TNAG-2474-FCO40-3604-Business-matters-in-Hong-Kong-acquisition-of-Midland-Bank-by-1992 — Page 42

4.

5.

amount. A summary of this Agreement is set out in paragraph 4 of Part IV of the Supplementary Listing Particulars.

Your attention is drawn to paragraph 7 of this letter and to the further terms of the Cash Election set out or referred to in Appendix I to this document and in the Form of Acceptance.

Details of the new HSBC Holdings shares

The new HSBC Holdings shares to be issued pursuant to the Final Offer will be issued credited as fully paid and will rank pari passu in all respects and have identical rights with the existing HSBC Holdings shares, including the right to receive in full all dividends and other distributions declared, made or paid hereafter. The first dividend which holders of the new HSBC Holdings shares will be entitled to receive will be the HSBC Holdings interim dividend in respect of the year ending 31 December 1992 expected to be declared in August 1992 and paid in November 1992.

The rights attaching to the new HSBC Holdings shares will be set out in the articles of association of HSBC Holdings which will be altered with effect from the date on which the Final Offer becomes or is declared unconditional in all respects. A summary of such rights is set out in paragraph 8 of Part VI of the Listing Particulars.

The 1992 interim dividend and all subsequent HSBC Holdings dividends will be declared and paid in sterling. However, holders of both new and existing HSBC Holdings shares will be entitled to elect to receive their dividends in Hong Kong dollars.

The 1992 interim dividend is expected to be paid when HSBC Holdings is not UK tax resident. Since it will not carry an associated UK tax credit, this dividend will not be treated in the same way as dividends previously paid by Midland. Notwithstanding there being no associated UK tax credit in respect of the 1992 interim dividend paid prior to HSBC Holdings becoming UK tax resident, the Final Offer represents a substantial increase in income for Midland shareholders based on 1991 dividends, as set out in paragraph 6 below. Holders of new HSBC Holdings shares who are UK resident and whose dividends are paid in sterling will receive the 1992 interim dividend after deduction of basic rate UK income tax (which will be set against their liability to UK tax or repaid where no tax is payable). All subsequent dividends will be paid when HSBC Holdings is UK tax resident and will be treated for UK tax purposes in the same way as dividends previously paid by Midland.

HSBC Holdings, like Midland, operates a scheme under which HSBC Holdings shareholders may elect to receive new Ordinary Shares by way of a scrip dividend instead of payment of dividends in cash. Such scheme will operate in respect of the HSBC Holdings interim dividend in respect of the year ending 31 December 1992 and details will be sent to HSBC Holdings shareholders at the relevant time.

Further details of the 1992 interim dividend and the payment of dividends thereafter, and an outline of the taxation treatment of dividends, are set out in paragraph 1 of Part III and in Part XI of the Listing Particulars.

As at the latest practicable date prior to the printing of this document, it was expected that all of the shares of HSBC Holdings would be included in both the FTSE 100 Index and the FT Actuaries All Share Index; the FTSE 100 Index Steering Committee was to consider the timing and eligibility of HSBC Holdings becoming a constituent of the FTSE 100 Index and whether such shares should be so included from the date on which the Final Offer becomes or is declared unconditional in all respects or following HSBC Holdings becoming UK tax resident on 1 January 1993. The decision of the Committee will be announced in due course.

Details of the new HSBC Holdings bonds

The new HSBC Holdings bonds will be issued in multiples of £1 in registered form and in multiples of £1,000, £10,000 and £100,000 in bearer form with coupons attached. Accepting Midland shareholders will receive the new HSBC Holdings bonds in registered form unless they elect to receive them in bearer form and specify that such bearer bonds are to be delivered for credit to a Euroclear or CEDEL account. Registered bonds will be exchangeable for bearer bonds and vice versa. The bonds will bear interest at a fixed coupon payable annually in arrears from the date which is 21 days after the date on which the Final Offer becomes or is declared unconditional in all respects. The coupon, which will be determined as soon as possible after 2.00 p.m. on the later of the day on which the Final Offer becomes or is declared unconditional

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