Annual Financial Report - 37 of 38

Accounting 365

developments (future) 367

policies (critical) 61

policies (significant) 157, 369

Accounts

approval 471

basis of preparation 66, 365

Acquisitions and disposals 444

Actuarial assumptions 394

American Depositary Shares 474

Annual General Meeting 333, 477

Areas of special interest 214

Asset-backed securities 154, 156

Assets

average balance sheet 46

by customer group 66

by geographical region 86, 417

charged as security 456

held in custody and under administration 148

intangible 438

other 444

trading 422

underlying/reported reconciliation 44

Associates and joint ventures

dilution gains 41, 386

interests in 432

share of profit in 40

Audit committee (Group) 310

Auditors' remuneration 400

Auditors' Report 350

Balance sheet

average 46

consolidated 42, 354

data 4, 67, 70, 76, 77, 80, 82, 88, 95, 98, 103, 108, 114, 118, 122, 126, 133, 137, 142, 417

HSBC Holdings 360

insurance manufacturing subsidiaries 270

underlying/reported reconciliation 44

Bank payroll tax 326

Borrowings (short-term) 56

Brand perception 20

Business highlights 68, 71, 74, 78

Business model 156

Business performance review

Europe 89, 93

Hong Kong 99, 101

Latin America 138, 140

Middle East 119, 121

North America 127, 131

Rest of Asia-Pacific 109, 112

Calendar (dividends) 473

Capital

management and allocation 285

return on invested capital 2

structure 289

Capital and performance ratios 3, 4

Cash flow

accounting policy 384

consolidated statement 356

HSBC Holdings 361

notes 461

payable under financial liabilities 249

projected scenario analysis 247

Cautionary statement regarding forward-looking statements 6

Certificates of deposit and other time deposits (maturity analysis) 60

Challenges and uncertainties 12

Client assets 78

Collateral and credit enhancements 207

Commercial Banking

business highlights 71

financial performance 70

products and services 145

strategic direction 70

underlying/reported profit 72

Committees (board) 310, 334

Communication with shareholders 332, 478

Concentration of exposure 208

Conduits 182

Constant currency 21

Constant Net Asset Value funds 187

Contents 1, 66, 85, 196, 294, 334, 472

Contingent liabilities and contractual commitments 463

Contractual obligations 56

Corporate governance

codes 308

report 294

Corporate sustainability 326

committee 313

governance 328

risk 264

Cost efficiency ratio 3, 39

Credit coverage ratios 3

Credit exposure 206

Credit quality 203

classifications 226

Credit risk

challenges and uncertainties 17

management thereof 201

insurance 277

Critical accounting policies 61

Cross-border exposures 206, 213

Customer accounts 87, 98, 107, 117, 125, 136

recommendation 20

underlying/reported reconciliation 45

Customer groups and global businesses 66

Daily distribution of revenues 253

Data security 149

Dealings in HSBC Holdings plc shares 332

Debt securities in issue 209, 446

accounting policy 384

Defined terms inside front cover, 489

Deposits

average balances and average rates 58

time 60

Derivatives 208, 209, 424

accounting policy 376

Dilution gains 41, 386

Directors 294

appointments and re-election 307

biographies 294

board of directors 302

bonus 338

emoluments 400

fees 344

interests 316

non-executive 343

other directorships 343

pensions 342, 346

remuneration (executive) 337, 345

remuneration (principles) 334

responsibilities (statement of) 349

service contracts 343

share plans 347

Disclosure policy (market turmoil) 151

Dividends 2, 331, 332, 410, 472, 473

Donations 327

Earnings per share 2, 19, 340, 341, 411

Economic briefing

Europe 88, 92

Hong Kong 99, 101

Latin America 137, 140

Middle East 118, 121

North America 125, 130

Rest of Asia-Pacific 107, 111

Economic profit 41, 340

Efficiency and revenue mix ratios 3

Employees 318

compensation and benefits 326, 388

disabled 318

engagement 20, 327

involvement 318

remuneration policy 318

Enforceability of judgements made in the US 472

Enhanced Variable Net Asset Value funds 188

Enquiries (from shareholders) 478

Equity 43

Equity securities 178, 255

Europe

balance sheet data 88, 95, 417

business performance 89, 93

challenges and uncertainties 14

customer accounts by country 87

economic briefing 88, 92

lending 211

loan impairment charges/allowances 231, 234, 237, 238

loans and advances to customers 87

principal operations 85

profit/(loss) 87, 88, 95, 413

regulation and supervision (UK) 197

underlying/reported profit 89, 92

Events after the balance sheet date 471

Exchange controls and other limitations affecting equity security holders 472

Exposures 152, 157, 162, 186, 188, 189, 206

Fee income (net) 27

Fair value

accounting policy 370

Financial assets

critical accounting policy (valuation) 64

designated at fair value 423

not qualifying for de-recognition 431

reclassification 153

Financial assets and liabilities

accounting policy 370, 378

by measurement basis 418

critical accounting policy (valuation) 63

Financial guarantee contracts

accounting policy 382

Financial highlights 2

Financial instruments

accounting policy (fair value) 374

credit quality 225

fair values, 166

net income from 30, 385

not at fair value 179

critical accounting policy (valuation) 63

Financial investments 428

accounting policy 375

gains less losses from 31

Financial liabilities designated at fair value 445

Financial risks (insurance) 272

Financial statements 5, 352

Five-year comparison 4

Footnotes 5, 149, 195, 291, 364

Foreign exchange

accounting policy 381

exposures 257, 455

rates 4

Funds under management 147

Geographical regions 85

Global Banking and Markets

asset-backed securities 154

balance sheet data 76

business highlights 74

financial performance 73

products and services 146

strategic direction 73

underlying/reported profit 75

Glossary 485

Going concern 316

Goodwill

accounting policy 378

and intangible assets 434

critical accounting policy 62

Governance codes 294

HSBC Holdings/New York Stock Exchange corporate governance differences 308

Group Chairman's Statement 8

Group Management Board 310

Health and safety 328

History and development of HSBC 482

Hong Kong

balance sheet data 98, 103, 417

business performance 99, 101

challenges and uncertainties 14

economic briefing 99, 101

lending 211

loan impairment charges/allowances 231, 234, 237, 238

principal operations 85

profit/(loss) 98, 103, 413

regulation and supervision 197

underlying/reported profit 99, 102

HSBC Holdings plc

balance sheet 360

cash flow 361

credit risk 241

deferred tax 410

dividends 473

employee emoluments 399

financial assets and liabilities 177, 421

liquidity and funding management 249

market risk 258

maturity analysis of assets and liabilities 455

net income from financial instruments 385

related party transactions 471

share plans 405, 347

statement of changes in equity 362

structural foreign exchange exposures 258

subordinated liabilities 453

Impairment

accounting policy 371

allowances and charges 35, 230

assessment 203

available-for-sale assets 178

critical accounting policy 61

impaired loans and advances 230

losses as percentage of loans and advances 232

movement by industry and geographical region 232, 233, 234

Income statement (consolidated) 23, 353

Information on HSBC (availability thereof) 480

Insurance

accounting policy 382

claims incurred (net) and movements in liabilities to policyholders 34, 387

liabilities under contracts issued 447

net earned premiums 32, 386

PVIF business 283

risk management 265

Interest income/expense (net) 26

accounting policy 369

analysis of changes in 53

average balance sheet 46

sensitivity 57, 256

Interim management statements 478

Internal control 313

IFRSs and Hong Kong Financial Reporting Standards comparison 366

Investor relations 479

IT performance 20

Key performance indicators

financial 18

non-financial 20

Latin America

balance sheet data 137, 142

business performance 138, 140

challenges and uncertainties 15

customer accounts by country 136

economic briefing 137, 140

lending 211

loan impairment charges/allowances 231, 234, 237, 238

loans and advances to customers 136, 212

principal operations 85

profit/(loss) 137, 142, 413

underlying/reported profit 138, 140

Lease commitments 465

accounting policy 380

Legal

challenges and uncertainties 17

proceedings 148

litigation 467

Leveraged finance transactions 165, 194

Liabilities

average balance sheet 49

other 447

subordinated 450

trading 445

underlying/reported reconciliation 44

Life insurance business 265

Liquidity and funding 244

challenges and uncertainties 15

management of risk 245

impact of market turmoil 248

insurance 281

policies and procedures 244

primary sources of funding 244

Loans and advances

accounting policy 371

collateral 207

concentration of exposure 209

credit quality of 203

delinquency in the US 224

impairment 230, 238, 241

maturity and interest sensitivity 57

modifications and re-aging 224

past due 229

renegotiated 224

to banks by geographical region 213

to customers by industry sector and geographical region 45, 181, 211

underlying/reported reconciliation 45

Market risk 250

impact of market turmoil 252

insurance 274

sensitivity analysis 251

Market turmoil 151, 248, 252

Maturity analysis of assets and liabilities 454

Maximum exposure to credit risk 206

Memorandum and Articles of Association 476

Middle East

balance sheet data 118, 122, 417

business performance 119, 121

challenges and uncertainties 14

customer accounts by country 117

economic briefing 118, 121

lending 211

loan impairment charges/allowances 231, 234, 237, 238

loans and advances to customers 117, 212

principal operations 85

profit/(loss) 117, 122, 413

underlying/reported profit 119, 120

wholesale lending 214

Minority interests 457

Money market funds 187

Monoline insurers 163

Mortgage lending 218, 222

Nomination committee 312

Non-interest income

accounting policy 369

Non-life insurance business 266

Non-money market investment funds 188

Non-trading portfolios 255

North America

balance sheet data 126, 133

business performance 127, 131

challenges and uncertainties 15

customer accounts by country 125

economic briefing 125, 130

lending 211

loan delinquency in the US 223

loan impairment charges/allowances 231, 234, 237, 238

loans and advances to customers 125

mortgage lending 218

principal operations 85

profit/(loss) 126, 133, 413

regulation and supervision (US) 198

underlying/reported profit 127, 130

Off-balance sheet arrangements 194

Operating expenses 38

Operating income 33, 388

Operational risk

challenges and uncertainties 18

Organisational structure chart 484

Other (notes) 80

Pensions

accounting policy 380

defined benefit plans 258, 395, 398

for directors 346

risk 263

Performance and context 335

Personal Financial Services

business highlights 68

financial performance 67

products and services 145

strategic direction 67

underlying/reported profit 69

Personal lending 215

Pillar 2 and 3 288

Principal activities 12

Private Banking

business highlights 78

financial performance 78

products and services 147

strategic direction 77

underlying/reported profit 79

Products and services 145

Profit before tax

by country 87, 106, 117, 125

by customer group 66, 67, 70 73, 77 80, 82

by geographical region 86, 88, 95, 98, 103, 108, 114, 118, 122, 126, 133, 137, 142, 413

consolidated 353

data 4

underlying/reported reconciliations 22, 69, 72, 75, 79, 81, 89, 92, 99, 102, 109, 112, 127, 130

Property, plant and equipment 148, 439

accounting policy 379

Provisions 450

accounting policy 382

PVIF 283

Ratios

advances to deposits 246

capital and performance 3

credit coverage 3

cost efficiency 3, 39

earnings to combined fixed charges 56

financial 4

key performance indicators 19

net liquid assets to customer liabilities 246

Regulation and supervision 196

challenges and uncertainties 16

Related party transactions 468

Remuneration committee 312, 334

Renegotiated loans 224

Repricing gap 254

Reputational risk 263

Residual value risk management 261

Rest of Asia-Pacific

balance sheet data 108, 114

business performance 109, 112

challenges and uncertainties 14

customer accounts by country 107

economic briefing 107, 111

lending 211

loan impairment charges/allowances 231, 234, 237, 238

loans and advances to customers 107, 212

principal operations 85

profit/(loss) 106, 114, 413

underlying/reported profit 109, 112

Rights issue 2, 466

accounting policy 385

Risk elements in loan portfolio 241

Risk management 157, 199, 336

appetite 200

capital management and allocation 285

contingent liquidity 247

control culture 201

credit 201

credit spread 255

gap risk 254, 260

governance and ownership 199

insurance operations 265

legal 262

liquidity and funding management 245

market 250

operational 262

pension 263

rating scales 226

reputational 263

residual value 261

scenario stress testing 200

security and fraud 263

sustainability 264

Risk-weighted assets 290

by principal subsidiary 291

Sale and repurchase agreements

accounting policy 376

Securities held for trading 208

Securitisations 189

Segmental analysis 412

accounting policy 369

Senior management

biographies 299

Share-based payments 401

accounting policy 381

Share capital 328, 457

accounting policy 384

notifiable interests in 332

ownership guidelines 342

rights and obligations 329

Share information 3

Share plans

Bank of Bermuda plans 325, 461

discretionary plans 322

for directors 347, 402

for employees 319, 402

HSBC Finance plans 324, 406, 460

HSBC France plans 323, 406, 459

Performance Shares and Restricted Share awards 347, 402, 403

Shareholder (communications with) 332, 478

profile 476

Special purpose entities 181, 190, 194

Staff numbers 38, 388

Statement of changes in equity 357

Statement of comprehensive income 354

Stock symbols 476

Strategic direction 12

Structural foreign exchange exposure 257

Structured investment vehicles ('SIV's) 182

Subsidiaries 442

accounting policy 378

Supplier payment policy 328

Taxation

accounting policy 380

challenges and uncertainties 18

deferred tax - critical accounting policy 65

expense 407

UK residents 480

US residents 481

Tier 1 capital 289, 290

Total shareholder return 3, 19, 340, 341, 342

Trading assets 422

accounting policy 374

Trading income (net) 28

Trading liabilities

accounting policy 374

Trading market (nature of) 475

Trading portfolios 253

Troubled debt restructurings 242

Underlying performance 21

Value at risk 251

Wholesale lending 214