HSBC HOLDINGS PLC

Glossary

Accounting term US equivalent or brief description Accounts Financial Statements Articles of Association Bylaws Associates Long-term equity investments accounted for using the equity method Attributable profit Net income Balance sheet Statement of financial position Bills Notes Called up share capital Ordinary shares, issued and fully paid Capital allowances Tax depreciation allowances Creditors Payables Debtors Receivables Deferred tax Deferred income tax Depreciation Amortisation Finance lease Capital lease Freehold Ownership with absolute rights in perpetuity Interests in associates and joint ventures Long-term equity investments accounted for using the equity method Loans and advances Lendings Loan capital Long-term debt Nominal value Par value One-off Non-recurring Ordinary shares Common stock Overdraft A line of credit, contractually repayable on demand unless a fixed-term has been agreed, established through a customer’s current account Preference shares Preferred stock Premises Real estate Provisions Liabilities Share capital Ordinary shares or common stock issued and fully paid Shareholders’ equity Stockholders’ equity Share premium account Additional paid-in capital Shares in issue Shares outstanding Write-offs Charge-offs

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Abbreviation Brief description ABS1 Asset-backed security ADR American Depositary Receipt ADS American Depositary Share AIEA Average interest-earning assets ALCO Asset and Liability Management Committee ARM Adjustable-rate mortgage ASEAN Association of Southeast Asian Nations ASF Asset and Structured Finance Asscher Asscher Finance Ltd, a structured investment vehicle managed by HSBC ATM Automated teller machine Bank of Bermuda The Bank of Bermuda Limited Bank of Communications Co., Limited, mainland China’s fourth largest bank by market capitalisation, in which HSBC currently has 19.01 per cent interest Bao Viet BaoViet Holdings Barion Barion Funding Limited, a term funding vehicle Basel Committee Basel Committee on Banking Supervision Basel I 1988 Basel Capital Accord Basel II1 2006 Basel Capital Accord BBA British Bankers’ Association Bps Basis points. One basis point is equal to one hundredth of a percentage point Brazilian operations HSBC Bank Brasil S.A.–Banco Múltiplo and subsidiaries, plus HSBC Serviços e Participações Limitada CD Certificate of deposit CDS1 Credit default swap CDO1 Collateralised debt obligation CGU Cash-generating unit CNAV1 Constant Net Asset Value Combined Code Combined Code on Corporate Governance issued by the Financial Reporting Council CP1 Commercial paper CPI Consumer price index CRR1 Customer risk rating Cullinan Cullinan Finance Ltd, a structured investment vehicle managed by HSBC Decision One Decision One Mortgage Company, HSBC Finance’s subsidiary which originates loans referred by mortgage brokers DPF Discretionary participation feature of insurance and investment contracts Enhanced VNAV1 Enhanced Variable Net Asset Value EPS Earnings per share EU European Union Fannie Mae Federal National Mortgage Association, US FDIC Federal Deposit Insurance Corporation (US) Financiera Independencia Financiera Independencia S.A.B. de C.V. Freddie Mac Federal Home Loan Mortgage Corporation, US FSA Financial Services Authority (UK) FTSE Financial Times - Stock Exchange index GAAP Generally Accepted Accounting Principles GCRO Group Chief Risk Officer GDP Gross domestic product Ginnie Mae Government National Mortgage Association, US Global Markets HSBC’s treasury and capital markets services in Global Banking and Markets GMB Group Management Board GMO Group Management Office Group HSBC Holdings together with its subsidiary undertakings H1N1 Influenza ‘A’ (H1N1) virus, commonly referred to as swine flu Hang Seng Bank Limited, the third largest bank listed in Hong Kong by market capitalisation

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Abbreviation Brief description HELoC Home equity lines of credit HFC HFC Bank Limited, the UK-based consumer finance business acquired through the acquisition by HSBC of HSBC Finance HIBOR Hong Kong Interbank Offer Rate HKMA Hong Kong Monetary Authority HKSE The Stock Exchange of Hong Kong Limited Hong Kong The Hong Kong Special Administrative Region of the People’s Republic of China HSBC HSBC Holdings together with its subsidiary undertakings HSBC Assurances HSBC Assurances, comprising Erisa S.A., the French life insurer, and Erisa I.A.R.D., the property and casualty insurer (together, formerly Erisa) HSBC Bank HSBC Bank plc, formerly plc HSBC Bank Argentina HSBC Bank Argentina S.A. HSBC Bank Brazil HSBC Bank Brasil S.A.–Banco Múltiplo HSBC Bank China HSBC Bank (China) Company Limited, HSBC’s banking subsidiary in mainland China which was incorporated in March 2007 HSBC Bank Malaysia HSBC Bank Malaysia Berhad HSBC Bank Middle East HSBC Bank Middle East Limited, formerly The British Bank of the Middle East HSBC Bank Panama HSBC Bank (Panama) S.A., formerly S.A. HSBC Bank USA HSBC’s retail bank in the US. From 1 July 2004, HSBC Bank USA, N.A. (formerly HSBC Bank USA, Inc.) HSBC Direct HSBC’s online banking and savings proposition HSBC Finance HSBC Finance Corporation, the US consumer finance company (formerly Household International, Inc.) HSBC France HSBC’s French banking subsidiary, formerly CCF S.A. HSBC Holdings HSBC Holdings plc, the parent company of HSBC HSBC Mexico HSBC México S.A., the commercial banking subsidiary of Grupo Financiero HSBC, S.A. de C.V. HSBC Premier HSBC’s premium global banking service HSBC Private Bank (Suisse) HSBC Private Bank (Suisse) S.A., HSBC’s private bank in Switzerland (merged with HSBC Guyerzeller Bank in 2009) IAS International Accounting Standard IASB International Accounting Standards Board IFRSs International Financial Reporting Standards IFRIC International Financial Reporting Interpretations Committee Industrial Bank Industrial Bank Co. Limited, a national joint-stock bank in mainland China in which Hang Seng Bank currently has a 12.78 per cent interest IPO Initial public offering IRB1 Internal ratings-based KPI Key performance indicator KPMG KPMG Audit Plc and its affiliates LIBOR London Interbank Offer Rate Madoff Securities Bernard L Madoff Investment Securities LLC Mainland China People’s Republic of China excluding Hong Kong Malachite Malachite Funding Limited, a term funding vehicle MasterCard MasterCard Inc. Mazarin Mazarin Funding Limited, an asset-backed CP conduit MBS1 US mortgage-backed security Metrovacesa Metrovacesa, S.A. Monoline1 Monoline insurance company M&S Money Marks and Spencer Retail Financial Services Holdings Limited MSCI Morgan Stanley Capital International index MTN1 Medium-term note NA Nationally Chartered, a designation for certain categories of banks in the US NYSE New York Stock Exchange

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Abbreviation Brief description OFT Office of Fair Trading (UK) OTC1 Over-the-counter Performance Shares Awards of HSBC Holdings ordinary shares under employee share plans that are subject to corporate performance conditions Ping An Insurance Ping An Insurance (Group) Company of China, Limited, the second-largest life insurer in the PRC, in which HSBC currently has 16.78 per cent interest PPI Payment protection insurance product Premier See HSBC Premier PVIF Present value of in-force long-term insurance business Repo Sale and repurchase transaction Restricted Shares Awards of Restricted Shares define the number of HSBC Holdings ordinary 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 Reverse repo Security purchased under commitments to sell RMM Risk Management Meeting of the Group Management Board RPI Retail price index (UK) RWA1 Risk weighted asset S&P Standard and Poor’s rating agency SEC Securities and Exchange Commission (US) SIC Securities investment conduit SIP Statement of investment principles produced by trustees of defined pension plans SIV1 Structured investment vehicle SME Small and medium-sized enterprise Solitaire Solitaire Funding Limited, a special purpose entity managed by HSBC SPE1 Special purpose entity STIP Short-term income protection insurance product Techcombank Vietnam Technological and Commercial Joint Stock Bank The Chinese Bank The Chinese Bank Co., Ltd., the business in Taiwan The Hongkong and Shanghai The Hongkong and Shanghai Banking Corporation Limited, the founding member of the Banking Corporation HSBC Group TSR Total shareholder return UAE United Arab Emirates UK United Kingdom US United States VAR1 Value at risk Visa Visa Inc. VNAV Variable Net Asset Value WWF World Wide Fund for Nature

1 For full definitions see pages 489 to 494.

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Term Definition Alt-A A US description for loans regarded as lower risk than sub-prime, but with higher risk characteristics than lending under normal criteria. Arrears Customers are said to be in arrears (or in a state of delinquency) when they are behind in fulfilling their obligations, with the result that an outstanding loan is unpaid or overdue. When a customer is in arrears, the total outstanding loans on which payments are overdue are described as delinquent. Asset-backed securities Securities that represent an interest in an underlying pool of referenced assets. The (‘ABS’s) referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages. Back-testing A statistical technique used to monitor and assess the accuracy of a model, and how that model would have performed had it been applied in the past. Basel II The capital adequacy framework issued by the Basel Committee on Banking Supervision in June 2006 in the form of the ‘International Convergence of Capital Measurement and Capital Standards’. Collectively assessed Impairment assessment on a collective basis for homogeneous groups of loans that impairment are not considered individually significant. Collateralised debt obligation A security issued by a third party which references ABSs and/or certain other related (‘CDO’) assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets. Commercial paper (‘CP’) An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. The debt is usually issued at a discount, reflecting prevailing market interest rates. Commercial real estate Any real estate investment, comprising buildings or land, intended to generate a profit, either from capital gain or rental income. Conduits A vehicle that holds asset-backed securities such as mortgages, vehicle finance loans and credit card loans which is financed by short-term debt normally issued in the form of commercial paper which is collateralised by the asset-backed debt. Constant net asset value fund A fund that prices its assets on an amortised cost basis, subject to the amortised book (‘CNAV’) value of the portfolio remaining within 50 basis points of its market value. Contractual maturities The date on which the final payment (principal or interest) of any financial instrument is due to be paid, at which point all the remaining outstanding principal and interest have been repaid. Core tier 1 capital The highest quality form of regulatory capital that comprises total shareholders’ equity and related minority interests, less goodwill and intangible assets and certain other regulatory adjustments. Credit default swap A derivative contract whereby a buyer pays a fee to a seller in return for receiving a payment in the event of a defined credit event (e.g. bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency) on an underlying obligation (which may or may not be held by the buyer). Credit derivative product Independent companies that specialise in selling credit default protection on companies (‘CDPC’s) corporate exposures in the form of credit derivatives. Credit enhancements Facilities used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Credit risk Risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises mainly from direct lending, trade finance and leasing business, but also from products such as guarantees, derivatives and debt securities. Credit risk adjustment An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties.

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Term Definition Credit risk mitigation A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as collateral, guarantee and credit protection. Credit risk spread The premium over the benchmark or risk-free rate required by the market to accept a lower credit quality. The yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks. The yield spread rises as the credit rating worsens. Customer deposits Money deposited by account holders. Such funds are recorded as liabilities. Customer risk rating (‘CRR’) A scale of 22 grades measuring internal obligor probability of default. Debt restructuring A restructuring by which the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as debt or interest charge reduction. Debt securities Assets on the Group’s balance sheet representing certificates of indebtedness of credit institutions, public bodies or other undertakings, excluding those issued by Central Banks. Debt securities in issue Transferable certificates of indebtedness of the Group to the bearer of the certificates. These are liabilities of the Group and include certificates of deposits. Delinquency See ‘Arrears’. Economic capital The internally calculated capital requirement which is deemed necessary by HSBC to support the risks to which it is exposed at a confidence level consistent with a target credit rating of AA. Economic profit The difference between the return on financial capital invested by shareholders (‘return on invested capital’) and the cost of that capital. Economic profit may be expressed as a whole number or as a percentage. Enhanced variable net asset Funds that price their assets on a fair value basis. Consequently, prices may change value funds from one day to the next. Equity risk The risk arising from positions, either long or short, in equities or equity-based instruments, which create exposure to a change in the market price of the equities or equity instruments. Expected loss (‘EL’) A regulatory calculation of the amount expected to be lost on an exposure using a 12 month time horizon and downturn loss estimates. EL is calculated by multiplying the Probability of Default (a percentage) by the Exposure at Default (an amount) and Loss Given Default (a percentage). Exposure A claim, contingent claim or position which carries a risk of financial loss. Exposure at default (‘EAD’) The amount expected to be outstanding after any credit risk mitigation, if and when the counterparty defaults. EAD reflects drawn balances as well as allowance for undrawn amounts of commitments and contingent exposures. Fair value adjustment An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model. First lien A security interest granted over an item of property to secure the repayment of a debt that places its holder first in line to collect repayment from the sale of the underlying collateral in the event of a default on the debt. Funded exposures A funded exposure is one where the notional amount of a contract is or has been exchanged. Funding risk A form of liquidity risk arising when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required.

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Term Definition Historic rating transition HRTMs show the probability of a counterparty with a particular rating moving to a matrices (‘HRTM’) different rating over a defined time horizon. Impaired loans Loans where the Group does not expect to collect all the contractual cash flows or expects to collect them later than they are contractually due. Impairment allowances Management’s best estimate of losses incurred in the loan portfolios at the balance sheet date. Individually assessed Exposure to loss is assessed on all individually significant accounts and all other impairment accounts that do not qualify for collective assessment. Insurance risk A risk, other than a financial risk, transferred from the holder of a contract to the insurance provider. The principal insurance risk is that, over time, the combined cost of claims, administration and acquisition of the contract may exceed the aggregate amount of premiums received and investment income. Internal Capital Adequacy The Group’s own assessment of the levels of capital that it needs to hold through an Assessment Process (‘ICAAP’) examination of its risk profile from regulatory and economic capital viewpoints. Internal Model Method (‘IMM’) One of three approaches defined by Basel II to determine exposure values for counterparty credit risk. Internal ratings-based approach A method of calculating credit risk capital requirements using internal, rather than (‘IRB’) supervisory, estimates of risk parameters. Invested capital Equity capital invested in HSBC by its shareholders. IRB advanced approach A method of calculating credit risk capital requirements using internal PD, LGD and EAD models. IRB foundation approach A method of calculating credit risk capital requirements using internal PD models but with supervisory estimates of LGD and conversion factors for the calculation of EAD. ISDA International Swaps and Derivatives Association. ISDA Master agreement Standardised contract developed by ISDA used as an umbrella under which bilateral derivatives contracts are entered into. Key management personnel Directors and Group Managing Directors of HSBC Holdings. Level 1 – quoted market price Financial instruments with quoted prices for identical instruments in active markets. Level 2 – valuation technique Financial instruments with quoted prices for similar instruments in active markets using observable inputs or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable. Level 3 – valuation technique Financial instruments valued using valuation techniques where one or more with significant unobservable significant inputs are unobservable. inputs Leveraged finance Funding provided for entities with higher than average indebtedness, which typically arises from sub-investment grade acquisitions or event-driven financing. Liquidity enhancement Liquidity enhancement makes funds available if required, for reasons other than asset default, e.g. to ensure timely repayment of maturing commercial paper. Liquidity risk The risk that HSBC does not have sufficient financial resources to meet its obligations as they fall due, or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows. Loan modification A process by which the terms of a loan are modified either temporarily or permanently, including changes to the rate and/or the payment. Modification may also lead to a re-ageing of the account.

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Term Definition Loan-to-value ratio (‘LTV’) A mathematical calculation that expresses the amount of the loan as a percentage of the value of security. A high LTV indicates that there is less cushion to protect the lender against house price falls or increases in the loan if repayments are not made and interest is added to the outstanding loan balance. Loans past due Loans on which repayments are overdue. Loss given default (‘LGD’) The estimated ratio (percentage) of the loss on an exposure to the amount outstanding at default (EAD) upon default of a counterparty. Market risk The risk that movements in market risk factors, including foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices will reduce income or portfolio values. Monoline insurers Entities which specialise in providing credit protection to the holders of debt (‘monolines’) instruments in the event of default by the debt security counterparty. This protection is typically held in the form of derivatives such as CDSs referencing the underlying exposures held. Mortgage-backed securities Securities that represent interests in groups of mortgages, which may be on (‘MBS’s) residential or commercial properties. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). When the MBS references mortgages with different risk profiles, the MBS is classified according to the highest risk class. Mortgage-related assets Assets which are referenced to underlying mortgages. Mortgage vintage The year a mortgage was originated. Medium term notes Notes issued by corporates across a range of maturities. MTNs are frequently issued (‘MTN’s) by corporates under MTN Programmes whereby notes are offered on a regular and continuous basis to investors. Net asset value per share Total shareholders’ equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue. Negative equity mortgages Negative equity is the value of the asset less the outstanding balance on the loan. It arises when the value of the property purchased is below the balance outstanding on the loan. Net interest income The amount of interest received or receivable on assets net of interest paid or payable on liabilities. Net principal exposure The gross principal amount of assets that are not protected by CDSs. It includes assets that benefit from monoline protection, except where this protection is purchased with a CDS. Non-conforming mortgages Mortgages that do not meet normal lending criteria, e.g. where the normal level of documentation has not been provided or where increased risk factors are present, such as poor credit history, result in lending at a rate that is higher than the normal lending rate. Operational risk The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events, including legal risk. Over-the-counter A bilateral transaction (e.g. derivatives) that is not exchange traded and valued using (‘OTC’) valuation models. Performance Shares Awards of HSBC Holdings ordinary shares under employee share plans that are subject to the achievement of corporate performance conditions. Prime A US description for mortgages granted to the most creditworthy category of borrowers. Private equity investments Equity securities in operating companies not quoted on a public exchange, often involving the investment of capital in private companies or the acquisition of a public company that results in the delisting of public equity.

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Term Definition Probability of default (‘PD’) The probability that an obligor will default within a one-year time horizon. Regulatory capital The capital which HSBC holds, determined in accordance with rules established by the FSA for the consolidated Group and by local regulators for individual Group companies. Renegotiated loans Loans whose terms have been renegotiated and are treated as up to date loans for measurement purposes once the minimum number of payments required under the new arrangements have been received. Restricted Shares Awards of HSBC Holdings ordinary shares to which employees will normally become entitled, generally between one and three years, subject to remaining an employee. Retail loans Money loaned to individuals rather than institutions. This includes both secured and unsecured loans such as mortgages and credit card balances. Return on equity Profit attributable to ordinary shareholders divided by average invested capital. Risk appetite An assessment of the types and quantum of risks to which HSBC wishes to be exposed. Risk-weighted assets Calculated by assigning a degree of risk expressed as a percentage (risk weight) to (‘RWA’s) an exposure in accordance with the applicable Standardised or IRB approach rules. Seasoning The emergence of credit loss patterns in portfolios over time. Second lien A security interest granted over an item of property to secure the repayment of a debt that is issued against the same collateral as a first lien but that is subordinate to it. In the case of default, repayment for this debt will only be received after the first lien has been repaid. Securitisation A transaction or scheme whereby the credit risk associated with an exposure, or pool of exposures, is tranched and where payments to investors in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures. A traditional securitisation involves the transfer of the exposures being securitised to an SPE which issues securities. In a synthetic securitisation, the tranching is achieved by the use of credit derivatives and the exposures are not removed from the balance sheet of the originator. Single-issuer liquidity facility A liquidity or stand-by line provided to a corporate customer which is different from a similar line provided to a conduit funding vehicle. Structured Investment Vehicles Special purpose entities which invest in diversified portfolios of interest-earning (‘SIV’s) assets, generally funded through issues of commercial paper, medium-term notes and other senior debt to take advantage of the spread differentials between the assets in the SIV and the funding cost. Special purpose entities A corporation, trust or other non-bank entity, established for a narrowly defined (‘SPE’s) purpose, including for carrying on securitisation activities. The structure of the entity and activities are intended to isolate the obligations of the SPE from those of the originator and the holders of the beneficial interests in the securitisation. Standardised approach In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions (‘ECAI’) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to the gross income of eight specified business lines. Structured finance / notes An instrument whose return is linked to the level of a specified index or the level of a specified asset. The return on a structured note can be linked to equities, interest rates, foreign exchange, commodities or credit. Structured notes may or may not offer full or partial capital protection in the event of a decline in the underlying index or asset.

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Term Definition Student loan related assets Securities with collateral relating to student loans. Subordinated liabilities Liabilities which rank after the claims of other creditors of the issuer in the event of insolvency or liquidation. Sub-prime A US description for customers with high credit risk, for example those who have limited credit histories, modest incomes, high debt-to-income ratios, high loan-to-value ratios (for real estate secured products) or have experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy or other credit-related problems. Tier 1 capital A component of regulatory capital, comprising core tier 1 and other tier 1 capital. Other tier 1 capital includes qualifying hybrid capital instruments such as non-cumulative perpetual preference shares and innovative tier 1 securities. Tier 2 capital A component of regulatory capital, comprising qualifying subordinated loan capital, related minority interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties. Troubled debt restructuring A US description for restructuring a debt whereby the creditor for economic or legal reasons related to a debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Unfunded exposures An exposure where the notional amount of a contract has not been exchanged. Value-at-risk A technique that measures the loss that could occur on risk positions as a result of (‘VAR’) adverse movements in market risk factors (e.g. rates, prices, volatilities) over a specified time horizon and to a given level of confidence. Wholesale loans Money loaned to sovereign borrowers, banks, non-bank financial institutions and corporate entities. Write-down Reduction in the carrying value of an asset due to impairment or fair value movements. Wrong-way risk An adverse correlation between the counterparty’s probability of default and the mark-to-market value of the underlying transaction.

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Accounting 365 payable under financial liabilities 249 developments (future) 367 projected scenario analysis 247 policies (critical) 61 Cautionary statement regarding forward-looking policies (significant) 157, 369 statements 6 Accounts Certificates of deposit and other time deposits approval 471 (maturity analysis) 60 basis of preparation 66, 365 Challenges and uncertainties 12 Acquisitions and disposals 444 Client assets 78 Actuarial assumptions 394 Collateral and credit enhancements 207 American Depositary Shares 474 Commercial Banking Annual General Meeting 333, 477 business highlights 71 Areas of special interest 214 financial performance 70 Asset-backed securities 154, 156 products and services 145 Assets strategic direction 70 average balance sheet 46 underlying/reported profit 72 by customer group 66 Committees (board) 310, 334 by geographical region 86, 417 Communication with shareholders 332, 478 charged as security 456 Concentration of exposure 208 held in custody and under administration 148 Conduits 182 intangible 438 Constant currency 21 other 444 Constant Net Asset Value funds 187 trading 422 Contents 1, 66, 85, 196, 294, 334, 472 underlying/reported reconciliation 44 Contingent liabilities and contractual Associates and joint ventures commitments 463 dilution gains 41, 386 Contractual obligations 56 interests in 432 Corporate governance share of profit in 40 codes 308 Audit committee (Group) 310 report 294 Auditors’ remuneration 400 Corporate sustainability 326 Auditors’ Report 350 committee 313 Balance sheet governance 328 average 46 risk 264 consolidated 42, 354 Cost efficiency ratio 3, 39 data 4, 67, 70, 76, 77, 80, 82, 88, 95, 98, 103, Credit coverage ratios 3 108, 114, 118, 122, 126, 133, 137, 142, Credit exposure 206 417 Credit quality 203 HSBC Holdings 360 classifications 226 insurance manufacturing subsidiaries 270 Credit risk underlying/reported reconciliation 44 challenges and uncertainties 17 Bank payroll tax 326 management thereof 201 Borrowings (short-term) 56 insurance 277 Brand perception 20 Critical accounting policies 61 Business highlights 68, 71, 74, 78 Cross-border exposures 206, 213 Business model 156 Customer accounts 87, 98, 107, 117, 125, 136 Business performance review recommendation 20 Europe 89, 93 underlying/reported reconciliation 45 Hong Kong 99, 101 Customer groups and global businesses 66 Latin America 138, 140 Daily distribution of revenues 253 Middle East 119, 121 Data security 149 North America 127, 131 Dealings in HSBC Holdings plc shares 332 Rest of Asia-Pacific 109, 112 Debt securities in issue 209, 446 Calendar (dividends) 473 accounting policy 384 Capital Defined terms inside front cover, 489 management and allocation 285 Deposits return on invested capital 2 average balances and average rates 58 structure 289 time 60 Capital and performance ratios 3, 4 Derivatives 208, 209, 424 Cash flow accounting policy 376 accounting policy 384 Dilution gains 41, 386 consolidated statement 356 Directors 294 HSBC Holdings 361 appointments and re-election 307 notes 461 biographies 294

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board of directors 302 reclassification 153 bonus 338 Financial assets and liabilities emoluments 400 accounting policy 370, 378 fees 344 by measurement basis 418 interests 316 critical accounting policy (valuation) 63 non-executive 343 Financial guarantee contracts other directorships 343 accounting policy 382 pensions 342, 346 Financial highlights 2 remuneration (executive) 337, 345 Financial instruments remuneration (principles) 334 accounting policy (fair value) 374 responsibilities (statement of) 349 credit quality 225 service contracts 343 fair values, 166 share plans 347 net income from 30, 385 Disclosure policy (market turmoil) 151 not at fair value 179 Dividends 2, 331, 332, 410, 472, 473 critical accounting policy (valuation) 63 Donations 327 Financial investments 428 Earnings per share 2, 19, 340, 341, 411 accounting policy 375 Economic briefing gains less losses from 31 Europe 88, 92 Financial liabilities designated at fair value 445 Hong Kong 99, 101 Financial risks (insurance) 272 Latin America 137, 140 Financial statements 5, 352 Middle East 118, 121 Five-year comparison 4 North America 125, 130 Footnotes 5, 149, 195, 291, 364 Rest of Asia-Pacific 107, 111 Foreign exchange Economic profit 41, 340 accounting policy 381 Efficiency and revenue mix ratios 3 exposures 257, 455 Employees 318 rates 4 compensation and benefits 326, 388 Funds under management 147 disabled 318 Geographical regions 85 engagement 20, 327 Global Banking and Markets involvement 318 asset-backed securities 154 remuneration policy 318 balance sheet data 76 Enforceability of judgements made in the US 472 business highlights 74 Enhanced Variable Net Asset Value funds 188 financial performance 73 Enquiries (from shareholders) 478 products and services 146 Equity 43 strategic direction 73 Equity securities 178, 255 underlying/reported profit 75 Europe Glossary 485 balance sheet data 88, 95, 417 Going concern 316 business performance 89, 93 Goodwill challenges and uncertainties 14 accounting policy 378 customer accounts by country 87 and intangible assets 434 economic briefing 88, 92 critical accounting policy 62 lending 211 Governance codes 294 loan impairment charges/allowances 231, 234, HSBC Holdings/New York Stock Exchange 237, 238 corporate governance differences 308 loans and advances to customers 87 Group Chairman’s Statement 8 principal operations 85 Group Management Board 310 profit/(loss) 87, 88, 95, 413 Health and safety 328 regulation and supervision (UK) 197 History and development of HSBC 482 underlying/reported profit 89, 92 Hong Kong Events after the balance sheet date 471 balance sheet data 98, 103, 417 Exchange controls and other limitations affecting business performance 99, 101 equity security holders 472 challenges and uncertainties 14 Exposures 152, 157, 162, 186, 188, 189, 206 economic briefing 99, 101 Fee income (net) 27 lending 211 Fair value loan impairment charges/allowances 231, 234, accounting policy 370 237, 238 Financial assets principal operations 85 critical accounting policy (valuation) 64 profit/(loss) 98, 103, 413 designated at fair value 423 regulation and supervision 197 not qualifying for de-recognition 431 underlying/reported profit 99, 102

496 HSBC Holdings plc profit/(loss) 137, 142, 413 balance sheet 360 underlying/reported profit 138, 140 cash flow 361 Lease commitments 465 credit risk 241 accounting policy 380 deferred tax 410 Legal dividends 473 challenges and uncertainties 17 employee emoluments 399 proceedings 148 financial assets and liabilities 177, 421 litigation 467 liquidity and funding management 249 Leveraged finance transactions 165, 194 market risk 258 Liabilities maturity analysis of assets and liabilities 455 average balance sheet 49 net income from financial instruments 385 other 447 related party transactions 471 subordinated 450 share plans 405, 347 trading 445 statement of changes in equity 362 underlying/reported reconciliation 44 structural foreign exchange exposures 258 Life insurance business 265 subordinated liabilities 453 Liquidity and funding 244 Impairment challenges and uncertainties 15 accounting policy 371 management of risk 245 allowances and charges 35, 230 impact of market turmoil 248 assessment 203 insurance 281 available-for-sale assets 178 policies and procedures 244 critical accounting policy 61 primary sources of funding 244 impaired loans and advances 230 Loans and advances losses as percentage of loans and advances 232 accounting policy 371 movement by industry and geographical collateral 207 region 232, 233, 234 concentration of exposure 209 Income statement (consolidated) 23, 353 credit quality of 203 Information on HSBC (availability thereof) 480 delinquency in the US 224 Insurance impairment 230, 238, 241 accounting policy 382 maturity and interest sensitivity 57 claims incurred (net) and movements in modifications and re-aging 224 liabilities to policyholders 34, 387 past due 229 liabilities under contracts issued 447 renegotiated 224 net earned premiums 32, 386 to banks by geographical region 213 PVIF business 283 to customers by industry sector and risk management 265 geographical region 45, 181, 211 Interest income/expense (net) 26 underlying/reported reconciliation 45 accounting policy 369 Market risk 250 analysis of changes in 53 impact of market turmoil 252 average balance sheet 46 insurance 274 sensitivity 57, 256 sensitivity analysis 251 Interim management statements 478 Market turmoil 151, 248, 252 Internal control 313 Maturity analysis of assets and liabilities 454 IFRSs and Hong Kong Financial Reporting Maximum exposure to credit risk 206 Standards comparison 366 Memorandum and Articles of Association 476 Investor relations 479 Middle East IT performance 20 balance sheet data 118, 122, 417 Key performance indicators business performance 119, 121 financial 18 challenges and uncertainties 14 non-financial 20 customer accounts by country 117 Latin America economic briefing 118, 121 balance sheet data 137, 142 lending 211 business performance 138, 140 loan impairment charges/allowances 231, 234, challenges and uncertainties 15 237, 238 customer accounts by country 136 loans and advances to customers 117, 212 economic briefing 137, 140 principal operations 85 lending 211 profit/(loss) 117, 122, 413 loan impairment charges/allowances 231, 234, underlying/reported profit 119, 120 237, 238 wholesale lending 214 loans and advances to customers 136, 212 Minority interests 457 principal operations 85 Money market funds 187

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Monoline insurers 163 75, 79, 81, 89, 92, 99, 102, 109, 112, 127, Mortgage lending 218, 222 130 Nomination committee 312 Property, plant and equipment 148, 439 Non-interest income accounting policy 379 accounting policy 369 Provisions 450 Non-life insurance business 266 accounting policy 382 Non-money market investment funds 188 PVIF 283 Non-trading portfolios 255 Ratios North America advances to deposits 246 balance sheet data 126, 133 capital and performance 3 business performance 127, 131 credit coverage 3 challenges and uncertainties 15 cost efficiency 3, 39 customer accounts by country 125 earnings to combined fixed charges 56 economic briefing 125, 130 financial 4 lending 211 key performance indicators 19 loan delinquency in the US 223 net liquid assets to customer liabilities 246 loan impairment charges/allowances 231, 234, Regulation and supervision 196 237, 238 challenges and uncertainties 16 loans and advances to customers 125 Related party transactions 468 mortgage lending 218 Remuneration committee 312, 334 principal operations 85 Renegotiated loans 224 profit/(loss) 126, 133, 413 Repricing gap 254 regulation and supervision (US) 198 Reputational risk 263 underlying/reported profit 127, 130 Residual value risk management 261 Off-balance sheet arrangements 194 Rest of Asia-Pacific Operating expenses 38 balance sheet data 108, 114 Operating income 33, 388 business performance 109, 112 Operational risk challenges and uncertainties 14 challenges and uncertainties 18 customer accounts by country 107 Organisational structure chart 484 economic briefing 107, 111 Other (notes) 80 lending 211 Pensions loan impairment charges/allowances 231, 234, accounting policy 380 237, 238 defined benefit plans 258, 395, 398 loans and advances to customers 107, 212 for directors 346 principal operations 85 risk 263 profit/(loss) 106, 114, 413 Performance and context 335 underlying/reported profit 109, 112 Personal Financial Services Rights issue 2, 466 business highlights 68 accounting policy 385 financial performance 67 Risk elements in loan portfolio 241 products and services 145 Risk management 157, 199, 336 strategic direction 67 appetite 200 underlying/reported profit 69 capital management and allocation 285 Personal lending 215 contingent liquidity 247 Pillar 2 and 3 288 control culture 201 Principal activities 12 credit 201 Private Banking credit spread 255 business highlights 78 gap risk 254, 260 financial performance 78 governance and ownership 199 products and services 147 insurance operations 265 strategic direction 77 legal 262 underlying/reported profit 79 liquidity and funding management 245 Products and services 145 market 250 Profit before tax operational 262 by country 87, 106, 117, 125 pension 263 by customer group 66, 67, 70 73, 77 80, 82 rating scales 226 by geographical region 86, 88, 95, 98, 103, reputational 263 108, 114, 118, 122, 126, 133, 137, 142, residual value 261 413 scenario stress testing 200 consolidated 353 security and fraud 263 data 4 sustainability 264 underlying/reported reconciliations 22, 69, 72, Risk-weighted assets 290

498 by principal subsidiary 291 Sale and repurchase agreements accounting policy 376 Securities held for trading 208 Securitisations 189 Segmental analysis 412 accounting policy 369 Senior management biographies 299 Share-based payments 401 accounting policy 381 Share capital 328, 457 accounting policy 384 notifiable interests in 332 ownership guidelines 342 rights and obligations 329 Share information 3 Share plans Bank of Bermuda plans 325, 461 discretionary plans 322 for directors 347, 402 for employees 319, 402 HSBC Finance plans 324, 406, 460 HSBC France plans 323, 406, 459 Performance Shares and Restricted Share awards 347, 402, 403 Shareholder (communications with) 332, 478 profile 476 Special purpose entities 181, 190, 194 Staff numbers 38, 388 Statement of changes in equity 357 Statement of comprehensive income 354 Stock symbols 476 Strategic direction 12 Structural foreign exchange exposure 257 Structured investment vehicles (‘SIV’s) 182 Subsidiaries 442 accounting policy 378 Supplier payment policy 328 Taxation accounting policy 380 challenges and uncertainties 18 deferred tax – critical accounting policy 65 expense 407 UK residents 480 US residents 481 Tier 1 capital 289, 290 Total shareholder return 3, 19, 340, 341, 342 Trading assets 422 accounting policy 374 Trading income (net) 28 Trading liabilities accounting policy 374 Trading market (nature of) 475 Trading portfolios 253 Troubled debt restructurings 242 Underlying performance 21 Value at risk 251 Wholesale lending 214

499