HSBC FINANCE CORPORATION (Exact Name of Registrant As Specified in Its Charter) Delaware 86-1052062 (State of Incorporation) (I.R.S
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ≤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2008 OR n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8198 HSBC FINANCE CORPORATION (Exact name of registrant as specified in its charter) Delaware 86-1052062 (State of incorporation) (I.R.S. Employer Identification No.) 26525 North Riverwoods Boulevard, Mettawa, Illinois 60045 (Address of principal executive offices) (Zip Code) (224) 544-2000 Registrant’s telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Floating Rate Notes due October 21, 2009 New York Stock Exchange Floating Rate Notes due October 21, 2009 New York Stock Exchange Floating Rate Notes due March 12, 2010 New York Stock Exchange 4.625% Notes due September 15, 2010 New York Stock Exchange 5.25% Notes due January 14, 2011 New York Stock Exchange 3 6 ⁄4% Notes due May 15, 2011 New York Stock Exchange 5.7% Notes due June 1, 2011 New York Stock Exchange Floating Rate Notes due April 24, 2012 New York Stock Exchange 5.9% Notes due June 19, 2012 New York Stock Exchange Floating Rate Notes due July 19, 2012 New York Stock Exchange Floating Rate Notes due September 14, 2012 New York Stock Exchange Floating Rate Notes due January 15, 2014 New York Stock Exchange 5.25% Notes due January 15, 2014 New York Stock Exchange 5.0% Notes due June 30, 2015 New York Stock Exchange 5.5% Notes due January 19, 2016 New York Stock Exchange Floating Rate Notes due June 1, 2016 New York Stock Exchange 6.875% Notes due January 30, 2033 New York Stock Exchange 6% Notes due November 30, 2033 New York Stock Exchange Depositary Shares (each representing one-fortieth share of New York Stock Exchange 6.36% Non-Cumulative Preferred Stock, Series B, no par, $1,000 liquidation preference) Guarantee of Preferred Securities of HSBC Capital Trust IX New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ≤ No n Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No ≤ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ≤ No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer n Accelerated filer n Non-accelerated filer ≤ Smaller reporting company n (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No ≤ As of February 27, 2009, there were 61 shares of the registrant’s common stock outstanding, all of which are owned by HSBC Investments (North America) Inc. DOCUMENTS INCORPORATED BY REFERENCE None. TABLE OF CONTENTS Part/Item No Page Part I Item 1. Business: Organization History and Acquisition by HSBC............................... 4 HSBC North America Operations ......................................... 4 HSBC Finance Corporation – General ...................................... 4 Operations .......................................................... 7 Funding ............................................................ 10 Regulation and Competition ............................................. 11 Corporate Governance and Controls ....................................... 13 Cautionary Statement on Forward-Looking Statements.......................... 14 Item 1A. Risk Factors........................................................... 14 Item 1B. Unresolved Staff Comments ............................................... 20 Item 2. Properties............................................................. 20 Item 3. Legal Proceedings ...................................................... 21 Item 4. Submission of Matters to a Vote of Security Holders ............................. 23 Part II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters ............. 23 Item 6. Selected Financial Data .................................................. 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations:.......................................................... 26 Executive Overview ................................................... 26 Basis of Reporting .................................................... 37 Critical Accounting Policies and Estimates . ................................. 40 Receivables Review ................................................... 47 Real Estate Owned .................................................... 50 Results of Operations .................................................. 51 Segment Results – IFRS Management Basis. ................................. 60 Credit Quality ....................................................... 67 Liquidity and Capital Resources .......................................... 89 Off Balance Sheet Arrangements and Secured Financings ....................... 96 Fair Value .......................................................... 98 Risk Management ..................................................... 102 Glossary of Terms .................................................... 109 Credit Quality Statistics ................................................ 112 Analysis of Credit Loss Reserves Activity . ................................. 114 Net Interest Margin ................................................... 116 Reconciliations to U.S. GAAP Financial Measures ............................ 118 Item 7A. Quantitative and Qualitative Disclosures About Market Risk ....................... 120 Item 8. Financial Statements and Supplementary Data: ................................. 120 Report of Independent Registered Public Accounting Firm ........................ 121 Consolidated Statement of Income (Loss) ..................................... 123 Consolidated Balance Sheet ............................................... 124 Consolidated Statement of Changes in Shareholders’ Equity ....................... 125 Consolidated Statement of Cash Flows ....................................... 126 2 Part/Item No Page Notes to Consolidated Financial Statements: Note 1. Organization ................................................... 128 Note 2. Summary of Significant Accounting Policies and New Accounting Pronouncements ................................................ 128 Note 3. Discontinued Operations .......................................... 137 Note 4. Business Acquisitions ............................................ 140 Note 5. Restructuring Activities ........................................... 140 Note 6. Securities ..................................................... 144 Note 7. Receivables .................................................... 146 Note 8. Credit Loss Reserves ............................................. 150 Note 9. Receivables Held for Sale ......................................... 150 Note 10. Asset Securitizations ............................................. 152 Note 11. Properties and Equipment, net ...................................... 155 Note 12. Intangible Assets ................................................ 155 Note 13. Goodwill ...................................................... 156 Note 14. Commercial Paper and Short-Term Borrowings.......................... 157 Note 15. Long-Term Debt ................................................ 158 Note 16. Derivative Financial Instruments . ................................. 160 Note 17. Income Taxes .................................................. 166 Note 18. Redeemable Preferred Stock ....................................... 171 Note 19. Accumulated Other Comprehensive Income ............................ 172 Note 20. Related Party Transactions ......................................... 173 Note 21. Share-Based Plans ............................................... 178 Note 22. Pension and Other Postretirement Benefits ............................. 181 Note 23. Business Segments .............................................. 185 Note 24. Commitments and Contingent Liabilities .............................. 190 Note 25. Fair Value Measurements .......................................... 191 Note 26. Concentration of Credit Risk ....................................... 196 Note 27. Subsequent Events ............................................... 197 Selected Quarterly Financial