3/4: Hang Seng FY03 PT 1

HSBC Holdings PLC
01 March 2004

                              HANG SENG BANK LIMITED
                             2003 RESULTS - HIGHLIGHTS

   •Operating profit before provisions up 2.0 per cent to HK$11,475 million
    (HK$11,255 million in 2002).

   •Operating profit of HK$10,683 million, maintained at 2002 level
    (HK$10,684 million in 2002).

   •Pre-tax profit down 0.9 per cent to HK$11,137 million (HK$11,242 million
    in 2002).

   •Attributable profit down 3.8 per cent to HK$9,539 million (HK$9,920
    million in 2002).

   •Return on average shareholders' funds of 23.4 per cent (23.1 per cent in
    2002).

   •Total assets up 6.0 per cent to HK$503.0 billion (HK$474.7 billion at 31
    December 2002).

   •Earnings per share down 3.9 per cent to HK$4.99 (HK$5.19 per share in
    2002).

   •Dividend per share of HK$4.90 (HK$5.40 per share in 2002, including a
    special dividend of HK$0.50 per share).

   •Total capital ratio of 13.2 per cent (14.2 per cent at 31 December 2002);
    tier 1 capital ratio of 11.3 per cent (11.9 per cent at 31 December 2002).

   •Cost:income ratio maintained at 25.4 per cent (25.4 per cent in 2002).

Note: Certain figures for 2002 have been restated to reflect the adoption of
Hong Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12)
on 'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

Hang Seng Bank attributable profit down 3.8 per cent to HK$9,539 million

Hang Seng Bank Limited (the bank) and its subsidiary and associated companies
(Hang Seng) reported a profit attributable to shareholders of HK$9,539 million
for 2003, a decrease of 3.8 per cent compared with 2002. Earnings per share of
HK$4.99 were 3.9 per cent lower than in 2002.

Operating profit before provisions rose by HK$220 million, or 2.0 per cent, to
HK$11,475 million, attributable to the encouraging 21.4 per cent growth in other
operating income, which outweighed the fall of 5.8 per cent in net interest
income. The net charge for bad and doubtful debts increased by HK$221 million,
or 38.7 per cent. This reflected a large release in general provisions of HK$330
million in 2002 which was not repeated in 2003. Specific provisions were reduced
by HK$103 million, or 11.4 per cent. As a result, operating profit was
maintained at the same level as in 2002. Profit before tax amounted to HK$11,137
million, which was HK$105 million, or 0.9 per cent, lower than in 2002.
Attributable profit fell by HK$381 million, or 3.8 per cent, taking into account
the increase in the Hong Kong profits tax rate from 16.0 per cent to 17.5 per
cent and after deducting the minority interest of Hang Seng Life Limited (HSLL).
Excluding the impact of the release in general provisions in 2002 and the
increase in the profits tax rate, the attributable profit for 2003 would have
increased by HK$69 million, or 0.7 per cent, over 2002.

Total assets grew by HK$28.3 billion or 6.0 per cent, to HK$503.0 billion,
compared with HK$474.7 billion at 31 December 2002, driven by an increase of 6.3
per cent in customer deposits. There has been a further shift of time deposits
to savings under a persistently low interest rate environment. Advances to
customers recorded a growth of 2.2 per cent during 2003, mainly in corporate
lending and trade advances, while mortgages under the Government Home Ownership
Scheme (GHOS) continued to fall. Investment in debt securities also rose, mainly
through the deployment of funds from customer deposits.

Shareholders' funds (excluding proposed dividends) fell by HK$576 million, or
1.6 per cent, to HK$36,200 million at 31 December 2003. This was the net result
of the increase in retained profits and the reduction in property revaluation
reserves following the annual property revaluation exercise.

The return on average total assets was 2.0 per cent (2.1 per cent in 2002). The
return on average shareholders' funds was 23.4 per cent, compared with 23.1 per
cent in 2002.

The advances to deposits ratio fell to 52.2 per cent at 31 December 2003
compared with 54.3 per cent at 31 December 2002, the effect of a faster pace of
growth in customer deposits than customer advances during 2003. Hang Seng
continued to maintain a strong liquidity position, with the average liquidity
ratio in 2003 (calculated in accordance with the Fourth Schedule of the Hong
Kong Banking Ordinance) at 46.2 per cent (44.4 per cent in 2002).

Note: Certain figures for 2002 have been restated to reflect the adoption of
Hong Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

The total capital ratio at 31 December 2003 was 13.2 per cent (14.2 per cent at
31 December 2002) and the tier 1 capital ratio was 11.3 per cent (11.9 per cent
at 31 December 2002).

The cost:income ratio of 25.4 per cent was unchanged from 2002.

The Directors have declared a third interim dividend of HK$1.80 per share, which
will be payable on Thursday, 25 March 2004 to shareholders on the Register of
Shareholders as of Wednesday, 17 March 2004. Together with the first and second
interim dividends of HK$2.10 and HK$1.00 per share respectively, the total
distribution for 2003 will amount to HK$4.90 per share (HK$5.40 per share in
2002, including a special dividend of HK$0.50 per share).

The total dividends for the year represent 98 per cent of the attributable
profit for 2003 (94 per cent in 2002 excluding special interim dividend paid out
of retained profits). This should not be taken as an indication of future
dividend levels.

Comment by David Eldon, Chairman

"Hang Seng remained resilient in a year affected by SARS. Attributable profit
for 2003, at HK$9,539 million, was 3.8 per cent lower than the previous year.
Excluding the increase in the profits tax rate for the year and a large release
in general provisions in 2002, attributable profit actually increased marginally
by 0.7 per cent.

"For the period 1999 to 2003, the bank exceeded its managing for value target of
doubling shareholder value in five years. The total return for shareholders was
106.3 per cent as measured by share price appreciation and reinvested dividends.
In the next five years of 2004 to 2008, the bank will be guided by our new
strategic plan to achieve strong competitive growth in earnings per share and
operating efficiency in terms of the cost:income ratio.

"The Hong Kong economy rebounded in the second half of 2003, benefiting from the
closer economic partnership between mainland China and the territory. While
unemployment is improving and deflation is receding, the banking industry is
facing the challenges of rising customer expectations, subdued credit and
depressed margins. Hang Seng will sustain profitability by deepening
relationships, diversifying income, implementing robust cost discipline and
expanding its foothold in mainland China. The announced deal to acquire 15.98
per cent of Industrial Bank Co. Ltd.'s enlarged capital is part of our plan to
grow through partnerships as well as organically in the mainland."

The financial information in this news release is based on the audited
consolidated accounts of Hang Seng Bank Limited and its subsidiary and
associated companies for the year ended 31 December 2003.

Highlights of Results and Chairman's Comment
Contents
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Economic Profit
Consolidated Cash Flow Statement
Financial Review
    Net interest income
    Other operating income
    Operating expenses
    Provisions for bad and doubtful debts
    Profit on tangible fixed assets and long-term investments
    Taxation
    Earnings per share
    Dividends per share
    Segmental analysis
    Cash and short-term funds
    Placings with banks maturing after one month
    Certificates of deposit
    Securities held for dealing purposes
    Advances to customers
    Provisions against advances to customers
    Non-performing advances to customers and provisions
    Overdue advances to customers
    Rescheduled advances to customers
    Repossessed assets
    Segmental analysis of advances to customers by geographical area
    Gross advances to customers by industry sector
    Long-term investments
    Other assets
    Current, savings and other deposit accounts
    Deposits from banks
    Other liabilities
    Shareholders' funds
    Capital resources management
    Liquidity ratio
    Reconciliation of cash flow statement
    Contingent liabilities, commitments and derivatives
    Cross border claims
Additional Information
    Accounting policies
    Comparative figures
    Property revaluation
    Market risk
    Foreign currency positions
    Material related-party transactions
    Statutory accounts
    Ultimate holding company
    Register of shareholders
    News release

Consolidated Profit and Loss Account

                                              Year ended   Year ended
                                                 31Dec03      31Dec02
Figures in HK$m                                              restated^

Interest income                                   12,846       14,960
Interest expense                                  (2,667)      (4,155)
Net interest income                               10,179       10,805
Other operating income                             5,198        4,282
Operating income                                  15,377       15,087
Operating expenses                                (3,902)      (3,832)
Operating profit before provisions                11,475       11,255
Provisions for bad and doubtful debts               (792)        (571)
Operating profit                                  10,683       10,684
Profit on tangible fixed assets and
  long-term investments                              461          461
Net deficit on property revaluation                  (37)         (36)
Share of profits of associated companies              30          133
Profit on ordinary activities before tax          11,137       11,242
Tax on profit on ordinary activities              (1,423)      (1,307)
Profit on ordinary activities after tax            9,714        9,935
Minority interests                                  (175)         (15)
Profit attributable to shareholders                9,539        9,920
Retained profits at 1Jan
- as previously reported                          19,242       19,499
- arising on change in accounting policies           198          254
- as restated                                     19,440       19,753
Transfer of depreciation to
  premises revaluation reserve                        68           79
Realisation on disposal of premises and
  investment properties                               23            9
Exchange and other adjustments                        18            3
Dividends                                         (9,368)     (10,324)
Retained profits at 31Dec                         19,720       19,440

Figures in HK$

Earnings per share                                  4.99         5.19
Dividends per share                                 4.90         5.40

^Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

Consolidated Balance Sheet

                                               At 31Dec03   At 31Dec02
Figures in HK$m                                               restated^

Assets
Cash and short-term funds                          71,903       77,784
Placings with banks maturing after one month       18,029       30,919
Certificates of deposit                            28,683       30,120
Securities held for dealing purposes                1,232        1,198
Advances to customers                             229,466      224,562
Amounts due from immediate holding company
  and fellow subsidiary companies                  13,715        7,471
Long-term investments                             113,881       79,169
Investments in associated companies                   549          672
Tangible fixed assets                               9,565       10,439
Other assets                                       15,936       12,320
                                                  502,959      474,654

Liabilities
Current, savings and other deposit accounts       439,913      413,693
Deposits from banks                                 1,202        1,072
Amounts due to immediate holding company
  and fellow subsidiary companies                   2,412        1,615
Other liabilities                                  19,147       14,745
                                                  462,674      431,125

Capital resources
Minority interests                                    644          444
Share capital                                       9,559        9,559
Reserves                                           26,641       27,217
Proposed dividends                                  3,441        6,309
Shareholders' funds                                39,641       43,085
                                                   40,285       43,529
                                                  502,959      474,654

^Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

Consolidated Statement of Changes in Equity

                                               Year ended   Year ended
                                                  31Dec03      31Dec02
Figures in HK$m                                               restated^

Shareholders' funds at 1Jan
- as previously reported                           43,564       44,952
- arising on change in accounting policies           (479)        (561)
- as restated                                      43,085       44,391

Decrease in revaluation reserve of premises          (285)        (344)
Deferred tax adjustment on revaluation of premises
  arising from adoption of HKSSAP 12                  (80)          29
Decrease in revaluation reserve of
  investment properties
- bank and subsidiary companies                      (273)        (270)
- associated company                                 (125)         (13)
Long-term equity investment revaluation
  reserve
- unrealised gain/(deficit) on revaluation            410         (840)
- realisation on disposal                            (410)        (423)
Deferred tax adjustment on revaluation of
  long-term equity investment arising from
  adoption of HKSSAP 12                                (2)           -
Exchange and other adjustments                         18            3
Net losses recognised in shareholders' funds
  for the year                                       (747)      (1,858)
Profit attributable to shareholders for the
  year                                              9,539        9,920
Dividends                                         (12,236)      (9,368)
Shareholders' funds at 31 December                 39,641       43,085

^Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

Economic Profit

Economic profit is calculated from profit after tax, adjusted for non-cash
items, and takes into account the cost of capital invested by Hang Seng's
shareholders. For the year 2003, the return on invested capital was HK$9,649
million, or 31.1 per cent. The economic profit of HK$5,001 million represented a
return of 16.1 per cent to shareholders after deducting the 15.0 per cent
benchmark cost of capital of HK$4,648 million invested by shareholders. The
benchmark cost of capital was, in management's view, above the true cost of
capital under the current low interest rate environment and has been used until
the end of the current five year strategic plan period, which expired at the end
of 2003, in order to ensure consistency and aid comparability. The sustainable
trend of economic profit shows that Hang Seng continues to create value for its
shareholders and contributed to the successful achievement of the total
shareholders' return target.

                           Year ended                      Year ended
                            31Dec03                          31Dec02
                                                             restated^
                         HK$m          %                HK$m            %

Average invested
  capital              31,021                         31,946

Return on invested
  capital^^             9,649       31.1              10,043         31.5
Cost of capital        (4,648)     (15.0)             (4,785)       (15.0)
Economic profit         5,001       16.1               5,258         16.5

^Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

^^Return on invested capital represents profit after tax adjusted for non-cash
items.

Consolidated Cash Flow Statement
                                               Year ended   Year ended
Figures in HK$m                                   31Dec03      31Dec02

Net cash inflow from operating activities          33,566        4,681

Cash flows from investing activities
Net cash outflow from investment in
  an associated company                                 -          (35)
Dividends received from an associated company          24           38
Purchase of long-term investments                 (98,041)     (96,052)
Proceeds from sale or redemption of
  long-term investments                            69,710       61,213
Purchase of tangible fixed assets                    (142)        (195)
Proceeds from sale of tangible fixed assets            35           14
Interest received from long-term investments        2,496        1,908
Dividends received from long-term investments          56           98
Net cash outflow from investing activities        (25,862)     (33,011)

Cash flows from financing activities
Dividends paid                                    (10,324)      (9,368)
Contribution from minority shareholders                 -           25
Net cash outflow from financing activities        (10,324)      (9,343)

Decrease in cash and cash equivalents              (2,620)     (37,673)

Cash and cash equivalents at 1Jan                  76,817      111,206
Effect of foreign exchange rate changes             3,378        3,284
Cash and cash equivalents at 31Dec                 77,575       76,817

Note: The components of cash and cash equivalents have been reclassified, in
light of their liquid nature, to include cash and balances with banks maturing
within one month (previously bank balances maturing within three months had been
included), and treasury bills and certificates of deposit with less than three
months' maturity from the date of acquisition. The figures for 2002 have been
restated.

Financial Review

Net interest income

Figures in HK$m                                    2003          2002

Net interest income                              10,179        10,805
Average interest-earning assets                 446,978       439,736
Net interest spread                                2.21%         2.36%
Net interest margin                                2.28%         2.46%

Net interest income decreased by HK$626 million, or 5.8 per cent, compared with
2002. Average interest-earning assets rose by HK$7.2 billion, or 1.6 per cent.
Net interest margin narrowed by 18 basis points to 2.28 per cent with a
reduction in net interest spread of 15 basis points to 2.21 per cent and a fall
in contribution from net free funds of 3 basis points to 0.07 per cent.

The reduction in the average mortgage portfolio yield caused net interest spread
to fall by 6 basis points. Decline in spreads on time deposits and interbank
placings accounted for a fall of 8 and 6 basis points respectively. This was
partly offset by the favourable impact of 5 basis points due to the increase in
the lower cost current and savings accounts. The contribution from net free
funds was affected by the further decline in market rates and fell by 3 basis
points.

The average yield on the residential mortgage portfolio, excluding GHOS
mortgages and staff loans, fell to 177 basis points below BLR for 2003 (149
basis points below BLR in 2002), before accounting for the effect of cash
incentive payments. Cash incentive payments on new mortgage loans of HK$130
million have been written off against interest income in 2003 (HK$105 million in
2002).

Compared with the first half of 2003, net interest income in the second half of
2003 fell by HK$261 million, or 5.0 per cent, with a 26 basis point fall in net
interest margin to 2.15 per cent. Net interest spread narrowed by 24 basis
points to 2.09 per cent. This was mainly affected by the decline in the average
yield on the mortgage portfolio and narrower spreads on time deposits, fixed
rate debt securities and interbank placings. The contribution from net free
funds was 2 basis points lower at 0.06 per cent.

Other operating income

Figures in HK$m                                        2003      2002

Dividend income
- listed investments                                     52        82
- unlisted investments                                   40        17
                                                         92        99
Fees and commissions
- securities/stockbroking                               361       244
- retail investment funds                               921       700
- insurance                                              82       343
- account services                                      211       255
- remittance                                            132       128
- cards                                                 551       598
- credit facilities                                     231       270
- import/export                                         223       217
- other                                                 192       147
Fees and commissions receivable                       2,904     2,902
Fees and commissions payable                           (349)     (297)
                                                      2,555     2,605
Dealing profits
- foreign exchange                                      764       604
- securities and other trading activities                43        16
                                                        807       620
Insurance underwriting                                1,144       333
Rental income from
  investment properties                                 210       225
Other                                                   390       400
                                                      5,198     4,282

Other operating income recorded strong growth of HK$916 million, or 21.4 per
cent, and contributed 33.8 per cent of total operating income, compared with
28.4 per cent in 2002.

Commission from the sale of retail investment funds rose by 31.6 per cent to
HK$921 million in 2003. Insurance commissions and underwriting profit together
grew by 90.1 per cent, reflecting strong growth in life insurance premiums and
the embedded value of the long-term assurance business. Securities/stockbroking
fees rose by 48.0 per cent, benefiting from the buoyant market in the second
half of the year. Dealing profits grew by 30.2 per cent, mainly contributed by
foreign exchange income.

Prior to November 2002, commissions paid by Hang Seng Life Limited (HSLL) to the
bank for distribution of life insurance products were reported under 'Fees and
commissions - Insurance', while the bank's share of HSLL's underwriting profit
after deduction of commission paid was reported under 'Share of profits of
associated companies'. After HSLL became a subsidiary of the bank in November
2002, HSLL's underwriting profits before deducting commission payment was
reported as 'Insurance underwriting'. This has resulted in the fall of fees and
commissions and the rise of underwriting profit in 2003.

Fee income from account services, cards and credit facilities, however, fell by
17.3 per cent, 6.1 per cent and 14.4 per cent respectively.

Analysis of income from wealth management business included in other operating
income

Figures in HK$m                                       2003        2002

Investment income
- retail investment funds                              921         700
- securities/stockbroking                              361         244
- margin trading/private banking                       125          68
                                                     1,407       1,012
Insurance income
- life (including embedded value)^                     851         562
- general and others                                   282         257
                                                     1,133         819
                                         Total       2,540       1,831

^The embedded value and underwriting profit of HSLL in 2002 which were reported
as share of profits of associated companies instead of other operating income
were re-grouped under this heading to conform with the current year's
presentation for the purpose of comparison in this analysis.

Income from wealth management comprising income from investment and insurance
grew strongly by 38.7 per cent to HK$2,540 million in 2003, representing 48.9
per cent of total other operating income.

Operating expenses

Figures in HK$m                                       2003       2002

Staff costs
- salaries and other costs                           1,860      1,867
- retirement benefit costs                             183        192
                                                     2,043      2,059
Depreciation                                           329        352
Premises and equipment
- rental expenses                                      178        171
- other                                                629        641
                                                       807        812
Other operating expenses                               723        609
                                                     3,902      3,832

Cost:income ratio                                     25.4%      25.4%

Staff numbers (full-time equivalent)                 7,280      7,279

Operating expenses increased by HK$70 million, or 1.8 per cent, to HK$3,902
million. Staff costs decreased by HK$16 million, or 0.8 per cent. Premises and
equipment expenses were stable while other operating expenses increased by
HK$114 million, or 18.7 per cent. This was mainly due to the increase in
marketing and advertising expenditure for investment and other personal
financial services products, and the inclusion of the operating expenses of HSLL
after it became a subsidiary of the bank in November 2002.

The cost:income ratio in 2003 was maintained at the same level as 2002 at 25.4
per cent.

Provisions for bad and doubtful debts

Figures in HK$m                                         2003      2002

Net charge/(release) for bad and doubtful debts
Advances to customers
Specific provisions
- new provisions                                       1,167     1,231
- releases                                              (315)     (285)
- recoveries                                             (54)      (45)
                                                         798       901
General provisions                                        (6)     (330)
Net charge to profit and loss account                    792       571

Compared with 2002, the net charge for bad and doubtful debts rose by HK$221
million, or 38.7 per cent. This was attributable to the release of HK$330
million in general provisions at the end of 2002 to recognise the reduction in
estimated latent loan losses (a small release of HK$6 million in general
provisions was made in 2003). Specific provisions decreased by HK$103 million,
or 11.4 per cent, to HK$798 million, with substantial improvement in the second
half of the year. New and additional specific provisions fell by HK$64 million,
or 5.2 per cent, to HK$1,167 million, with the reduction in provisions for
credit card advances, corporate and personal loans partly offset by increased
provisions for residential mortgages and commercial banking customers. Releases
and recoveries rose by HK$39 million, or 11.8 per cent, to HK$369 million,
mainly from commercial banking and corporate customers.

Profit on tangible fixed assets and long-term investments

Figures in HK$m                                           2003    2002

Profit on disposal of long-term equity investments
- realisation of amounts previously recognised in
  revaluation reserves at 1Jan                             418     528
- loss arising in current year                              (8)   (105)
                                                           410     423
Profit less loss on disposal of
  held-to-maturity debt securities                          48      46
Profit less loss on disposal of tangible fixed assets        3       1
Provision for impairment of long-term investments            -      (9)
                                                           461     461

Profit on disposal of tangible fixed assets and long-term investments, mainly
from the profit on disposal of listed equities and debt securities, was
maintained at the same level as 2002.

Taxation

Taxation in the consolidated profit and loss account represents:

                                                      2003        2002
Figures in HK$m                                               restated^

Current tax - provision for Hong Kong profits tax
Tax for the year                                     1,443       1,287
Over-provision in respect of prior years               (39)        (59)
                                                     1,404       1,228
Current tax - taxation outside Hong Kong
Tax for the year                                         4           6
Over-provision in respect of prior years               (14)          -
                                                       (10)          6

Deferred tax
Origination and reversal of temporary differences       70          53
Effect of increase in tax rate on deferred tax
  balances at 1Jan                                      (9)          -
Benefit of previously unrecognised
  tax losses now recognised                            (36)          -
                                                        25          53
Share of associated companies' taxation                  4          20
Total charge for taxation                            1,423       1,307
Effective tax rate                                    12.8%       11.6%

^Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information on page 49.

The current tax provision is based on the estimated assessable profit in 2003
and, for the bank and subsidiaries operating in the Hong Kong SAR, using the
Hong Kong profits tax rate of 17.5 per cent (16.0 per cent for 2002). For
subsidiaries and branches operating in other jurisdictions, the appropriate tax
rates prevailing in the countries in which they operate are used. The effective
tax rate for 2003 increased to 12.8 per cent from 11.6 per cent for 2002, mainly
reflecting the 1.5 percentage points increase in the Hong Kong profits tax rate.

Following the adoption of the HKSSAP 12 which became effective on 1 January
2003, temporary differences in the carrying amounts of assets and liabilities
for financial reporting purposes and their tax bases would give rise to deferred
tax assets and liabilities respectively. Deferred tax assets would also arise
from unused tax losses and unused tax credits.

Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available, against which deductible
temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the
year when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the profit and loss account, except when it relates to
items charged or credited directly to reserves, in which case the deferred tax
is also dealt with in reserves. The carrying amount of deferred tax assets/
liabilities is reviewed at each balance sheet date and is reduced to the extent
that it is no longer probable that sufficient taxable profit will be available
to allow the related tax benefit to be utilised.

The impact of the change in accounting policy on deferred tax following the
adoption of the HKSSAP 12 in the current year profit and loss account and
reserves, and the related prior year adjustment are set out in Note 1 of
additional information on page 49.

Earnings per share

The calculation of earnings per share in 2003 is based on earnings of HK$9,539
million (HK$9,920 million in 2002) and on the weighted average number of
ordinary shares in issue of 1,911,842,736 shares (unchanged from 2002).

Dividends per share

                                    2003                          2002
                         HK$        HK$m              HK$         HK$m
                   per share                    per share

First interim           2.10       4,015             2.10        4,015
Second interim          1.00       1,912             2.80        5,353
Third interim           1.80       3,441                -            -
Special interim            -           -             0.50          956
                        4.90       9,368             5.40       10,324

Hang Seng has moved to a programme of quarterly dividends starting in January
2004 to acknowledge the increasing importance of dividend flows to our
shareholders.



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