News Release

MLHSBC to be Integrated Into HSBC

17 May 2002

HSBC and Merrill Lynch have agreed in principle that their joint venture company, Merrill Lynch HSBC (MLHSBC), will be integrated into the HSBC Group.

MLHSBC was formed as a 50:50 joint venture between HSBC and Merrill Lynch in April 2000 to provide direct investment and banking services over the internet to mass affluent investors outside the US. The company currently operates in Australia, Canada and the UK.

In the past year, MLHSBC has been ranked first in Europe for Usability by BlueSky International, and Most Consumer Friendly Online Broker by Investors Week magazine. In Australia, the company was named Online Broker of the Year and Best Online Broker for Experienced Investors by Personal Investor magazine and by yourbroker.com.au respectively. The Globe & Mail in Canada ranked MLHSBC a close second to the countrys market leading broker.

However, notwithstanding the progress made, economic conditions and low online investor volume have created a difficult trading environment for the joint venture and business expansion plans have been postponed for the time being. Following a strategic review of the joint venture, it was considered that the business could be developed more effectively if integrated within the HSBC Group rather than remaining as a joint venture. The decision also reflects Merrill Lynchs review of its international retail operations in the light of changed market conditions.

Going forward, MLHSBC will enjoy more direct access to the resources of HSBC. It is intended that the business will continue to use Merrill Lynch as part of its name and clients will still have access to Merrill Lynch research for 2½ years. Merrill Lynch will also continue to provide trading and settlement services for a transition period.

Keith Whitson, HSBCs Group Chief Executive and Chairman of MLHSBC, said: HSBC remains confident in the long-term prospects for MLHSBCs business. We are pleased that the new structure allows for a continuing relationship with Merrill Lynch, including access to Merrills research for MLHSBC clients.

Michael Marks, Executive Vice President of Merrill Lynch and Chairman of Merrill Lynch Investment Managers and International Private Client Group, commented: We are very pleased to have reached this agreement with HSBC, which has resulted from a strategic review of all our business operations in the light of changed market conditions.

Merrill Lynch does not envisage a material impact to its financial results for the 2002 second quarter or future periods as a result of this agreement. As at 31 December 2001, the net asset value of MLHSBC was US$109 million.