As filed with the Securities and Exchange Commission on March 17, 2009.

Registration No. 333-      

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form F-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

HSBC Holdings plc

(Exact name of Registrant as specified in its charter)

 

8 Canada Square

London E14 5HQ

England

Tel. No.: (011-44-20) 7991-8888

(Address and telephone number of Registrant’s principal executive offices)

 

Janet Burak

HSBC Bank USA, National Association

452 Fifth Avenue

New York, New York 10018

Tel. No.: (212) 525 5000

(Name, address and telephone number of agent for service)

 

Please send copies of all communications to:

 

 

Approximate date of commencement of proposed sale to the public:  20 March 2009.

 

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  o

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is filed as a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  þ

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  o

 

CALCULATION OF REGISTRATION FEE

 

 

 

PROSPECTUS

 

 

 

HSBC Holdings plc

 

5,060,239,065 Ordinary Shares

 

HSBC is offering its shareholders the right to acquire HSBC ordinary shares, or new ordinary shares, and its ADS holders the right to acquire HSBC ADSs, or new ADSs. Up to 5,060,239,065 new ordinary shares are being offered in the form of ordinary shares or ADSs. One new ADS will represent five new ordinary shares.

 

The ADS Rights

 

If you own ADSs, you will receive 5 non-transferable ADS rights for every 12 ADSs you owned on 13 March 2009. One ADS right allows you to acquire one new ADS. If you decide to acquire new ADSs, you must deposit US$19.53, or the ADS deposit amount, per new ADS subscribed, which represents 110% of the estimated new ADS subscription price of US$17.75 per new ADS, to account for (i) possible exchange rate fluctuations, (ii) applicable UK stamp duty reserve tax, and (iii) any currency conversion expenses. The estimated new ADS subscription price is the US dollar equivalent of the share subscription price using an exchange rate of £0.7153 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on 13 March 2009), multiplied by five to reflect that each ADS represents five ordinary shares. The ADS rights agent will refund any excess amount to the subscribing ADS holder. Subscribing ADS holders must pay any shortfall to the ADS rights agent. The ADS rights will expire at 5.00 p.m. (New York City time) on 31 March 2009. If you decide not to acquire any new ADSs and therefore not exercise your ADS rights, you may instruct the ADS rights agent by no later than 5.00 p.m. (New York City time) on 30 March 2009 to attempt to sell the share rights underlying the ADS rights for you, or you may surrender your ADS rights by no later than 5.00 p.m. (New York City time) on 30 March 2009, receive delivery of the underlying share rights and attempt to sell or exercise them yourself. If you do not do either of those things, the joint global coordinators will attempt to arrange subscribers for you, by no later than 4.30 p.m. (London time) on 8 April 2009, for all (or as many as possible) of the new ordinary shares underlying the share rights that were not exercised.

 

Share Rights

 

If you own ordinary shares, you will receive 5 share rights for every 12 ordinary shares you owned on 13 March 2009. One share right allows you to acquire one new ordinary share. The share subscription price for holders of ordinary shares on the UK principal register is £2.54 (254 pence) per new ordinary share (equivalent to US$3.55 using an exchange rate of £0.7153 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on 13 March 2009)). The share rights will expire at 11.00 a.m. (London time) on 3 April 2009. If you decide not to acquire any new ordinary shares and therefore do not exercise your share rights, the joint global coordinators will attempt to arrange subscribers for you, by no later than 4.30 p.m. (London time) on 8 April 2009, for the new shares underlying share rights that were not exercised.

 

 

 

 

The ADS rights are not transferable and will not be admitted to trading on the New York Stock Exchange or any other exchange. Dealings on the London Stock Exchange in the share rights are expected to commence on 20 March 2009 and continue until 3 April 2009.

 

Outstanding HSBC ADSs are listed on the New York Stock Exchange under the symbol “HBC”. Outstanding HSBC ordinary shares are traded on the London Stock Exchange under the symbol “HSBA” and other stock exchanges in Hong Kong, Paris and Bermuda. Listing of the new ADSs on the New York Stock Exchange is expected on or about 6 April 2009. Dealings on the London Stock Exchange in the new ordinary shares are expected to commence on 6 April 2009.

 

 

 

 

Investing in the ADSs or ordinary shares involves certain risks. See “Risk Factors” beginning on Page W-24 hereof and on page 5 of the accompanying UK prospectus.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

If and to the extent that the joint global coordinators are unable to procure subscribers for any new ordinary shares, whether in the form of ordinary shares or ADSs, that are not subscribed for pursuant to the exercise of the share rights or ADS rights the underwriters have severally agreed, subject to certain conditions, to procure subscribers or themselves subscribe for such remaining new ordinary shares. See “Underwriting.” HSBC’s estimated net proceeds from the rights offering, after deducting the commission payable to the underwriters and the joint global coordinators and other expenses of an aggregate of approximately £0.4 billion (US$0.5 billion) (exclusive of value added tax), will be approximately £12.5 billion (approximately US$17.7 billion), or approximately £2.47 (US$3.51) per new ordinary share. The pound sterling aggregate proceeds for the rights offering assumes amounts raised in HK dollars are converted into pounds sterling at an exchange rate of HK$11.0236 per pound sterling and amounts raised in US dollars are converted into pounds sterling at an exchange rate of US$1.42145 per pound sterling. US dollar amounts for commission and net proceeds are based on an exchange rate of £0.7035 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on 27 February 2009).

 

 

HSBC expects the new ADSs to be delivered on or about 6 April 2009 and to be listed on the New York Stock Exchange on or about 6 April 2009. HSBC expects the share certificates for the fully paid new ordinary shares to be dispatched on or about 14 April 2009. The new ordinary shares are expected to be admitted to listing and trading on the London Stock Exchange on 6 April 2009 and uncertificated holders will have their CREST stock accounts credited on that date.

 

 

 

The date of this prospectus is 17 March 2009

 

TABLE OF CONTENTS

 

Prospectus Wrap

 

 

UK Prospectus

 

 

You should only rely on the information contained or incorporated by reference in this prospectus. Neither HSBC nor any of the joint global coordinators or the underwriters has authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. HSBC is not, and the underwriters are not, making an offer to sell the ordinary shares or ADSs in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus, as well as information HSBC has previously filed with the Securities and Exchange Commission and incorporated by reference, is accurate as of the date of each document. In case there are any differences or inconsistencies between this prospectus and the information incorporated by reference, you should rely on the information with the latest date. HSBC’s business, financial condition, results of operations and prospects may have changed since that date.

 

The distribution of this prospectus and the offering of ordinary shares and ADSs in certain jurisdictions may be restricted by law. This prospectus does not constitute an offer, or an invitation on HSBC’s behalf or on behalf of the joint global coordinators or the underwriters or any of them, to acquire any of the ordinary shares and ADSs, and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

 

There are certain restrictions on the distribution of this prospectus as set out in “Underwriting.”

 

This prospectus comprises this document and the accompanying UK prospectus. The accompanying UK prospectus is identical to the final UK prospectus relating to HSBC made under Section 85 of the UK Financial Services and Markets Act 2000 in connection with the offering of new ordinary shares and their admission to the Official List of the UK Listing Authority, to listing on the London Stock Exchange’s main market for listed securities as well as to listing on the Main Board of the Hong Kong Stock Exchange, Paris Euronext and Bermuda Stock Exchange, except that the accompanying UK prospectus does not incorporate any document by reference and does not include the following sections and certain other portions from the final UK prospectus:

 

 

The contents of the referenced final UK prospectus as filed with the UK Financial Services Authority do not form part of, nor are they incorporated by reference into, this prospectus.

 

It is important that you read this prospectus in its entirety before making an investment decision.

 

Definitions

 

As used in this prospectus, the terms “HSBC,” “we,” “us” and “our” refer to HSBC Holdings plc. “HSBC Group” means HSBC together with its subsidiary undertakings. Certain capitalized terms used in this prospectus are defined on pages 113 to 119 of the accompanying UK prospectus. Certain terms used in the UK prospectus differ from the corresponding terms used in this prospectus for applicable market practice reasons.

 

Presentation of Financial Information

 

HSBC’s consolidated Group financial statements and the separate financial statements of HSBC have been prepared in accordance with IFRSs, as endorsed by the EU. EU-endorsed IFRSs may differ from IFRSs as issued by the IASB, if, at any point in time, new or amended IFRSs have not been endorsed by the EU. At 31 December 2008, there were no unendorsed standards effective for the year ended 31 December 2008 affecting these consolidated and separate financial statements, and there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC’s financial statements for the year ended 31 December 2008 are prepared in accordance with IFRSs as issued by the IASB.

 

The information presented in this document has been prepared in accordance with IFRSs. See “Where You Can Obtain More Information About HSBC.” HSBC uses the US dollar as its presentation currency because the US dollar and currencies linked to it form the major currency bloc in which HSBC transacts its business.

 

Currency

 

In this prospectus, all references to (i) “US dollars,” “US$,” “dollars” or “$” are to the lawful currency of the United States of America, (ii) “euro” or “€” are to the lawful currency of the participating Member States in the Third Stage of the European Economic and Monetary Union of the Treaty Establishing the European Community, as amended by the Treaty on European Union, (iii) “sterling,” “pounds sterling,” “£” or “pence” are to the lawful currency of the United Kingdom, (iv) “Hong Kong dollars,” “HK dollars” or “HK$” are to the lawful currency of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), (v) CAD is to the lawful currency of Canada and (vi) BRL is to the lawful currency of the Federative Republic of Brazil.

Unless otherwise stated, US dollar amounts converted from sterling amounts are converted at an exchange rate of £0.7035 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on 27 February 2009).

 

HSBC is an English public limited company. Most of HSBC’s directors and executive officers (and certain experts named in this prospectus or in documents incorporated herein by reference) are resident outside the United States, and a substantial portion of HSBC’s assets and the assets of such persons are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon these persons or to enforce against them or HSBC in US courts judgments obtained in US courts predicated upon the civil liability provisions of the federal securities laws of the United States. HSBC has been advised by its English solicitors, Norton Rose LLP, that there is doubt as to enforceability in the English courts, in original actions or in actions for enforcement of judgments of US courts, of liabilities predicated solely upon the federal securities laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere may not be enforceable in the United Kingdom. The enforceability of any judgment in the United Kingdom will depend on the particular facts of the case in question at the time.

 

 

This prospectus and the documents incorporated by reference herein contain both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements may be identified by the use of terms such as believes, expects, estimate, may, intends, plan, will, should, envisages or anticipates or the negative thereof or similar expressions, or by discussions of strategy. HSBC has based the forward-looking statements on current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about HSBC. You are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. These factors include, among others:

 

Changes in general economic conditions in the markets in which HSBC operates, such as:

 

 

Changes in government policy and regulation, including:

 

 

Factors specific to HSBC:

 

 

In light of these risks, uncertainties and assumptions, the forward-looking events discussed herein might not occur. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of their dates. HSBC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

 

 

HSBC files with the SEC annual reports and special reports, proxy statements and other information. You may read and copy any document HSBC files at the SEC’s public reference room at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at +1 (800) SEC-0330 for further information on the public reference room. Documents filed with the SEC are also available to the public on the SEC’s internet site at http://www.sec.gov.

 

HSBC is “incorporating by reference” in this prospectus the information in certain documents that HSBC files with the SEC, which means HSBC can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus. HSBC incorporates by reference in this prospectus its Annual Report on Form 20-F for the year ended 31 December 2008.

 

In addition, all documents filed by HSBC with the SEC pursuant to Sections 13(a), 13(c) or 15(d) of the US Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, to the extent expressly stated therein, certain Reports on Form 6-K furnished by HSBC after the date of this prospectus shall also be deemed to be incorporated by reference in this prospectus from the date of filing of such documents. Any statement contained

herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus and to be a part hereof from the date of filing of such document.

 

You may request a copy of these documents at no cost to you by writing or telephoning HSBC at either of the following addresses or telephone numbers:

 

Group Company Secretary

HSBC Holdings plc

8 Canada Square

London E14 5HQ

England

Tel: +44-20-7991-8888

 

HSBC Holdings plc

c/o HSBC Bank USA, National Association

452 Fifth Avenue

New York, New York, 10018

Attn: Investor Affairs

Tel: +1-212-525-5000

 

Alternatively, you may request a copy of these documents at no cost to you by writing or telephoning the US Information Agent at the following address or telephone number:

 

BNY Mellon Shareowner Services

480 Washington Blvd.

Jersey City, NJ 07310

1-866-208-3310

 

 

SUMMARY OF THE RIGHTS OFFERING

ADS rights offering		Each holder of HSBC ADSs will receive 5 non-transferable ADS rights for every 12 ADSs it holds on the ADS record date. Each ADS right entitles the holder thereof to subscribe for one new ADS at the ADS subscription price. Fractions of ADS rights will not be issued and, as such, any entitlement to receive a fraction of an ADS right is rounded down to the nearest whole number of ADS rights. However, you may receive a payment in lieu of any fractional ADS entitlement if and to the extent the ADS depositary is successful in selling all or part of the aggregate of share rights underlying the aggregate fractional ADS entitlements for an amount that exceeds its expenses. See “The Rights Offering — Fractional Entitlements.”
		To the extent you were a registered holder of ADSs on the ADS record date, HSBC has arranged for its ADS depositary, The Bank of New York Mellon, which is acting as ADS rights agent in connection with the rights offering, to send you an ADS subscription form showing your entitlement to subscribe for new ADSs.
ADS rights agent		The Bank of New York Mellon.
Transfer of ADS rights		ADS rights are not transferable and may not be exercised by, or sold or assigned to, third parties. However, you may direct the ADS depositary to attempt to sell the share rights underlying your ADS rights for you; or you may surrender your ADS rights for delivery of the underlying share rights, all as described below.
		The ADS rights will not be listed on the New York Stock Exchange or any other stock exchange.
ADS record date		The ADS record date is the close of business on 13 March 2009. The ADS rights will be credited to the book-entry system of The Depository Trust Company, or DTC, for further credit to the accounts of persons who held ADSs on the ADS record date and registered ADS holders will be sent their ADS subscription forms via first class mail as promptly as practicable after approval of this offering by the General Meeting.
ADS subscription period		From 9.00 a.m. (New York City time) on 20 March 2009 to 5.00 p.m. (New York City time) on 31 March 2009.
ADS subscription price		The estimated ADS subscription price is US$17.75 per new ADS subscribed. The actual ADS subscription price per new ADS will be the ADS rights agent’s cost of the share subscription price of 254 pence in US dollars on or about 1 April 2009, multiplied by five to reflect that each ADS represents five ordinary shares.

		The estimated ADS subscription price is the US dollar equivalent of the share subscription price, using an exchange rate of £0.7153 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on 13 March 2009), multiplied by five to reflect that each ADS represents five HSBC ordinary shares. A subscriber of the new ADSs must deposit US$19.53, or the ADS deposit amount, per new ADS subscribed, which represents 110% of the estimated ADS subscription price, upon the exercise of each ADS right. This additional amount over and above the estimated ADS subscription price is to increase the likelihood that the ADS rights agent will have sufficient funds to pay the final ADS subscription price in light of a possible appreciation of the pound sterling against the US dollar between the date hereof and the end of the ADS subscription period, and to pay applicable UK stamp duty reserve tax of 1.5% of the underlying share subscription price and any currency conversion expenses.
		If the actual US dollar price (equal to the sterling share subscription price multiplied by five and converted into US dollars on or about 1 April 2009) plus applicable UK stamp duty reserve tax and any currency conversion expenses is less than the ADS deposit amount, the ADS rights agent will refund such excess to the subscribing ADS rights holder without interest. However, if the actual US dollar price plus applicable UK stamp duty reserve tax and any currency conversion expenses exceeds the ADS deposit amount, the ADS rights agent will not deliver the new ADSs to such subscribing ADS rights holder until it has received payment of the deficiency from the subscriber. The ADS rights agent may sell a portion of the new ADSs that is sufficient to pay any shortfall that is not paid within 14 days of notice of the deficiency. In addition, to the extent that the shortfall of the ADS deposit amount below the actual US dollar price multiplied by five plus the applicable UK stamp duty reserve tax and any currency conversion expenses exceeds 20%, the ADS rights agent may reduce pro rata the amount of new shares for which it subscribes, which will reduce the number of new ADSs that will be available for delivery to subscribing ADS rights holders.
Exercise of ADSs		Each holder or beneficial owner of ADS rights may exercise all or only part of its ADS rights. Subscriptions must be received by the ADS rights agent prior to 5.00 p.m. (New York City time) on 31 March 2009.
		Each beneficial owner of ADS rights who wishes to exercise its ADS rights should consult with the financial intermediary through which it holds its ADSs and ADS rights as to the manner, timing and form of exercise documentation, method of payment of the ADS deposit amount and other related matters required to effect such exercise. The financial intermediary with whom the subscription is made may require any person exercising rights to pay or block the ADS deposit amount for the new ADSs being subscribed for in a deposit account as a condition to accepting the relevant subscription. You are urged to consult your financial intermediary without delay in case your financial intermediary is unable to act immediately.
		Please see “The Rights Offering” for further details on how to exercise ADS rights.

Exercise of ADS rights and instructions irrevocable		Any exercise of ADS rights or instructions to the ADS rights agent will be irrevocable upon exercise and may not be cancelled or modified after such exercise or instructions.
Delivery of new ADSs		The new ADSs are expected to be delivered to each ADS subscriber (by credit to its book-entry account at the financial intermediary through which it holds the ADS rights or by direct registration on an uncertificated basis if it is a holder registered directly with the ADS depositary) as soon as practicable on or after 6 April 2009.
Sales of ADS rights by the ADS depositary		You may direct the ADS depositary by no later than 5.00 p.m. (New York City time) on 30 March 2009 to attempt to sell the share rights underlying your ADS rights for you. The ADS depositary will, to the extent practicable, attempt to sell the share rights underlying the ADS rights on the London Stock Exchange beginning on the trading day following the day on which the instruction to sell is received until 11.00 a.m. on 3 April 2009 for those ADS holders from whom it receives such instruction. The ADS rights agent will distribute the proceeds, after accounting for the ADS depositary’s fees of up to $0.02 per ADS underlying each ADS right in respect of which such instruction was given and expenses, any applicable taxes and any other applicable fees and expenses of the ADS depositary as provided under the deposit agreement, pro rata to the holders of ADS rights by whom it has been directed to make such sales by March 30, 2009.
Surrender of ADS rights for delivery of share rights		If you wish to surrender any ADS rights and receive the underlying share rights, you must instruct the ADS rights agent to cancel your ADS rights before 5.00 p.m. (New York City time) on 30 March 2009. Upon payment of any taxes or charges, such as stamp taxes and stock transfer taxes or fees, The Bank of New York Mellon will deliver the underlying share rights to an account you specify.
Unexercised ADS rights		Any ADS rights not exercised in accordance with the procedures laid down for acceptance and payment or instructed to be sold by the ADS depositary or surrendered for delivery of share rights, those ADS rights will be deemed to have been declined and will lapse. If possible, the new ordinary shares ultimately underlying your ADS rights will be sold to other people on your behalf, and any net proceeds of the sale in excess of the amount of the share subscription price plus the expenses of such sale will be sent to you by check, after deduction of the ADS depositary’s fees, applicable taxes and any currency conversion expenses. There is no guarantee that it will be possible to find other people to acquire the new ordinary shares underlying the new ADSs which your ADS rights entitled you to acquire at a price which results in a payment to you. You will receive compensation for unexercised ADS rights only if and to the extent a premium over the share subscription price, after deducting the joint global coordinators’ expenses of procuring such subscribers (including any applicable brokerage and commissions and amounts in respect of UK value added tax which are not recoverable), can be obtained.
US information agent		BNY Mellon Shareowner Services.

		2009
Announcement of rights offering		2 March
ADS record date		5.00 p.m. on 13 March
General Meeting		6.00 a.m. on 19 March
ADS subscription period commences		9.00 a.m. on 20 March
Notice to ADS holders of ADS rights to which they are entitled		After 20 March
Notice to brokers/dealers of terms of ADS rights offering		After 20 March
Notice to ADS holders of terms of ADS rights offering		After 20 March
ADS rights agent sale election expires		5.00 p.m. on 30 March
Latest day to surrender ADS rights for delivery of share rights		5.00 p.m. on 30 March
ADS subscription period ends		5.00 p.m. on 31 March
ADS rights agent subscribes into the rights offering		2 April
Expected date for issuance and delivery of the new ADSs		On or around 6 April

Share rights		Subject to certain exceptions, each holder of HSBC ordinary shares will receive 5 share rights for every 12 ordinary shares that they hold on the share record date. Each share right entitles the holder thereof to subscribe for one new ordinary share at the share subscription price. Fractions of share rights will not be issued and, as such, any entitlement to receive a fraction of a share right is rounded down to the nearest whole number of share rights.
		If you have received a provisional allotment letter (PAL) in your name, unless you have sold all your ordinary shares shown in Box A on page 1 of your PAL (other than ex-rights) prior to the share ex-rights date, you are entitled to acquire new ordinary shares. You have been sent a PAL because, as at the record date, you were an owner of HSBC ordinary shares.
		To the extent you were a registered holder of ordinary shares on the share record date, HSBC has arranged to send you, unless you have sold all your ordinary shares shown in Box A on page 1 of your PAL (other than ex-rights) prior to the share ex-rights date, a PAL showing the entitlement to subscribe for new ordinary shares.
		If you hold your ordinary shares in uncertificated form in CCASS, please contact your broker for further details. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.
Transfer of and trading in share rights		Subject to compliance with relevant securities laws, the share rights are freely transferable and are expected to trade on the London Stock Exchange under the symbol ‘‘HSBN” on 20 March 2009 to 3 April 2009.
Share record date		5.00 p.m. (London time) on 13 March 2009
Share ex-rights date		8.00 a.m. (London time) on 20 March 2009
Share subscription period		From 8.00 a.m. (London time) on 20 March 2009 to 11.00 a.m. (London time) on 3 April 2009.
Share subscription price		254 pence (£2.54) per new ordinary share (equivalent to US$3.55 on 13 March 2009 using an exchange rate of £0.7153 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on that date)).
Exercise of share rights		Each holder of share rights may exercise all or only part of its share rights. The share rights will expire at 11.00 a.m. (London time) on 3 April 2009.
Unexercised share rights		Any share rights not exercised in accordance with the procedures laid down for acceptance and payment or instructed to be sold on your behalf will be deemed to have been declined and will lapse. If possible, the new ordinary shares underlying your share rights will be sold to other people on your behalf, and any net proceeds in excess of the amount of the share subscription price plus the expenses of such sale will be sent to you by check (provided that the amount exceeds £5.00). There is no guarantee that it will be possible to find other people to buy the new ordinary shares underlying your lapsed share rights at a price which results in a payment to you. You will receive compensation for unexercised share rights only if and to the extent a premium over the share subscription price, after deducting the joint global coordinators’

		expenses of procuring such subscribers (including any applicable brokerage and commissions and amounts in respect of UK value added tax which are not recoverable), can be obtained.
Delivery of and start of trading in new ordinary shares		HSBC expects the share certificates for the fully paid new ordinary shares in certificated form to be dispatched on or about 14 April 2009. The new ordinary shares are expected to be admitted to listing and trading on the London Stock Exchange on 6 April 2009 and uncertificated holders will have their CREST stock accounts credited on that date.
Shareholder helpline		+44 870 702 0137.

		All Time References are to
		London Time
		2009
Suspension of removals of ordinary shares from the UK principal register to a branch register begins		8.00 a.m. on 2 March
UK record date for entitlements under the rights offering		5:00 p.m. on 13 March
Date of publication of the UK prospectus		17 March
Latest time and date for receipt of forms of proxy for the General Meeting		10.00 a.m. on 17 March
“Ex” date for ordinary shares in respect of the fourth interim dividend		8.00 a.m. on 18 March
General Meeting		10.00 a.m. on 19 March
Dispatch of Provisional Allotment Letters (to Qualifying Non-CREST Shareholders only)		19 March
UK Admission and start of offer period in the UK		8.00 a.m. on 20 March
Ordinary shares marked “ex-rights” by the London Stock Exchange		8.00 a.m. on 20 March
Nil Paid Rights credited to stock accounts in CREST (Qualifying CREST Shareholders only)		8.00 a.m. on 20 March
Nil Paid Rights and Fully Paid Rights enabled in CREST		8.00 a.m. on 20 March
Dealings in new ordinary shares, nil paid, commence on the London Stock Exchange		8.00 a.m. on 20 March
Suspension of removals of ordinary shares from the UK principal register to a branch register ends		8.00 a.m. on 20 March
Record date in respect of the fourth interim dividend		5.00 p.m. on 20 March
Latest time and date for cashless take up or sale of your rights using Computershare Investor Services PLC dealing facility		3.00 p.m. on 27 March
Recommended latest time and date for requesting withdrawal of Nil Paid Rights or Fully Paid Rights from CREST (that is, if your Nil Paid Rights or Fully Paid Rights are in CREST and you wish to convert them into certificated form)		4.30 p.m. on 27 March
Recommended latest time and date for depositing renounced Provisional Allotment Letters, nil paid or fully paid, into CREST or for dematerializing Nil Paid Rights or Fully Paid Rights into a CREST stock account (that is, if your Nil Paid Rights or Fully Paid Rights are represented by a Provisional Allotment Letter and you wish to convert them into uncertificated form)		3.00 p.m. on 30 March

		All Time References are to
		London Time
		2009
Latest time and date for splitting Provisional Allotment Letters, nil paid or fully paid, for rights traded on the London Stock Exchange		3.00 p.m. on 1 April
Latest time and date in the UK for acceptance, payment in full and registration of renounced Provisional Allotment Letters		11.00 a.m. on 3 April
New ordinary shares credited to stock accounts in CREST (uncertificated holders only)		8.00 a.m. on 6 April
Dealings in new ordinary shares, fully paid, commence on the London Stock Exchange		8.00 a.m. on 6 April
Announcement of results of the rights offering		by 8 April
Expected date of dispatch of definitive share certificates for new ordinary shares in certificated form (certificated holders only)		by 14 April

		All Time References are to
		Hong Kong Time
		2009
Suspension of removals of ordinary shares from the Hong Kong branch register to the UK principal register or the Bermuda branch register begins		9.30 a.m. on 2 March
Ordinary shares marked “ex-rights” by the Hong Kong Stock Exchange		9.30 a.m. on 12 March
HK record date for entitlements under the rights offering		4.30 p.m. on 13 March
Latest time and date for which transfers of ordinary shares are accepted for registration on the Hong Kong branch register for participation in the rights offering		4.30 p.m. on 13 March
Latest time and date for receipt of forms of proxy for the General Meeting		6.00 p.m. on 17 March
“Ex” date for ordinary shares in respect of the fourth interim dividend		9.30 a.m. on 18 March
General Meeting (held in the UK)		6.00 p.m. on 19 March
Dispatch of Provisional Allotment Letters (to Qualifying Non-CCASS Shareholders only)		19 March
HK Admission and start of offer period in Hong Kong		9.30 a.m. on 20 March
Record date in respect of the forth interim dividend (see note (v) below)		4.30 p.m. on 20 March
Suspension of removals of ordinary shares from the Hong Kong branch register to the UK principal register or the Bermuda branch register ends		4.30 p.m. on 23 March
Nil Paid Rights credited to stock accounts in CCASS (Qualifying CCASS Shareholders only)		9:30 a.m. on 23 March
Dealings in new ordinary shares, nil paid, commence on the Hong Kong Stock Exchange		9.30 a.m. on 23 March
Latest time and date for splitting Provisional Allotment Letters, for rights traded on the Hong Kong Stock Exchange		4.30 p.m. on 26 March
Last day of dealings in new ordinary shares, nil paid		31 March
Latest time and date in Hong Kong for acceptance, payment in full and registration of Provisional Allotment Letters		4.00 p.m. on 3 April
Announcement of results of the rights offering		by 8 April
Expected date of dispatch of definitive share certificates for new ordinary shares in certificated form (certificated holders only)		by 8 April
New ordinary shares credited to stock accounts in CCASS (uncertificated holders only)		9.30 a.m. on 9 April

		All Time References are to
		Hong Kong Time
		2009
Dealings in new ordinary shares, fully paid, commence on the Hong Kong Stock Exchange		9.30 a.m. on 9 April

		All Time References are to
		Bermuda Time
		2009
Suspension of removals of ordinary shares from the Bermuda branch register to the UK principal register or the Hong Kong branch register begins		9.00 a.m. on 2 March
Ordinary shares marked “ex-rights” by the Bermuda Stock Exchange		9.00 a.m. on 11 March
Bermuda Record Date for entitlements under the rights offering		5.00 p.m. on 13 March
Latest time and date for receipt of forms of proxy for the General Meeting		7.00 a.m. on 17 March
“Ex” date for ordinary shares in respect of the fourth interim dividend		9.00 a.m. on 18 March
General Meeting (held in the UK)		7.00 a.m. on 19 March
Dispatch of Provisional Allotment Letters to Qualifying Bermuda Shareholders		19 March
Start of offer period in Bermuda		9.00 a.m. on 20 March
Suspension of removals of ordinary shares from the Bermuda branch register to the UK principal register or the Hong Kong branch register ends		9.00 a.m. on 20 March
Record date in respect of the fourth interim dividend		5.00 p.m. on 20 March
Latest time and date for splitting Provisional Allotment Letters		3.00 p.m. on 1 April
Latest time and date in Bermuda for acceptance, payment in full and registration of Provisional Allotment Letters		11.00 a.m. on 3 April
Dealings in new ordinary shares, fully paid, commence on the Bermuda Stock Exchange		9.00 a.m. on 6 April
Announcement of results of the rights offering		by 8 April

(1)		Each of the times and dates set out in the above timetables and mentioned in this document and in any other document issued in connection with the rights offering is subject to change by HSBC (with the agreement of the joint global coordinators), in which event details of the new times and dates will be notified to the UK Listing Authority, the Hong Kong Stock Exchange, the Bermuda Stock Exchange, the New York Stock Exchange and Euronext Paris and, where appropriate, to shareholders.
(2)		If there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong at any time:

(a)		before 12.00 noon (Hong Kong time) but no longer in force after 12.00 noon (Hong Kong time) on the latest date for acceptance and payment in Hong Kong, the latest time for acceptance of and payment for the new ordinary shares will be extended to 5.00 p.m. (Hong Kong time) on the same date; or
(b)		between 12.00 noon and 4.00 p.m. (Hong Kong time) on the latest date for acceptance and payment in Hong Kong, the latest time for acceptance of and payment for the new ordinary shares will be postponed to 4.00 p.m. (Hong Kong time) on the following HK Business Day.

(3)		If the latest time for acceptance of and payment for the new ordinary shares does not take place on 3 April 2009, the dates mentioned in the preceding timetables may be affected. HSBC will notify shareholders by way of announcement of any change to the expected timetables as soon as practicable.
(4)		If you hold your ordinary shares through a nominee, depending on the arrangements made on your behalf by that nominee, the latest time and date for giving instructions to that nominee may be set earlier. If you hold your ordinary shares through an Admitted Institution of Euroclear France, your Admitted Institution may set an earlier deadline for subscription in order to permit the Admitted Institution to communicate acceptances to the French Subscription Agent in a timely manner.
(5)		As the record date for the fourth interim dividend for the financial year ended 31 December 2008 is on 20 March 2009, the Hong Kong branch register will be closed on 20 March 2009.
(6)		Subject to the granting of listing of, and permission to deal in, the new ordinary shares in their nil paid and fully paid forms on the Main Board of the Hong Kong Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the new ordinary shares in their nil paid and fully paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the new ordinary shares in their nil paid and fully paid forms or such other dates as determined by HKSCC. Settlement of transactions between participants of the Hong Kong Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Underwriting		Pursuant to the underwriting agreement, if and to the extent that the joint global coordinators are unable to procure subscribers for any new ordinary shares, whether in the form of ordinary shares or ADSs, that are not subscribed for pursuant to the exercise of the share rights or ADS rights, the underwriters have severally agreed, subject to certain conditions, to procure subscribers or themselves subscribe for such remaining new ordinary shares at the share subscription price per new ordinary share. See “Underwriting.”
Risk Factors		Investing in HSBC ordinary shares or ADSs involves risks. See “Risk Factors” beginning on page W-24.
Dilution		If you do not exercise your ADS rights or share rights, as applicable, the value of your holding in HSBC will be diluted. See “Dilution.”
Lock-up		HSBC has agreed that, subject to certain exceptions, HSBC will not, without the prior written consent of Goldman Sachs International, J.P. Morgan Cazenove Limited and J.P. Morgan Securities Ltd., offer or sell any of its ordinary shares (including in the form of ADSs) and securities that are substantially similar to HSBC’s ordinary shares, including any shares that are convertible into or exercisable or exchangeable for HSBC’s ordinary shares, for a period from the date of the underwriting agreement to the expiration of 90 days after the date of settlement of the rights offering. See “Underwriting.”

 

You should carefully consider the risks relating to HSBC’s business, and the risks relating to investment in HSBC ADSs and HSBC ordinary shares described below, as well as the other information included or incorporated by reference into this prospectus, before making a decision to invest in the ADSs or ordinary shares.

 

Risks Related to HSBC and its Business

 

Current economic and market conditions may adversely affect HSBC’s results

 

The global economy has entered the most severe downturn for 80 years, with the financial services industry facing extraordinary turbulence. A shortage of liquidity, lack of funding, pressure on capital and extreme price volatility across a wide range of asset classes are putting financial institutions under considerable pressure. This is leading governments and central banks to undertake unprecedented intervention designed to stabilize the global and domestic financial systems, to stimulate new lending and to support systemically important institutions at risk of failing. Many developed economies have entered recession and growth has slowed in many emerging countries, with serious adverse consequences for asset values, employment, consumer confidence and levels of economic activity. Commodity prices have significantly retrenched, in many cases from recent historical highs, interest rate yield curves have flattened, interest rates have fallen in absolute terms and trade flows have contracted. Global equity markets have experienced severe declines and various currencies, including sterling, have depreciated significantly against the US dollar. Emerging markets have suffered as portfolio investments have been repatriated and cross-border inter-bank funding has been withdrawn. Numerous governments and central banks have responded by proposing programmes to make substantial funds and guarantees available to boost liquidity and confidence in their financial systems, as well as cutting taxes and lowering interest rates. It is not known whether these responses will be effective in addressing the severe economic and market conditions or whether recently proposed measures will be implemented as initially proposed.

 

HSBC’s earnings are affected by global and local economic and market conditions. Dramatic declines in 2007 and 2008 in the housing markets in the US, the UK and elsewhere have combined with increasing unemployment to affect negatively the credit performance of real estate-related exposures, resulting in significant write-downs of asset values by financial institutions, including HSBC. These write-downs, initially of asset-backed securities but spreading to other securities and loans, have caused many financial institutions to seek additional capital, to reduce or eliminate dividends, to merge with larger and stronger competitors or, in some cases, to fail.

 

A worsening of these conditions may exacerbate the impact of these difficult market conditions on HSBC and other financial institutions and could have an adverse effect on HSBC’s operating results. In particular, the HSBC Group may face the following challenges in connection with these events:

 

 

 

As a worldwide financial institution, HSBC is exposed to these developments across all its businesses, both directly and through their impact on its customers and clients.

 

Risks associated with liquidity and funding, which are inherent in HSBC’s business, have been greatly increased by the current global market conditions

 

HSBC’s business model depends upon its ability to access financial resources whenever required to meet its obligations. To this end, HSBC seeks to maintain a diversified and stable funding base comprising core retail and corporate customer deposits and institutional balances and to augment this with wholesale funding and portfolios of highly liquid assets diversified by currency and maturity which are held to enable HSBC to respond to unforeseen liquidity requirements. HSBC’s earnings are affected by its ability to properly value financial instruments. In certain illiquid markets, determining the value at which financial instruments can be realized is highly subjective, and processes to ascertain value and estimates of value, both of which require substantial elements of judgment, assumptions and estimates (which may change over time), are required. Increased illiquidity adds to uncertainty over the accessibility of financial resources and may reduce capital resources as valuations decline. Rating agencies, which determine HSBC’s own credit ratings and thereby influence the HSBC Group’s cost of funds, take into consideration management effectiveness and the success with which HSBC’s liquidity risk factors are managed. Actions by third parties and independent market participants, such as rating agency downgrades of instruments to which HSBC has exposure, can result in reduced liquidity and valuations of those instruments. While HSBC’s liquidity and capital position remains strong, the financial results of the HSBC Group could also be adversely affected in any given period by increased costs of or restrictions on access to the debt capital markets due to a variety of unforeseen market dislocations or interruptions.

 

The extreme market conditions facing the financial services industry have been reflected in shortages of liquidity, lack of funding, pressure on capital and extreme price volatility across a wide range of asset classes. Illiquidity of these assets has prevented the realization of existing asset positions and has constrained risk distribution in ongoing banking activities. The extreme market conditions have also highlighted the importance of a strong diversified core deposit base leading to increased competition for such deposits and the risk of deposit migration. HSBC’s Global Banking and Markets business operates in the markets affected by illiquidity and extreme price volatility, either directly or indirectly, through exposures to securities, loans, derivatives and other commitments, and HSBC has made substantial write-downs and impairments on illiquid legacy credit and structured credit positions. While it is difficult to predict how long the conditions described above will exist and which of HSBC’s markets, products and other businesses will be affected, continuation of these factors could have an adverse effect on the HSBC Group’s results.

 

HSBC has significant exposure to counterparty risk

 

HSBC’s ability to engage in routine transactions to fund its operations and manage its risks could be adversely affected by the actions and commercial soundness of other financial services institutions. Financial institutions are extremely interdependent because of trading, clearing, counterparty or other relationships. As a consequence, a default by, or decline in market confidence in, individual institutions, or anxiety about the financial services industry generally, can lead to further individual and/or systemic difficulties, defaults and losses. HSBC has

exposure to virtually all major industries and counterparties, and it routinely executes transactions with counterparties in financial services, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. Many of these transactions expose HSBC to credit risk in the event of default by its counterparty or client. Where counterparty risk has been mitigated by taking collateral, HSBC’s credit risk may be exacerbated if the collateral it holds cannot be realized or has to be liquidated at prices which are insufficient to recover the full amount of its loan or derivative exposure. The failure of one of HSBC’s counterparties could have an adverse effect on its results.

 

HSBC operates in a highly competitive environment, and competition could intensify as a result of current global market conditions

 

Consolidation in the financial services industry is increasingly concentrating activity in companies that are capable of offering a wide array of financial products at competitive prices, with globalization exposing HSBC to competition in capital markets and financial services at global and local levels alike. In addition, technological advances, the growth of e-commerce, regulatory developments and public sector participation or guarantees have made it possible for non-deposit taking institutions to offer products and services that traditionally were the preserve of banks. The prominence in recent years of sovereign wealth funds, private equity and hedge funds as alternative sources of funding, which has increased competition for traditional financial institutions, may ease as investors seek safer, more traditional alternatives. Competition may further intensify or the competitive landscape may change as the consolidation of financial services companies continues and others are brought into part or full public ownership in response to the current market conditions. HSBC’s ability to grow its businesses, and therefore its earnings, is affected by these competitive pressures and is dependent on HSBC’s ability to attract and retain talented and dedicated employees.

 

HSBC is subject to political and economic risks in the countries in which it operates

 

HSBC operates through an international network of subsidiaries and affiliates in 86 countries and territories around the world. Its results are therefore subject to the risk of loss from unfavorable political developments, currency fluctuations, social instability and change in government policies on such matters as expropriation, authorizations, international ownership, interest-rate caps, limits on dividend flows and tax in the jurisdictions in which it operates. These factors may also negatively affect revenues from the trading of securities and investment in securities, the effect being accentuated through certain international trading markets, particularly those in emerging market countries, being typically smaller, less liquid and more volatile than developed trading markets. HSBC’s subsidiaries and affiliates’ ability to pay dividends could be restricted by changes to official banking measures, exchange controls and other requirements. Because HSBC prepares its accounts in US dollars, while a substantial part of its assets, liabilities, assets under management, revenues and expenses are denominated in other currencies, changes in foreign exchange rates have an effect on its reported income and shareholders’ equity.

 

Operational risks are inherent in HSBC’s business

 

HSBC is exposed to many types of operational risk, including fraudulent and other criminal activities (both internal and external), breakdowns in processes or procedures and systems failure or non-availability. HSBC is also subject to the risk of disruption of its business arising from events that are wholly or partially beyond its control (for example natural disasters, acts of terrorism, epidemics and transport or utility failures) which may give rise to losses in service to customers and/or economic loss to HSBC. All of these risks are also applicable where HSBC relies on outside suppliers or vendors to provide services to it and its customers.

 

HSBC is subject to legal risks, which may have an adverse effect on the HSBC Group

 

Legal risks arise from a variety of sources with the potential to cause harm to the HSBC Group and its ability to operate. These issues require the HSBC Group to deal appropriately with potential conflicts of interest; legal and regulatory requirements; ethical issues; anti-money laundering laws or regulations; privacy laws; information security policies; sales and trading practices; and conduct by companies with which it is associated. Failure to address these issues appropriately may give rise to additional legal and compliance risk to HSBC, with an increase

in the number of litigation claims and the amount of damages asserted against HSBC, or subject HSBC to regulatory enforcement actions, fines, or penalties or reputational damage.

 

Increased regulation of the financial services industry could have an adverse effect on HSBC’s operations

 

HSBC, its subsidiaries and its affiliates are subject to extensive and increasing legislation, regulation, accounting standards and changing interpretations thereof in the various countries in which the HSBC Group operates. From time to time, new laws are introduced, including tax, consumer protection, privacy and other legislation, which affect the environment in which the HSBC Group operates. As a corollary of the recent interventions by governments in response to global economic conditions, it is widely expected that there will be a substantial increase in government regulation and supervision of the financial services industry, including the imposition of higher capital requirements, heightened disclosure standards and restrictions on certain types of transaction structures. If enacted, such new regulations could require additional capital to be injected into HSBC’s subsidiaries and affiliates, require HSBC to enter into business transactions that are not otherwise part of its current Group strategy, prevent HSBC from continuing current lines of operations, restrict the type or volume of transactions HSBC may enter into, limit HSBC’s subsidiaries’ and affiliates’ ability to declare dividends to HSBC, or set limits on or require the modification of rates or fees that HSBC charges on certain loan or other products. HSBC may also face increased compliance costs and limitations on its ability to pursue business opportunities.

 

The Basel II Accord’s requirement for financial institutions to increase their capital in response to deteriorating market conditions may have secondary effects on lending, which could exacerbate the current market downturn.

 

In the UK for example, the Banking Act 2009 includes a “Special Resolutions Regime” which gives wide powers in respect of UK banks and their parent companies to the UK Treasury, the FSA and the Bank of England in circumstances where any such UK bank has encountered, or is likely to encounter, financial difficulties.

 

The foregoing regulatory measures, alone or in combination, could have an adverse effect on HSBC.

 

HSBC is subject to tax-related risks in the countries in which it operates, which could have an adverse effect on its operating results

 

HSBC is subject to the substance and interpretation of tax laws in all countries in which it operates. A number of double taxation agreements entered into between countries also affect the taxation of the HSBC Group. Tax risk is the risk associated with changes in tax law or in the interpretation of tax law. It also includes the risk of changes in tax rates and the risk of consequences arising from failure to comply with procedures required by tax authorities. Failure to manage tax risks could lead to increased tax charges, including financial or operating penalties, for not complying as required with tax laws.

 

Risks Relating to the Rights Offering, the New Ordinary Shares and the New ADSs

 

HSBC’s ADS price and/or share price may fluctuate and may fall below the subscription price of the new ADS and/or new ordinary shares, respectively, issued upon the exercise of ADS rights and share rights, respectively

 

The market prices of the new ADS, new ordinary shares (including the nil paid rights and the fully paid rights) and/or the ADSs and ordinary shares could be subject to significant fluctuations due to a change in sentiment in the market regarding the new ordinary shares (including the nil paid rights and the fully paid rights) and/or the ADSs and ordinary shares. Such risks depend on the market’s perception of the likelihood of completion of the rights offering, on sales of ADSs and ordinary shares in the market during the offer period or the impression that such sales will take place and/or in response to various facts and events, including any regulatory changes affecting the HSBC Group’s operations, variations in the HSBC Group’s operating results and business developments of the HSBC Group and/or its competitors. Stock markets have, from time to time, experienced significant price and volume fluctuations that have affected the market prices for securities and which may be unrelated to the HSBC Group’s financial condition, operating performance or prospects. Furthermore, the HSBC Group’s financial condition,

operating results and prospects from time to time may be below the expectations of market analysts and investors. Any of these events could result in a decline in the market price of the new ordinary shares (including the nil paid rights and the fully paid rights) and/or the ordinary shares.

 

HSBC cannot give any assurance that the public trading market prices of its ADSs and ordinary shares will not decline below the subscription price of the new ADSs and new ordinary shares, respectively, issued pursuant to the rights offering. Should that occur after the ADS rights and share rights are exercised by their holders, such holders would suffer an immediate unrealized loss as a result. Moreover, there can be no assurance that, following the exercise of rights, a holder will be able to sell new ADSs or new ordinary shares at a price equal to or greater than the applicable subscription price.

 

Shareholders who do not acquire new ADSs or new ordinary shares (as applicable) in the rights offering will experience dilution in their ownership of HSBC

 

If holders of ADS rights or share rights (as applicable) do not take up the offer of new ADSs and new ordinary shares, respectively, under the rights offering their proportionate ownership and voting interests in HSBC will be reduced and the percentage that their shares will represent of HSBC’s increased share capital after completion of the rights offering will be disproportionately reduced. Even if an existing holder of ADS rights or share rights elects to sell its unexercised ADS rights or share rights (as applicable) or such rights are sold on its behalf, the consideration it receives for them may not be sufficient to compensate such holder fully for the dilution of its percentage ownership of HSBC’s share capital that may be caused as a result of the rights offering.

 

An active trading market in the share rights might not develop

 

An active trading market in the share rights may not develop on the London Stock Exchange and/or the Hong Kong Stock Exchange during the trading period. In addition, because the trading price of the share rights depends on the trading price of the ordinary shares, the share rights price may be volatile and subject to the same risks as noted elsewhere in this document.

 

HSBC’s ability to continue to pay dividends will depend on the level of profits and cash flows generated by the HSBC Group

 

Under UK company law, a company can only pay cash dividends to the extent that it has distributable reserves and cash available for this purpose. As a holding company, HSBC’s ability to pay dividends in the future is affected by a number of factors, principally its ability to receive sufficient dividends from subsidiaries.

 

The ability of these subsidiaries to pay dividends or advance moneys to HSBC depends on, among other things, their respective regulatory and capital requirements, statutory reserves and financial and operating performance. These laws and restrictions could limit the payment of dividends and distributions to HSBC by its subsidiaries, which could in future restrict HSBC’s ability to fund other operations or to pay a dividend to Shareholders.

 

HSBC cannot assure you that the listing and admission to trading of the new ordinary shares on the London Stock Exchange or that the issuance of the new ADSs will occur when HSBC expects

 

Until the ordinary shares underlying the new ADSs are admitted to trading on the London Stock Exchange, you will not be issued any new ADSs for which you subscribed. See “The Rights Offering” for further information on the expected dates of these events. HSBC cannot assure you that the listing and admission to trading of the ordinary shares underlying the new ADSs will take place when anticipated.

 

The ADS rights will not be admitted to trading on any exchange and will not be transferable

 

The ADS rights will not be admitted to trading on the New York Stock Exchange or any other exchange and will not be transferable. Unless you surrender your ADS rights for delivery of underlying share rights or instruct The Bank of New York Mellon to sell share rights underlying your ADS rights for you, you will be unable to sell your ADS rights. HSBC cannot assure you that a market in the share rights will develop or that you or The Bank of New York Mellon will have adequate time to arrange purchasers for share rights.

You may not receive any value for your rights if you do not exercise or sell them

 

The ADS subscription period is expected to begin at 9.00 a.m. (New York City time) on 20 March 2009 and expire at 5.00 p.m. (New York City time) on 31 March 2009. The share subscription period begins at 8.00 a.m. (London time) on 20 March 2009 and expires at 11.00 a.m. (London time) on 3 April 2009. If you do not exercise your ADS rights or share rights, or you do not attempt to sell your share rights (including share rights received upon surrender of ADS rights), you will receive compensation only if and to the extent that the joint global coordinators are able to sell new ordinary shares relating to those rights at a premium over the share subscription price, after deducting the joint global coordinators’ expenses of procuring such subscribers (including any applicable brokerage and commissions and amounts in respect of UK value added tax which are not recoverable) and the fee of the ADS depositary, can be obtained.

 

The exercise of ADS rights is subject to exchange rate risk

 

If the US dollar weakens against the pound sterling, holders of ADSs subscribing for new ADSs will be required to pay more than the estimated subscription price of US$17.75 per new ADS.

 

The estimated ADS subscription price is US$17.75 per new ADS subscribed. The estimated ADS subscription price is the US dollar equivalent of the share subscription price, using an exchange rate of £0.7153 per US dollar (as published by Bloomberg at approximately 3.00 p.m. (London time) on 13 March 2009), multiplied by five to reflect that each ADS represents five HSBC ordinary Shares. A subscriber of the new ADSs must deposit US$19.53 per new ADS subscribed, which represents 110% of the estimated ADS subscription price, upon exercise of each ADS right. This additional amount over and above the estimated ADS subscription price is to increase the likelihood that the ADS rights agent will have sufficient funds to pay the final ADS subscription price in light of a possible appreciation of the pound sterling against the US dollar between the date hereof and the end of the ADS subscription period, and to pay applicable UK stamp duty reserve tax and any currency conversion expenses. If the actual US dollar price (which will be US dollar equivalent, based on the exchange rate published by Bloomberg at approximately 3.00 p.m. (London time) on 1 April 2009, of the share subscription price of 254 pence multiplied by five) plus applicable tax and any currency conversion expenses is less than the ADS deposit amount, the ADS rights agent will refund such excess US dollar subscription price to the subscribing ADS rights holder without interest. However, if there is a deficiency as a result of such conversion, the ADS rights agent will not deliver the new ADSs to such subscribing ADS rights holder until it has received payment of the deficiency. The ADS rights agent may sell a portion of your new ADSs to cover the deficiency if not paid by a specified date.

 

The following table shows the consolidated unaudited capitalization, indebtedness and share capital position of HSBC Holdings plc and its subsidiary undertakings as at 31 December 2008:

 

 

 

 

 

US$1.00: HK$7.75010; €1.00 : US$1.3955; £1.00 : US$1.4586; US$1.00 : Canadian dollars 1.2237.

 

HSBC’s net tangible book value as of 31 December 2008 was US$66,234 million, or US$5.18 per ordinary share. Net tangible book value is total shareholders’ equity excluding goodwill and intangible assets at 31 December 2008. Net tangible book value per share has been calculated as the amount of HSBC’s net tangible book value of US$66,234 million less non-cumulative preference shares of US$1.4 billion and capital securities of US$2.1 billion, divided by the number of ordinary shares outstanding.

 

After giving effect to HSBC’s issuance of 5,060,239,065 new ordinary shares pursuant to the rights offering, at an issue price of $3.61 per new ordinary share, which was the US dollar equivalent of the share subscription price of £2.54 (254 pence) on 27 February 2009 using an exchange rate of £0.7035 per US dollar (as published by Bloomberg at approximately 3.00 p.m. on 27 February 2009), and after deducting the underwriting commission and estimated offering expenses payable by HSBC of an aggregate of approximately US$0.5 billion (exclusive of value added tax), HSBC’s net tangible book value as of 31 December 2008 would have been US$83,974 million, or $4.69 per ordinary share. This represents an immediate increase of US$1.08 per share to new investors in the rights offering, as illustrated by the following table:

 

 

After giving effect to HSBC’s sale of 5,060,239,065 new ordinary shares in the rights offering, existing ADS holders or shareholders who do not exercise their ADS rights or share rights, respectively, in the rights offering will be diluted such that a shareholder holding 10% of HSBC’s outstanding ordinary share capital prior to the offering will have its shareholding reduced to 5.83% of HSBC’s outstanding ordinary share capital following the issuance of 5,060,239,065 new ordinary shares pursuant to the rights offering.

 

HSBC 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 maintains its principal share register in England and overseas branch share registers in Hong Kong and Bermuda (collectively, the “share register”).

 

The following table shows, for the years, calendar quarters and months indicated, the highest and lowest prices for the HSBC 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

 

 

 

 

Stock Symbols

 

HSBC ordinary shares trade under the following stock symbols:

 

 

General Information

 

HSBC is proposing to raise approximately £12.5 billion (net of expenses) by way of a 5 for 12 rights offering of 5,060,239,065 new ordinary shares at a price of 254 pence (£2.54) per new ordinary share. HSBC has also arranged with The Bank of New York Mellon, the depositary for its ADSs, and accordingly the holder of record of the ordinary shares underlying the ADSs, to make available to holders of ADSs at the ADS record date non-transferable ADS rights granted to them under contractual agreement.

 

Each eligible registered holder of ADSs will be sent a subscription form showing its ADS rights entitlement and instructions relating to the exercise of these ADS rights, instructing the ADS depositary to sell the share rights, and the surrender of the ADS rights for delivery of underlying share rights. Each eligible beneficial owner of ADSs will receive a book-entry credit of ADS rights in its DTC participant account and instructions relating to the exercise of the ADS rights, instructing the ADS depositary to sell the share rights, and the surrender of the ADS rights for delivery of underlying share rights. Each eligible holder of ordinary shares in certificated form whose registered address is in the United States will be sent a transferable provisional allotment letter evidencing its share rights and containing instruments regarding acceptances and payment procedures and a notice of availability of this prospectus. Eligible holders of ordinary shares in uncertified form in CREST whose registered address is in the United States will receive a credit to a stock account in respect of their entitlement to share rights and a notice of availability of this prospectus.

 

Holders of ordinary shares whose registered address is in the United States should read the “Questions and Answers About the Rights Offering” contained in this prospectus and “Part VIII — Terms of the Rights Issue” beginning on page 26 of the accompanying UK prospectus for more information regarding share rights, the procedures for exercising the share rights, and the transfer of the share rights. Further information about the ADS rights, the procedures for exercising the rights, instructing the ADS depositary to sell the share rights, and surrendering the ADS rights for delivery of underlying share rights is set forth below.

 

Subscription by Holders of ADS Rights

 

The timetable below lists certain important dates relating to the rights offering, some of which are subject to change. All time references are to New York City time.

 

 

Other than dates prior to the date hereof, all dates are provisional and subject to change. No assurance can be given that the issuance and delivery of the new ADSs will not be delayed.

 

The Bank of New York Mellon, the depositary for HSBC ADSs, will act as ADS rights agent in respect of the new ADSs offered under this prospectus.

ADS Rights

 

Each holder of HSBC ADSs will receive 5 non-transferable ADS rights for every 12 ADSs that it owns on the ADS record date. Each ADS right entitles the holder thereof to acquire one new ADS at the ADS subscription price.

 

ADS Record Date

 

The ADS record date for the purpose of determining entitlement to ADS rights was the close of business on 13 March 2009. The ADS rights will be credited through the book-entry system of DTC to the accounts of persons who held ADSs in book-entry form on the ADS record date and notices as to ADS rights will be sent via first class mail to registered holders of ADSs as promptly as practicable after the rights offering is approved by the General Meeting.

 

Fractional Entitlements

 

The ADS rights agent will not allot ADS rights for fractions of new ADSs. Any entitlement to receive a fraction of an ADS right will be rounded down to the nearest whole number of ADS rights. Fractional ADS rights will be aggregated and the ADS depositary will use its reasonable endeavors to procure that all or as many as is reasonably practicable of the share rights underlying these fractional ADS rights are sold through the London Stock Exchange as soon as practicable after admission to trading of the new ordinary shares (nil paid) on the London Stock Exchange. If the share rights are sold at a price in excess of the expenses of sale, including any irrecoverable value added tax, any premium will be paid pro rata to each ADS holder entitled to the proceeds, after deduction of applicable taxes and any currency conversion expenses. Any unsold share rights underlying the aggregated fractional ADS rights (the “Unsold Portion”) will be deemed to have been declined and will lapse. If possible, the new ordinary shares underlying the Unsold Portion will be sold by the joint global coordinators on behalf of the ADS depositary, and any net proceeds of the sale to the ADS depositary in excess of the amount of the share subscription price plus the expenses of such sale will be paid pro rata to each ADS holder entitled to the proceeds, after deduction of applicable taxes and any currency conversion expenses. There is no guarantee that it will be possible to sell the new ordinary shares underlying the Unsold Portion at a price which results in a payment to you.

 

ADS Subscription Period

 

The ADS rights may be exercised during the period from 9.00 a.m. (New York City time) on 20 March 2009 to 5.00 p.m. (New York City time) on 31 March 2009, referred to as the ADS subscription period. The ADS subscription period ends before the share subscription period.

 

Any exercise of ADS rights will be irrevocable upon exercise and may not be cancelled or modified after such exercise.

 

ADS Rights Agent

 

The Bank of New York Mellon, which is the ADS depositary, is acting as the ADS rights agent.

 

ADS Subscription Price

 

The estimated ADS subscription price is US$17.75 per new ADS subscribed. The actual ADS subscription price per new ADS will be the US dollar equivalent, based on the exchange rate published by Bloomberg at approximately 3.00 p.m. (London time) on 1 April 2009, of the share subscription price of 254 pence, multiplied by five to reflect that each ADS represents five HSBC ordinary shares. The estimated ADS subscription price is the US dollar equivalent of the share subscription price, using an exchange rate of £0.7153 per US dollar (as published by Bloomberg at approximately 3.00 p.m. on 13 March 2009), multiplied by five to reflect that each ADS represents five HSBC ordinary shares. A subscriber of the new ADSs must deposit US$19.53 per new ADS subscribed, which represents 110% of the estimated ADS subscription price, upon the exercise of each ADS right. This additional amount over and above the estimated ADS subscription price is to increase the likelihood that the ADS rights agent will have sufficient funds to pay the final ADS subscription price in light of a possible appreciation of the pound sterling against the US dollar between the date hereof and the end of the ADS subscription period, and to pay applicable UK stamp duty reserve tax and any currency conversion expenses. HSBC and the ADS depositary have agreed that ADS holders that subscribe in this rights offering will not be responsible for the issuance fee payable to the ADS depositary under the deposit agreement in connection with the issuance of the new ADSs.

If the actual US dollar price (equal to the share subscription price multiplied by five and stated in US dollars on or about 1 April 2009) plus applicable UK stamp duty reserve tax of 1.5% of the underlying share subscription price and any currency conversion expenses is less than the ADS deposit amount, the ADS rights agent will refund such excess to the subscribing ADS rights holder without interest. However, if the actual US dollar price plus applicable UK stamp duty reserve tax and any currency conversion expenses exceeds the ADS deposit amount, the ADS rights agent will advance the shortfall to the extent it does not exceed 20% of the amount required to be deposited by such ADS rights holder and will not deliver the new ADSs to such subscribing ADS rights holder until it has received payment of the deficiency. The ADS rights agent may sell a portion of the new ADSs that is sufficient to pay any shortfall that is not paid within 14 days of notice of the deficiency. In addition, to the extent that the shortfall of the ADS deposit amount below the actual US dollar price plus applicable UK stamp duty reserve tax and any currency conversion expenses exceeds 20%, the ADS rights agent shall not be required to advance the amount of that shortfall and may reduce pro rata the number of new ordinary shares for which it subscribes, which will reduce the number of new ADSs that will be available for delivery to subscribing ADS rights holders.

 

ADS Subscription Procedures

 

You may exercise your ADS rights to acquire new ADSs as follows:

 

Subscription by brokers and banks

 

If you hold ADS rights through DTC, you can exercise your ADS rights by delivering completed subscription instructions for new ADSs through DTC’s system and instructing DTC to charge your applicable DTC account for the ADS deposit amount for the new ADSs and to deliver such amount to the ADS rights agent. DTC must receive the subscription instructions and the payment of the ADS deposit amount for the new ADSs so as to allow DTC sufficient time to transmit the subscription instructions and payment of the ADS deposit amount to the ADS rights agent prior to the expiration of the ADS subscription period. If the ADS deposit amount instructions and payment with respect to ADS rights are not received by the ADS rights agent by the end of the ADS subscription period, the ADS rights agent will not be authorized to, and consequently will not, accept any delivery or exercise of subscription instructions with respect to those ADS rights.

 

Subscription by beneficial owners

 

If you are a beneficial owner of ADS rights and wish to acquire new ADSs but are neither a DTC participant nor a registered holder of ADS rights, you should immediately contact the financial intermediary through which you hold ADS rights to arrange for their exercise and to arrange for payment of the ADS deposit amount. You are urged to consult your financial intermediary without delay in case your financial intermediary is unable to act immediately.

 

Subscription by registered holders

 

If you are a holder of ADS rights registered directly with the ADS rights agent, you can exercise your ADS rights by delivering to the ADS rights agent a properly completed ADS subscription form and paying in full the ADS deposit amount for the new ADSs. Payment must be made by certified check or bank draft payable to “The Bank of New York Mellon — HSBC ADS Rights Offering.”

 

The properly completed ADS subscription form (except in the case of subscriptions submitted through DTC) and payment should be delivered to:

 

 

The ADS rights agent must receive the ADS subscription form and payment of the ADS deposit amount on or before the end of the ADS subscription period. Deposit in the mail will not constitute delivery to the ADS rights agent. HSBC has discretion to refuse to accept any improperly completed or unexecuted ADS subscription form.

You will elect the method of delivering the ADS subscription form and paying the ADS deposit amount to the ADS rights agent and you will bear any risk associated with it. If you send the ADS subscription form and payment by mail, you should use registered mail, properly insured, with return receipt requested, and allow sufficient time to ensure delivery to the ADS rights agent.

 

Subscriptions and full payment must be received by the ADS rights agent prior to 5.00 p.m. (New York City time) on 31 March 2009.

 

HSBC and the ADS rights agent will determine all questions about the timeliness, validity, form and eligibility of any exercise of the right to acquire new ADSs. In HSBC’s sole discretion, HSBC may waive any defect or irregularity, or permit you to correct a defect or defects and irregularity within the time it determines. ADS subscriptions will not be considered received or accepted until HSBC has waived all irregularities or you have cured them in time. Neither HSBC nor the ADS rights agent has to notify you of any defect or irregularity in submitting an ADS subscription. HSBC and the ADS rights agent will not incur any liability for failing to do so.

 

Partial Exercise of ADS Rights

 

Subject to the requirements for the exercise of ADS rights contained herein, if you are a registered holder of ADS rights and you wish to exercise only a portion of your total ADS rights, you will need to so indicate on the ADS subscription form; and if you are a beneficial owner of ADS rights and wish to exercise only a portion of your total ADS rights, you will need to instruct the financial intermediary through which you hold your ADS rights to debit the ADS rights from the applicable book-entry account and deliver the ADS rights to the ADS rights agent, and further instruct the ADS rights agent to subscribe only for the number of ADS rights that you wish to exercise.

 

Sales by the ADS Depositary

 

You may direct the ADS depositary by no later than 5.00 p.m. (New York City time) on 30 March 2009 to attempt to sell all or a portion of the share rights underlying your ADS rights for you. The ADS depositary will, to the extent practicable, attempt to sell share rights underlying ADS rights on the London Stock Exchange beginning on the trading day following the day on which the instruction to sell is received until 11.00 a.m. on 3 April 2009 for those ADS holders from whom it receives such instruction. The ADS rights agent will distribute the proceeds, after accounting for the ADS depositary’s fees of up to $0.02 per ADS underlying each ADS right in respect of which such instruction was given and expenses, any applicable taxes and any other applicable expenses of the ADS depositary as provided under the deposit agreement, pro rata to the holders of ADS rights by whom it has been directed to make such sales. The instruction to sell share rights may be given through the DTC system or by completing and returning an ADS subscription form.

 

Exchange of ADS Rights for Share Rights

 

If you wish to surrender any ADS rights and receive the underlying share rights, you must instruct the ADS rights agent to cancel your ADS rights before 5.00 p.m. (New York City time) on 30 March 2009. Upon payment of any taxes or charges, such as stamp taxes and stock transfer taxes or fees, The Bank of New York Mellon will deliver the underlying share rights to an account you specify. Should you decide to so cancel any ADS rights held by you, you will be solely responsible for providing a securities brokerage account in the UK that can accept the rights for your benefit. Furthermore, you will be solely responsible for causing any actions to be taken with respect to those rights, including the timely exercise or sale of the rights. ADS rights may be surrendered for delivery of share rights through the DTC system or by completing and returning an ADS subscription form.

 

None of HSBC, The Bank of New York Mellon or any of their respective agents (including, without limitation, the custodian for the ADS depositary) assumes any responsibility for the required securities brokerage account in the UK or for the execution of any such actions.

 

Unexercised ADS Rights

 

Any ADS rights or share rights not exercised in accordance with the procedures laid down for acceptance and payment or instructed to be sold by the ADS depositary or surrendered for delivery of share rights will be deemed to have been declined and will lapse. The joint global coordinators will use reasonable endeavors to procure, by not later than 4.30 p.m. (London time) on 8 April 2009, subscribers for all (or as many as possible) of the new ordinary shares underlying the share rights that were not exercised if a premium over the total of the share subscription price

(in pounds sterling) and the expenses of procuring such acquirers can be obtained. You will receive compensation for unexercised rights only if and to the extent a premium over the share subscription price, after deducting the joint global coordinators’ expenses of procuring such subscribers (including any applicable brokerage and commissions and amounts in respect of UK value added tax which are not recoverable), can be obtained for the ordinary shares underlying the share rights that are not exercised. The aggregate premium (if any) will be paid (without interest) to holders of unexercised rights in proportion to their respective numbers of lapsed rights. The ADS depositary will convert these proceeds to US dollars and remit the proceeds pro rata to the holders of ADSs to whom the unsubscribed new ADSs had been provisionally allotted, after deduction of the ADS depositary’s fees of up to $0.02 per ADS underlying each ADS right that expired unexercised, applicable taxes and any currency conversion expenses.

 

Notwithstanding the above, the joint global coordinators may cease to endeavor to procure any such subscribers if, in the opinion of the joint global coordinators, it is unlikely that any such subscribers can be so procured at such a price and by such time. If and to the extent that subscribers cannot be procured on the basis outlined above, such unsubscribed for new ordinary shares will be subscribed for by the underwriters as principals pursuant to the underwriting agreement or by sub-underwriters procured by the underwriters, in each case, at the share subscription price and in their respective underwriting proportions.

 

Any transactions undertaken pursuant to unexercised rights will be deemed to have been undertaken at HSBC’s request and none of the joint global coordinators, the underwriters, nor any other person procuring new subscribers, will be responsible for any loss arising from the terms or timing of the subscription or the failure to procure subscribers on the basis described above. Checks for the amount due will be sent at the risk of the person(s) entitled to their registered addresses (the registered address of the first named in the case of joint holders).

 

Delivery of New ADSs

 

The ADS depositary will receive the new ordinary shares to be represented by the new ADSs on or about 6 April 2009. The ADS depositary will then deliver to your broker’s account or register in your name the new ADSs subscribed for as soon as practicable thereafter, provided that you have paid the ADS rights agent any shortfall arising from the conversion of the US dollar payment and your payment of the ADS subscription price has cleared.

 

Transfer of ADS Rights

 

ADS rights are not transferable and may not be exercised by, or sold or assigned to, third parties. The ADS rights will not be listed on the New York Stock Exchange or any other stock exchange.

 

ADS Information Agent

 

BNY Mellon Shareowner Services is acting as information agent for the ADS rights offering. If you have any questions on the offering of ADS rights or would like a copy of the prospectus, please telephone 1-866-208-3310. This helpline is available from 9.00 a.m. to 6.00 p.m. (New York City time) Monday to Friday.

 

Please note that, for legal reasons, the helpline will only be able to provide you with information contained in the prospectus, and will not be able to give advice on the merits of the ADS rights offering or to provide financial advice.

 

Restrictions on Participation in the Rights Offering by Certain ADS Holders

 

The ADS rights offering is only addressed to persons to whom it may lawfully be made. The distribution of this prospectus, and the exercise of any of the rights, may be restricted by law. Persons into whose possession this prospectus comes or who wish to exercise any of the rights must inform themselves about and observe any such restrictions. Any failure to comply with any of those restrictions may constitute a violation of the securities laws of any such jurisdiction. Specifically, due to restrictions under the securities laws of Canada, Indonesia, Japan, Mexico, the Kingdom of Saudi Arabia, South Korea, Switzerland, Turkey and the United Arab Emirates, no notices as to ADS rights will be sent to ADS holders with registered addresses in, and who are residents of any of, Canada, Indonesia, Japan, Mexico, the Kingdom of Saudi Arabia, South Korea, Switzerland, Turkey or the United Arab Emirates, and the new ADSs may not be transferred or delivered in any of those countries. Accordingly, no offer of new ADSs is being made under this prospectus to ADS holders with registered addresses in, or to residents of any of, Canada, Indonesia, Japan, Mexico, the Kingdom of Saudi Arabia, South Korea, Switzerland, Turkey or the United

Arab Emirates, and these ADS holders will be treated as restricted holders. Such ADS holders must treat this prospectus for information purposes only.

 

General

 

The Bank of New York Mellon, as depositary, delivers HSBC ADSs. Each HSBC ADS represents an ownership interest in five HSBC ordinary shares which have been deposited with the depositary. The principal executive office of The Bank of New York Mellon is located at One Wall Street, New York, NY 10286.

 

You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having ADSs registered in your name in the Direct Registration System, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what these procedures are.

 

The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, also referred to as DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements sent by the depositary to the registered holders of uncertificated ADSs.

 

The following is a summary of the deposit agreement. Because it is a summary, it does not contain all the information that may be important to holders of HSBC ADSs. For more complete information, the holder should read the entire agreement and the American Depositary Receipt, or ADR, evidencing the HSBC ADSs. Copies of the agreement and the ADR will be available for inspection at the office of The Bank of New York Mellon. The laws of the State of New York govern the deposit agreement.

 

The term deposited securities, as used in this description, includes HSBC ordinary shares deposited under the deposit agreement and other securities, cash and property received by The Bank of New York Mellon in respect of the HSBC ordinary shares, or in respect of any other securities, property or cash previously received, and held under the deposit agreement.

 

Deposit and Withdrawal of Deposited Securities

 

The Bank of New York Mellon will deliver the HSBC ADSs that the holder is entitled to receive against deposits of HSBC ordinary shares. The Bank of New York Mellon will deliver additional HSBC ADSs if the holder or his broker deposits HSBC ordinary shares, along with any appropriate instruments of transfer or endorsement, with the custodian. The Bank of New York Mellon may also require the holder to deliver evidence of necessary governmental approvals and an agreement transferring his right as a shareholder to receive dividends or other property. Upon payment of its fees and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York Mellon will register the appropriate number of HSBC ADSs in the names the holder requests and will deliver book-entry HSBC ADSs or, if the holder specifically requests, deliver certificates representing the HSBC ADSs at its New York office to the persons the holder requests.

 

The holder may submit a written request to withdraw HSBC ordinary shares and turn in his certificated HSBC ADSs, if any, at the New York office of The Bank of New York Mellon. Upon payment of its fees and of any taxes or charges, such as stamp taxes, stock transfer taxes or fees, The Bank of New York Mellon will deliver at the office of its custodian in London the deposited securities underlying the HSBC ADSs, and at The Bank of New York Mellon’s New York office any dividends or distributions with respect to the deposited securities represented by the HSBC ADSs, or any proceeds from the sale of any dividends, distributions or rights held by The Bank of New York Mellon. Alternatively, at the holder’s request, risk and expense, The Bank of New York Mellon will deliver the deposited securities at its New York office.

 

Dividends and Other Distributions

 

The Bank of New York Mellon will pay the holder of HSBC ADSs the cash dividends or other distributions it or the custodian receives on HSBC ordinary shares or other deposited securities, after deducting its fees and

expenses (if any). The holder will receive these distributions in proportion to the number of HSBC ordinary shares his HSBC ADSs represent.

 

Cash

 

The Bank of New York Mellon will convert any cash dividend or other cash distribution HSBC pays on the HSBC ordinary shares, other than any dividend or distribution paid in US dollars, into US dollars. If that is not possible on a reasonable basis, or if any approval from any government is needed and cannot be obtained, the deposit agreement allows The Bank of New York Mellon to distribute the non-US currency only to those ADS holders to whom it is possible to do so or to hold the non-US currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the non-US currency and it will not be liable for any interest.

 

Before making a distribution, The Bank of New York Mellon will deduct any withholding taxes that must be paid under applicable laws. It will distribute only whole US dollars and cents and will round any fractional amounts to the nearest whole cent.

 

Shares

 

The Bank of New York Mellon may distribute new HSBC ADSs representing any HSBC ordinary shares HSBC distributes as a dividend or free distribution, and will do so if HSBC requests it to make this distribution. The Bank of New York Mellon will only distribute whole HSBC ADSs. It may sell HSBC ordinary shares which would require it to issue a fractional HSBC ADS and distribute the net proceeds in the same way as it does with cash dividends and distributions paid by HSBC. If The Bank of New York Mellon does not distribute additional cash or HSBC ADSs, each HSBC ADS will also represent the new ordinary shares.

 

Rights to Receive Additional Shares

 

If HSBC offers holders of securities any rights to acquire additional HSBC ordinary shares or any other rights, The Bank of New York Mellon may, and will if HSBC so requests, take actions necessary to make these rights available to the holder of HSBC ADSs. If The Bank of New York Mellon determines that it is not legal or not feasible to make these rights available to the holder, The Bank of New York Mellon may sell the rights and allocate the net proceeds to holders’ accounts. The Bank of New York Mellon may allow rights that are not distributed or sold to lapse.

 

If The Bank of New York Mellon makes rights available to the holder of HSBC ADSs, upon instruction from the holder it will exercise the rights and purchase the HSBC ordinary shares on his behalf. The Bank of New York Mellon will then deposit the HSBC ordinary shares and deliver HSBC ADSs to the holder. The Bank of New York Mellon will only exercise rights if the holder pays it the exercise price and any other charges the rights require the holder to pay.

 

US securities laws may restrict the sale, deposit, cancellation and transfer of the HSBC ADSs issued after exercise of rights. In this case, The Bank of New York Mellon may deliver the HSBC ADSs under a separate restricted deposit agreement which will contain the same provisions as the deposit agreement, except for changes needed to put the restrictions in place. The Bank of New York Mellon will not offer the holder rights unless those rights and the securities to which the rights relate are either exempt from registration or have been registered under the Securities Act with respect to a distribution to the holder. HSBC will have no obligation to register under the Securities Act those rights or the securities to which they relate.

 

Other Distributions

 

The Bank of New York Mellon will send to the holder anything else HSBC distributes on deposited securities by any means The Bank of New York Mellon thinks is legal, fair and practical. If it cannot make such distribution, The Bank of New York Mellon may decide to sell what HSBC distributed — for example by public or private sale — and distribute the net proceeds, in the same way as it does with cash dividends and distributions paid by HSBC.

 

HSBC will have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to ADS holders.

Reclassifications, Realizations and Mergers

 

If HSBC:

 

 

the cash, shares or other securities received by The Bank of New York Mellon will become new deposited securities under the deposit agreement. Each HSBC ADS will automatically represent its equal share of the new deposited securities. The Bank of New York Mellon will, if HSBC asks it to, issue new ADSs or ask the holder to surrender his outstanding HSBC ADRs in exchange for new HSBC ADRs identifying the new deposited securities.

 

Record Dates

 

Each time a dividend is payable or other distribution is made, or a meeting of shareholders is scheduled, HSBC may set a record date to establish those shareholders who are eligible to receive the dividend or distribution or to attend the meeting. The Bank of New York Mellon will fix a dividend record date relating to the HSBC ADSs, which will be the same as any corresponding record date set by HSBC for ordinary shares or, if a different date, set after consultation with HSBC to the extent practicable.

 

Voting Rights

 

The ADS holder may instruct The Bank of New York Mellon, as depositary, as to the exercise of voting rights attaching to deposited securities represented by HSBC ADSs.

 

If requested in writing by HSBC, The Bank of New York Mellon will notify the holder of the upcoming meeting and arrange to deliver relevant materials to him. The materials will (1) describe the meeting time, place and the matters to be voted on and (2) explain how the holder may give instructions for his HSBC ordinary shares to be voted. For instructions to be valid, The Bank of New York Mellon must receive them on or before the date specified in the instructions. The Bank of New York Mellon will, to the extent practical, subject to applicable law and the provisions of HSBC’s Memorandum and Articles of Association, vote the HSBC ordinary shares or other deposited securities as the holder instructs. The Bank of New York Mellon will only vote as the holder instructs.

 

Although The Bank of New York Mellon will try to send the notice of the meeting reasonably in advance of the meeting, HSBC will not be able to assure that the holder will receive the voting materials in time to ensure that the holder can give instructions for his HSBC ordinary shares to be voted. In addition, The Bank of New York Mellon and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions.

 

Disclosure of Interests

 

The obligation of a holder of ordinary shares and other persons with an interest in the ordinary shares to disclose information to HSBC under English law and Hong Kong law applies to ADS holders and any other persons with an interest in the HSBC ADSs. The consequence of failure to comply with these provisions will be the same for an ADS holder and any other persons with an interest in the ADS as for a holder of ordinary shares. The Bank of New York Mellon will co-operate with HSBC’s efforts to comply with the disclosure requirements and ownership limitations.

 

Amendment and Termination of the Deposit Agreement

 

HSBC may agree with The Bank of New York Mellon to amend, for any reason, the deposit agreement and the HSBC ADSs without the holder’s consent. If the amendment adds or increases fees or charges, except for taxes and other governmental charges, or prejudices an important right of ADS holders, it will only become effective 30 days after The Bank of New York Mellon notifies the holder of the amendment. At the time an amendment becomes effective, the holder is considered, by continuing to hold his HSBC ADSs, to agree to the amendment and to be

bound by the agreement as amended. However, no amendment will impair the holder’s right to receive the deposited securities in exchange for his HSBC ADSs, except as required to comply with applicable law.

 

The Bank of New York Mellon will terminate the deposit agreement if HSBC asks it to do so in which case it must notify the holder at least 90 days before termination. The Bank of New York Mellon may also terminate the agreement if The Bank of New York Mellon informs HSBC that it would like to resign and HSBC does not appoint a new depositary bank within 90 days.

 

After termination, The Bank of New York Mellon and its agents will be required to do only the following under the agreement: (l) collect dividends and other distributions on the deposited securities, (2) sell rights offered to holders of deposited securities and (3) deliver shares and other deposited securities upon cancellation of HSBC ADSs. At any time after one year following termination of the deposit agreement, The Bank of New York Mellon may sell any remaining deposited securities. After that, The Bank of New York Mellon will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their HSBC ADSs. The Bank of New York Mellon will not invest the money and will have no liability for interest. The Bank of New York Mellon’s only obligations will be to account for the money and other cash. After termination, HSBC’s only obligations will be with respect to indemnification and to pay specified amounts to The Bank of New York Mellon.

 

Charges of Depositary

 

HSBC will pay specified fees, charges and expenses of The Bank of New York Mellon as agreed between The Bank of New York Mellon and HSBC. Fees for which the holders of the HSBC ADSs will be responsible include:

 

Liability of Holder for Taxes

 

The Bank of New York Mellon may deduct the amount of any taxes owed from any payments to the holder. It may also restrict the transfer of the holder’s HSBC ADSs or restrict the withdrawal of the holder’s underlying deposited securities until the holder pays any taxes owed on his HSBC ADSs or underlying securities. It may also sell deposited securities, by public or private sale, to pay any taxes owed. The holder will remain liable if the proceeds of the sale are not enough to pay the taxes. If The Bank of New York Mellon sells deposited securities, it will, if appropriate, reduce the number of HSBC ADSs to reflect the sale and pay to the holder any proceeds, or send to the holder any property, remaining after it has paid the taxes.

 

Limitations on Obligations and Liability to HSBC ADS Holders

 

The deposit agreement expressly limits HSBC’s obligations and the obligations of The Bank of New York Mellon. It also limits HSBC’s liability and the liability of The Bank of New York Mellon, HSBC and The Bank of New York Mellon:

 

 

In the deposit agreement, HSBC and The Bank of New York Mellon agree to indemnify each other under specified circumstances.

 

Holder’s Right to Receive the HSBC Ordinary Shares Underlying HSBC ADSs

 

The holder of HSBC ADSs has the right to cancel his HSBC ADSs and withdraw the underlying shares at any time, except (i) when The Bank of New York Mellon or HSBC has closed its transfer books (for example, to permit voting at a shareholders’ meeting or when HSBC is paying a dividend on the HSBC ordinary shares); (ii) when the holder seeking to withdraw HSBC ordinary shares owes money to pay fees, taxes and similar charges; or (iii) when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to HSBC ADSs or to the withdrawal of HSBC ordinary shares or other deposited securities.

 

This right of withdrawal may not be limited by any other provision of the deposit agreement.

 

Inspection of Books and Shareholder Communications

 

The Bank of New York Mellon will keep books at its transfer office in New York City for the registration and transfer of HSBC ADSs which will be open for inspection by the holders of HSBC ADSs and HSBC at all reasonable times. Any reports and communications that HSBC sends to The Bank of New York Mellon or the custodian or otherwise makes available to shareholders are available for inspection by the holders of HSBC ADSs and HSBC at The Bank of New York Mellon’s New York City transfer office. The holder of HSBC ADSs has the right to inspect a list, as of a recent date, of the names and addresses of all registered holders of HSBC ADSs.

Pre-Release of HSBC ADSs

 

The Bank of New York Mellon may deliver HSBC ADSs before deposit of the underlying HSBC ordinary shares. This is called a pre-release of HSBC ADSs. The Bank of New York Mellon may also deliver HSBC ordinary shares prior to the receipt and cancellation of pre-released HSBC ADSs even if the HSBC ADSs are cancelled before the pre-release transaction has been closed out. A pre-release is closed out as soon as the underlying HSBC ordinary shares are delivered to The Bank of New York Mellon. The Bank of New York Mellon may receive HSBC ADSs instead of HSBC ordinary shares to close out a pre-release. The Bank of New York Mellon may pre-release HSBC ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made must represent to The Bank of New York Mellon in writing that it or its customer, as the case may be, owns the HSBC ordinary shares or HSBC ADSs to be remitted; (2) the pre-release must be fully collateralized with cash or other collateral that The Bank of New York Mellon considers appropriate; (3) The Bank of New York Mellon must be able to close out the pre-release on not more than three business days’ notice. The pre-release will be subject to whatever indemnities and credit regulations that The Bank of New York Mellon considers appropriate. In addition, The Bank of New York Mellon will limit the number of HSBC ADSs that may be outstanding at any time as a result of pre-release.

 

Requirements for Depositary Actions

 

Before The Bank of New York Mellon will deliver or register the transfer of HSBC ADSs, make a distribution on HSBC ADSs or permit withdrawal of HSBC ordinary shares, HSBC or The Bank of New York Mellon may require:

 

 

US Taxation Related to US Holders who Acquire, Own or Dispose of Rights to the New ADSs or New Ordinary Shares

 

The following is a summary of certain material US federal income tax consequences of the acquisition, ownership and disposition of rights to acquire the new ordinary shares or new ADSs pursuant to the rights offering (“Rights”), new ordinary shares or new ADSs by a US Holder (as defined below). For a summary of certain United Kingdom taxation considerations, please see “Part XVI — Additional Information — 10 Taxation — 10.1 United Kingdom taxation” in the accompanying UK Prospectus. This summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular investor, and does not discuss state, local, foreign or other tax laws. In particular, the summary does not deal with Rights, new ordinary shares or new ADSs that are not held as capital assets and does not address the tax treatment of holders that are subject to special rules, such as US expatriates, banks and other financial institutions, insurance companies, dealers in securities or currencies, regulated investment companies, persons that elect mark-to-market treatment, persons holding shares as a position in a synthetic security, straddle or conversion transaction, persons subject to the alternative minimum tax, persons who acquired the shares pursuant to the exercise of employee stock options or otherwise as compensation, individual accounts and other tax deferred accounts, tax exempt entities, persons that own, directly or indirectly, 10% or more of the Company’s shares and persons whose functional currency is not the US dollar.

 

For purposes of this summary, a “US Holder” is a beneficial owner of Rights, new ordinary shares or new ADSs that is a citizen or resident of the United States, a US domestic corporation, or otherwise subject to US federal income tax on a net income basis with respect to its Rights, new ordinary shares or new ADSs.

 

A U.S. holder of the ADSs generally will be treated for U.S. federal income tax purposes as the beneficial owner of the shares represented by those ADSs. No gain or loss will be recognized upon an exchange of the ADSs for such shares or on an exchange of rights to new ADSs for the rights to new ordinary shares.

 

The US federal income tax treatment of a partner in a partnership that holds Rights and new ordinary shares or new ADSs will depend on the status of the partner and the activities of the partnership. Prospective purchasers that are partnerships should consult their tax advisers concerning the US federal income tax consequences to their partners of the acquisition, ownership and disposition of Rights and new ordinary shares or new ADSs by the partnership.

 

The summary is based on the tax laws of the United States, including the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, as well as on the income tax treaty between the United States and the United Kingdom (the “Treaty”), all as of the date hereof and all subject to change at any time, possibly with retroactive effect.

 

THE SUMMARY OF US FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. ALL PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING RIGHTS, NEW ORDINARY SHARES AND NEW ADSS, INCLUDING THEIR ELIGIBILITY FOR THE BENEFITS OF THE TREATY, THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.

 

Taxation in Respect of Rights

 

Receipt of Rights

 

The tax consequences of the receipt of Rights by a US Holder are not free from doubt. In particular, it is not clear whether the sale of ordinary shares underlying Rights by the joint global coordinators, and the remittance of the proceeds from that sale to certain holders whose ordinary shares underlying Rights were sold, should be treated as a sale and distribution by the Company, or as a distribution of Rights by the Company and a subsequent sale of those Rights by the relevant holders. If the sale and distribution were considered to be made by the Company, then the receipt of Rights would be taxable to US Holders as a dividend, as described below under “— Taxation in Respect of new ordinary shares and new ADSs — Dividends.” However, based on the particular facts relating to the

Rights and the sale of ordinary shares underlying Rights by the joint global coordinators, the Company believes it is proper to take the position that a US Holder is not required to include any amount in income for US federal income tax purposes as a result of the receipt of the Rights. It is possible that the IRS will take a contrary view and require a US Holder to include in income the fair market value of the Rights on the date of their distribution. The remainder of this discussion assumes that the receipt of Rights will not be a taxable event for US federal income tax purposes.

 

The basis and holding period of the Rights will be determined by reference to a US Holder’s Existing Ordinary Shares or Existing ADSs. If the fair market value of the Rights is worth 15% or more of the value of the Existing Ordinary Shares or Existing ADSs on the date the Rights are distributed, a US holder will be required to allocate its basis in its Existing Ordinary Shares between the Existing Ordinary Shares or Existing ADSs and the Rights based on the fair market value of each on the distribution date. In the event that the fair market value of the Rights is less than 15% of the value of the Existing Ordinary Shares or Existing ADSs on the date the Rights are distributed, US Holders may elect to allocate their basis in the same manner, and with the same results, as discussed above. In the absence of such election, no basis will be allocated to the Rights. US Holders’ holding period with respect to Rights will be the same as their holding period for their Existing Ordinary Shares or Existing ADSs with respect to which the Rights were allocated.

 

Sale or other disposition of Rights

 

A US Holder will recognize capital gain or loss on the sale or other disposition of Rights in an amount equal to the difference between such holder’s tax basis in the Rights, if any, and the US dollar value of the amount realized from the sale or other disposition. A US Holder will recognize long-term capital gain or loss, subject to taxation at reduced rates for individual taxpayers, if such holder’s holding period in the Rights exceeds one year. A US Holder’s holding period will include the holding period in the Existing Ordinary Shares or Existing ADSs with respect to which the Rights were allocated. In addition, any gain or loss will generally be treated as arising from US sources. US Holders should consult their own tax advisors as to the US tax and foreign tax credits implications of such sale or other disposition of Rights. The ability to offset capital losses against ordinary income is limited.

 

A US Holder that receives a payment from the underwriters on account of the sale of new ordinary shares or new ADSs at a premium over the share subscription price will be treated either as having sold the Rights or as having exercised the Rights and sold the new ordinary shares or new ADSs (as described below under “Taxation in respect of new ordinary shares or new ADSs — Sale or other disposition”). A US Holder that receives such a payment should consult its own tax advisers about the US federal income tax treatment of those amounts.

 

The amount realized on a sale or other disposition of Rights for an amount in a currency other than the US dollar (a “foreign currency”) will be the US dollar value of this amount on the date of sale or disposition (or in the case of cash basis and electing accrual basis taxpayers, the settlement date, provided that the Rights are traded on an established securities market). On the settlement date, the US Holder will recognize US source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the US dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date. However, in the case of Rights traded on an established securities market that are sold by a cash basis US Holder (or an accrual basis US Holder that so elects), the amount realized will be based on the exchange rate in effect on the settlement date for the sale, and no exchange gain or loss will be recognized at that time. If an accrual basis US Holder makes the election described above, it must be applied consistently from year to year and cannot be revoked without the consent of the Internal Revenue Service.

 

Expiration of Rights

 

If a US Holder allows the Rights to expire without selling or exercising them and does not receive any proceeds, the allocation of basis to the Rights will be disregarded and such holder will not recognize any loss upon expiration of the Rights.

 

Exercise of Rights

 

A US Holder will not recognize taxable income upon the receipt of new ordinary shares or new ADSs pursuant to the exercise of Rights. A US Holder’s basis in the new ordinary shares or new ADSs will equal the sum of the US

dollar value of the share subscription price determined at the spot rate on the date of exercise and the US Holder’s basis, if any, in the Rights exercised to obtain the new ordinary shares or new ADSs. A US Holder’s holding period in each new ordinary share or new ADS acquired through the exercise of a Right will begin with and include the date of exercise.

 

Taxation in Respect of New Ordinary Shares or New ADSs

 

Dividends

 

The gross amount of any cash distribution received by a US Holder (including the amount of any UK taxes withheld) with respect to its new ordinary shares or new ADSs generally will be subject to US federal income taxation as foreign-source dividend income. Any dividends paid in a foreign currency will be included in a US Holder’s income in a US dollar amount calculated by reference to the exchange rate in effect on the date of a US Holder’s receipt of the dividend, regardless of whether the payment is in fact converted into US dollars on such date. If such a dividend is converted into US dollars on the date of receipt, a US Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. Dividends paid on new ordinary shares or new ADSs generally will not be eligible for the dividends received deduction available to US corporate shareholders.

 

Subject to certain exceptions for short-term and hedged positions, the US dollar amount of dividends received by certain non-corporate US Holders with respect to new ordinary shares or new ADSs before January 1, 2011 will be subject to taxation at a maximum rate of 15% if the dividends are “qualified dividends.” Dividends received with respect to new ordinary shares or new ADSs will be qualified dividends if the Company (i) is eligible for the benefits of a comprehensive income tax treaty with the United States that the IRS has approved for purposes of the qualified dividend rules and (ii) was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The current Treaty has been approved for purposes of the qualified dividend rules. Based on the Company’s audited financial statements and relevant market and shareholder data, the Company believes that it was not treated as a PFIC for US federal income tax purposes with respect to its 2008 taxable year. In addition, based on its current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, the Company does not anticipate becoming a PFIC for its 2009 taxable year or in the foreseeable future.

 

Dividends received by US Holders generally will constitute passive category income (or, in the case of certain US Holders, general category income) for US foreign tax credit purposes. UK tax withheld from dividends will be treated, up to any applicable reduced rates provided under the Treaty, as a foreign income tax that, subject to generally applicable limitations under US tax law, is eligible for credit against the US federal income tax liability of US Holders or, if they have elected to deduct such taxes, may be deducted in computing taxable income. US Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

 

Sale or other disposition

 

A US Holder will recognize capital gain or loss on the sale, exchange or other disposition of the shares in an amount equal to the US dollar value of the difference between the amount realized for the new ordinary shares or new ADSs and such holder’s adjusted tax basis (determined in US dollars) in the new ordinary shares or new ADSs. Such gain or loss generally will be US source gain or loss, and will be long-term capital gain or loss if the new ordinary shares or new ADSs were held for more than one year. The net amount of long-term capital gain recognized by an individual US Holder generally is subject to taxation at a preferential rate. In addition, such gain or loss generally will be US-source gain or loss for US foreign tax credit purposes. Prospective investors should consult their own tax advisors as to the US tax and foreign tax credits implications of such sale or other disposition of new ordinary shares or new ADSs. A US Holder’s ability to offset capital losses against ordinary income is limited.

 

The tax basis of a new ordinary share or new ADS purchased with foreign currency will generally be the US dollar value of the purchase price on the date of purchase, or the settlement date for the purchase, in the case of new ordinary shares or new ADSs traded on an established securities market that are purchased by a cash basis US Holder (or an accrual basis US Holder that so elects). (For the tax basis of a US Holder in new ordinary shares

acquired by exercising Rights, see “Taxation in Respect of Rights-Exercise of Rights” above). The amount realized on a sale or other disposition of new ordinary shares or new ADSs for an amount in foreign currency will be the US dollar value of this amount on the date of sale or disposition. On the settlement date, the US Holder will recognize US source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the US dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date. However, in the case of new ordinary shares or new ADSs traded on an established securities market that are sold by a cash basis US Holder (or an accrual basis US Holder that so elects), the amount realized will be based on the exchange rate in effect on the settlement date for the sale, and no exchange gain or loss will be recognized at that time. If an accrual basis US Holder makes the election described above, it must be applied consistently from year to year and cannot be revoked without the consent of the Internal Revenue Service.

 

Backup withholding and information reporting

 

Payments of dividends and sales proceeds of Rights, new ordinary shares or new ADSs that are made within the United States or through certain US-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are not US persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-US status in connection with payments received within the United States or through a US-related financial intermediary (generally on Form W-8BEN). Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s US federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rule by filing the appropriate claim for refund with the IRS and furnishing any required information.

 

UK stamp duty reserve tax

 

US Holders should note that under UK domestic law there is a charge to stamp duty reserve tax on the issue of new ordinary shares to the ADS depositary (or its nominee) calculated at 1.5 per cent of the consideration given for the new ordinary shares. This cost will be borne by the relevant US Holder and, accordingly, the ADS subscription price for such US Holders shall be increased on the terms set out in this prospectus to account for such stamp duty reserve tax. Following the receipt of such additional monies in respect of stamp duty reserve tax, they will be paid to HM Revenue & Customs.

 

HSBC is offering its shareholders the right to subscribe for new ordinary shares and its ADS holders the right to subscribe for new ADSs. Unless the context otherwise requires, in this section the term “new ordinary shares” shall mean new ordinary shares, whether in the form of new ordinary shares or new ADSs.

 

For the timing of delivery of new ordinary shares in respect of the exercise of rights, see “The Rights Offering — Subscription by Holders of ADS Rights” in this document and “Part VIII — Terms of the Rights Issue” in the accompanying UK prospectus.

 

In connection with the rights offering, Goldman Sachs International (“GSI”) is acting as sponsor, joint bookrunner and joint global coordinator and HSBC Bank plc and J.P. Morgan Cazenove Limited (“JPMC”) are acting as joint bookrunners and joint global coordinators. GSI, HSBC Bank plc and JPMC are referred to collectively as the “joint global coordinators.” GSI may be contacted at Goldman Sachs International, Peterborough Court, 133 Fleet Street, London EC4A 2BB, United Kingdom. HSBC Bank plc may be contacted at HSBC Bank plc, 8 Canada Square, London E14 5HQ, United Kingdom. JPMC may be contacted at J.P. Morgan Cazenove Limited, 20 Moorgate, London EC2R 6DA, United Kingdom.

 

HSBC, the joint global coordinators and the underwriters named below have entered into an underwriting agreement with respect to the new ordinary shares. Pursuant to the underwriting agreement, if any new ordinary shares are not subscribed for pursuant to the exercise of rights (such new ordinary shares not subscribed for, the “remaining new ordinary shares”), the joint global coordinators have severally agreed, subject to certain conditions, to seek to procure subscribers for the remaining new ordinary shares and, failing that, the underwriters have agreed to procure subscribers or themselves subscribe at the share subscription price (in each case in pounds sterling) per share for remaining new ordinary shares up to the maximum number of remaining new ordinary shares indicated in the following table.

 

 

 

 

The underwriting agreement provides that the obligations of the joint global coordinators to seek to procure subscribers or, failing that, the obligations of the underwriters to procure subscribers or themselves subscribe for the remaining new ordinary shares are subject to the receipt of customary legal opinions from counsel and to certain other conditions, including the admission of the new ordinary shares (nil paid) to the Official List of the UK Listing Authority and approvals of the listing of the new ordinary shares by the Main Board of the Hong Kong Stock Exchange and the New York Stock Exchange.

 

GSI, JPMC or J.P. Morgan Securities Ltd. (“JPMSL”) may terminate the underwriting agreement at any time before admission of the new ordinary shares (nil paid) to the Official List of the UK Listing Authority (i) if certain force majeure events were to occur that, in GSIs, JPMC’s or JPMSL’s judgment acting in good faith and after consultation with HSBC, where practicable, are material and adverse to the HSBC group, (ii) in the event of a material adverse change relating to HSBC as a result of which GSI, JPMC or JPMSL, acting in good faith and after consultation with HSBC, where practicable, considers it impracticable or inadvisable to proceed with the rights offering and (iii) in other customary circumstances. The underwriting agreement may not be terminated in any circumstances after the admission of the new ordinary shares (nil paid) to the Official List of the UK Listing Authority.

Pursuant to the underwriting agreement, HSBC has agreed to pay the joint global coordinators and the underwriters an aggregate base fee of 2.75% of the aggregate sale proceeds of the rights offering, or £353.5 million (approximately £0.07 per new ordinary share). HSBC may also, in its sole discretion, pay in aggregate to the joint global coordinators and the underwriters an additional fee equal to 0.50% of the aggregate sale proceeds of the rights offering. HSBC has also agreed to pay or reimburse certain expenses of the joint global coordinators and the underwriters related to the rights offering.

 

* * * * *

 

Set forth below is an itemization of the estimated total fees and expenses, excluding underwriting discounts and commissions, that are expected to be incurred in connection with the rights offering.

 

 

HSBC has agreed that, for a period from the date of the underwriting agreement to the expiration of 90 days from the date of delivery of the new ordinary shares (or, if earlier, the date that the joint global coordinators’ and the underwriters’ obligations under the underwriting agreement cease), HSBC will not, without the prior written consent of GSI, JPMC and JPMSL, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, deposit into any depositary receipt facility or otherwise transfer or dispose of any of HSBC’s ordinary shares or any securities convertible into or exercisable or exchangeable for HSBC’s ordinary shares or any other interest therein or file any registration statement under the Securities Act with respect to any of the foregoing (or publicly announce the same); or (ii) enter into any swap, forward sale, option or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any HSBC ordinary shares, whether any such swap, forward sale, option, agreement or transaction described in (i) or (ii) above is to be settled by delivery of HSBC ordinary shares or such other securities, in cash or otherwise. The foregoing restrictions do not apply to (a) any ordinary shares issued by HSBC upon the exercise of an option or warrant or the conversion of a security outstanding on the date of the underwriting agreement and disclosed in the accompanying UK prospectus; (b) any HSBC ordinary shares issued or options to subscribe for HSBC ordinary shares granted pursuant to HSBC’s employee benefit plans disclosed in the accompanying UK prospectus or dividend re-investment arrangements or the scrip dividend arrangements in each case in accordance with normal practice or (c) any such matters undertaken directly or indirectly in connection with financing a proposed acquisition.

 

* * * * *

 

HSBC is aware that all of its directors intend to exercise their rights, in full, to acquire new ordinary shares, other than rights arising in connection with any HSBC ordinary shares HSBC’s executive directors hold through the HSBC Holdings UK Share Ownership Plan. In accordance with the basis on which such plan operates, HSBC’s executive directors will sell such number of rights during the nil paid dealing period as is required to meet the cost of taking up the balance of such rights.

 

Certain of the underwriters and JPMC have advised HSBC that they are currently making a market for HSBC ordinary shares and that they intend to make a market in the share rights. However, there is currently no market for the share rights and HSBC can give you no assurance that a market for the share rights will develop or, if a market does develop, as to how long it will continue. If these market making activities are commenced, they may be discontinued at any time at the sole discretion of the underwriters and without notice. These transactions may be effected on the New York Stock Exchange, the London Stock Exchange or Euronext Paris, in the over-the-counter market or otherwise.

Each underwriter has agreed that neither it nor its affiliates will, without the consent of HSBC, enter into any transaction involving HSBC ordinary shares or securities or derivatives (other than securities or derivatives referencing any existing and established sector or market index in which the weighting of HSBC’s ordinary shares does not exceed 8%) that is intended to hedge (or otherwise mitigate the economic risk associated with) the underwriting commitment of such underwriter. The underwriters may, however, enter into transactions in the ordinary course to facilitate client orders or that constitute ordinary course market making activity. Any such transactions shall be undertaken in compliance with applicable securities laws and regulations.

 

As described above, subject to certain conditions, the joint global coordinators will be required to seek to procure subscribers or, failing that, the underwriters will be required to subscribe for the remaining new ordinary shares, if there are any. This prospectus may be used by the underwriters to make offers and sales, or resales, of the remaining new ordinary shares.

 

Subject to certain selling restrictions, the several underwriters may offer remaining new ordinary shares to the public at variable prices, which may be less than or in excess of the share subscription price. Any remaining new ordinary shares sold by the underwriters to securities dealers, and any such securities that such dealers may resell to certain other brokers or dealers, may be sold at a discount to the price or prices offered to the public.

 

HSBC has been advised by the underwriters that one or more of the underwriters are expected to make offers and sales of remaining new ordinary shares through their respective selling agents. Any offers and sales in the United States will be conducted by or through broker-dealers registered with the Securities and Exchange Commission as permitted by applicable regulations.

 

HSBC has been advised that the underwriters may distribute the remaining new ordinary shares in one or more of the following types of transactions:

 

 

HSBC has agreed to indemnify the joint global coordinators and the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

 

Certain of the joint global coordinators and the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory, investment banking, commercial banking or other services for HSBC, for which they received or will receive customary fees and expenses. HSBC and its affiliates have, from time to time, performed, and may in the future perform, various financial advisory, investment banking, commercial banking or other services for certain of the joint global coordinators or the underwriters or their respective affiliates, for which they received or will receive customary fees and reimbursement of expenses.

 

Subscribers for new ordinary shares may be required to pay taxes and other charges in accordance with the laws and practices of their country in addition to the subscription price stated on the cover of this prospectus.

 

Selling Restrictions

 

You are referred to the information and limitations set forth under the applicable notices to investors on pages iv to vii of the accompanying UK prospectus in connection with the rights and exercises of rights.

 

In connection with any offering of the remaining new ordinary shares, the remaining new ordinary shares may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the remaining new ordinary shares may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.

 

Certain legal matters in connection with the securities to be offered hereby will be passed upon for HSBC by Cleary Gottlieb Steen & Hamilton LLP, London, England, HSBC’s US counsel, and Norton Rose LLP, HSBC’s English solicitors and for the joint global coordinators and the underwriters by Shearman & Sterling (London) LLP, London, England, US counsel for the underwriters, and Linklaters LLP, English solicitors for the joint global coordinators and the underwriters.

 

HSBC’s consolidated financial statements as at 31 December 2008 and 31 December 2007 and for each of the three years ended 31 December 2008, 2007 and 2006 and management’s assessment of the effectiveness of internal control over financial reporting appearing in its annual report on Form 20-F for the year ended 31 December 2008 have been incorporated by reference herein in reliance on the report of KPMG Audit Plc, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The aforementioned report of KPMG Audit Plc refers to HSBC having changed its method of accounting for certain financial assets in the year ended 31 December 2008 following the adoption of “Reclassification of Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures).”

 

INSTRUCTIONS ON COMPLETING THE PAL

 

These instructions are for holders of HSBC ordinary shares in certificated form who need to exercise their share rights through a PAL. If you hold your HSBC ordinary shares in uncertificated form in CREST, your exercise options are the same; however, for instructions on how to exercise your rights, please refer to the accompanying UK prospectus and the CREST Manual.

 

 

 

Checks or banker’s drafts must be drawn on an account at a branch (which must be in the United Kingdom, the Channel Islands or the Isle of Man) of a bank or building society which is either a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its checks and banker’s drafts to be cleared through facilities provided by either of those companies.

 

 

If you mail your PAL, please allow sufficient time for delivery.

 

 

 

 

3 This must reach Computershare by 3.00 p.m. (London time) on 27 March 2009.