HSBC 2012 Annual Report Download - page 122

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Footnotes
120
Footnotes to pages 3 to 119
Financial highlights
1 Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of,
or for, that year. The third interim dividend for 2011 of US$0.09 was paid on 18 January 2012. The fourth interim dividend for 2011 of
US$0.14 was paid on 2 May 2012. First, second and third interim dividends for 2012, each of US$0.09 per ordinary share, were paid
on 5 July 2012, 4 October 2012 and 12 December 2012, respectively. Note 10 on the Financial Statements provides more information
on the dividends declared in 2012. On 4 March 2013 the Directors declared a fourth interim dividend for 2012 of US$0.18 per ordinary
share in lieu of a final dividend, which will be payable to ordinary shareholders on 8 May 2013 in cash in US dollars, or in pounds
sterling or Hong Kong dollars at exchange rates to be determined on 29 April 2013, with a scrip dividend alternative. The reserves
available for distribution at 31 December 2012 were US$38,175m.
Quarterly dividends of US$15.50 per 6.2% non-cumulative Series A US 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 US dollar preference share, were paid on
15 March 2012, 15 June 2012, 17 September 2012 and 17 December 2012.
Quarterly coupons of US$0.508 per security were paid with respect to 8.125% capital securities on 17 January 2012, 16 April 2012,
16 July 2012 and 15 October 2012.
Quarterly coupons of US$0.50 per security were paid with respect to 8% capital securities on 15 March 2012, 15 June 2012,
17 September 2012 and 17 December 2012.
2 The return on average ordinary shareholders’ equity is defined as profit attributable to ordinary shareholders of the parent company
divided by average ordinary shareholders’ equity.
3 Return on average invested capital is based on the profit attributable to ordinary shareholders. Average invested capital is measured
as average total shareholders’ equity after adding back goodwill previously amortised or written-off directly to reserves, deducting
average equity preference shares issued by HSBC Holdings and deducting/(adding) average reserves for unrealised gains/(losses) on
effective cash flow hedges and available-for-sale securities and property revaluation reserves. This measure reflects capital initially
invested and subsequent profit.
4 The cost efficiency ratio is defined as total operating expenses divided by net operating income before loan impairment charges and
other credit risk provisions.
5 Each American Depositary Share represents five ordinary shares.
6 Total shareholder return is defined as the growth in share value and declared dividend income during the relevant period.
7 The Financial Times Stock Exchange 100 Index.
8 The Morgan Stanley Capital International World Index.
9 The Morgan Stanley Capital International World Bank Index.
10 The core tier 1 capital ratio for 2012 and 2011 includes the effect of the Basel 2.5 rules.
Business and operating models and KPIs
11 Based upon pro forma post-tax profits allocation. See page 349 for details.
12 Intermediation of securities, funds and insurance products, including Securities Services in GB&M.
13 Merger and acquisition, ECM, event and project financing, and co-investments in GPB.
14 Including Foreign Exchange, Rates, Credit and Equities.
15 Including portfolio management.
16 Including private trust and estate planning (for financial and non-financial assets).
17 Including hedge funds, real estate and private equity.
18 Vehicle Finance was sold in 2010.
19 ‘Transactions’ refers to the sale or closure of non-strategic businesses or non-core investment.
20 Hong Kong, Rest of Asia-Pacific, Middle East and North Africa, and Latin America.
21 Net operating income before loan impairment charges and other credit risk provisions, also referred to as ‘revenue.’
22 The sum of balances presented does not agree to consolidated amounts because inter-company eliminations are not presented here.
23 For definitions of HSBC UK, HBAP and HSBC US, see footnotes 40 to 42, respectively, on page 249. Subsidiaries of these entities are
not included unless there is unrestricted transferability of liquidity between the subsidiaries and the parent. ‘Other entities’ (footnote 43
on page 249) comprise our other main banking subsidiaries and, as such, includes businesses spread across a range of locations, in
many of which we may require a higher ratio of net liquid assets to customer liabilities to reflect local market conditions.
Reconciliations of reported and underlying profit/(loss) before tax
24 ‘Currency translation adjustment’ is the effect of translating the results of subsidiaries and associates for the previous year at the
average rates of exchange applicable in the current year.
25 Positive numbers are favourable: negative numbers are unfavourable.
26 Changes in fair value due to movements in own credit spread on long-term debt issued. This does not include the fair value changes
due to own credit spread on structured notes issued, derivatives and other hybrid instruments included within trading liabilities.
27 Other income in this context comprises where applicable net trading income, net income/(expense) from other financial instruments
designated at fair value, gains less losses from financial investments, dividend income, net earned insurance premiums and other
operating income less net insurance claims incurred and movement in liabilities to policyholders.
28 Individual reconciliations by global businesses and geographical regions are available on www.hsbc.com.
29 Underlying performance eliminates the effects of acquisitions, disposals and changes of ownership levels of subsidiaries, associates
and businesses so we can view results on a like-for-like basis. We achieve this by eliminating gains and losses on disposal or dilution in
the year incurred and by removing material results of operations from all the years presented. For example, if a disposal was made in
the current year after four months of operations, the results of the disposed of business would be removed from the results of the current
year and the previous year as if the disposed of business did not exist in those years.
30 In addition, the operating results of these disposals were removed from underlying results.
31 The presentation of the ‘Reconciliation of reported and underlying profit/(loss) before tax’ for 2011 compared with 2010 has not been
updated to reflect the change in presentation in 2012 splitting underlying reconciliations from the constant currency reconciliations.
The presentational change had no material impact on results.
32 These columns comprise the net increments or decrements in profits in the current year compared with the previous year which are
attributable to acquisitions or disposals, gains on the dilution of interests in associates and/or movements in fair value of own debt