HSBC 2004 Annual Report Download - page 291

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(b) Guaranteed by HSBC Bank
The two issues of Non-cumulative Step-up Perpetual Preferred Securities (footnote 2) were made by Jersey
limited partnerships and are guaranteed, on a subordinated basis, by HSBC Bank. The proceeds of the issues
were on-lent to HSBC Bank by the limited partnerships by issue of subordinated notes. The Preferred Securities
qualify as innovative tier 1 capital for HSBC and for HSBC Bank on a solo and consolidated basis and, together
with the guarantee, are intended to provide investors with rights to income and capital distributions and
distributions upon liquidation of HSBC Bank that are equivalent to the rights they would have had if they had
purchased non-cumulative perpetual preference shares of HSBC Bank.
The Preferred Securities are perpetual, but redeemable in 2031 and 2020, respectively, at the option of the
general partner of the limited partnerships. If not redeemed the distributions payable step-up and become floating
rate. The same limitations on the payment of distributions applies to HSBC Bank, as to HSBC, as above, and
HSBC Bank has provided a similar covenant to that provided by HSBC Holdings, also as above.
If (i) any Preferred Securities are outstanding in November 2048 or April 2049, respectively, or (ii) the total
capital ratio of HSBC Bank on a solo and consolidated basis falls below the regulatory minimum ratio required,
or (iii) in view of the deteriorating financial condition of HSBC Bank, the Directors expect (ii) to occur in the
near term, then the Preferred Securities will be substituted by Preference Shares of HSBC Bank having economic
terms which are in all material respects equivalent to those of the Preferred Securities and the guarantee taken
together.
34 Called up share capital
Authorised
The authorised ordinary share capital of HSBC Holdings at 31 December 2004, 2003 and 2002 was US$7,500
million divided into 15,000 million ordinary shares of US$0.50 each, and £301,500 divided into 301,500 non-voting
deferred shares of £1 each.
At 31 December 2004, 2003 and 2002, the authorised preference share capital of HSBC Holdings was 10 million
non-cumulative preference shares of £0.01 each, 10 million non-cumulative preference shares of US$0.01 each, and
10 million non-cumulative preference shares of €0.01 each.
Issued
Number o
f
HSBC Holdings
ordinary shares US$m
At 1 January 2004 ........................................................................................................................... 10,960,018,480 5,481
Shares issued in connection with the early settlement of HSBC Finance Corporation
8.875 per cent Adjustable Conversion-Rate Equity Security Units ............................................. 1,590,319 1
Shares issued under HSBC Finance Corporation share plans .......................................................... 293,254 –
Shares issued to QUEST ................................................................................................................. 1,079,099 –
Shares issued under other employee share plans ............................................................................. 49,052,156 25
Shares issued in lieu of dividends ................................................................................................... 160,042,242 80
At 31 December 2004 .................................................................................................................... 11,172,075,550 5,587
At 1 January 2003 ........................................................................................................................... 9,480,820,796 4,741
Shares issued on acquisition of HSBC Finance Corporation ........................................................... 1,273,297,057 637
Shares issued in connection with the early settlement of HSBC Finance Corporation
8.875 per cent Adjustable Conversion-Rate Equity Security Units ............................................. 51,072,691 26
Shares issued under HSBC Finance Corporation share plans .......................................................... 26,576 –
Shares issued to QUEST ................................................................................................................. 2,200,630 1
Shares issued under other employee share plans ............................................................................. 33,858,455 17
Shares issued in lieu of dividends ................................................................................................... 118,742,275 59
At 31 December 2003 ..................................................................................................................... 10,960,018,480 5,481