(b)
(c)
(iii) Subsequent disposals of new HSBC Holdings shares
To the extent that new HSBC Holdings shares are received in exchange for Midland shares, a subsequent disposal of such new HSBC Holdings shares may result in a liability to UK taxation on capital gains for shareholders who are resident and/or ordinarily resident in the UK, or who carry on a business in the UK through a branch or agency to which the new HSBC Holdings shares are attributable. Any chargeable gain or allowable loss on such disposal would be calculated taking into account the allowable indexed original cost to the holder for capital gains purposes of acquiring the relevant Midland shares, or, in appropriate cases, the indexed value of the Midland shares on 31 March 1982.
(iv) Subsequent disposals of new HSBC Holdings bonds
To the extent that new HSBC Holdings bonds are received in exchange for Midland shares, the appropriate proportion of any chargeable gain or allowable loss accrued in respect of the Midland shares up to the time of their exchange for the new HSBC Holdings bonds, computed by reference to the excess of the market value of the Midland shares at that time over the relevant allowable base cost for capital gains purposes, will be deemed to arise on a subsequent disposal of the new HSBC Holdings bonds (including on redemption or repayment). This may result in a liability to UK taxation on capital gains for bondholders who are resident and/or ordinarily resident in the UK, or who carry on a business in the UK through a branch or agency to which the new HSBC Holdings bonds are attributable. New HSBC Holdings bonds will be qualifying corporate bonds. Accordingly, no indexation allowance will accrue in respect of the new HSBC Holdings bonds for the purposes of UK taxation on capital gains, and any gain or loss on the new HSBC Holdings bonds will not be taken into account for such purposes.
Persons who currently hold Midland shares for trading purposes will be subject to different tax treatment.
Midland share option schemes
Shareholders who acquired or acquire their Midland shares by exercising options under the Midland share option schemes are reminded that special taxation provisions may apply to them on exercise of their options or on any disposal of the Midland shares acquired on exercise, including provisions imposing a charge to UK income tax.
General
The attention of Midland shareholders is drawn to Part XI of the Listing Particulars, which includes further information on the tax position of HSBC Holdings and the tax treatment of a holder of new HSBC Holdings shares and new HSBC Holdings bonds.
A Midland shareholder who is in any doubt about his or her own tax position should consult his or her professional advisers.
Procedure for acceptance
11.
(a)
To accept the Final Offer
(b)
(c)
To accept the Final Offer, you must complete Box 1 and Box 4 and sign Box 3 of the accompanying Form of Acceptance in the presence of a witness, who should also sign, in accordance with the instructions printed thereon.
To accept the Final Offer and elect for the Cash Election
To accept the Final Offer and elect for the Cash Election, you must complete Boxes 1, 2 and 4 and sign Box 3 of the accompanying Form of Acceptance in the presence of a witness, who should also sign, in accordance with the instructions printed thereon. An election for the Cash Election will not be valid unless the Form of Acceptance, correctly completed in all respects and accompanied by all relevant share certificate(s) and/or other document(s) of title, are received by the time the Cash Election closes see paragraph 3 of this letter.
Bonds in bearer form
If you want to receive the new HSBC Holdings bonds to which you become entitled under the Final Offer in bearer form, you should put "Yes" in Box [7] of the Form of Acceptance and specify, by completing as appropriate in Box [7], the relevant Euroclear or CEDEL account number. You may only elect to receive new HSBC Holdings bonds in bearer form if you specify that such bearer bonds are to be delivered for credit to a Euroclear or CEDEL account. If any such instructions are not validly given, bonds will be issued in registered form. Bearer bonds
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