2000 Interim Report - Part 1

HSBC Hldgs PLC
11 August 2000


PART 1

The following is the text of the HSBC Holdings plc 2000 Interim Report which
is being sent to shareholders today. The 2000 interim results were announced
on 31 July 2000.


Contents
    Financial Highlights
    Overview of Results
    Group Chairman's Comment
    Consolidated Profit and Loss Account
    Consolidated Balance Sheet
    Statement of Total Consolidated Recognised Gains and Losses
    Reconciliation of Movements in Consolidated Shareholders' Funds
    Consolidated Cash Flow Statement
    Notes on the Accounts
    Review Report of the Auditors
    Additional Information



Financial Highlights

Results for the half-year to 30 June 2000

     Half-year to
30 Jun 99  31 Dec 99                          Half-year to 30 June 2000
     US$m       US$m                          US$m           £m        HK$m
                      For the period
    4,068      3,914  Profit before tax       5,206        3,317      40,535
    2,694      2,714  Profit attributable     3,525        2,245      27,446
    1,118      1,754  Dividends               1,280          815       9,966

                      At period-end
   31,642     33,408  Shareholders' funds    35,319       23,311     275,311
   44,990     44,270  Capital resources      47,935       31,637     373,653
                      Customer accounts and 
  351,559    398,075    deposits by banks   426,122      281,240   3,321,620
  496,520    569,139  Total assets          580,280      382,985   4,523,283
  294,016    336,126  Risk-weighted assets  339,444      224,033   2,645,966
 
      US$^^^     US$  Per share                 US$            £         HK$
     0.33       0.32  Basic earnings           0.42         0.27        3.27
     0.33       0.33  Cash earnings^^          0.44         0.28        3.43
     0.33       0.32  Diluted earnings         0.41         0.26        3.19
    0.133       0.207 Dividend                 0.15         0.10^       1.17^
     3.76       3.95  Net asset value          4.14         2.73       32.27

                      Share information
                      US$0.50 ordinary 
   8,407m     8,458m    shares in issue       8,532m
   US$99b    US$118b  Market capitalisation   US$98b
                      Closing market price
   £7.49      £8.63     per share             £7.56

        %          %  Ratios (annualised)         %
                      Return on average 
     18.6       16.4    shareholders' funds   20.2
                      Post-tax return on 
      1.22       1.18   average assets         1.37 
                      Post-tax return on 
                        average risk-
      2.02       2.00   weighted assets        2.33 
                      Capital ratios
     15.3       13.2  - total capital         14.1 
     11.4        8.5  - tier 1 capital         9.6
                      Cost:income ratio 
                        (excluding goodwill
     51.9       55.8    amortisation)         53.3


^    The first interim dividend is translated at the closing rate
     on 30 June 2000 (see Note 2 in the 'Notes on the Accounts').
^^   Cash earnings per share comprise basic earnings per share
     after adding back the impact of goodwill amortisation.
^^^  Restated to reflect the share capital reorganisation implemented
     on 2 July 1999.



Overview of Results

HSBC Holdings plc made a profit before tax of US$5,206 million in 
the first six months of 2000, an increase of US$1,138 million, or
28 per cent, over the same period in 1999. Profit attributable to
shareholders was US$3,525 million, an increase of 31 per cent.

The Directors have declared a first interim dividend for 2000 of 
US$0.15 per ordinary share (1999 first interim dividend of US$0.133 
per ordinary share), an increase of 13 per cent. The dividend will be 
payable on 5 October 2000.

Net interest income of US$6,684 million was US$771 million, or 13 per 
cent, higher than the same period in 1999. Other operating income rose 
by US$837 million, or 19 per cent, to US$5,334 million.

The Group's cost:income ratio (excluding the impact of the amortisation 
of goodwill) increased to 53.3 per cent from 51.9 per cent in the same 
period in 1999.

The charge for bad and doubtful debts was US$368 million, which was 
US$714 million lower than in the same period in 1999 and US$623 million 
lower than the second half of 1999; this was after releasing 40 per
cent (US$116 million) of the special general provision for Asian risk
established in 1997.

Gains on disposal of investments of US$162 million were US$7 million 
higher than in the same period of 1999.

The total capital ratio and tier 1 capital ratio for the Group remained 
strong at 14.1 per cent and 9.6 per cent, respectively, at 30 June 2000. 
Had the acquisition of Credit Commercial de France been completed on 
30 June, it is estimated that on a pro forma basis the tier 1 ratio 
would have been 9.1 per cent at that date.

The Group's total assets at 30 June 2000 were US$580 billion, an 
increase of US$11 billion, or 2 per cent, since 31 December 1999.



Geographical distribution of results

                                       Half-year to
                         30 Jun 2000    30 Jun 1999    31 Dec 1999
                        US$m        %  US$m        %  US$m        %

Profit before tax
  Europe               1,962     37.6  1,719    42.3  1,603    40.9
  Hong Kong            1,903     36.6  1,391    34.2  1,663    42.5 
  Rest of Asia-Pacific   734     14.1    180     4.4    149     3.8
  North America          414      8.0    530    13.0    429    11.0
  Latin America          193      3.7    248     6.1     70     1.8

Group profit before 
  tax                  5,206    100.0  4,068   100.0  3,914   100.0

Tax on profit on 
  ordinary activities (1,263)         (1,103)          (935)

Profit on ordinary 
  activities after 
  tax                  3,943           2,965          2,979
Minority interests      (418)           (271)          (265) 

Profit attributable    3,525           2,694          2,714 



Group Chairman's Comment

HSBC's results for the first half of 2000 were encouraging. 
Our performance has enabled us to declare a 13 per cent increase 
in the first interim dividend and make some major investments in 
the future of our business, in line with our strategic plan.

The increase in total revenues of 15 per cent reflected both 
organic growth and the contribution from recent acquisitions. 
In addition, with improved trading conditions in much of Asia 
and the major OECD economies remaining strong, the level of 
provisions for new bad and doubtful debts returned to historical
levels which helped achieve the 31 per cent increase in attributable 
profit. The geographical distribution of our earnings remained 
broadly stable with increased earnings in Asia balancing the cash 
contribution from the acquisitions of Republic New York Corporation 
and Safra Republic Holdings completed at the end of 1999. We estimate 
that the contribution of these businesses, before funding costs and 
goodwill amortisation, was about US$300 million.

In the UK, we saw strong competition from traditional providers of 
financial services and a fierce challenge from new entrants. In this
 environment, success depends on achieving high levels of customer 
trust and satisfaction. HSBC has taken an industry lead in becoming 
customer driven. HSBC Bank plc has a growing reputation for fairness 
and openness in its provision of wealth management and other services. 
In the first half, life, pensions and investments income grew by 9
per cent.

In July, having achieved its objectives as a founding partner in 
British Interactive Broadcasting, HSBC Bank has agreed to sell its 
20 per cent shareholding to BSkyB for a consideration which, at 
current share prices, is approximately three times the capital it
has contributed of US$121 million. The sale remains subject to 
regulatory approvals.

In Hong Kong, major initiatives to expand fee services in the light 
of limited credit demand were successful. Revenues from securities
distribution, credit cards and mutual fund business all rose strongly. 
HSBC invested heavily in preparing for the introduction of the 
Mandatory Provident Fund, a compulsory retirement plan covering company
employees and the self-employed.

Our results in the rest of Asia improved as economies rebounded from 
the regional downturn. New provisions for bad and doubtful debts 
declined and we were able to recover certain provisions made previously. 
Given the improving conditions, we considered it appropriate to release 
40 per cent of the US$290 million special general provision made in 1997.
Expense discipline remained firm and the marked rise in staff costs and
marketing expenditure were encouraging reflections of increased business
opportunities. In May, we announced an agreement in principle to acquire 
75 per cent of Bangkok Metropolitan Bank.

In the United States, we have made good progress in integrating the 
former Republic New York business. We are on target to achieve the 
annual cost savings of US$300 million after tax that we projected 
when we announced the acquisition.

In Latin America, we have started to build our loan business in Brazil 
on the back of historically low interest rates. Our insurance businesses 
in both Brazil and Argentina produced strong results.

Within investment banking, our private banking operations performed well. 
The number of clients we serve and the funds they entrust to us 
increased, growing to US$103 billion. Together with institutional and 
retail, HSBC now has US$239 billion funds under management. With equity
volumes very strong in both the institutional and retail markets,
our securities business produced a record performance in generating 
commission income of US$291 million. Good teamwork within HSBC 
contributed to customers of our commercial banks making greater use 
of the services provided by our investment banks. Corporate finance 
revenues increased by 28 per cent to US$183 million.

We took two major steps during the first half of 2000 to expand both our
geographic reach and our product range. The acquisition of Credit 
Commercial de France, which became effective on 28 July, provides  
us with a platform within the euro zone and with the opportunity
to build on the fine reputation which CCF enjoys for serving its major
corporate and high net worth customer base in France. The high take-up 
of the share exchange element of our offer for CCF has maintained
our tier 1 capital ratio above our target and thus added flexibility to 
our capital management.

On 18 April, we announced the formation of a 50:50 partnership with 
Merrill Lynch to create the first global online banking and investment
services company for affluent customers outside the US. We are firmly
on track to launch this service in the final quarter of this year. 
Our joint venture with Merrill Lynch is a major step forward in our 
strategy to enable us to succeed in the e-age. We described this in some
detail when we announced our 1999 results and we are making good progress 
in implementing our plans.

The progress we have made during the last two years and planning for the
changes made possible by new technology have reinforced our view that 
national economies are increasingly inter-dependent. Geographical boundaries
are becoming less relevant. We believe that, going forward, HSBC's
internationalism - defined by its systems, people, branding and character
- will give us a major competitive advantage.

We view the remainder of 2000 with optimism although unexpected shocks 
to the financial system can never be ruled out. The United States, the
principal motor of the world economy, has enjoyed an unprecedented 
period of growth. This may not continue indefinitely. However, the 
economic outlook in many of our markets remains favourable. After the 
exciting developments in the first half of the year we are concentrating 
on integration and execution. HSBC is in very good shape. We have a 
broad spread of businesses, an excellent customer base and a first class
product range. We have an increasingly well-known and respected brand. We
have resources, both financial and human, which enable us to pursue growth.
HSBC has built up real momentum and I am confident in our ability to deliver
value to our customers and shareholders.

Sir John Bond, Group Chairman
31 July 2000



Consolidated Profit and Loss Account

            Half-year to                                  Half-year to
 30 Jun 1999  31 Dec 1999                                 30 June 2000
        US$m       US$m                      Note    US$m       £m       HK$m
      14,460     14,744  Interest receivable       17,431   11,104    135,718
      (8,547)    (8,667) Interest payable         (10,747)  (6,846)   (83,676)
       5,913      6,077  Net interest income    4   6,684    4,258     52,042
       4,497      4,515  Other operating income 5   5,334    3,398     41,531
      10,410     10,592  Operating income          12,018    7,656     93,573
      (5,415)    (5,934) Operating expenses     6  (6,576)  (4,189)   (51,201)

                         Operating profit before
       4,995      4,658   provisions                5,442    3,467     42,372
                         Provisions for bad and
      (1,082)      (991)  doubtful debts        7    (368)    (234)    (2,865)
                         Provisions for contingent
         (52)       (91)  liabilities and commitments (40)     (25)      (311)
                         Amounts written off fixed
         (10)       (18)   asset investments          (14)      (9)      (109)

       3,851      3,558  Operating profit           5,020    3,199     39,087
                         Income from associated
          60         63    undertakings                25       16        195
                         Gains/(losses) on 
                           disposal of:
         155        295  - investments          8     162      103      1,261
           2         (2) - tangible fixed assets       (1)      (1)        (8)

                         Profit on ordinary activities
       4,068      3,914    before tax               5,206    3,317     40,535
                         Tax on profit on ordinary
      (1,103)      (935)   activities          9   (1,263)    (805)    (9,834)

                         Profit on ordinary activities
       2,965      2,979    after tax                3,943    2,512     30,701
                         Minority interests:
        (234)      (226) - equity                    (290)    (185)    (2,258)
         (37)       (39) - non-equity                (128)     (82)      (997)

                         Profit attributable to
       2,694      2,714    shareholders             3,525    2,245     27,446
      (1,118)    (1,754) Dividends                 (1,280)    (815)    (9,966)

                         Retained profit for 
       1,576        960    the period               2,245    1,430     17,480


Consolidated Balance Sheet

     At           At
30 June  31 December
   1999          1999                                    At 30 June 2000
   US$m          US$m                           Note   US$m      £m       HK$m
                       ASSETS
                       Cash and balances at
  2,591         6,179    central banks                3,494   2,306     27,236
                       Items in the course 
                         of collection
  6,776         5,826    from other banks             8,126   5,363     63,342
                       Treasury bills and other
 23,683        23,213    eligible bills              21,380  14,111    166,657
                       Hong Kong SAR Government
                         certificates of 
  7,277         9,905    indebtedness                 7,910   5,221     61,664
 96,136       100,077  Loans and advances to banks  112,667  74,360    878,239
                       Loans and advances to
236,125       253,567    customers                  261,593 172,651  2,039,117
 75,066       110,068  Debt securities              104,143  68,734    811,794
  4,420         4,478  Equity shares                  5,503   3,632     42,896
                       Interests in associated
    875           926    undertakings                 3,542   2,338     27,610
    297           280  Other participating interests    128      84        998
    299         6,541  Intangible fixed assets        6,372   4,206     49,670
 11,640        12,868  Tangible fixed assets         12,505   8,253     97,476
 26,564        29,363  Other assets                  26,967  17,799    210,204
                       Prepayments and accrued
  4,771         5,848   income                        5,950   3,927     46,380

496,520       569,139  Total assets                 580,280 382,985  4,523,283

                       LIABILITIES
                       Hong Kong SAR currency
  7,277         9,905    notes in circulation         7,910   5,221     61,664
 35,920        38,103  Deposits by banks             37,026  24,437    288,617
315,639       359,972  Customer accounts            389,096 256,803  3,033,003
                       Items in the course of
  5,090         4,872    transmission to other banks  5,922   3,909     46,162
 29,084        33,780  Debt securities in issue      20,680  13,649    161,201
 48,920        59,584  Other liabilities             51,237  33,816    399,389
  4,696         6,129  Accruals and deferred income   5,959   3,933     46,450
                       Provisions for liabilities
                         and charges
  1,264         1,388     - deferred taxation         1,362     899     10,617
  2,691         2,920     - other provisions          2,991   1,974     23,315
                       Subordinated liabilities
  3,223         3,235     - undated loan capital      3,337   2,202     26,012
  7,718        12,188     - dated loan capital       12,091   7,980     94,249
                       Minority interests
  2,484         2,072     - equity                    2,148   1,418     16,744
    872         1,583     - non-equity                5,202   3,433     40,549
  3,514         4,230  Called up share capital    10  4,266   2,816     33,253
 28,128        29,178  Reserves                   11 31,053  20,495    242,058
 31,642        33,408  Shareholders' funds           35,319  23,311    275,311

496,520       569,139  Total liabilities            580,280 382,985  4,523,283



Statement of Total Consolidated Recognised Gains and Losses

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Profit for the period attributable to shareholders

                                   3,525            2,694             2,714

Unrealised (deficit) on 
revaluation of investment 
properties:
 - subsidiaries                        -                -              (45)
 - associates                          -                -               (1)
Unrealised surplus on revaluation
  of land and buildings 
  (excluding investment properties)    -                -              371
Exchange and other movements        (819)            (764)             142

Total recognised gains and 
  losses for the period

                                   2,706            1,930            3,181



Reconciliation of Movements in Consolidated Shareholders' Funds

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Profit for the period attributable to shareholders

                                   3,525            2,694             2,714
Dividends                         (1,280)          (1,118)           (1,754)
                                   2,245            1,576               960

Other recognised gains and 
  losses relating to the period     (819)            (764)              467
New share capital issued, 
  net of costs                       340            2,978               295
Capitalised reserves arising
  on issue of shares to a qualifying
  employee share ownership trust    (323)               -              (185)
Amounts arising on shares issued
  in lieu of dividends               468              450               229

Net addition to shareholders' 
  funds                            1,911            4,240             1,766

Shareholders' funds at beginning
  of period                       33,408           27,402            31,642

Shareholders' funds 
  at end of period                35,319           31,642            33,408



Consolidated Cash Flow Statement

                                  Half-year        Half-year         Half-year
                                 to 30 June       to 30 June    to 31 December
Figures in US$m           Note         2000             1999              1999

Net cash inflow from 
  operating activities      13       17,896           12,768            8,776

Dividends received from 
  associated undertakings                67               84                2

Returns on investments and 
 servicing of finance:
   Interest paid on finance 
    leases and similar hire
    purchase contracts                  (13)             (14)             (11)
   Interest paid on subordinated
    loan capital                       (533)            (379)            (430)
   Dividends paid to minority interests 
   - equity                            (245)            (199)            (469)
   - non-equity                         (42)             (35)             (41)

Net cash (outflow) from returns on 
investments and servicing of finance   (833)            (627)            (951)
Taxation paid                          (994)            (701)            (874)

Capital expenditure and financial investments:
 Purchase of investment securities  (58,517)         (34,526)         (73,850)
 Proceeds from sale of investment
   securities                        62,501           30,703           60,682
 Purchase of tangible fixed assets     (631)            (488)            (681)
 Proceeds from sale of tangible 
   fixed assets                         102               87              122

Net cash inflow/(outflow) from capital expenditure
  and financial investments           3,455           (4,224)         (13,727)

Acquisitions and disposals:
 Net cash (outflow)/inflow from 
   acquisition of and increase in 
   stake in subsidiary undertakings  (9,764)            (123)             848
 Purchase of interest in associated
   undertakings and other
   participating interests           (2,626)             (32)             (91)
 Proceeds from disposal of 
   associated undertakings and
   other participating interests        140                3               25

Net cash (outflow)/inflow from 
acquisitions and disposals          (12,250)            (152)             782

Equity dividends paid                (1,286)          (1,049)            (889)

Net cash inflow/(outflow) 
  before financing                    6,055            6,099           (6,881)

Financing:
 Issue of ordinary share capital        17             2,978              110
 Issue of preference share capital   3,614                 -                -
 Subordinated loan capital issued      481               714            1,387
 Subordinated loan capital repaid     (245)             (452)            (147)

Net cash inflow from financing       3,867             3,240            1,350
Increase/(decrease) in cash          9,922             9,339           (5,531)



Notes on the Accounts

1   Accounting policies

The accounting policies adopted are consistent with those described in the
1999 Annual Report and Accounts.



2   Dividend

The Directors have declared a first interim dividend for 2000 of US$0.15 per
ordinary share, an increase of 13 per cent. The dividend will be payable on 
5 October 2000 to shareholders on the Register at the close of business on 
18 August 2000. The dividend will be payable in cash, in US dollars, sterling
or Hong Kong dollars, or a combination of these currencies, at the exchange
rates on 25 September 2000, with a scrip dividend alternative. Particulars of
these arrangements will be mailed to shareholders on or about 25 August 2000,
and elections will be required to be made by 18 September 2000.

The dividend payable in cash on shares held through SICOVAM, the settlement
and central depositary system in France, will be converted into euros at the
exchange rate on 25 September 2000 and paid on 5 October 2000 through Credit
Commercial de France, HSBC's paying agent.

The dividend payable to holders of American Depositary Shares (ADSs), each of
which represents five ordinary shares, will be paid in cash in US dollars on 
5 October 2000 or invested in additional ADSs for participants in the dividend
reinvestment plan operated by HSBC Bank USA as depositary.

The Company's shares will be quoted ex-dividend in London and in Hong Kong on
14 August 2000 and in Paris on 21 August 2000. The ADSs will be quoted
ex-dividend in New York on 16 August 2000.



3   Earnings and dividend per share

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999^             1999

Basic earnings per share            0.42             0.33              0.32
Cash earnings per share             0.44             0.33              0.33
Diluted earnings per share          0.41             0.33              0.32
Dividend per share                  0.15             0.133             0.207


^   Restated to reflect the share capital reorganisation implemented on 
    2 July 1999.


Basic earnings per ordinary share was calculated by dividing the earnings of
US$3,525 million by the weighted average number of ordinary shares outstanding
of 8,455 million (first half of 1999: earnings of US$2,694 million and 8,167
million shares; second half of 1999: earnings of US$2,714 million and 8,426
million shares). Diluted earnings per share was calculated by dividing the
basic earnings, which require no adjustment for the effects of dilutive
ordinary potential shares, by the weighted average number of ordinary shares
outstanding plus the weighted average number of ordinary shares that would
be issued on conversion of all the dilutive potential ordinary shares (being
share options outstanding not yet exercised) of 8,551 million (first half of
1999: 8,237 million shares; second half of 1999: 8,515 million shares).

The cash earnings per share was calculated by dividing the basic earnings,
including the add-back of amortised goodwill, by the weighted average number
of ordinary shares outstanding.



4   Net interest income

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Net interest income                6,684            5,913             6,077
Average interest-earning assets  484,247          413,778           424,583
Net interest spread (per cent)      2.23             2.35              2.26
Net interest margin (per cent)      2.78             2.88              2.84



5   Other operating income

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Dividend income                      111               73                84
Fees and commissions (net)         3,559            2,887             3,130
Dealing profits                      878              814               485
Other                                786              723               816

Total other operating income       5,334            4,497             4,515



6   Operating expenses

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Staff costs                        3,893            3,266             3,426
Premises and equipment 
  (excluding depreciation)           695              606               723
Other administrative expenses      1,305            1,072             1,257

Administrative expenses^           5,893            4,944             5,406
Depreciation and amortisation
- tangible fixed assets              511              460               503
- goodwill                           172               11                25

Operating expenses                 6,576            5,415             5,934

Cost:income ratio (excluding goodwill
  amortisation)(per cent)           53.3             51.9              55.8

^    Included in administrative expenses were US$56 million of restructuring
     costs relating to the former Republic and Safra Republic businesses
     (second half of 1999: US$164 million).



7   Bad and doubtful debts

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Profit and loss account charge 
Loans and advances to customers:
- specific charge:
  new provisions                     995            1,493            1,500
  releases and recoveries           (493)            (389)            (480)
- net general (release):
    special provision reflecting
    Asian risk raised in 1997       (116)               -                -
    other                            (16)             (20)             (27)

Customer bad and doubtful 
  debt charge                        370            1,084              993
Loans and advances to banks:
- net specific (release)              (2)              (2)              (2)

Total bad and doubtful debt charge   368            1,082              991



                              At 30 June       At 30 June    At 31 December
Figures in US$m                     2000             1999              1999

Total outstanding provisions
Loans and advances to customers:
- specific provisions              5,442            5,200             5,692
- general provisions               2,125            1,986             2,304

                                   7,567            7,186             7,996
Loans and advances to banks:
- specific provisions                 22               26                24

Total provisions                   7,589            7,212             8,020

Interest in suspense               1,045              933             1,073



8   Gains on disposal of investments

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

Gains/(losses) on disposal of:
- investment securities              174              142               297
- part of a business                   -               10                 -
- other participating interests      (12)               -                 -
- associates                           -                3                 -
- subsidiaries                         -                -                (2)

                                     162              155               295

HSBC Private Equity recorded a US$28 million profit from venture capital
investment disposals (first half of 1999: US$47 million; second half of 1999:
US$67 million).



9   Tax on profit on ordinary activities

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

UK corporation tax charge            421              431               165
Overseas taxation                    763              634               679
Deferred taxation                     88               34                95
                                   1,272            1,099               939
Associated undertakings               (9)               4                (4)

Total charge for taxation          1,263            1,103               935

Effective tax rate                  24.3%            27.1%             23.9%

The Company and its subsidiary undertakings in the UK provided for UK
corporation tax at 30 per cent, the rate for the calendar year 2000 (1999:
30.25 per cent). Overseas tax included Hong Kong profits tax of US$267 million
(first half of 1999: US$175 million; second half of 1999: US$192 million)
provided at the rate of 16.0 per cent (1999: 16.0 per cent) on the profits
assessable in Hong Kong. Other overseas taxation was provided for in the
countries of operation at the appropriate rates of taxation.

At 30 June 2000, there were potential future tax benefits of approximately
US$500 million (31 December 1999: US$520 million) in respect of trading
losses, allowable expenditure charged to the profit and loss account but not
yet allowed for tax, and capital losses which have not been recognised because
recoverability of the potential benefits is not considered certain.

The effective tax rate was below the standard rate of UK corporation tax of 
30 per cent, mainly because of lower rates of tax in major subsidiaries
overseas, in particular in Hong Kong, and the utilisation of previously
unrecognised tax losses in Asia. 



10   Called up share capital

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

At beginning of period             4,230            3,443             3,514
Shares issued, placing                 -              111                 -
Shares cancelled on reorganisation     -                -            (3,515)
Shares issued on reorganisation        -                -             4,204
Shares issued via a qualifying 
  employee share ownership trust      14                -                 -
Shares issued in lieu of dividends    21               18                10
Shares issued under option schemes     1                1                16
Exchange adjustments                   -              (59)                1

At end of period                   4,266            3,514             4,230



11   Reserves

                               Half-year        Half-year         Half-year
                              to 30 June       to 30 June    to 31 December
Figures in US$m                     2000             1999              1999

At beginning of period            29,178           23,959            28,128
Retained profit for the half-year  2,245            1,576               960
Arising on new shares issued,
  net of costs                       309            2,857                 -
Capitalised in share reorganisation    -                -              (689)
Arising on shares issued in
  lieu of dividends                  468              450              (478)
Unrealised deficit on revaluation 
  of investment properties:
- subsidiaries                         -                -               (45)
- associates                           -                -                (1)
Unrealised surplus on revaluation
  of Group premises                    -                -                371
Share options                         16                9                279
Capitalised on issue of shares
  via a qualifying employee share
  ownership trust                   (323)               -               (185)
Capitalisation of share premium 
  account on scripp dividend issue
  and associated costs               (21)             (18)               (10)
Exchange and other movements        (819)            (705)               848

                                  31,053           28,128             29,178

The reserves of the Group include property revaluation reserves amounting to
US$2,292 million (31 December 1999: US$2,342 million).

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