Annual Report and Accounts -

RNS Number : 7363P

HSBC Holdings PLC

31 March 2009

 



	Page
Information about the enforceability of judgements made in the US	448
Exchange controls and other limitations affecting equity security holders	448
Fourth interim dividend for 2008	448
Interim dividends for 2009	449
Dividends on the ordinary shares of HSBC Holdings	449
Nature of trading market	449
Shareholder profile	451
Memorandum and Articles of Association	451
Annual General Meeting	452
Interim Management Statements and Interim results	452
Actuaries	452
Shareholder enquiries and communications	453
Investor relations	454
Where more information about HSBC is available	454
Taxation of shares and dividends	455
History and development of HSBC	457
Organisational structure	459

Information about the enforceability of judgements made in the US

HSBC Holdings is a public limited company incorporated in England and Wales. Most of HSBC Holdings' Directors and executive officers live outside the US. As a result, it may not be possible to serve process on such persons or HSBC Holdings in 

the US or to enforce judgements obtained in US courts against them or HSBC Holdings based on civil liability provisions of the securities laws of the US. There is doubt as to whether English courts would enforce:

• certain civil liabilities under US securities laws in original actions; or

• judgements of US courts based upon these civil liability provisions.

In addition, awards of punitive damages in actions brought in the US or elsewhere may be unenforceable in the UK. The enforceability of any judgement in the UK will depend on the particular facts of the case as well as the laws and treaties in effect at the time.

Exchange controls and other limitations affecting equity security holders

There are currently no UK laws, decrees or regulations which would prevent the import or export of capital or remittance of distributable profits by way of dividends and other payments to holders of HSBC Holdings' equity securities who are not residents of the UK. There are also no restrictions under the laws of the UK or the terms of the Memorandum and Articles of Association of HSBC Holdings concerning the right of non-resident or foreign owners to hold HSBC Holdings' equity securities or, when entitled to vote, to do so.

Fourth interim dividend for 2008

The Directors have declared a fourth interim dividend for 2008 of US$0.10 per ordinary share. Information on the scrip dividend scheme and currencies in which shareholders may elect to have the cash dividend paid will be sent to shareholders on or about 31 March 2009. The timetable for the dividend is:

	2009
Shares quoted ex-dividend in London, Hong Kong, Paris and Bermuda	18 March
ADSs quoted exߛdividend in New York	18 March
Record date for dividend and closure of Hong Kong Overseas Branch Register of shareholders for one day	20 March
Mailing of Annual Report and Accounts 2008 and/or Annual Review 2008, Notice of Annual General Meeting and dividend documentation	31 March
Final date for receipt by registrars of forms of election, Investor Centre electronic instructions and revocations of  standing instructions for scrip dividends	23 April
Exchange rate determined for payment of dividends in sterling and Hong Kong dollars	27 April
Payment date: dividend warrants, new share certificates or transaction advices and notional tax vouchers mailed and shares credited to stock accounts in CREST	6 May

Interim dividends for 2009

The Board has adopted a policy of paying quarterly interim dividends on the ordinary shares. Under this policy it is intended to have a pattern of three equal interim dividends with a variable fourth interim dividend. It is envisaged that the first interim dividend in respect of 2009 will be US$0.08 per ordinary share. The proposed timetables for the dividends in respect of 2009 are:

	Interim dividends for 2009
	First		Second		Third		Fourth
Announcement	5 May 2009		3 August 2009		2 November 2009		1 March 2010
ADSs quoted ex-dividend in New York	20 May 2009		19 August 2009		18 November 2009		17 March 2010
Shares quoted ex-dividend in London,  Hong Kong, Paris and Bermuda	20 May 2009		19 August 2009		18 November 2009		17 March 2010
Record date in Hong Kong	22 May 2009		21 August 2009		19 November 2009		18 March 2010
Record date in London, Paris and Bermuda	22 May 2009		21 August 2009		20 November 20091		19 March 20101
Closure of the Overseas Branch Register of shareholders in Hong Kong for one day	22 May 2009		21 August 2009
Payment date	8 July 2009		7 October 2009		13 January 2010		5 May 2010
	Interim dividends for 2009
	First		Second		Third		Fourth
Announcement	5 May 2009		3 August 2009		2 November 2009		1 March 2010
ADSs quoted ex-dividend in New York	20 May 2009		19 August 2009		18 November 2009		17 March 2010
Shares quoted ex-dividend in London,  Hong Kong, Paris and Bermuda	20 May 2009		19 August 2009		18 November 2009		17 March 2010
Record date in Hong Kong	22 May 2009		21 August 2009		19 November 2009		18 March 2010
Record date in London, Paris and Bermuda	22 May 2009		21 August 2009		20 November 20091		19 March 20101
Closure of the Overseas Branch Register of shareholders in Hong Kong for one day	22 May 2009		21 August 2009
Payment date	8 July 2009		7 October 2009		13 January 2010		5 May 2010

1    Removals to and from the Overseas Branch Register of shareholders in Hong Kong will not be permitted on these dates.

Dividends on the ordinary shares of HSBC Holdings

HSBC Holdings has paid dividends on its ordinary shares every year without interruption since it became the HSBC Group holding company by a scheme of arrangement in 1991. The dividends declared, per ordinary share, for each of the last five years were:

		First     interim		Second     interim		Third     interim		Fourth     interim1		Total2
2008	US$	0.180		0.180		0.180		0.100		0.640
	£	0.090		0.100		0.124		0.069		0.383
	HK$	1.403		1.398		1.395		0.775		4.971
2007	US$	0.170		0.170		0.170		0.390		0.900
	£	0.085		0.084		0.086		0.194		0.449
	HK$	1.328		1.322		1.325		3.041		7.016
2006	US$	0.150		0.150		0.150		0.360		0.810
	£	0.082		0.079		0.078		0.183		0.422
	HK$	1.164		1.167		1.168		2.799		6.298
2005	US$	0.140		0.140		0.140		0.310		0.730
	£	0.077		0.079		0.079		0.169		0.404
	HK$	1.088		1.086		1.085		2.403		5.662
2004	US$	0.130		0.130		0.130		0.270		0.660
	£	0.071		0.072		0.069		0.141		0.353
	HK$	1.013		1.014		1.013		2.104		5.144

1    The fourth interim dividend for 2008 of US$0.10 per share has been translated into pounds sterling and Hong Kong dollars at the closing rate on 31 December 2008. The dividend will be paid on 6 May 2009.

2    The above dividends declared are accounted for as disclosed in Note 12 on the Financial Statements. 

Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, sterling and Hong Kong dollars, or, subject to the Board's determination that a scrip dividend is to be offered in respect of that dividend, may be satisfied in whole or in part by the issue of new shares in lieu of a cash dividend.

Nature of trading market

HSBC Holdings ordinary shares are listed or admitted to trading on the London Stock Exchange, the Hong Kong Stock Exchange ('HKSE'), Euronext Paris, the New York Stock Exchange ('NYSE') and the Bermuda Stock Exchange. HSBC Holdings maintains its principal share register in England and overseas branch share registers in Hong Kong and Bermuda (collectively, the 'share register').

As at 31 December 2008, there were a total of 217,633 holders of record of HSBC Holdings ordinary shares.

As at 31 December 2008, a total of 14,601,549 of the HSBC Holdings ordinary shares were registered in the HSBC Holdings' share register in the name of 13,196 holders of record with addresses in the US. These shares represented 0.12 per cent of the total HSBC Holdings ordinary shares in issue.

As at 31 December 2008, there were 10,041 holders of record of ADSs holding approximately 114 million ADSs, representing approximately 569 million HSBC Holdings ordinary shares. 9,845 of these holders had addresses in the US, holding approximately 113.7 million ADSs, representing 568.6 million HSBC Holdings ordinary shares. As at 31 December 2008, approximately 4.7 per cent of the HSBC Holdings ordinary shares were represented by ADSs held by holders of record with addresses in the US.

The following table shows, for the years, calendar quarters and months indicated, the highest and lowest prices for the HSBC Holdings ordinary shares and ADSs. These are based on mid-market prices at close of business on the London Stock Exchange, HKSE, Euronext Paris, NYSE and the Bermuda Stock Exchange.

Past share price performance should not be regarded as a guide to future performance.

High and low mid-market closing prices

	London				Hong Kong				New York				Paris				Bermuda
	US$0.50 shares				US$0.50 shares				ADSs1				US$0.50 shares				US$0.50 shares
	High		Low		High		Low		High		Low		High		Low		High		Low
	pence		pence		HK$		HK$		US$		US$		euro		euro		US$		US$
2008	928		612		136.3		73.3		87.7		45.6		11.9		6.4		17.7		9.0
2007	964		803		152.8		129.6		99.5		82.5		14.4		11.2		19.6		16.5
2006	1028		914		151.2		124.5		98.4		80.5		15.4		13.3		19.6		16.4
2005	950		825		133.5		120.1		85.8		77.5		13.9		12.0		17.1		15.7
2004	954		784		136.5		109.5		87.8		70.0		13.6		11.8		17.3		14.5
2008
4th Quarter	928		612		123.6		73.3		82.5		45.6		11.9		6.4		16.0		9.0
3rd Quarter	920		716		129.6		112.8		84.0		71.9		11.8		9.0		16.6		14.3
2nd Quarter	897		776		136.3		120.9		87.7		76.6		11.4		9.8		17.7		15.8
1st Quarter	842		712		131.7		104.4		83.7		69.9		11.4		9.5		16.8		14.1
2007
4th Quarter	964		803		152.8		129.6		99.5		82.5		13.9		11.2		19.6		16.5
3rd Quarter	917		861		145.8		135.8		93.8		87.2		13.7		12.8		18.8		17.1
2nd Quarter	955		886		147.1		136.3		95.2		88.0		14.0		13.2		18.7		17.7
1st Quarter	953		880		145.4		133.0		93.1		85.8		14.4		12.8		18.8		17.2
2009
January	682		485		77.5		55.0		49.6		33.8		7.3		5.2		9.9		7.0
2008
December	763		612		87.7		73.3		56.7		45.6		8.7		6.4		10.5		9.0
November	790		626		95.0		74.8		63.0		45.8		9.7		7.2		12.1		9.6
October	928		663		123.6		75.0		82.5		52.0		11.9		8.4		16.0		11.4
September	920		796		126.0		114.9		81.8		72.9		11.8		10.1		16.1		14.8
August	869		806		129.4		117.8		84.0		76.2		11.0		10.2		16.3		15.2
July	847		716		129.6		112.8		84.0		71.9		10.8		9.0		16.6		14.3

1    In New York each ADS represents 5 underlying ordinary shares.

Stock symbols

HSBC Holdings ordinary shares trade under the following stock symbols:

London Stock Exchange	HSBA
Hong Kong Stock Exchange	5
New York Stock Exchange (ADS)	HBC
Euronext Paris	HSB
Bermuda Stock Exchange	HSBC

Shareholder profile

At 31 December 2008 the register of members recorded the following details:

Ordinary shares held	Number of      shareholders		Total     shares held
1-100	34,307		1,096,309
101-400	36,669		9,352,754
401-500	10,430		4,718,343
501-1,000	33,322		25,102,571
1,001-5,000	68,515		158,400,107
5,001-10,000	16,039		113,367,551
10,001-20,000	8,723		121,509,773
20,001-50,000	5,319		163,350,441
50,001-200,000	2,659		250,022,876
200,001-500,000	679		214,879,617
500,001 and above	971		11,043,464,740
Total	217,633		12,105,265,082

Memorandum and Articles of Association

The disclosure under the caption 'Memorandum and Articles of Association' contained in HSBC Holdings' Annual Reports on Form 20-F for the years ended 31 December 2000 and 2001 is incorporated by reference herein, together with the disclosure below.

Interested directors

Subject to the provisions of the Companies Act 2006 and provided that the Articles are complied with, a Director, notwithstanding his office:

• may enter into or otherwise be interested in any contract, arrangement, transaction or proposal with HSBC Holdings or in which HSBC Holdings is otherwise interested;

• may hold any other office or place of profit under HSBC Holdings (except that of auditor or auditor of a subsidiary of HSBC Holdings) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity for HSBC Holdings, and in any such case on such terms as to remuneration and otherwise as the Board may arrange;

• may be a director or other officer, or employed by, or a party to any transaction or arrangement with or otherwise interested in, any company promoted by HSBC Holdings or in which HSBC Holdings is otherwise interested or as regards which HSBC Holdings has any powers of appointment; and

• shall not be liable to account to HSBC Holdings for any profit, remuneration or other benefit realised by any such office, employment, contract, arrangement, transaction or proposal or from any interest in any body corporate and no such contract, arrangement, transaction, proposal or interest shall be avoided on the grounds of any such interest or benefit nor shall the receipt of any such profit, remuneration or any other benefit constitute a breach of his duty under the Companies Act 2006 not to accept benefits from third parties.

Since 1 October 2008, the Board may authorise any matter proposed to it which would, if not so authorised, involve a breach by a Director of his duty to avoid conflicts of interest under the Companies Act 2006, including, without limitation, any matter which relates to a situation in which a Director has, or can have, an interest which conflicts, or possibly may conflict, with the interest of HSBC Holdings (including the exploitation of any property, information or opportunity, whether or not HSBC Holdings could take advantage of it, but excluding any situation which cannot reasonably be regarded as likely to give rise to a conflict of interest). Any such authorisation will be effective only if:

• any requirement as to quorum at the meeting at which the matter is considered is met without counting the Director in question or any other interested Director; and

• the matter was agreed to without their voting or would have been agreed to if their votes had not been counted.

The Board may (whether at the time of the giving of the authorisation or subsequently) make any such authorisation subject to any limits or conditions it expressly imposes but such authorisation is otherwise given to the fullest extent permitted. The Board may vary or terminate any such authorisation at any time.

A Director shall be under no duty to HSBC Holdings with respect to any information which he obtains or has obtained otherwise than as a Director of HSBC Holdings and in respect of which he has a duty of confidentiality to another person.

Annual General Meeting

The 2009 Annual General Meeting will be held at the Barbican Hall, Barbican Centre, London EC2 on Friday 22 May 2009 at 11 am. 

An informal meeting of shareholders will be held at Level 28, 1 Queen's Road Central, Hong Kong on Tuesday, 19 May 2009 at 4.30 pm.

All resolutions considered at the 2008 Annual General Meeting were passed on a poll as follows:

		Total votes
Resolution		For1		Against		Vote withheld2
1	To receive the Report and Accounts for 2007	4,378,043,313		10,278,857		2,300,035
2	To approve the Directors' Remuneration Report for 2007	3,564,669,072		467,114,424		328,531,356
3	To re-elect the following as Directors:
	(a)    S A Catz	4,375,443,604		15,493,924		4,853,194
	(b)    V H C Cheng	4,374,705,038		16,651,751		4,560,793
	(c)    J D Coombe	4,349,432,760		41,839,567		4,614,758
	(d)    J L Durán	4,375,677,125		15,302,707		4,915,245
	(e)    D J Flint	4,374,609,502		16,771,975		4,536,647
	(f)    A A Flockhart	4,373,920,231		17,415,825		4,580,796
	(g)    W K L Fung	4,259,101,744		76,102,878		60,005,424
	(h)    S T Gulliver	4,372,071,648		17,464,424		6,374,625
	(i)    J W J Hughes-Hallett	4,372,359,698		18,870,339		4,659,213
	(j)    W S H Laidlaw	4,375,327,024		15,801,272		4,735,846
	(k)    N R N Murthy	4,375,645,536		15,587,234		4,671,202
	(l)    S W Newton	4,374,735,344		16,524,200		4,612,269
4	To reappoint the Auditor at remuneration to be determined by the  Group Audit Committee	4,304,372,153		12,720,218		72,285,220
5	To authorise the Directors to allot shares	4,356,107,796		29,620,845		4,880,817
6	To disapply pre-emption rights (Special Resolution)	4,332,361,701		47,782,336		10,450,441
7	To authorise the Company to purchase its own Ordinary Shares	4,305,412,056		12,665,996		71,358,559
8	To alter the Articles of Association (Special Resolution)	4,327,487,122		53,604,562		9,091,619
9	To alter the Articles of Association with effect from 1 October 2008 (Special Resolution)	4,360,324,406		21,054,665		8,805,451
10	To amend the rules of the HSBC Share Plan	3,684,549,040		399,610,155		290,185,238

1    Includes discretionary votes.

2    A 'Vote withheld' is not a 'vote' in law and is not counted in the calculation of the votes 'For' and 'Against' the resolution.

Interim Management Statements and Interim results

Interim Management Statements are expected to be issued on 11 May 2009 and 6 November 2009, respectively. The interim results for the six months to 30 June 2009 are expected to be issued on 3 August 2009.

Actuaries

Actuaries preparing the latest valuations for the main retirement benefit schemes are:

HSBC Bank (UK) Pension Scheme: C G Singer, Fellow of the Institute of Actuaries, of Watson Wyatt Limited;

HSBC Group Hong Kong Local Staff Retirement Benefit Scheme: Estella Chiu, Fellow of the Society of Actuaries of the United States of America, of HSBC Insurance (Asia) Limited, a subsidiary of HSBC Holdings; and 

HSBC North America (US) Retirement Income Plan: Jennifer Jakubowski, Fellow of the Society of Actuaries, Enrolled Actuary and member of the American Academy of Actuaries, and Emily Carlson, Associate of the Society of Actuaries.

Disclosures relating to the latest valuations are included in Note 8 on the Financial Statements.

Shareholder enquiries and communications

Enquiries

Any enquiries relating to your shareholding, for example transfers of shares, change of name or address, lost share certificates or dividend cheques, should be sent to the Registrars:

Principal Register		Hong Kong Overseas Branch Register:		Bermuda Overseas Branch Register:
Computershare Investor Services PLC PO Box 1064 The Pavilions Bridgwater Road Bristol BS99 3FA United Kingdom Telephone: [phone] Email: [e-mail]		Computershare Hong Kong Investor   Services Limited Hopewell Centre  Rooms 1806-1807 18th Floor 183 Queen's Road East  Hong Kong Telephone: [phone] Email: [e-mail]		Corporate Shareholder Services  The Bank of Bermuda Limited 6 Front Street Hamilton HM 11 Bermuda Telephone: [phone] Email: bob.bda.shareholder.services@ bob.hsbc.com
Investor Centre: www.computershare.com/investor/uk		Investor Centre: www.computershare.com/hk/investors		Investor Centre: www.computershare.com/investor/bm

Any enquiries relating to ADSs should be sent to the depositary:

BNY Mellon Shareowner Services

PO Box 358516

Pittsburgh, PA 15252-8516

USA

Telephone (US): 1 887 283 5786

Telephone (International): 1 201 680 6825

Email: [e-mail]

Website: www.bnymellon.com/shareowner

Any enquiries relating to shares held through Euroclear France, the settlement and central depositary system for Euronext Paris, should be sent to the paying agent:

HSBC France

103, avenue des Champs Elysées

75419 Paris Cedex 08

France

Telephone: [phone]

If you have been nominated to receive general shareholder communications directly from HSBC Holdings it is important to remember that your main contact in terms of your investment remains as it was (so the registered shareholder, or perhaps custodian or broker, who administers the investment on your behalf). Therefore any changes or queries relating to your personal details and holding (including any administration thereof) must continue to be directed to your existing contact at your investment manager or custodian. HSBC Holdings cannot guarantee dealing with matters directed to it in error.

Further copies of this Annual Report and Accounts 2008 may be obtained by writing to the following departments:

For those in Europe, the Middle East and Africa:		For those in Asia-Pacific:		For those in the Americas:
Group Communications HSBC Holdings plc 8 Canada Square London E14 5HQ UK		Group Communications (Asia) The Hongkong and Shanghai Banking Corporation Limited  1 Queen's Road Central Hong Kong		Internal Communications HSBC-North America 26525 N Riverwoods Boulevard Mettawa Illinois 60045 USA

Electronic communications

Shareholders may at any time choose to receive corporate communications in printed form or to receive a notification of its availability on HSBC's website. To receive future notifications of the availability of a corporate communication on HSBC's website by email, or revoke or amend an instruction to receive such notifications by email, go to www.hsbc.com/ecomms. If you provide an email address to receive electronic communications from HSBC we will also send notifications of your dividend entitlements by email. If you received a notification of the availability of this document on HSBC's website and would like to receive a printed copy of it, or if you would like to receive future corporate communications in printed form, please write or send an email to the appropriate Registrars at the address given above. Printed copies will be provided without charge.

Chinese translation

A Chinese translation of this Annual Report and Accounts 2008 is available upon request after 31 March 2009 from the Registrars:

Computershare Hong Kong Investor Services Limited

Hopewell Centre, Rooms 1806-07, 18th Floor

183 Queen's Road East

Hong Kong

Computershare Investor Services PLC

PO Box 1064, The Pavilions

Bridgwater Road

Bristol BS99 3FA

UK 

Please also contact the Registrars if you wish to receive Chinese translations of future documents or if you have received a Chinese translation of this document and do not wish to receive such translations in future.

本年報及賬目備有中譯本，各界人士可向股份登記處索取（地址見上文）。

閣下如欲於日後收取相關文件的中譯本，或已收到本文件的中譯本但不希望繼續收取有關譯本，均請聯絡股份登記處

Investor relations

Enquiries relating to HSBC's strategy or operations may be directed to:

Manager Investor Relations HSBC Holdings plc 8 Canada Square London E14 5HQ UK		Investor Relations Officer HSBC North America Holdings Inc. 26525 N. Riverwoods Boulevard Mettawa, Illinois 60045 USA		Head of Investor Relations (Asia) The Hongkong and Shanghai Banking    Corporation Limited 1 Queen's Road Central Hong Kong
Telephone:     [phone]		1 224 544 4400		852 2822 4929
Facsimile:     44 (0)20 7991 4663		1 224 552 4400		852 2845 0113
Email:     [e-mail]		[e-mail]		[e-mail]

Where more information about HSBC is available

This Annual Report and Accounts 2008, and other information on HSBC, may be viewed on HSBC's website: www.hsbc.com.

Reports, statements or information that HSBC Holdings files with the Securities and Exchange Commission are available at www.sec.gov. Investors can also request hard copies of these documents upon payment of a duplicating fee, by writing to the SEC at the Office of Investor Education and Advocacy, 100 F Street N.E. Washington, DC 20549-0123 or by emailing [e-mail]. Investors should call the Commission at [phone] if they require further assistance. Investors may also obtain the reports and other information that HSBC Holdings files at the offices of the New York Stock Exchange, Inc., 11 Wall Street, New York, NY 10005.

Taxation of shares and dividends

Taxation - UK residents

The following is a summary, under current law, of the principal UK tax considerations that are likely to be material to the ownership and disposition of shares. The summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a holder of shares. In particular, the summary deals principally with shareholders who are resident in the UK for UK tax purposes and only with holders who hold the shares as investments and who are the beneficial owners of the shares, and does not address the tax treatment of certain classes of holders such as dealers in securities. Holders and prospective purchasers should consult their own advisers regarding the tax consequences of an investment in shares in light of their particular circumstances, including the effect of any national, state or local laws.

Taxation of dividends

Currently no tax is withheld from dividends paid by HSBC Holdings. However, dividends are paid with an associated tax credit which is available for set-off by certain shareholders against any liability they may have to UK income tax. Currently, the associated tax credit is equivalent to 10 per cent of the combined cash dividend and tax credit, i.e. oneߛninth of the cash dividend.

For individual shareholders who are resident in the UK for taxation purposes and liable to UK income tax at the basic rate, no further UK income tax liability arises on the receipt of a dividend from HSBC Holdings. Individual shareholders who are liable to UK income tax at the higher rate on UK dividend income (currently 32.5 per cent) are taxed on the combined amount of the dividend and the tax credit. The tax credit is available for set-off against the higher rate liability, leaving net higher rate tax to pay equal to 25 per cent of the cash dividend. Individual UK resident shareholders are not entitled to any tax credit repayment.

Although non-UK resident shareholders are generally not entitled to any repayment of the tax credit in respect of any UK dividend received, some such shareholders may be so entitled under the provisions of a double taxation agreement between their country of residence and the UK. However, in most cases no amount of the tax credit is, in practice, repayable.

Information on the taxation consequences of the HSBC Holdings scrip dividends offered in lieu of the 2007 fourth interim dividend and the first, second and third interim dividends for 2008 was set out in the Secretary's letters to shareholders of 3 April, 3 June, 3 September and 3 December 2008. In each case, the difference between the cash dividend foregone and the market value of the scrip dividend did not equal or exceed 15 per cent of the market value and accordingly, the price of HSBC Holdings US$0.50 ordinary shares (the 'shares') for UK tax purposes for the dividends was the cash dividend foregone.

Taxation of capital gains

The computation of the capital gains tax liability arising on disposals of shares in HSBC Holdings by shareholders subject to UK capital gains tax can be complex, partly depending on whether, for example, the shares were purchased since April 1991, acquired in 1991 in exchange for shares in The Hongkong and Shanghai Banking Corporation Limited, or acquired subsequent to 1991 in exchange for shares in other companies. 

For capital gains tax purposes, the acquisition cost for ordinary shares is adjusted to take account of subsequent rights and capitalisation issues. Further adjustments apply where an individual shareholder has chosen to receive shares instead of cash dividends, subject to scrip issues made since 6 April 1998 being treated for tax as separate holdings. Any capital gain arising on a disposal may also be adjusted to take account of indexation allowance and, in the case of individuals, taper relief. Except for gains made by a company chargeable to UK corporation tax, any such indexation allowance is calculated up to 5 April 1998 only.

Changes to capital gains tax were made that apply to disposals of shares with effect from 6 April 2008. The changes included:

• shares will no longer be treated as separate holdings but pooled, the consequence of which is the tax basis of disposals will be calculated on the average cost of the shares held;

• indexation allowance was withdrawn;

• Taper Relief was withdrawn; and

• a single tax rate of 18 per cent applies to all gains.

If in doubt, shareholders are recommended to consult their professional advisers.

Inheritance tax

Shares or ADSs held by an individual whose domicile is determined to be the US for the purposes of the United States-United Kingdom Double Taxation Convention relating to estate and gift taxes (the 'Estate Tax Treaty') and who is not for such purposes a national of the UK will not, provided any US Federal estate or gift tax chargeable has been paid, be subject to UK inheritance tax on the individual's death or on a lifetime transfer of shares or ADSs except in certain cases where the shares or ADSs (i) are comprised in a settlement (unless, at the time of the settlement, the settlor was domiciled in the US and was not a national of the UK), (ii) is part of the business property of a UK permanent establishment of an enterprise, or (iii) pertains to a UK fixed base of an individual used for the performance of independent personal services. In such cases, the Estate Tax Treaty generally provides a credit against US Federal tax liability for the amount of any tax paid in the UK in a case where the shares or ADSs are subject to both UK inheritance tax and to US Federal estate or gift tax.

Stamp duty and stamp duty reserve tax

Transfers of shares by a written instrument of transfer generally will be subject to UK stamp duty at the rate of 0.5 per cent of the consideration paid for the transfer, and such stamp duty is generally payable by the transferee.

An agreement to transfer shares, or any interest therein, normally will give rise to a charge to stamp duty reserve tax at the rate of 0.5 per cent of the consideration. However, provided an instrument of transfer of the shares is executed pursuant to the agreement and duly stamped before the date on which the stamp duty reserve tax becomes payable, under the current practice of UK HM Revenue and Customs it will not be necessary to pay the stamp duty reserve tax, nor to apply for such tax to be cancelled. Stamp duty reserve tax is generally payable by the transferee.

Paperless transfers of shares within CREST, the UK's paperless share transfer system, are liable to stamp duty reserve tax at the rate of 0.5 per cent of the consideration. In CREST transactions, the tax is calculated and payment made automatically. Deposits of shares into CREST generally will not be subject to stamp duty reserve tax, unless the transfer into CREST is itself for consideration.

Taxation - US residents

The following is a summary, under current law, of the principal UK tax and US federal income tax considerations that are likely to be material to the ownership and disposition of shares or ADSs by a holder that is a resident of the US for the purposes of the income tax convention between the US and the UK (the 'Treaty'), and is fully eligible for benefits under the Treaty (an 'eligible US holder'). The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a holder of shares or ADSs. In particular, the summary deals only with eligible US holders that hold shares or ADSs as capital assets, and does not address the tax treatment of holders that are subject to special tax rules, such as banks, tax-exempt entities, insurance companies, dealers in securities or currencies, persons that hold shares or ADSs as part of an integrated investment (including a 'straddle') comprised of a share or ADS and one or more other positions, and persons that own, directly or indirectly, 10 per cent or more of the voting stock of HSBC Holdings. This discussion is based on laws, treaties, judicial decisions and regulatory interpretations in effect on the date hereof, all of which are subject to change. Under the current income tax treaty between the UK and the US, eligible US holders are no longer entitled to claim a special foreign tax credit in respect of dividends. 

Holders and prospective purchasers should consult their own advisers regarding the tax consequences of an investment in shares or ADSs in light of their particular circumstances, including the effect of any national, state or local laws. 

In general, the beneficial owner of a share or ADS will be entitled to benefits under the Treaty (and, therefore, will be an eligible US holder) if it is (i) an individual resident of the US, a US corporation meeting ownership criteria specified in the Treaty or other entity meeting criteria specified in the Treaty; and (ii) not also resident in the UK for UK tax purposes. Special rules, including a limitation of benefits provision, may apply. The Treaty benefits discussed below generally are not available to US holders that hold shares or ADSs in connection with the conduct of a business through a permanent establishment, or the performance of personal services through a fixed base, in the UK.

Taxation of dividends

An eligible US holder must include cash dividends paid on the shares or ADSs in ordinary income on the date that such holder or the ADS depositary receives them, translating dividends paid in UK pounds sterling into US dollars using the exchange rate in effect on the date of receipt. Subject to certain exceptions for positions that are held for less than 61 days or are hedged, and subject to a foreign corporation being considered a 'qualified foreign corporation' (which includes not being classified for US federal income tax purposes as a passive foreign investment company), certain dividends ('qualified dividends') received by an individual eligible US holder before 2011 generally will be subject to US taxation at a maximum rate of 15 per cent. Based on the company's audited financial statements and relevant market and shareholder data, HSBC Holdings believes that it was not treated as a passive foreign investment company for US federal income tax purposes with respect to its 2008 taxable year. In addition, based on the company's current expectations regarding the value and nature of its assets, and the sources and nature of its income, HSBC Holdings does not anticipate being classified as a passive foreign investment company for its 2009 taxable year. Accordingly, dividends paid on the shares or ADSs generally should be treated as qualified dividends.

Taxation of capital gains

Gains realised by an eligible US holder on the sale or other disposition of shares or ADSs normally will not be subject to UK taxation unless at the time of the sale or other disposition the holder carries on a trade, profession or vocation in the UK through a branch or agency or permanent establishment and the shares or ADSs are or have been used, held or acquired for the purposes of such trade, profession, vocation, branch or agency or permanent establishment. Such gains will be included in income for US tax purposes, and will be long-term capital gains if the shares or ADSs were held for more than one year. A long-term capital gain realised by an individual holder generally is subject to US tax at a maximum rate of 15 per cent.

Stamp duty and stamp duty reserve tax - ADSs

If shares are transferred into a clearance service or depository receipt ('ADR') arrangement (which will include a transfer of shares to the Depository) UK stamp duty and/or stamp duty reserve tax will be payable. The stamp duty or stamp duty reserve tax is generally payable on the consideration for the transfer and is payable at the aggregate rate of 1.5 per cent. 

The amount of stamp duty reserve tax payable on such a transfer will be reduced by any stamp duty paid in connection with the same transfer. 

No stamp duty will be payable on the transfer of, or agreement to transfer, an ADS, provided that the ADR and any separate instrument of transfer or written agreement to transfer remain at all times outside the UK, and provided further that any such transfer or written agreement to transfer is not executed in the UK. No stamp duty reserve tax will be payable on a transfer of, or agreement to transfer, an ADS effected by the transfer of an ADR.

On a transfer of shares from the Depository to a registered holder of an ADS upon cancellation of the ADS, a fixed stamp duty of £5 per instrument of transfer will be payable by the registered holder of the ADR cancelled.

US backup withholding tax and information reporting

Distributions made on shares and proceeds from the sale of shares or ADSs that are paid within the US, or through certain financial intermediaries to US holders, are subject to information reporting and may be subject to a US 'backup' withholding tax unless, in general, the US holder complies with certain certification procedures or is a corporation or other person exempt from such withholding. Holders that are not US persons generally are not subject to information reporting or backup withholding tax, but may be required to comply with applicable certification procedures to establish that they are not US persons in order to avoid the application of such information reporting requirements or backup withholding tax to payments received within the US or through certain financial intermediaries.

History and development of HSBC

1865	The founding member of the HSBC Group, The Hongkong and Shanghai Banking Corporation, is established in both Hong Kong and Shanghai.
1959	The Mercantile Bank of India Limited and The British Bank of the Middle East, now HSBC Bank Middle East Limited, are purchased.
1965	A 51 per cent interest (subsequently increased to 62.14 per cent) is acquired in Hang Seng Bank Limited. Hang Seng Bank is the fourth-largest listed bank in Hong Kong by market capitalisation.
1980	A 51 per cent interest in Marine Midland Banks, Inc., now HSBC USA, Inc, is acquired (with the remaining interest acquired in 1987).
1981	The Hongkong and Shanghai Banking Corporation incorporates its then existing Canadian operations. HSBC Bank Canada subsequently makes numerous acquisitions, expanding rapidly to become the largest foreign-owned bank in Canada and the seventh-largest overall at 31 December 2007.

1987	A 14.9 per cent interest in Midland Bank plc, now HSBC Bank plc, one of the UK's principal clearing banks, is purchased.
1991	HSBC Holdings plc is established as the parent company of the HSBC Group.
1992	HSBC purchases the remaining interest in Midland Bank plc.
1993	As a consequence of the Midland acquisition, HSBC's Head Office is transferred from Hong Kong to London in January.
1997	HSBC assumes selected assets, liabilities and subsidiaries of Banco Bamerindus do Brasil S.A., now HSBC Bank Brazil, following the intervention of the Central Bank of Brazil, and in Argentina completes the acquisition of Grupo Roberts, now part of HSBC Bank Argentina S.A.
1999	HSBC acquires Republic New York Corporation, subsequently merged with HSBC USA, Inc., and Safra Republic Holdings S.A.
2000	HSBC completes its acquisition of 99.99 per cent of the issued share capital of Crédit Commercial de France S.A., now HSBC France.
2002	HSBC acquires 99.59 per cent of Grupo Financiero Bital, S.A. de C.V., the holding company of what is now HSBC Mexico.
2003	HSBC acquires Household International, Inc., now HSBC Finance Corporation. HSBC Finance brings to the Group national coverage in the US for consumer lending, credit cards and credit insurance through multiple distribution channels.
2003	HSBC acquires Banco Lloyds TSB S.A.-Banco Múltiplo in Brazil and the country's leading consumer finance company, Losango Promotora de Vendas Limitada.
2004	HSBC Bank USA, Inc. merges with HSBC Bank & Trust (Delaware) N.A. to form HSBC Bank USA, N.A.
2004	The acquisition of The Bank of Bermuda Limited is completed.
2004	HSBC acquires Marks and Spencer Retail Financial Services Holdings Limited, which trades as Marks and Spencer Money ('M&S Money') in the UK.

2004	HSBC acquires 19.9 per cent of Bank of Communications, and Hang Seng Bank acquires 15.98 per cent of Industrial Bank.
2005	HSBC increases its holding in Ping An Insurance to 19.9 per cent, having made its initial investment in 2002. Ping An Insurance is the second-largest life insurer and the third-largest property and casualty insurer in mainland China.
2005	HSBC Finance completes the acquisition of Metris Companies Inc., making HSBC the fifth-largest issuer of MasterCard and Visa cards in the USA.
2006	HSBC acquires Grupo Banistmo S.A. ('Banistmo'), the leading banking group in Central America, through a tender offer to acquire 99.98 per cent of the outstanding shares of Banistmo.
2007	HSBC's three associates in mainland China, Industrial Bank, Ping An Insurance and Bank of Communications, issue new shares. HSBC does not subscribe and, as a result, its interests in the associates' equity decrease from 15.98 per cent to 12.78 per cent, from 19.90 per cent to 16.78 per cent and from 19.90 per cent to 18.60 per cent, respectively. Subsequently, HSBC increases its holding in Bank of Communications from 18.60 per cent to 19.01 per cent for US$308 million.
2007	HSBC agrees to acquire 51.02 per cent of the issued share capital of Korea Exchange Bank for US$6.5 billion. (HSBC terminated the agreement in September 2008.)
2007	HSBC is named the successful bidder in a government auction to acquire the assets, liabilities and operations of The Chinese Bank in Taiwan.
2008	In July, HSBC completes the sale of its seven French regional banks, Sociètè Marseillaise de Crèdit, Banque de Savoie, Banque Chaix, Banque Marze, Banque Dupuy, de Parseval, Banque Pelletier and Crèdit Commercial du Sud Ouest, for US$3.2 billion.
2008	In October, HSBC enters into an agreement to acquire 88.89 per cent of PT Bank Ekonomi Raharja Tbk in Indonesia for US$608 million in cash. The transaction is subject to regulatory approval.

 

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