Annual Financial Report - 23

RNS Number : 4104J

HSBC Holdings PLC

30 March 2010

 



Employees

At 31 December 2009, HSBC employed 302,000 full and part-time employees worldwide, compared with 325,000 at 31 December 2008 and 330,000 at 31 December 2007. The main centres of employment are the UK with approximately 53,000 employees; the US 29,000, India 35,000, Hong Kong 28,000, Brazil 24,000, Mexico 19,000, mainland China 14,000 and France 11,000. HSBC negotiates with recognised unions. The five highest concentrations of union membership are in Argentina, Brazil, mainland China, Malta and Mexico. It is HSBC's policy to maintain well-developed communications and consultation programmes with unions and there have been no material disruptions to its operations from labour disputes during the past five years.

The Group People Strategy was introduced in 2008. This set a number of priorities: strengthening leadership capabilities and developing people skills in general, robust performance management complementing a reward strategy which is market competitive, and improving employee engagement. Continuing emphasis was given in 2009 to increasing international mobility to broaden the internationalism and diversity of employee experience. Training was focused on risk awareness, change management, customer orientation and performance management. Employee engagement continued to improve significantly in the year (see non-financial KPIs on page 20).

HSBC remains committed to creating a diverse and inclusive work environment reflective of its customer base, international workforce, and the communities in which it operates. It has a Group-wide strategy to build an inclusive culture. Focus is placed on improving gender, ethnicity and age diversity to ensure the long term sustainability of the organisation, taking into account global demographic changes. Diversity initiatives are implemented at a regional, country and global business level and local and national laws are respected. Employee network groups, flexible working and mentoring programmes are promoted and established, where possible, to facilitate open discussion of workplace issues for employees and to foster an environment that celebrates diversity and inclusion.

Employee involvement

HSBC values and encourages open communication with employees. Employees have the opportunity to share views via learning programmes, networking events and management blogs, and to enrich their experience and perspectives through international and cross-business assignments. Employment matters and the financial and economic factors affecting HSBC's performance are regularly shared with employees via management channels, internal seminars, and in-house communication channels such as the company intranet, which is accessible to the majority of HSBC's employees worldwide. The Group's annual Global People Survey gives employees the opportunity to provide systematic feedback on their experience of HSBC, and survey results are followed through and acted upon.

Employment of disabled persons

HSBC believes in providing equal opportunities to all employees. The employment of disabled persons is included in this commitment and the recruitment, training, career development and promotion of disabled persons is based on the aptitudes and abilities of the individual. Should employees become disabled while employed by the Group, efforts are made to continue their employment and, if necessary, appropriate training is provided.

Remuneration policy

As the quality and commitment of its human capital is deemed fundamental to HSBC's success, the Board's stated strategy is to attract, retain and motivate the very best people; this strategy is referenced to the overall business strategy and the commercial environment.

In a business that is based on trust and relationships, HSBC's broad policy is to recruit those who are committed to making a long-term career with the organisation since trust and relationships are built over time.

Remuneration is an important component in an individual's decision about which organisation to join and to stay with but, in HSBC's experience, it is not the overriding one. HSBC seeks to attract people who wish to work for an organisation with strong and sound values, one which is meritocratic and competitive, and which offers challenging career development.

In line with the overall principles applied to executive Directors by the Remuneration Committee described on page 334 in the Directors' Remuneration Report:

·     employees' salaries are reviewed annually in the context of business performance, market practice and internal relativities. Allowances and benefits are largely determined by local market practice;

·     employees participate in various variable pay arrangements. Discretionary variable pay is

dependent on the achievement of objectives which derive from those determined at Group level. Since 2008, these objectives have typically been categorised in four segments - financial, customer, process and people. Financial and non-financial metrics are used to measure performance against the objectives, which include profitability, expense control, customer recommendation, employee engagement, adherence to HSBC's ethical standards, lending guidelines and internal controls and procedures. Effective risk management is emphasised to maintain a strong and secure operating platform, and that influences employee remuneration. Actual levels of variable pay depend on the performance of the Group, its constituent businesses and the individual, taking into account competitive market practice and relevant regulator requirements;

·     to ensure that the interests of HSBC and its employees are aligned with those of its shareholders, that HSBC's approach to risk management supports the interests of all stakeholders and that remuneration is consistent with effective risk management, the Group requires a proportion of variable pay awards above certain thresholds to be deferred into awards of Restricted Shares. In addition, employees are encouraged to participate in HSBC Holdings savings-related share option plans and local share ownership arrangements.

Employee share plans

To help align the interests of employees with those of shareholders, share options are granted under all-employee share plans and discretionary awards of Performance Shares and Restricted Shares are made under the HSBC Share Plan. There have been no awards of discretionary share options since 30 September 2005.

Set out on pages 320 to 326 are particulars of outstanding employee share options, including those held by employees working under employment contracts that are regarded as 'continuous contracts' for the purposes of the Hong Kong Employment Ordinance. The options were granted at nil consideration. No options have been granted to substantial shareholders, suppliers of goods or services, or in excess of the individual limit for each share plan. No options were cancelled by HSBC during the year.

The Remuneration Committee agreed to make adjustments to all unexercised share options and share awards under HSBC's various share plans and share schemes as a consequence of the 2009 rights issue. The adjustments were based on the theoretical ex-rights price, which was considered to be the most appropriate methodology to reflect the rights issue. The adjustments under certain share plans and share schemes were approved by the relevant tax authorities, where necessary. In the case of the HSBC France and HSBC Private Bank France share plans, similar adjustments were made by these subsidiaries as a consequence of the rights issue.  The adjustments were to the ratios at which the subsidiary company shares are exchangeable for HSBC Holdings ordinary shares of US$0.50 following the exercise of options.

Employee share plans are subject to the following limits on the number of HSBC Holdings ordinary shares that may be subscribed for. In any 10-year period not more than 10 per cent of the HSBC Holdings ordinary shares in issue from time to time (approximately 1,742 million HSBC Holdings ordinary shares at 1 March 2010) may in aggregate become issuable pursuant to the grant of options or be issued other than pursuant to options under all‑employee share plans. In any 10‑year period not more than 5 per cent of the HSBC Holdings ordinary shares in issue from time to time (approximately 871 million HSBC Holdings ordinary shares on 1 March 2010) may in aggregate be put under option under the HSBC Share Plan or be issuable pursuant to the HSBC Holdings Group Share Option Plan, the HSBC Executive Share Option Scheme, the HSBC Holdings Restricted Share Plan 2000 or the HSBC Share Plan. The number of HSBC Holdings ordinary shares that may be issued on exercise of all options granted on or after 27 May 2005 under the HSBC Share Plan and any other plans must not exceed 1,585,250,000 (1,119,000,000 prior to adjustment for the rights issue) HSBC Holdings ordinary shares. Under the HSBC Holdings savings-related share option plans, the HSBC Share Plan, HSBC Holdings Group Share Option Plan and the HSBC Holdings Executive Share Option Scheme there were options outstanding over 337,038,157 HSBC Holdings ordinary shares at 31 December 2009 (1.9 per cent of the issued ordinary shares). Particulars of options over HSBC Holdings shares held by Directors of HSBC Holdings are set out on page 347 of the Directors' Remuneration Report.

The effect on earnings per share of granting share options and share awards is shown in diluted earnings per share on the face of the consolidated income statement, with further details disclosed in the Earnings per share Note 13 on the Financial Statements.

All-employee share option plans

The HSBC Holdings Savings-Related Share Option Plan and the HSBC Holdings Savings-Related Share Option Plan: International are all-employee share plans under which eligible HSBC employees (those employed within the Group on the first working day of the year of grant) may be granted options to acquire HSBC Holdings ordinary shares. Employees may make contributions of up to £250 (or equivalent) each month over a period of one, three or five years which may be used on the first, third or fifth anniversary of the commencement of the relevant savings contract, at the employee's election, to exercise the options. Alternatively, the employee may elect to have the savings, plus (where applicable) any interest or bonus, repaid in cash. Options granted over a one-year period are only available under the HSBC Holdings Savings-Related Share Option Plan: International and will be exercisable within three months following the first anniversary of the commencement of the savings contract. Options granted over three or five-year periods will be exercisable within six months following the third or fifth anniversary of the commencement of the relevant savings contract. In the case of redundancy, retirement on grounds of injury or ill health, retirement at or after normal retirement age, the transfer of the employing business to another party, or a change of control of the employing company, options may be exercised before completion of the relevant savings contract.

Under the HSBC Holdings Savings-Related Share Option Plan and the HSBC Holdings Savings-Related Share Option Plan: International the option exercise price is determined by reference to the average market value of the ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20 per cent (except for the one-year options awarded under the US sub-plan where a 15 per cent discount is applied). Where applicable, the US dollars, Hong Kong dollars and euro exercise prices are converted from the sterling exercise price at the applicable exchange rate on the working day preceding the relevant invitation date. The exercise period of the options awarded under all-employee share plans may be advanced to an earlier date in certain circumstances, for example on retirement, and may be extended in certain circumstances, for example on the death of a participant, the executors may exercise the option up to six months beyond the normal exercise period. The closing price per HSBC Holdings ordinary share on 28 April 2009, the day before options were awarded in 2009 under the HSBC Holdings Savings‑Related Share Option Plan and the HSBC Holdings Savings-Related Share Option Plan: International, was £4.57. The all-employee share option plans will terminate on 27 May 2015 unless the Directors resolve to terminate the plans at an earlier date.

HSBC Holdings Savings-Related Share Option Plan

HSBC Holdings ordinary shares of US$0.50

	Exercise price (£)
Date of award	At    1 Jan    2009		At 31 Dec    20091						At         1 Jan        2009	Adjustment    for rights           issue			Awarded       during          year		Exercised       during          year2		Lapsed       during          year		At      31 Dec         2009
					Exercisable
					from		until
23 Apr 2003	5.3496		4.6618		1 Aug 2008		31 Jan 2009		371,318		5,203		-		153,737		222,784		-
21 Apr 2004	6.4720		5.6399		1 Aug 2009		31 Jan 2010		4,647,894		610,947		-		2,713,037		846,201		1,699,603
24 May 2005	6.6792		5.8205		1 Aug 2008		31 Jan 2009		200,358		4,384		-		13,355		191,387		-
24 May 2005	6.6792		5.8205		1 Aug 2010		31 Jan 2011		4,550,403		550,913		-		21,802		2,781,386		2,298,128
26 Apr 2006	7.6736		6.6870		1 Aug 2009		31 Jan 2010		3,159,428		395,653		-		533,470		804,188		2,217,423
26 Apr 2006	7.6736		6.6870		1 Aug 2011		31 Jan 2012		2,636,893		319,896		-		2,782		1,791,103		1,162,904
25 Apr 2007	7.0872		6.1760		1 Aug 2010		31 Jan 2011		4,705,656		529,574		-		11,212		3,598,098		1,625,920
25 Apr 2007	7.0872		6.1760		1 Aug 2012		31 Jan 2013		3,554,943		418,019		-		3,608		2,619,335		1,350,019
30 Apr 2008	6.8160		5.9397		1 Aug 2011		31 Jan 2012		6,733,293		756,995		-		6,097		5,449,347		2,034,844
30 Apr 2008	6.8160		5.9397		1 Aug 2013		31 Jan 2014		5,947,860		694,867		-		2,221		4,855,816		1,784,690
29 Apr 2009	-		3.3116		1 Aug 2012		31 Jan 2013		-		-		32,960,627		3,273		1,028,614		31,928,740
29 Apr 2009	-		3.3116		1 Aug 2014		31 Jan 2015		-		-		31,053,247		1,141		588,049		30,464,057

1  The exercise price of awards granted prior to 2009 adjusted for rights issue.

2  The weighted average closing price of the shares immediately before the dates on which options were exercised was £6.78.

HSBC Holdings Savings-Related Share Option Plan: International

HSBC Holdings ordinary shares of US$0.50

	Exercise price
Date of award	At    1 Jan    2009		At 31 Dec    20091						At         1 Jan        2009	Adjustment    for rights           issue			Awarded      during         year		Exercised      during          year2		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
	(£)		(£)
08 May 2003	5.3496		-		1 Aug 2008		31 Jan 2009		380,020		-		-		91,562		288,458		-
21 Apr 2004	6.4720		5.6399		1 Aug 2009		31 Jan 2010		7,456		1,098		-		-		-		8,554
10 May 2004	6.4720		5.6399		1 Aug 2009		31 Jan 2010		2,281,863		239,792		-		695,492		1,446,976		379,187
24 May 2005	6.6792		-		1 Aug 2008		31 Jan 2009		621,324		-		-		61,252		560,072		-
24 May 2005	6.6792		5.8205		1 Aug 2010		31 Jan 2011		2,804,273		254,169		-		9,089		2,119,303		930,050
26 Apr 2006	7.6736		6.6870		1 Aug 2009		31 Jan 2010		1,525,575		191,701		-		151,609		1,170,491		395,176
26 Apr 2006	7.6736		6.6870		1 Aug 2011		31 Jan 2012		323,674		40,882		-		-		227,824		136,732
25 Apr 2007	7.0872		-		1 Aug 2008		31 Oct 2008		264		-		-		264		-		-
25 Apr 2007	7.0872		6.1760		1 Aug 2010		31 Jan 2011		2,816,884		340,681		-		1,589		1,985,219		1,170,757
25 Apr 2007	7.0872		6.1760		1 Aug 2012		31 Jan 2013		773,845		89,634		-		-		559,998		303,481
30 Apr 2008	6.8160		5.9397		1 Aug 2009		31 Oct 2009		1,839,871		204,574		-		371,870		1,672,575		-
30 Apr 2008	6.8160		5.9397		1 Aug 2011		31 Jan 2012		3,291,771		387,480		-		2,332		2,533,167		1,143,752
30 Apr 2008	6.8160		5.9397		1 Aug 2013		31 Jan 2014		1,195,576		146,309		-		-		973,112		368,773
29 Apr 2009	-		3.3116		1 Aug 2010		31 Oct 2010		-		-		4,625,837		1,781		160,903		4,463,153
29 Apr 2009	-		3.3116		1 Aug 2012		31 Jan 2013		-		-		12,639,343		2,638		204,074		12,432,631
29 Apr 2009	-		3.3116		1 Aug 2014		31 Jan 2015		-		-		8,014,194		272		81,886		7,932,036
	(US$)		(US$)
26 Apr 2006	13.3290		11.6154		1 Aug 2009		31 Jan 2010		1,148,429		151,349		-		48,570		1,013,721		237,487
26 Apr 2006	13.3290		11.6154		1 Aug 2011		31 Jan 2012		305,353		40,157		-		64		167,450		177,996
25 Apr 2007	13.8803		12.0958		1 Aug 2010		31 Jan 2011		2,044,643		268,319		-		1,217		1,220,072		1,091,673
25 Apr 2007	13.8803		12.0958		1 Aug 2012		31 Jan 2013		590,169		78,253		-		87		353,595		314,740
30 Apr 2008	14.48763		12.6250		1 Aug 2009		31 Oct 2009		549,534		71,547		-		-		621,081		-
30 Apr 2008	13.6354		11.8824		1 Aug 2009		31 Oct 2009		399,466		50,322		-		34,889		414,899		-
30 Apr 2008	13.6354		11.8824		1 Aug 2011		31 Jan 2012		1,837,345		246,992		-		275		1,160,590		923,472
30 Apr 2008	13.6354		11.8824		1 Aug 2013		31 Jan 2014		507,206		69,969		-		-		319,324		257,851
29 Apr 2009	-		5.19313		1 Aug 2010		31 Oct 2010		-		-		1,082,798		-		54,207		1,028,591
29 Apr 2009	-		4.8876		1 Aug 2010		31 Oct 2010		-		-		604,897		279		25,496		579,122
29 Apr 2009	-		4.8876		1 Aug 2012		31 Jan 2013		-		-		5,084,031		769		160,306		4,922,956
29 Apr 2009	-		4.8876		1 Aug 2014		31 Jan 2015		-		-		2,599,092		-		59,764		2,539,328
	(€)		(€)
26 Apr 2006	11.0062		9.5912		1 Aug 2009		31 Jan 2010		124,371		16,114		-		1,083		86,382		53,020
26 Apr 2006	11.0062		9.5912		1 Aug 2011		31 Jan 2012		21,831		3,084		-		-		14,177		10,738
25 Apr 2007	10.4217		9.0818		1 Aug 2010		31 Jan 2011		254,482		34,383		-		-		148,699		140,166
25 Apr 2007	10.4217		9.0818		1 Aug 2012		31 Jan 2013		74,809		10,211		-		-		47,547		37,473
30 Apr 2008	8.6720		7.5571		1 Aug 2009		31 Oct 2009		149,323		16,379		-		8,786		156,916		-
30 Apr 2008	8.6720		7.5571		1 Aug 2011		31 Jan 2012		482,470		60,300		-		-		378,332		164,438
30 Apr 2008	8.6720		7.5571		1 Aug 2013		31 Jan 2014		196,833		23,563		-		-		182,523		37,873
29 Apr 2009	-		3.6361		1 Aug 2010		31 Oct 2010		-		-		369,886		-		8,150		361,736
29 Apr 2009	-		3.6361		1 Aug 2012		31 Jan 2013		-		-		1,466,146		-		25,483		1,440,663
29 Apr 2009	-		3.6361		1 Aug 2014		31 Jan 2015		-		-		1,058,095		-		20,492		1,037,603
	(HK$)		(HK$)
26 Apr 2006	103.4401		90.1414		1 Aug 2009		31 Jan 2010		2,311,113		179,064		-		40,639		2,295,061		154,477
26 Apr 2006	103.4401		90.1414		1 Aug 2011		31 Jan 2012		574,365		28,637		-		-		552,108		50,894
25 Apr 2007	108.4483		94.5057		1 Aug 2010		31 Jan 2011		2,367,952		122,567		-		-		2,325,423		165,096
25 Apr 2007	108.4483		94.5057		1 Aug 2012		31 Jan 2013		676,123		38,246		-		-		657,164		57,205
30 Apr 2008	106.2478		92.5881		1 Aug 2009		31 Oct 2009		1,698,625		101,377		-		5,208		1,794,794		-
30 Apr 2008	106.2478		92.5881		1 Aug 2011		31 Jan 2012		2,756,295		121,655		-		-		2,780,939		97,011
30 Apr 2008	106.2478		92.5881		1 Aug 2013		31 Jan 2014		959,694		54,445		-		-		956,585		57,554
29 Apr 2009	-		37.8797		1 Aug 2010		31 Oct 2010		-		-		5,783,397		5,528		240,016		5,537,853
29 Apr 2009	-		37.8797		1 Aug 2012		31 Jan 2013		-		-		23,940,771		3,806		406,542		23,530,423
29 Apr 2009	-		37.8797		1 Aug 2014		31 Jan 2015		-		-		21,513,401		4,060		221,612		21,287,729

1  The exercise price of awards granted prior to 2009 adjusted for rights issue.

2  The weighted average closing price of the shares immediately before the dates on which options were exercised was £6.52.

3  Exercisable at a 15 per cent discount to the average market value of the ordinary shares on the five business days immediately preceding the invitation date. 

Discretionary Share Plans

Note 10 on the Financial Statements gives detail on share-based payments, including awards of Restricted Shares made in 2009.

The HSBC Share Plan was approved at the 2005 Annual General Meeting and amendments were approved at the Annual General Meeting in 2008. Awards of Performance Shares are made under this Plan to executive Directors and other senior executives. The performance conditions for these awards are described under 'Performance Shares' on page 339.

Awards of Performance Shares are directed to those senior executives who can influence corporate performance such as members of the Group Management Board. Due to market context it was decided that no awards of Performance Shares would be made in 2009. 

Awards of Restricted Shares may be made to other senior executives. In addition, awards are typically made to employees as part of the Group's bonus deferral policy. Awards of Restricted Shares define the number of shares to which the employee will become entitled, generally between one and three years from the date of the award, and normally subject to the individual remaining in employment. To date, all vesting awards of Performance Shares and Restricted Shares have been satisfied by the transfer of existing shares. To create additional core tier 1 capital and retain funds within HSBC, the Board has agreed that new shares may be issued to satisfy the vesting of awards of Restricted Shares and Performance Shares that cannot be satisfied from shares held by employee benefit trusts commencing in 2011.

The maximum value of awards that may be granted to an employee in any one year under the HSBC Share Plan is 700 per cent of the employee's annual salary at the date of grant. For the purpose of the limit, any Restricted Share awards made on or shortly after the commencement of employment or in substitution for all or any part of any bonus to which the employee would otherwise have been entitled, are excluded.

Since September 2005, no share options have been granted under the HSBC Share Plan. There may be particular circumstances in the future where option grants could be appropriate. 

Prior to 2005, discretionary awards of share options, with vesting subject to the attainment of a predetermined TSR performance condition, were made to employees at all levels of HSBC.

The vesting of these options was subject to the attainment of pre-determined relative TSR performance criteria, except in HSBC France (which was acquired in 2000) where performance criteria were phased in. There are no outstanding performance conditions that remain to be satisfied for the exercise of discretionary share options. Under the HSBC Holdings Group Share Option Plan, the maximum grant of options which could be made to an employee in any one year (together with the Performance Share awards under the HSBC Holdings Restricted Share Plan 2000) was 150 per cent (or in exceptional circumstances 225 per cent) of the employee's annual salary at the date of grant plus any bonus paid in the previous year.

Under the HSBC Holdings Executive Share Option Scheme the maximum value of options which could be granted to an employee in any one year was four times the employee's relevant earnings.

The options are generally exercisable between the third and the tenth anniversary of the date of grant.

The exercise price of options granted under the HSBC Share Plan, and previously under the HSBC Holdings Group Share Option Plan, is the higher of the average market value of the ordinary shares on the five business days prior to the grant of the option or the market value of the ordinary shares on the date of grant of the option, or the nominal value of a share. The exercise price of options granted under the HSBC Holdings Executive Share Option Scheme was the market value of the ordinary shares on the business day prior to the grant of the option. The HSBC Share Plan will terminate on 27 May 2015 unless the Directors resolve to terminate the Plan at an earlier date.

The exercise period of the options awarded under discretionary share incentive plans may be advanced to an earlier date in certain circumstances, for example on the sale of a business. In the case of the HSBC Holdings Executive Share Option Scheme, the exercise period of the options awarded may be extended in certain circumstances, for example, on the death of a participant the executors may exercise the option beyond the normal exercise period.

HSBC Holdings Executive Share Option Scheme¹

HSBC Holdings ordinary shares of US$0.50

	Exercise price (£)
Date of award	At      1 Jan      2009		At   31 Dec      20092						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during          year3		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
29 Mar 1999	6.3754		5.5557		3 Apr 2002		29 Mar 2009		6,858,013		1,005,752		6,300		7,857,465		-
10 Aug 1999	7.4210		6.4669		10 Aug 2002		10 Aug 2009		71,100		10,490		-		81,590		-
31 Aug 1999	7.8710		6.8591		31 Aug 2002		31 Aug 2009		4,000		590		-		4,590		-
3 Apr 2000	7.4600		6.5009		3 Apr 2003		3 Apr 2010		7,030,893		1,028,887		912,232		440,700		6,706,848

1  The HSBC Holdings Executive Share Option Scheme expired on 26 May 2000. No options have been granted under the Scheme since that date.

2  Adjusted for rights issue.

3  The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.20.

HSBC Holdings Group Share Option Plan¹

HSBC Holdings ordinary shares of US$0.50

	Exercise price (£)
Date of award	At      1 Jan      2009		At   31 Dec      20092						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during          year3		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
4 Oct 2000	9.6420		8.4024		4 Oct 2003		4 Oct 2010		299,016		43,745		-		3,034		339,727
23 Apr 2001	8.7120		7.5919		23 Apr 2004		23 Apr 2011		26,148,186		3,900,975		574		797,516		29,251,071
30 Aug 2001	8.2280		7.1702		30 Aug 2004		30 Aug 2011		147,768		21,766		-		15,053		154,481
7 May 2002	8.4050		7.3244		7 May 2005		7 May 2012		28,369,933		4,203,127		39,355		1,329,471		31,204,234
30 Aug 2002	7.4550		6.4966		30 Aug 2005		30 Aug 2012		337,142		50,554		-		-		387,696
2 May 2003	6.9100		6.0216		2 May 2006		2 May 2013		25,860,244		3,866,806		1,230,221		578,851		27,917,978
29 Aug 2003	8.1300		7.0848		29 Aug 2006		29 Aug 2013		367,644		52,884		-		48,746		371,782
3 Nov 2003	9.1350		7.9606		3 Nov 2006		3 Nov 2013		4,019,800		593,054		-		-		4,612,854
30 Apr 2004	8.2830		7.2181		30 Apr 2007		30 Apr 2014		50,891,202		7,544,767		277,525		1,888,126		56,270,318
27 Aug 2004	8.6500		7.5379		27 Aug 2007		27 Aug 2014		299,200		44,142		-		18,395		324,947
20 Apr 2005	8.3620		7.2869		20 Apr 2008		20 Apr 2015		6,660,770		1,011,194		-		787,567		6,884,397

1  The HSBC Holdings Group Share Option Plan expired on 26 May 2005. No options have been granted under the Plan since that date.

2  Adjusted for rights issue.

3  The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.17.

HSBC Share Plan

HSBC Holdings ordinary shares of US$0.50

	Exercise price (£)
Date of award	At      1 Jan      2009		At   31 Dec      20091						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during          year		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
21 Jun 2005	8.794		7.6634		21 Jun 2008		21 Jun 2009		224,727		33,155		-		257,882		-
30 Sep 2005	9.170		7.9911		30 Sep 2008		30 Sep 2015		74,985		11,061		-		-		86,046

1  Adjusted for rights issue.

Subsidiary company share plans

HSBC France and subsidiary company

When it was acquired in 2000, HSBC France and one of its subsidiary companies, HSBC Private Bank France, operated employee share option plans under which options could be granted over their respective shares. No further options will be granted under either of these companies' plans. The following are details of outstanding options to acquire shares in HSBC France and HSBC Private Bank France.

HSBC France

Shares of €5

Date of award	Exercise        price (€)		Exercisable				Options at       1 January              2009		Options        exercised     during year1		Options            lapsed     during year		Options at 31 December              20091
			from		until
7 Apr 1999	81.71		7 Jun 2000		7 Apr 2009		183,627		-		183,627		-
12 Apr 2000	142.50		1 Jan 2002		12 Apr 2010		604,250		-		-		604,250

1  Following exercise of the options, the HSBC France shares will be exchanged for HSBC Holdings ordinary shares in the ratio of 14.917916 HSBC Holdings ordinary shares for each HSBC France share. At 31 December 2009, The HSBC Holdings Employee Benefit Trust 2001 (No. 1) held 9,963,718 HSBC Holdings ordinary shares which may be exchanged for HSBC France shares arising from the exercise of these options.

HSBC Private Bank France

Shares of €2

Date of award	Exercise        price (€)		Exercisable				Options at       1 January              2009		Options        exercised     during year1		Options            lapsed     during year		Options at 31 December              20091
			from		until
21 Dec 1999	10.84		21 Dec 2000		21 Dec 2009		26,250		17,250		9,000		-
10 Mar 2000	12.44		27 Jun 2004		31 Dec 2010		20,626		16,206		-		4,420
15 May 2001	20.80		15 May 2002		15 May 2011		141,525		-		-		141,525
1 Oct 2002	22.22		2 Oct 2005		1 Oct 2012		145,575		-		-		145,575

1  Following exercise of the options, the HSBC Private Bank France shares will be exchanged for HSBC Holdings ordinary shares in the ratio of 2.099984 HSBC Holdings ordinary shares for each HSBC Private Bank France share. At 31 December 2009, The CCF Employee Benefit Trust 2001 held 998,783 HSBC Holdings ordinary shares which may be exchanged for HSBC Private Bank France shares arising from the exercise of these options. 

HSBC Finance

Following the acquisition of HSBC Finance in 2003, all outstanding options and equity-based awards over HSBC Finance common shares were converted into rights to receive HSBC Holdings ordinary shares in the same ratio as the share exchange offer for the acquisition of HSBC Finance (2.675 HSBC Holdings ordinary shares for each HSBC Finance common share) and the exercise prices per share were adjusted accordingly. No further options will be granted under the plans.

All outstanding options and other equity-based awards over HSBC Finance common shares granted before 14 November 2002, being the date the transaction was announced, vested on completion of the acquisition. Options granted after 14 November 2002 are exercisable on their original terms, save that they were adjusted to reflect the exchange ratio.

The following are details of options to acquire shares in HSBC Holdings.

At 31 December 2009, the HSBC (Household) Employee Benefit Trust 2003 held 2,642,279 HSBC Holdings ordinary shares and 1,455 American Depositary Shares, each of which represents five HSBC Holdings ordinary shares, which may be used to satisfy the exercise of employee share options.

HSBC Finance: 1996 Long-Term Executive Incentive Compensation Plan

HSBC Holdings ordinary shares of US$0.50

	Exercise price (US$)
Date of award	At      1 Jan      2009		At   31 Dec      20091						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during         year2		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
17 May 1999	16.99		14.81		17 May 2000		17 May 2009		334,375		49,331		-		383,706		-
31 Aug 1999	13.96		12.17		31 Aug 2000		31 Aug 2009		300,938		44,397		-		345,335		-
8 Nov 1999	16.96		14.78		8 Nov 2000		8 Nov 2009		4,250,577		627,096		-		4,877,673		-
8 Feb 2000	13.26		11.56		8 Feb 2001		8 Feb 2010		66,875		9,866		-		-		76,741
30 Jun 2000	15.70		13.68		30 Jun 2001		30 Jun 2010		26,846		3,959		-		-		30,805
13 Nov 2000	18.40		16.03		13 Nov 2001		13 Nov 2010		5,728,514		845,109		-		-		6,573,623
12 Nov 2001	21.37		18.62		12 Nov 2002		12 Nov 2011		7,571,322		1,116,966		-		-		8,688,288
20 Nov 2002	10.66		9.29		20 Nov 2003		20 Nov 2012		2,402,135		354,367		20,000		-		2,736,502

1  Adjusted for rights issue.

2  The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.172.

Bank of Bermuda

Following the acquisition of Bank of Bermuda in 2004, all outstanding options over Bank of Bermuda shares were converted into rights to receive HSBC Holdings ordinary shares based on the consideration of US$40 for each Bank of Bermuda share and the average closing price of HSBC Holdings ordinary shares, derived from the London Stock Exchange Daily Official List, for the five business days preceding the closing date of the acquisition. No further options will be granted under any of these plans.

All outstanding options over Bank of Bermuda shares vested on completion of the acquisition. The following are details of options to acquire shares in HSBC Holdings. At 31 December 2009, the HSBC (Bank of Bermuda) Employee Benefit Trust 2004 held 2,113,611 HSBC Holdings ordinary shares which may be used to satisfy the exercise of employee share options.

Bank of Bermuda: Executive Share Option Plan 1997

HSBC Holdings ordinary shares of US$0.50

	Exercise price (US$)
Date of award	At      1 Jan      2009		At   31 Dec      20091						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during          year2		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
23 Feb 1999	7.40		6.45		23 Feb 2000		23 Feb 2009		4,904		723		-		5,627		-
3 Aug 1999	7.10		6.19		3 Aug 2000		3 Aug 2009		7,634		1,125		5,841		2,918		-
4 Feb 2000	7.21		6.28		4 Feb 2001		4 Feb 2010		31,678		4,674		10,613		-		25,739
1 Jun 2000	7.04		6.13		1 Jun 2001		1 Jun 2010		61,649		9,095		-		-		70,744
31 Jul 2000	10.11		8.81		31 Jul 2001		31 Jul 2010		27,744		4,093		-		-		31,837
11 Jan 2001	14.27		12.44		11 Jan 2002		11 Jan 2011		53,943		7,958		-		-		61,901

1  Adjusted for rights issue.

2  The weighted average closing price of the shares immediately before the dates on which options were exercised was £6.58.

Bank of Bermuda: Share Option Plan 2000

HSBC Holdings ordinary shares of US$0.50

	Exercise price (US$)
Date of award	At      1 Jan      2009		At   31 Dec      20091						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during          year2		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
11 Jan 2001	14.27		12.44		11 Jan 2002		11 Jan 2011		134,857		19,896		-		-		154,753
6 Feb 2001	16.41		14.30		6 Feb 2002		6 Feb 2011		556,353		81,148		-		-		637,501
29 Mar 2001	15.39		13.41		29 Mar 2002		29 Mar 2011		270		40		-		-		310
16 Apr 2001	15.57		13.57		16 Apr 2002		16 Apr 2011		539		80		-		-		619
6 Jun 2001	18.35		15.99		6 Jun 2002		6 Jun 2011		8,091		1,194		-		-		9,285
16 Jul 2001	16.87		14.70		16 Jul 2002		16 Jul 2011		14,930		2,203		-		-		17,133
28 Aug 2001	15.39		13.41		28 Aug 2002		28 Aug 2011		13,486		1,990		-		-		15,476
26 Sep 2001	12.79		11.15		26 Sep 2002		26 Sep 2011		350,196		51,667		-		-		401,863
30 Jan 2002	15.60		13.59		30 Jan 2003		30 Jan 2012		1,226		181		-		-		1,407
5 Feb 2002	16.09		14.02		5 Feb 2003		5 Feb 2012		740,461		108,165		-		-		848,626
10 Jul 2002	15.84		13.80		10 Jul 2003		10 Jul 2012		12,260		1,809		-		-		14,069
4 Feb 2003	10.69		9.32		4 Feb 2004		4 Feb 2013		128,904		14,877		1,699		-		142,082
21 Apr 2003	11.85		10.33		21 Apr 2004		21 Apr 2013		6,833		1,009		-		-		7,842

1  Adjusted for rights issue.

2  The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.33.

Bank of Bermuda: Directors' Share Option Plan

HSBC Holdings ordinary shares of US$0.50

	Exercise price (US$)
Date of award	At      1 Jan      2009		At   31 Dec      20091						At         1 Jan        2009	Adjustment    for rights           issue			Exercised      during          year		Lapsed      during         year		At     31 Dec        2009
					Exercisable
					from		until
22 Sep 1999	8.02		6.99		22 Sep 2000		22 Sep 2009		3,082		455		-		3,537		-
20 Sep 2000	11.31		9.86		20 Sep 2001		20 Sep 2010		4,046		597		-		4,643		-
28 Mar 2001	15.76		13.73		28 Mar 2002		28 Mar 2011		12,811		1,890		-		2,321		12,380
3 Apr 2002	16.01		13.95		3 Apr 2003		3 Apr 2012		24,520		3,615		-		5,627		22,508
30 Apr 2003	12.23		10.66		30 Apr 2004		30 Apr 2013		4,904		723		-		-		5,627

1  Adjusted for rights issue.

Employee compensation and benefits

Note 8 on the Financial Statements gives details about employee compensation and benefits including pension plans.

Set out below is information in respect of the five individuals (including two Directors of HSBC Holdings) whose emoluments were the highest in HSBC for the year ended 31 December 2009.

Emoluments of 5 highest paid employees

	£000
Basic salaries, allowances and benefits in kind ...................................................	3,190
Pension contributions ...........................	324
Bonuses paid or receivable .....................	35,017
Inducements to join paid or receivable ..	-
Total ....................................................	38,531
Total (US$000) ....................................	60,103

Their emoluments were within the following bands:

	Number of      employees
£4,300,001 - £4,400,000 ....................	1
£5,600,001 - £5,700,000 ....................	1
£9,000,001 - £9,100,000 ....................	1
£9,300,001 - £9,400,000 ....................	1
£10,000,001 - £10,100,000 ................	1

Performance-related variable pay awards for the five individuals reported above were fully deferred and will vest pro rata over three years from the date of the award.

The aggregate remuneration of Directors and Senior Management (being members of the Group Management Board) for the year ended 31 December 2009 was US$70,620,005.

The aggregate amount set aside or accrued to provide pension, retirement or similar benefits for Directors and Senior Management for the year ended 31 December 2009 was US$1,790,072.

Executive Directors and members of Senior Management are generally subject to notice periods of up to 12 months and a normal retirement age of 65.

Bank payroll tax

Both the UK and French governments announced in late 2009 their intention to introduce one-off taxes in respect of certain bonuses payable by banks and banking groups. In both countries the taxes are to be levied at 50 per cent on bonuses awarded in a certain period and over a threshold amount. The taxes will be liabilities of the employer and will be payable on awards of both cash and shares.

In the UK, draft provisions have been issued by HM Revenue & Customs. It is the UK government's intention to include the bank payroll tax in the 2010 Finance Bill. The Bill will not be enacted until later in 2010 and will apply retrospectively to certain bonuses awarded in the period from 9 December 2009 to 5 April 2010. In France, the legislation has not yet been enacted. In both countries there are uncertainties as to the interpretation of the draft proposals, and detailed analysis of individual awards in the context of the final legislation will be required to determine the precise effect of the taxes.

The estimated tax payable under the proposals, as currently drafted, both in respect of cash and deferred awards, is US$355 million in the UK and US$45 million in France. The taxes will be payable and accounted for in 2010 once the legislation is enacted. The actual amount paid may be different depending on the final details of each tax.

Corporate sustainability

HSBC's values promote ethical and sustainable business practices, making sustainability central to the Group's strategy and culture. It is about the Group's long-term approach to managing economic, social and environmental issues that are within its ability to influence. Primarily, this concerns achieving sustainable profit growth so that HSBC can continue to reward shareholders and employees, build long-lasting relationships with customers and suppliers, pay taxes and duties in those countries where it operates, and invest in communities for future growth.

HSBC's continuing financial success depends, in part, on its ability to identify and address certain non-financial considerations which are material to the business, and to mitigate the risks and maximise the opportunities arising from them. These generally fall into one or more of the following four broad areas:

·     Business sustainability

·     Environmental issues

·     Community investment

·     Employee engagement

Business sustainability

HSBC aims to build long-term customer relationships around the world through the provision of a consistent and high-quality service and customer experience. The Group uses the benefits of its scale, financial strength, geographical reach and strong brand value to achieve this.

HSBC aims to take advantage of the opportunities and manage the risks presented by emerging global trends by leading the development of sustainable business models to address them. The Group understands that the world is changing, with increased longevity, a widening gap in the relative growth rates of emerging and mature economies and the need to move to a lower-carbon economy in order to mitigate some of the effects of climate change being significant examples. Over the long term, HSBC anticipates playing a leading role in shaping the market response to these challenges and is among those financial institutions identifying how business can respond in ways that bring both environmental and social benefits, as well as providing viable economic returns.

Environmental issues

HSBC focuses its environmental initiatives primarily on addressing and responding to issues associated with climate change, including energy, water management and biodiversity. Climate change has the potential to materially affect HSBC's customers and, by extension, the Group's long-term success, introducing new risks to business activity. However, it also has the potential to stimulate a new era of low carbon growth, innovation and development. In 2009, HSBC continued to deepen its understanding of the likely effects that climate change and the responses to it will have upon its business and those of its customers. The Group further developed its ability to research the commercial implications of climate change mitigation initiatives, improved the make up and distribution of its investable index offering, 'The Global Climate Change Benchmark Index' and benefited from the continuing counsel of Lord Stern as advisor to the Group Chairman on economic development and climate change.

Community investment

HSBC has a long-standing commitment to the communities in which it operates. Many of the Group's key markets are emerging economies. HSBC's operations bring benefits to its host countries through tax contributions, and to local people and businesses through employment, training, purchasing and investment. Beyond the impact of its core business, the Group aims to encourage social and economic opportunity through its community investment activity.

HSBC focuses this activity on education and the environment because it believes they are essential building blocks for the development of communities and are prerequisites for economic growth. Global education programmes such as Future First, JA More Than Money^TM and Eco-Schools focus on helping disadvantaged children, promoting financial literacy and environmental education and understanding. The Group's flagship environmental programme is the HSBC Climate Partnership, a US$100 million commitment to working with The Climate Group, Earthwatch, Smithsonian Tropical Research Institute and WWF on tackling climate change.

In 2009, HSBC donated a total of US$100 million to community investment projects (2008: US$102 million, or US$99 million at constant exchange rates).

Employee engagement

'Employee engagement' describes employees' emotional and intellectual commitment to their organisation and its success and is critical to the long-term ability of the Group to deliver the highest quality of financial services. HSBC's annual Global People Survey shows that employees value the Group's commitment to sustainable business practices and view the Group as being a leader in this regard. HSBC has made sustainability a key element of the employee induction and senior management training programmes, and has fully integrated sustainability risk issues into the Group's risk management processes covering corporate clients.

Sustainability governance

Sustainability at HSBC exists as a GMO function, with senior executives charged with implementing sustainable business practice in all major regions through inclusion in the Group Standards Manuals and through induction and developmental training.

The Corporate Sustainability Committee, a Committee of the Board, is responsible for advising the Board, committees of the Board and executive management on corporate sustainability policies, including environmental, social and ethical issues. At an operational level, implementation of these policies is managed primarily by Group Human Resources, Group Risk, Group Compliance and Group Corporate Sustainability.

The terms of reference of the Corporate Sustainability Committee are available at www.hsbc.com/boardcommittees. The members of the Committee throughout 2009 were W K L Fung (Chairman), Sir Mark Moody-Stuart and N R N Murthy, each of whom is a non-executive Director, G V I Davis, Lord May and Dame Mary Marsh (appointed a member on 31 July 2009), who are non-director members of the Committee. There were five meetings of the Corporate Sustainability Committee during 2009. Following each meeting, the Committee reports to the Board on its activities.

HSBC reports on its progress in developing and implementing its sustainability strategy annually in the HSBC Sustainability Report, which is externally verified and prepared using the Global Reporting Initiative. PricewaterhouseCoopers has been re‑appointed for 2009 and will verify the Group's commitment to carbon neutrality and adherence to the Equator Principles. The HSBC Sustainability Report 2009 will be issued on 28 May 2010 and will be available at www.hsbc.com/sustainability.

Sustainability risk

HSBC's approach to managing sustainability risk is detailed on page 264.

Health and safety

The maintenance of appropriate health and safety standards throughout HSBC remains a key responsibility of all managers and HSBC is committed to proactively managing all health and safety risks associated with its business. HSBC's objectives are to identify, remove, reduce or control material risks of fires and of accidents or injuries to employees and visitors.

Group standards, instructions and related policies and procedures are set by Group Corporate Real Estate and implemented by Health, Safety and Fire Co‑ordinators ('HSFC's) based in each country in which HSBC operates. The HSFC may call upon regional and Group resource by way of support at any time.

Despite the considerable international pressure on terrorist networks over the past few years, the global threat from terrorism persists. HSBC remains committed to maintaining its preparedness and to ensuring the highest standards of health and safety wherever in the world it operates.

Group Security provides regular risk assessments in areas of increased risk to assist management in judging the level of terrorist threat. In addition, regional security functions conduct regular security reviews to ensure measures to protect HSBC staff, buildings, assets and information are appropriate for the level of threat.

Supplier payment policy

The Company does not currently subscribe to any code or standard on payment practice. It is the Company's policy, however, to settle terms of payment with those suppliers when agreeing the terms of each transaction, to ensure that those suppliers are made aware of the terms of payment, and to abide by the terms of payment.

It is HSBC Holdings' practice to organise payment to its suppliers through a central accounts payable function operated by its subsidiary, HSBC Bank. Included in the balance with HSBC Bank is the amount due to trade creditors which, at 31 December 2009, represented 24 days' average daily purchases of goods and services received from such creditors, calculated in accordance with the Companies Act 2006, as amended by Statutory Instrument 2008 No. 410.

Share capital

Issued share capital

The nominal value of the issued share capital of HSBC Holdings paid up at 31 December 2009 was US$8,704,117,884 divided into 17,408,206,768 ordinary shares of US$0.50 each and 1,450,000 non-cumulative preference shares of US$0.01 each; and £301,500 comprising 301,500 non-voting deferred shares of £1 each.

The percentage of the nominal value of the total issued share capital of HSBC Holdings paid up at 31 December 2009 represented by the ordinary shares of US$0.50 each, non-cumulative preference shares of US$0.01 each and non-voting deferred shares of £1 each was approximately 99.9942, 0.0002, and 0.0056 per cent respectively.

Rights and obligations attaching to shares

The rights and obligations attaching to each class of share in the share capital of HSBC Holdings are set out in the Articles of Association of HSBC Holdings. Set out below is a summary of the rights and obligations attaching to each class of shares with respect to voting, dividends, capital and, in the case of the preference shares, redemption.

To be registered, a transfer of shares must be in relation to a share which is fully paid up and on which the Company has no lien and to one class of shares denominated in the same currency. The transfer must be in favour of a single transferee or no more than four joint transferees and it must be duly stamped (if required). The transfer must be delivered to the registered office of the Company or to its Registrars accompanied by the certificate to which it relates or such other evidence that proves the title of the transferor.

If a shareholder or any person appearing to be interested in the Company's shares has been sent a notice under section 793 of the Companies Act 2006 (which confers upon public companies the power to require information from any person whom the Company knows or has reasonable cause to believe to be interested in the shares) and has failed in relation to any shares (the 'default shares') to supply the information requested within the period set out in the notice, then the member, unless the Board otherwise determines, is not entitled to be present at or to vote the default shares at any general meeting or to exercise any other right conferred by being a shareholder. If the default shares represent at least 0.25 per cent in nominal value of the issued shares of that class, unless the Board otherwise determines, any dividend shall be withheld by the Company without interest, no election may be made for any scrip dividend alternative, and no transfer of any shares held by the member will be registered except in limited circumstances.

Ordinary shares

Subject to the Companies Act 2006 and the Articles of Association of HSBC Holdings, HSBC Holdings may, by ordinary resolution, declare dividends to be paid to the holders of ordinary shares, however, no dividend shall exceed the amount recommended by the Board. The Board may pay interim dividends as appears to the Board to be justified by the profits of HSBC Holdings available for distribution. All dividends shall be apportioned and paid proportionately to the percentage of the nominal amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid, but if any share is issued on terms providing that it shall rank for dividend as from a particular date, it shall rank for dividend accordingly. Subject to the Articles of Association of HSBC Holdings, the Board may, with the prior authority of an ordinary resolution of HSBC Holdings and subject to such terms and conditions as the Board may determine, offer to any holders of ordinary shares the right to elect to receive ordinary shares of the same or a different currency, credited as fully paid, instead of cash in any currency in respect of the whole (or some part, to be determined by the Board) of any dividend specified by the ordinary resolution. At the 2007 Annual General Meeting shareholders gave authority to the Directors to determine to offer a scrip dividend alternative until the conclusion of the Annual General Meeting in 2012.

Preference shares

The non-cumulative preference shares of £0.01 each, the non-cumulative preference shares of US$0.01 each (the 'Dollar Preference Shares') and the non-cumulative preference shares of €0.01 each carry the same rights and obligations under the Articles of Association save in respect of the timing of and payment of proceeds from the redemption of each class of share, to the extent issued, and certain rights and obligations that attach to each class of preference share as determined by the Board prior to allotment of the relevant preference shares. The Dollar Preference Shares are the only class of the preference shares which have been issued and allotted to date.

Holders of the preference shares will only be entitled to attend and vote at general meetings of HSBC Holdings if any dividend payable on the relevant preference shares in respect of such period as the Board shall determine prior to allotment thereof (which, in the case of the Dollar Preference Shares in issue at 1 March 2010, is four consecutive dividend payment dates) is not paid in full or in such other circumstances, and upon and subject to such terms, as the Board may determine prior to allotment of the relevant preference shares. Whenever holders of the relevant preference shares are entitled to vote on a resolution at a general meeting, on a show of hands every such holder who is present in person or by proxy shall have one vote and on a poll every such holder who is present in person or by proxy shall have one vote per preference share held by him or her or such number of votes per share as the Board shall determine prior to allotment of such share.

Subject to the Articles of Association, holders of the relevant preference shares shall have the right to a non-cumulative preferential dividend at such rate, on such dates and on such other terms and conditions as may be determined by the Board prior to allotment thereof in priority to the payment of any dividend to the holders of ordinary shares and any other class of shares of HSBC Holdings in issue (other than (i) the other preference shares in issue and any other shares expressed to rank pari passu therewith as regards income; and (ii) any shares which by their terms rank in priority to the relevant preference shares as regards income). Dividends on the Dollar Preference Shares in issue at 1 March 2010 are paid quarterly at the sole and absolute discretion of the Board of Directors. The Board of Directors will not declare a dividend on the Dollar Preference Shares if payment of the dividend would cause HSBC Holdings not to meet the applicable capital adequacy requirements of the FSA or the profit of HSBC Holdings available for distribution as dividends is not sufficient to enable HSBC Holdings to pay in full both dividends on the relevant preference shares and dividends on any other shares that are scheduled to be paid on the same date and that have an equal right to dividends. HSBC Holdings may not declare or pay dividends on any class of its shares ranking lower in the right to dividends than the preference shares nor redeem nor purchase in any manner any of its other shares ranking equal with or lower than the preference shares unless it has paid in full, or set aside an amount to provide for payment in full, the dividends on the preference shares for the then-current dividend period.

The preference shares carry no rights to participate in the profits or assets of HSBC Holdings other than as set out in the Articles of Association and subject to the Companies Act 2006, do not confer any right to participate in any offer or invitation by way of rights or otherwise to subscribe for additional shares in HSBC Holdings, do not confer any right of conversion and do not confer any right to participate in any issue or bonus shares or shares issued by way of capitalisation of reserves.

Subject to the relevant insolvency laws and the Articles of Association of HSBC Holdings, holders of the relevant preference shares have the right in a winding up of HSBC Holdings to receive out of the assets of HSBC Holdings available for distribution to its shareholders, in priority to any payment to the holders of the ordinary shares and any other class of shares of HSBC Holdings in issue (other than (i) the other relevant preference shares and any other shares expressed to rank pari passu therewith as regards repayment of capital; and (ii) any shares which by their terms rank in priority to the relevant preference shares as regards repayment of capital), a sum equal to any unpaid dividend on the relevant preference shares which is payable as a dividend in accordance with or pursuant to the Articles of Association and the amount paid up or credited as paid up on the relevant preference shares together with such premium (if any) as may be determined by the Board prior to allotment thereof.

HSBC Holdings may redeem the relevant preference shares in accordance with the Articles of Association and the terms on which the relevant preference shares were issued and allotted. In the case of the Dollar Preference Shares in issue at 1 March 2010, HSBC Holdings may redeem such shares in whole at any time on or after 16 December 2010, subject to prior notification to the FSA.

Non-voting deferred shares

The non-voting deferred shares are held by a subsidiary undertaking of HSBC Holdings. Holders of the non-voting deferred shares are not entitled to receive dividends on these shares. In addition, on winding up or other return of capital, holders are entitled to receive the amount paid up on their shares after distribution to ordinary shareholders of £10 million in respect of each ordinary share held by them. The holders of the non‑voting deferred shares are not entitled to receive notice of or to attend (either personally or by proxy) any general meeting of HSBC Holdings or to vote (either personally or by proxy) on any resolution to be proposed thereat.

Share capital during 2009

The following events occurred during the year in relation to the ordinary share capital of HSBC Holdings:

Scrip dividends

1.    38,963,783 ordinary shares were issued at par in January 2009 to shareholders who elected to receive new shares in lieu of the third interim dividend for 2008. The market value per share used to calculate shareholders' entitlements to new shares was US$9.7631, being the US dollar equivalent of £6.4785.

2.    109,826,747 ordinary shares were issued at par in May 2009 to shareholders who elected to receive new shares in lieu of the fourth interim dividend for 2008. The market value per share used to calculate shareholders' entitlements to new shares was US$5.6847, being the US dollar equivalent of £3.907.

3.    21,713,706 ordinary shares were issued at par in July 2009 to shareholders who elected to receive new shares in lieu of the first interim dividend for 2009. The market value per share used to calculate shareholders' entitlements to new shares was US$8.7461, being the US dollar equivalent of £5.4595.

4.    64,721,433 ordinary shares were issued at par in October 2009 to shareholders who elected to receive new shares in lieu of the second interim dividend for 2009. The market value per share used to calculate shareholders' entitlements to new shares was US$10.7597, being the US dollar equivalent of £6.566.

Rights issue

5.    5,060,239,065 new ordinary shares were issued at 254 pence per new ordinary share in April 2009 in connection with a rights issue announced on 2 March 2009.

All-Employee share plans

6.    In connection with the exercise of options under the HSBC Holdings savings-related share option plans: 4,855,485 ordinary shares were issued at prices ranging from £3.3116 to £7.6736 per share; 59,241 ordinary shares were issued at prices ranging from HK$37.8797 to HK$92.5881per share; 86,150 ordinary shares were issued at prices ranging from US$4.8876 to US$13.8803 per share; and 9,869 ordinary shares were issued at prices ranging from €7.5571 to €9.5912per share. Options over 57,629,816 ordinary shares lapsed.

7.    Options over 152,795,762 ordinary shares were granted at nil consideration under the HSBC Holdings savings-related share option plans on 29 April 2009 as a result of more than 90,000 applications received from HSBC employees resident in over 70 countries and territories.

Discretionary share incentive plans

8.    918,532 ordinary shares were issued at prices ranging from £5.5557 to £6.5009 per share in connection with the exercise of options under the HSBC Holdings Executive Share Option Scheme. Options over 8,384,345 ordinary shares lapsed.

9.    1,547,675 ordinary shares were issued at prices ranging from £6.0216 to £8.4050 per share in connection with the exercise of options under the HSBC Holdings Group Share Option Plan. Options over 5,466,759 ordinary shares lapsed.

10.  No options were exercised under and no ordinary shares were issued in connection with the HSBC Share Plan. Options over 257,882 ordinary shares lapsed.

Authority to purchase ordinary shares

11.  At the Annual General Meeting in 2009, shareholders renewed the authority for the Company to make market purchases of ordinary shares. The authority is to make market purchases of up to 1,720,481,200 ordinary shares. The Directors have not exercised this authority. In accordance with the terms of a waiver granted by the Hong Kong Stock Exchange on 19 December 2005, HSBC Holdings will comply with the applicable law and regulation in the UK in relation to the holding of any shares in treasury and with the conditions of the waiver, in connection with any shares it may hold in treasury.

Authority to allot shares

12.  At the Annual General Meeting in 2009, shareholders renewed the general authority for the Directors to allot new shares. The general authority is to allot up to 3,440,962,400 ordinary shares, 10,000,000 non-cumulative preference shares of £0.01each, 8,550,000 non-cumulative preference shares of US$0.01 each and 10,000,000 non-cumulative preference shares of €0.01 each. Within this, the Directors have authority to allot up to a maximum of 860,240,600 ordinary shares wholly for cash to persons other than existing shareholders.

Other than as described in paragraphs 1 to 6 and 8 to 9 above, the Directors did not allot any shares during 2009.

Dividends, shareholders and meetings

Dividends for 2009

First, second and third interim dividends for 2009, each of US$0.08 per ordinary share, were paid on 8 July 2009, 7 October 2009 and 13 January 2010 respectively. Note 12 on the Financial Statements gives more information on the dividends declared in 2009. On 1 March 2010, the Directors declared a fourth interim dividend for 2009 of US$0.10 per ordinary share in lieu of a final dividend, which will be payable on 5 May 2010 in cash in US dollars, or in sterling or Hong Kong dollars at exchange rates

to be determined on 26 April 2010, with a scrip dividend alternative. As the fourth interim dividend for 2009 was declared after the balance sheet date it has not been included as a creditor at 31 December 2009. The reserves available for distribution at 31 December 2009 were US$34,460 million.

A quarterly dividend of US$15.50 per 6.20 per cent non-cumulative US dollar preference share, Series A ('Series A dollar preference share'), equivalent to a dividend of US$0.3875 per Series A American Depositary Share, each of which represents one-fortieth of a Series A dollar preference share, was paid on 16 March, 15 June, 15 September and 15 December 2009.

Dividends for 2010

The proposed timetable for interim dividends in respect of 2010 on the ordinary shares of US$0.50 is set out in the Shareholder Information section on page 473.

A quarterly dividend of US$15.50 per Series A dollar preference share (equivalent to a dividend of US$0.3875 per Series A American Depositary Share, each of which represents one-fortieth of a Series A dollar preference share) was declared on 10 February 2010 for payment on 15 March 2010.

Communication with shareholders

Communication with shareholders is given high priority. Extensive information about HSBC's activities is provided in the Annual Report and Accounts, Annual Review and the Interim Report to shareholders which are available on www.hsbc.com. There is regular dialogue with institutional investors and enquiries from individuals on matters relating to their shareholdings and the business of HSBC are welcomed and are dealt with in an informative and timely manner. All shareholders are encouraged to attend the Annual General Meeting or the informal meeting of shareholders held in Hong Kong to discuss the progress of HSBC.

Notifiable interests in share capital

At 31 December 2009, the following disclosures of major holdings of voting rights had been received by the Company (and have not been subsequently amended or withdrawn) pursuant to the requirements of the Financial Services Authority Disclosure and Transparency Rule 5:

·     Barclays PLC gave notice on 17 April 2007 that it had an indirect interest on 16 April 2007 in

518,233,657 HSBC Holdings ordinary shares, representing 4.47 per cent of the ordinary shares in issue at that date.

·     Legal & General Group Plc gave notice on 18 April 2008 that it had a direct interest on 16 April 2008 in 593,425,216 HSBC Holdings ordinary shares, representing 5.00 per cent of the ordinary shares in issue at that date and gave notice on 21 April 2008 that on 18 April 2008 its holding of HSBC ordinary shares fell below 5.00 per cent of the ordinary shares in issue at that date.

As at 31 December 2009, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong, JPMorgan Chase & Co. had given notice that on 30 December 2009 it had a long position of 1,024,160,585 HSBC Holdings ordinary shares, representing 5.88 per cent of the ordinary shares in issue, a short position of 63,293,272 HSBC Holdings ordinary shares, representing 0.36 per cent of the ordinary shares in issue and a lending pool of 771,012,503 HSBC Holdings ordinary shares, representing 4.43 per cent of the ordinary shares in issue. Since 31 December 2009, and following interim notifications on 26 and 27 January 2010 and 5 February 2010, JPMorgan Chase & Co. gave notice that on 9 February 2010 it had a long position of 1,044,033,679 HSBC Holdings ordinary shares, representing 5.99 per cent of the ordinary shares in issue, a short position of 57,605,424 HSBC Holdings ordinary shares, representing 0.33 per cent of the ordinary shares in issue and a lending pool of 769,997,063 HSBC Holdings ordinary shares, representing 4.42 per cent of the ordinary shares in issue.

In compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited at least 25 per cent of the total issued share capital of HSBC Holdings has been held by the public at all times during 2009 and up to the date of this Report.

Dealings in HSBC Holdings shares

Except for dealings as intermediaries by HSBC Bank, HSBC Financial Products (France) and The Hongkong and Shanghai Banking Corporation, which are members of a European Economic Area exchange, neither HSBC Holdings nor any subsidiary has bought, sold or redeemed any securities of HSBC Holdings during the year ended 31 December 2009.

Annual General Meeting

The Annual General Meeting of HSBC Holdings will be held at the Barbican Hall, Barbican Centre, London EC2 on 28 May 2010 at 11.00am.

An informal meeting of shareholders will be held at 1 Queen's Road Central, Hong Kong on Monday 24 May 2010 at 4.30pm.

Resolutions to receive the Annual Report and Accounts, approve the Directors' Remuneration Report, re-elect Directors and reappoint KPMG Audit Plc as Auditor will be submitted to the Annual General Meeting. KPMG Audit Plc has expressed its willingness to continue in office and the Group Audit Committee and the Board has recommended that KPMG Audit Plc be reappointed. Resolutions will also be submitted to the Annual General Meeting to renew the authorities for the allotment of shares and the disapplication of pre‑emption rights. In addition, resolutions will be proposed to seek approval for changes to the Articles of Association, to amend the HSBC Holdings UK Incentive Plan and to continue to be able to call general meetings (other than Annual General Meetings) on 14 days' notice.

A live webcast of the Annual General Meeting will be available on www.hsbc.com. From shortly after the conclusion of the Meeting until 30 June 2010 a recording of the proceedings will be available on www.hsbc.com.

On behalf of the Board

S K Green, Group Chairman                1 March 2010

HSBC Holdings plc

Registered number 617987

 

END

 

 

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