007 Annual Report Download - page 384

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Notes 10 and 11
382
described above in ‘Calculation of fair values’. A risk-free interest rate of 4.3 per cent was used, with all other inputs
to the model consistent with those used to value the other share options and awards made during 2006.
HSBC Holdings Executive Share Option Scheme
The HSBC Holdings Executive Share Option Scheme was a long-term incentive plan under which certain senior
HSBC employees were awarded share options before the adoption of the HSBC Holdings Group Share Option Plan
in 2000. The aim of the plan was to align the interests of those higher performing senior employees with the creation
of shareholder value. This was achieved by setting certain TSR targets to be attained in order for the awards to vest.
Options were granted at market value and were exercisable between the third and tenth anniversaries of the date of
grant, subject to vesting conditions. No awards have been made under this plan since 2000 and the remaining
unexercised options are summarised below:
2007 2006
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
(000’s) £ (000’s) £
Outstanding at 1 January .............................................. 22,037 6.82 32,255 6.78
Exercised in the year ..................................................... (3,377) 6.65 (9,767) 6.69
Forfeited in the year ...................................................... (421) 6.84 (451) 5.94
Outstanding at 31 December ........................................ 18,239 6.85 22,037 6.82
The weighted average share price at the date the share options were exercised was US$18.08 (2006: US$17.65).
The number of options, weighted average exercise price and weighted average remaining contractual life of options
outstanding at the balance sheet date, analysed by exercise price range, were as follows:
2007 2006
Exercise price range (£) ...................................................................................... 6.01 – 7.87 2.17 – 6.00 6.01 – 7.87
Number (000’s) ................................................................................................... 18,239 188 21,849
Weighted average exercise price (£) .................................................................. 6.85 5.02 6.84
Weighted average remaining contractual life (years) ........................................ 1.66 – 2.64
Of which exercisable:
Number (000’s) .............................................................................................. 18,239 188 21,849
Weighted average exercise price (£) .............................................................. 6.85 5.02 6.84
HSBC France and subsidiary company plans
Before its acquisition by HSBC in 2000, HSBC France and certain of its subsidiaries operated employee share plans
under which share options were granted over their respective shares.
Options over HSBC France shares granted between 1994 and 1999 vested upon announcement of HSBC’s agreement
to acquire HSBC France and were therefore included in the valuation of HSBC France.
HSBC France granted 909,000 options in 2000 after the public announcement of the acquisition and these options did
not vest as a result of the change in control. The options were subject to continued employment and vested on
1 January 2002. The HSBC France shares obtained on exercise of the options are exchangeable for HSBC’s ordinary
shares of US$0.50 each in the same ratio as the Exchange Offer for HSBC France shares (13 ordinary shares of
US$0.50 for each HSBC France share). Options were granted at market value and are exercisable within 10 years of
the date of grant.
2007 2006
Number
Exercise
price Number
Exercise
price
(000’s) € (000’s) €
Outstanding at 1 January .............................................. 646 142.5 766 142.5
Exercised in the year ..................................................... (44) 142.5 (120) 142.5
Outstanding and exercisable at 31 December .............. 602 142.5 646 142.5
The remaining contractual life for options outstanding at the balance sheet date was 2.3 years (2006: 3.3 years).