HSBC 2002 Annual Report Download - page 155

HSBC HOLDINGS PLC
Report of the Directors
153
Results for 2002
HSBC reported operating profit before provisions of
US$10,787 million. Profit attributable to
shareholders of HSBC Holdings was US$6,239
million, a 12.3 per cent return on shareholders’
funds. The retained profit to be transferred to
reserves was US$1,238 million.
A first interim dividend of US$0.205 per
ordinary share was paid on 9 October 2002. The
Directors have declared a second interim dividend of
US$0.325 per ordinary share in lieu of a final
dividend, making a total distribution for the year of
US$5,001 million. The second interim dividend will
be payable on 6 May 2003 in cash in United States
dollars, or in sterling or Hong Kong dollars at
exchange rates to be determined on 28 April 2003,
with a scrip dividend alternative. The reserves
available for distribution before accounting for the
second interim dividend of US$3,069 million are
US$10,943 million.
Further information about the results is given in
the consolidated profit and loss account on page 190.
Principal activities and business
review
Through its subsidiary and associated undertakings,
HSBC provides a comprehensive range of banking
and related financial services through an
international network of over 8,000 offices in 80
countries and territories in Europe, the Asia-Pacific
region, the Americas, the Middle East and Africa.
Taken together, the five largest customers of HSBC
do not account for more than 2 per cent of HSBC’ s
income.
On 29 May 2002, HSBC Holdings and AEA
Investors Inc. agreed in principle that HSBC will
invest up to US$750 million over the next five years
in a new US$1 billion plus private equity fund being
organised by AEA.
On 28 June 2002, Merrill Lynch HSBC
('MLHSBC') became a 100 per cent owned
subsidiary of HSBC. MLHSBC was formed as a
50:50 joint venture between HSBC and Merrill
Lynch in April 2000 to provide direct investment and
banking services primarily over the internet to mass
affluent investors outside the United States.
On 14 November 2002, HSBC and Household
International, Inc. ("Household") entered into an
agreement for HSBC to acquire Household. The
agreeement is subject to a number of conditions
including the approval of shareholders of Household,
and regulatory and other consents and approvals in
the USA, Canada, UK and other relevant
jurisdictions. Under the terms of the agreement,
Household common shareholders will be entitled to
receive 2.675 HSBC ordinary shares or 0.535 HSBC
American Depositary Shares for each share of
Household common stock.
On 25 November 2002, HSBC Insurance
Holdings Limited subscribed for new common
shares of Ping An Insurance Company of China, Ltd.
equivalent to 10 per cent of Ping An's enlarged
issued share capital, for a consideration of US$600
million.
On 25 November 2002, HSBC completed the
acquisition of 99.59 per cent of GF Bital for a
consideration of US$1,135 million.
A review of the development of the business of
HSBC undertakings during the year and an
indication of likely future developments are given in
the ‘Description of Business’ on pages 8 to 33.
HSBC’ s five-year strategy, launched in
December 1998, is designed to focus on shareholder
value. HSBC Holdings’ governing objective is to
exceed the total shareholder return of a benchmark
comprising a peer group of financial institutions,
with a minimum objective of doubling shareholder
return over the five-year period. Total shareholder
return for the first four years was 155 per cent,
compared to 95 per cent for the benchmark (starting
point 100 per cent on 31 December 1998). An
explanation of the basis of calculation of total
shareholder return can be found on page 174.
Capital and reserves
The following events occurred during the year:
Scrip dividends
1. 75,150,755 ordinary shares of US$0.50 each
were issued at par on 7 May 2002 to
shareholders who elected to receive new shares
in lieu of the 2001 second interim dividend. The
market value per share used to calculate
shareholders’ entitlements to new shares was
US$11.3968, being the United States dollar
equivalent of £8.009.
2. 14,434,840 ordinary shares of US$0.50 each
were issued at par on 9 October 2002 to