FORM 6-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                        Report of Foreign Private Issuer
                    Pursuant to Rule 13a - 16 or 15d - 16 of
                      the Securities Exchange Act of 1934

                          For the month of December, 2006

                               HSBC Holdings plc

                              42nd Floor, 8 Canada
                        Square, London E14 5HQ, England


(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).

                          Form 20-F X Form 40-F ......

(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).

                                Yes....... No X


(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)




THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.  If you are in
any doubt about this  document or as to the action you should  take,  you should
consult a stockbroker,  solicitor,  accountant or other appropriate  independent
professional adviser.

If you sold or transferred  all or some of your ordinary  shares on or before 21
November 2006, but those shares are included in the number shown in box 1 on the
accompanying Form of Election or Entitlement Advice, you should,  without delay,
consult the  stockbroker  or other agent  through  whom the sale or transfer was
effected for advice on the action you should take.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents
of this document, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this document.  The
ordinary shares of HSBC Holdings plc trade under stock symbol 5 on The Stock
Exchange of Hong Kong.


HSBC

                                                                 5 December 2006

Dear Shareholder

SCRIP DIVIDEND SCHEME AND PAYMENT OF DIVIDENDS IN UNITED STATES DOLLARS,
STERLING OR HONG KONG DOLLARS
On 6 November 2006,  your Directors  declared a third interim  dividend for
2006 of US$0.15 per ordinary  share,  payable on 18 January 2007. You may elect
to receive:
1.  a scrip dividend of new shares at a 'Market Value' of US$18.7596
    (GBP9.65) per share;
2.  a cash dividend in United States dollars, sterling, or Hong Kong dollars; or
3.  a combination of cash and scrip dividend.
For  illustration,  using the  exchange  rates on 28  November  2006,  the third
interim dividend in sterling and Hong Kong dollars would have been approximately
GBP0.077 and  HK$1.166.  The precise  amounts which will be payable per ordinary
share in  either  sterling  or Hong  Kong  dollars  on 18  January  2007 will be
converted  from United States dollars using the exchange rates on 8 January 2007
as explained on page 2. Please read this letter carefully.

1.   Scrip dividend
     ______________

     If you have already given standing instructions to receive new shares under
     the Scrip Dividend  Scheme,  you will find an Entitlement  Advice  enclosed
     with this  letter.  You need take no further  action if you wish to receive
     the number of new shares  shown on the  Entitlement  Advice.  If you do not
     wish to receive the maximum  entitlement to new shares,  a letter  revoking
     your standing instructions must be received by the appropriate  Registrars,
     at the address  given on page 8, by close of business on 3 January 2007. If
     you wish to receive new shares in respect of only part of this dividend, or
     if you wish to receive  your cash  dividend  in any  combination  of United
     States  dollars,  sterling  and  Hong  Kong  dollars,  please  also ask the
     Registrars for a Form of Election in time to return it to them by 3 January
     2007.
     If you have not  previously  given  standing  instructions  to receive  new
     shares under the Scrip  Dividend  Scheme and you wish to receive new shares
     in lieu of the cash  dividend,  you  should  complete  and sign the Form of
     Election  enclosed  with  this  letter  and  return  it to the  appropriate
     Registrars,  at the address given on page 8, by 3 January 2007. If you take
     no action,  you will receive the dividend in cash in the currency indicated
     on the Form of Election.  We will calculate your  entitlement to new shares
     using a 'Market  Value' of  US$18.7596  (GBP9.65)  for each new  share.  An
     explanation of the calculation of 'Market Value' and the basis of allotment
     of new  shares is set out in  paragraphs  2 and 3 of the  Appendix  to this
     letter.
     Since fractions of shares cannot be issued,  if you have elected to receive
     the maximum  entitlement to new shares,  any residual dividend  entitlement
     will be carried forward in United States dollars. This will be added to the
     next  dividend to determine the number of new shares to be received on that
     occasion.  Residual  dividend  entitlements  carried  forward will not bear
     interest.
     The scrip dividend  alternative will enable  shareholders to increase their
     holdings of shares without incurring dealing costs or stamp duty.  However,
     the scrip dividend on shares held through the American  Depositary  Receipt
     programme or Euroclear France, the settlement and central depositary system
     in France,  will be subject to Stamp Duty  Reserve Tax,  currently  1.5 per
     cent of the Market Value. To the extent that shareholders  elect to receive
     new  shares,  the  Company  will  benefit by  retaining  cash  which  would
     otherwise be payable by way of  dividend.  The Appendix to this letter sets
     out details of the Scrip Dividend  Scheme and provides a general outline of
     the tax considerations in the United Kingdom and overseas.  Please read the
     next section  regarding the payment of dividends in cash,  even if you wish
     to receive your dividend in the form of new shares.

2.   Cash dividend
     _____________

     If your shares were recorded on the Principal Register at close of business
     on 24 November 2006, you will  automatically  receive any dividends payable
     to you in cash in sterling,  unless you have previously  elected to receive
     payment in United  States  dollars or Hong Kong dollars.  However,  if your
     address  is in  the  United  States  you  will  automatically  receive  any
     dividends payable to you in cash in United States dollars,  unless you have
     previously elected to receive payment in Hong Kong dollars or sterling.
     If your shares were recorded on the Hong Kong Overseas  Branch  Register at
     close of business on 24 November 2006, you will  automatically  receive any
     dividends  payable  to you in cash in Hong Kong  dollars,  unless  you have
     previously elected to receive payment in United States dollars or sterling.
     If your shares were  recorded on the Bermuda  Overseas  Branch  Register at
     close of business on 24 November 2006, you will  automatically  receive any
     dividends payable to you in cash in United States dollars,  unless you have
     previously elected to receive payment in Hong Kong dollars or sterling.
     The currency in which any  dividends  payable to you in cash are to be paid
     is stated on the accompanying  Form of Election or Entitlement  Advice.  If
     you wish to give standing  instructions to receive such dividends in one of
     the other available  currencies  (United States  dollars,  sterling or Hong
     Kong dollars),  you should complete the One Currency  Election on page 2 of
     the Form of Election or Entitlement Advice.  Completion of the One Currency
     Election  will not revoke a standing  instruction  to receive  the  maximum
     entitlement to new shares under the Scrip Dividend Scheme.

3.   Combination of cash and scrip dividend
     ______________________________________

     If you wish to receive  this  dividend in a  combination  of the  available
     currencies  or in a combination  of cash and new shares,  you must complete
     Section  B on page 1 of the  Form of  Election.  If you  have  received  an
     Entitlement  Advice  with this letter and not a Form of  Election,  and you
     wish to receive your dividend in cash, in any  combination of the available
     currencies, or in a combination of cash and new shares, you should write to
     the appropriate Registrars,  at the address given on page 8, to revoke your
     standing instructions for scrip dividends and to request a Form of Election
     in time to return it to them by 3 January 2007.

     Dividends  payable in sterling or Hong Kong dollars on 18 January 2007 will
     be  converted  from United  States  dollars at the forward  exchange  rates
     quoted by HSBC Bank plc in London at or about  11.00 am on 8 January  2007.
     The exchange  rates will be announced to the London,  Hong Kong,  New York,
     Paris and Bermuda stock exchanges.

     Dividend  warrants  and,  where  applicable,  new  share  certificates  are
     expected to be mailed to shareholders on or about 18 January 2007.
     Whether you elect to receive  your  dividends  in cash or in shares,  it is
     recommended that you complete and return the Dividend  Payment  Instruction
     on page 2 of the  accompanying  Form of Election or  Entitlement  Advice so
     that  any  dividends  payable  to you in cash  can be  sent  to  your  bank
     account(s)  as you  require.  It is not  necessary  for you to complete the
     Dividend  Payment  Instruction if you have already given  instructions  for
     cash  dividends  to be sent direct to your bank account and you do not wish
     to change those instructions.

Yours sincerely

R G Barber
Group Company Secretary


APPENDIX
SCRIP DIVIDEND SCHEME ('THE SCHEME')

1.  Terms

     The Scheme,  authority for which shareholders renewed at the Annual General
     Meeting  on 31 May 2002  for a  further  five-year  period,  will  apply in
     respect of the second interim dividend for 2006.
     Holders of  ordinary  shares on the  Principal  Register as at the close of
     business in England on 24 November 2006 or on the Hong Kong Overseas Branch
     Register as at the close of business in Hong Kong on 24 November 2006 or on
     the Bermuda  Overseas Branch Register as at close of business in Bermuda on
     18 August 2006 (other  than those  shareholders  referred to below) will be
     able to elect to  receive  new  shares in  respect  of all or part of their
     holdings of shares (see  paragraph 3 below) as an  alternative to receiving
     the second interim dividend for 2006 of US$0.15 per share in cash.
     The new  ordinary  shares  will be issued  subject  to the  Memorandum  and
     Articles  of  Association  of the Company  and will rank  equally  with the
     existing issued ordinary shares in all respects.


2.  Market Value

     The 'Market  Value' is the average of the middle market  quotations for the
     ordinary  shares on the London  Stock  Exchange,  as derived from the Daily
     Official  List,  for the five business  days  beginning on 22 November 2006
     (the day on which the shares  were  first  quoted  ex-dividend).  Since the
     dividend is declared in United  States  dollars,  the average of the middle
     market  quotations of GBP9.65 was then converted into United States dollars
     using the exchange rate quoted by HSBC Bank plc in London at 11.00 am on 28
     November 2006, giving the Market Value of US$18.7596 for each new share.


3.  Basis of allotment and examples

    Your entitlement to new shares is based on:
    (a)  the Market Value (as defined in paragraph 2 above) of US$18.7596 per
         share;
    (b)  the cash dividend of US$0.15 per share; and
    (c)  the number of shares held by you on 24 November 2006
         ('the record date').
    The formula used for calculating your entitlement is as follows:
         Number of shares held at the record date x cash  dividend  per share
         + any residual  dividend  entitlement  brought
         forward = maximum dividend available for share election
         __________________________

         Maximum dividend available               = maximum number of new
                 Market Value                       shares (rounded to the
                                                    nearest whole number)

     You may  elect to  receive  new  shares in  respect  of all or part of your
     holding of ordinary shares. No fraction of a share will be issued.
     If you elect to receive  the  maximum  number of new shares in lieu of your
     dividend,  a residual  dividend  entitlement  may arise,  representing  the
     difference between the total Market Value of the new shares and the maximum
     dividend available on your shareholding. This residual dividend entitlement
     will be carried forward in United States dollars (without  interest) to the
     next dividend (see Example 1).
     If you choose to take only part of your  dividend as new  shares,  you will
     receive the balance in cash (see Example 2).
     Example 1
     If you have 1,000 ordinary shares, your maximum entitlement will be
     calculated as follows:
     Your cash dividend (1,000 x US$0.15)                             US$150.00
     Plus residual dividend entitlement brought forward (say)         US$  4.00
                                                                      _________
    Maximum dividend available _________                              US$154.00
                               US$154.00                              _________
                                                                      _________

    Number of new shares     =           =8.2091                 = 8 new shares
                               US18.7596
    Total Market Value of 8 new shares = 8 x US$18.7596              US$ 150.08
    Plus residual dividend entitlement carried forward
    (US$154.00 - US$150.08)                                          US$   3.92
                                                                     __________
                                                                     __________

                                                                     US$ 154.00
                                                                     __________

     Example 2
     If you have  1,000  ordinary  shares and a  residual  dividend  entitlement
     brought forward of, say,  US$4.00,  your maximum  entitlement will be 8 new
     shares,  as shown in  Example  1.  Should  you wish to  receive  only 5 new
     shares,  you should insert this number in the  appropriate box in Section B
     (i) on the Form of  Election.  The cash  balance  due to you would  then be
     calculated as follows:
     Your cash dividend (1,000 x US$0.15)                            US$ 150.00
     Plus residual dividend entitlement brought forward (say)        US$   4.00
                                                                     __________
                                                                     __________

     Maximum dividend available                                      US$ 154.00
                                                                     __________

     Total Market Value of 5 new shares = 5 x US$18.7596             US$  93.80
     Plus cash balance (US$154.00 - US$93.80)                        US$  60.20
                                                                     __________

                                                                     US$ 154.00
                                                                     __________


     In addition to the 5 new ordinary  shares,  you will receive a cash balance
     of US$60.20. The cash balance will be paid to you in the currency indicated
     in box 4 on the  Form of  Election,  unless  you give  instructions  to the
     contrary by indicating the  currency/currencies  you wish to receive in the
     boxes in  Sections B (iii) to B (v).  An example of how Section B of a Form
     of Election might be completed is given below.

________________________________________________________________________________

    Section B -Complete  this  section  if you  wish to  receive  your
               dividend  in cash in a  combination  of the available currencies
               or in a combination of cash and new shares

    I/We wish to receive my/our dividend in shares and/or in cash as follows:
    in shares

                                                              5   Shares
    (i)    please insert the number of new
           shares you wish to receive
          (see box 3 above for maximum)          US$         93.80

    (ii)   total value of new shares you
           wish to receive (number of new
           shares in (i) above x US$17.9844)     US$         20.06

    in cash
    (iii)  in US$                                US$         20.07

    (iv)   in sterling, the equivalent of
           (please insert US$ amount)            US$         20.07

    (v)    in HK$, the equivalent of
           (please insert US$ amount)            US$        154.00

    Maximum dividend available (the sum of
    (ii) + (iii) + (iv) + (v))
________________________________________________________________________________

4.  Payment of residual dividend entitlements
    Residual dividend entitlements will be payable in cash (without interest)
    if, at any time, you:
    *  dispose of your entire holding; or
    *  make an election in respect of part only of your holding; or
    *  receive the full cash dividend on the whole of your holding; or
    *  revoke your standing instructions to receive scrip dividends; or
    *  so request in writing to the appropriate Registrars.

5.  How to participate in the Scheme

 (a) If you have already given  standing  instructions  to receive new shares
     under the Scheme,  you will find an Entitlement  Advice  enclosed with this
     letter.  You need take no further  action  unless  you wish to revoke  your
     standing  instructions  or to elect to  receive  a  smaller  number  of new
     shares.  If you do not  formally  revoke your  standing  instructions  by 3
     January 2007,  you will receive the number of new ordinary  shares shown in
     box 2 on the accompanying Entitlement Advice. If you do not wish to receive
     new shares,  a letter  revoking the standing  instructions to receive scrip
     dividends  must be received by the  appropriate  Registrars  at the address
     given on the  Entitlement  Advice by close of business on 3 January 2007. A
     cash  dividend  will then be paid on your  entire  holding in the  currency
     shown in box 5 on the Entitlement Advice. If, however,  you wish to receive
     new  shares  in  respect  of only part of this  dividend  or if you wish to
     receive any dividend payable to you in cash in a currency/currencies  other
     than that shown in box 5 on the  Entitlement  Advice,  please  also ask the
     Registrars for a Form of Election in time to return it to them by 3 January
     2007.  In any event,  if you revoke  your  standing  instructions  you will
     receive a Form of  Election  for any future  dividends  to which the Scheme
     applies.

 (b) If you have not previously  given standing  instructions to receive new
     shares  under the Scheme  and you wish to  receive  new shares in lieu of a
     cash dividend on this  occasion  only,  an election to  participate  in the
     Scheme  must be made on the  accompanying  Form of  Election.  The  Form is
     issued to shareholders registered as at 24 November 2006 and should be read
     in  conjunction  with  this  letter.  If you wish to elect to  receive  the
     maximum  entitlement  to new  shares  for this  dividend,  you may do so by
     inserting a 'X' in the box in Section A (i) of the Form of Election. If you
     wish to elect to  receive a  smaller  number  of  shares  than the  maximum
     entitlement,  you  should  complete  Section B of the Form.  To be valid in
     respect of the dividend payable on 18 January 2007, a Form of Election must
     be  completed  correctly,  signed and  received  by the  Registrars  at the
     address given on page 2 of the Form by close of business on 3 January 2007.

 (c) If you have not previously  given standing  instructions  to receive new
     shares under the Scheme and you wish to receive the maximum  entitlement to
     new shares automatically for this and for subsequent dividends to which the
     Scheme  applies,  you may do so by  inserting a 'X' in the box in Section A
     (ii) of the  accompanying  Form of Election and then signing and  returning
     the Form to the Registrars at the address given on page 2 of the Form.
     Completion  of Section A (ii) of the Form will  ensure  that you receive
     your maximum entitlement to new shares offered in lieu of the third interim
     dividend for 2006 payable on 18 January 2007 and for subsequent  dividends.
     Your  standing  instructions  may be revoked  at any time by giving  signed
     notice in writing to the appropriate  Registrars.  However, such revocation
     will  take  effect  in  respect  of an  offer of  shares  in lieu of a cash
     dividend  only if the  notice is  received  on or before the final date for
     receipt of Forms of Election  in respect of that  dividend.  Your  standing
     instructions will lapse  automatically if at any time you cease to hold any
     ordinary shares.


     ON THE ASSUMPTION THAT NO RESIDUAL DIVIDEND ENTITLEMENT IS BROUGHT FORWARD,
     SHAREHOLDERS  WITH A  HOLDING  AS AT 24  NOVEMBER  2006 OF  FEWER  THAN 126
     ORDINARY  SHARES  WHO HAVE GIVEN  STANDING  INSTRUCTIONS  TO RECEIVE  SCRIP
     DIVIDENDS,  OR WHO MAKE AN ELECTION TO RECEIVE  SCRIP  DIVIDENDS,  WILL NOT
     RECEIVE  ANY NEW  SHARES  ON THIS  OCCASION  AND WILL HAVE  THEIR  DIVIDEND
     ENTITLEMENT  CARRIED FORWARD IN UNITED STATES DOLLARS (WITHOUT INTEREST) AS
     DESCRIBED ON PAGE 1.


6.   Overseas shareholders

     No person  receiving  a copy of this  document or a Form of Election in any
     jurisdiction  outside the United  Kingdom ('UK') or Hong Kong may treat the
     same as offering a right to elect to receive  new shares  unless such offer
     could lawfully be made to such person without the Company being required to
     comply  with any  governmental  or  regulatory  procedures  or any  similar
     formalities. It is the responsibility of any person outside the UK and Hong
     Kong who wishes to receive  new shares  under the Scheme to comply with the
     laws  of the  relevant  jurisdiction(s),  including  the  obtaining  of any
     governmental or other consents and compliance  with all other  formalities.
     It is also the responsibility of any person who receives new shares in lieu
     of a cash  dividend  to comply with any  restrictions  on the resale of the
     shares  which  may  apply  outside  the  UK and  Hong  Kong.  For  example,
     shareholders  in Ontario who have scrip  dividend  shares  allotted to them
     must ensure that the first trade of their scrip dividend shares is executed
     on a stock exchange outside Canada.


7.   Issue of share certificates and listing of new shares

     Application  will be made to the UK  Listing  Authority  and to the  London
     Stock  Exchange for the new shares to be admitted to the Official  List and
     to trading respectively, to the Stock Exchange of Hong Kong for listing of,
     and permission to deal in, the new shares,  and to the New York,  Paris and
     Bermuda stock exchanges for listing of the new shares.
     Existing  ordinary  shares on the Principal  Register may be held either in
     certificated  form,  or in  uncertificated  form  through  CREST.  Where  a
     shareholder  has  holdings  of  ordinary  shares in both  certificated  and
     uncertificated  form,  each  holding  will be  treated  separately  for the
     purpose of calculating entitlements to new shares.
     Definitive share certificates for the new shares issued under the Scheme in
     respect of  holdings  in  certificated  form are  expected  to be mailed to
     shareholders entitled thereto at their risk on 18 January 2007, at the same
     time as warrants  in respect of the cash  dividend  are mailed.  New shares
     issued  under the  Scheme in  respect of  holdings  of shares  which are in
     uncertificated form will also be issued in uncertificated form. The Company
     will arrange for the relevant  shareholders'  stock accounts in CREST to be
     credited with the appropriate numbers of new shares on 18 January 2007.
     Dealings in the new shares in London, Hong Kong, Paris and Bermuda,  and in
     the  American  Depositary  Shares in New York,  are expected to begin on 18
     January 2007.


8.   If you have sold or transferred your shares

     If you sold or transferred all or some of your ordinary shares on or before
     21  November  2006  (the date on which the  shares  eligible  for the third
     interim dividend for 2006 were last quoted cum-dividend on the London, Hong
     Kong and  Bermuda  stock  exchanges),  but those  shares  are  nevertheless
     included in the number shown in box 1 on the accompanying  Form of Election
     or Entitlement Advice, you should,  without delay,  consult the stockbroker
     or other agent through whom the sale or transfer was effected for advice on
     the action you should take.


9.   General

     If all  shareholders  were to elect to take up  their  entitlements  to new
     shares under the Scheme in respect of the third interim  dividend for 2006,
     92,522,759 new shares would be issued, representing an increase of 0.80 per
     cent in the issued  ordinary share capital of the Company as at 28 November
     2006.

     The total  cost of the  third  interim  dividend  for  2006,  ignoring  any
     elections for the scrip alternative, is approximately US$1,736 million. The
     applicable tax credit is the sterling  equivalent of  approximately  US$193
     million.

     Whether or not it is to your  advantage  to elect to receive  new  ordinary
     shares in lieu of a cash dividend or to elect to receive  payment in United
     States  dollars,  sterling or Hong Kong dollars is a matter for  individual
     decision   by  each   shareholder.   HSBC   Holdings   cannot   accept  any
     responsibility  for your  decision.  The effect on the tax  position of any
     shareholder will depend on that shareholder's particular circumstances.  If
     you are in any doubt as to what to do, you should consult your professional
     advisers.  No  acknowledgement  of  receipt of a Form of  Election  will be
     issued.


10.  Tax return

     To  assist  shareholders  who  receive  a scrip  dividend,  we will  send a
     Notional Tax Voucher which may be needed for tax returns. This will contain
     the following particulars:

     *  number of ordinary shares held at close of business on 24 November 2006
     *  number of new ordinary shares allotted
     *  total dividend payable
     *  residual dividend entitlement (if any) brought forward from previous
        dividend
     *  residual dividend entitlement (if any) carried forward to the next
        dividend
     *  cash equivalent of the new shares allotted
     *  amount of UK income tax treated as paid on the new shares.


11.  Taxation

     The precise tax consequences for a shareholder receiving a cash dividend or
     electing to receive new shares in lieu of a cash  dividend will depend upon
     the shareholder's own individual circumstances.  The following is a general
     outline of the tax  consequences  in the UK and overseas,  based on current
     law and practice.
     No tax is currently  withheld  from  dividends  paid by the  Company.  Such
     dividends carry a tax credit equal to one-ninth of the dividend.
    (i)   Cash dividends
          UK resident individuals
          Individual shareholders,  who are resident in the UK for tax purposes,
          will generally be subject to income tax on the aggregate amount of the
          dividend and associated tax credit. For example, on a cash dividend of
          US$90 an  individual  would be  treated  as having  received  dividend
          income equal to the  sterling  equivalent  of both the US$90  dividend
          received  and the  associated  tax credit of US$10 and as having  paid
          income tax equal to the sterling  equivalent of US$10 (the  associated
          tax credit).
          Individual  shareholders  who are liable to income tax at the starting
          rate or basic  rate only will have no further  tax to pay,  as the tax
          liability will be fully extinguished by the associated tax credit.
          Individual shareholders who are not liable to income tax are not able
          to recover the tax credit.
          Individual  shareholders subject to income tax at the higher rate will
          be  liable to tax at a rate of 32.5 per cent on the  aggregate  of the
          dividend and the associated tax credit. For example,  if a higher rate
          tax payer were to receive a dividend of US$90, he/she would for income
          tax  purposes be treated as  receiving  dividend  income  equal to the
          sterling  equivalent  of both  the  US$90  dividend  received  and the
          associated tax credit of US$10. The related tax liability would be the
          sterling  equivalent of US$32.50.  However,  the associated tax credit
          equal to the sterling equivalent of US$10 would be set against the tax
          liability,  leaving the individual with net tax to pay of the sterling
          equivalent of US$22.50.
          UK resident trustees
          Trustees of  discretionary  trusts,  which are  usually  liable to pay
          income tax at the rate of 40 per cent,  may be required to account for
          additional tax on UK dividend income at 32.5 per cent of the aggregate
          amount of dividend  received and the  associated  tax credit,  against
          which the effective 10 per cent tax credit may be offset.
          UK resident companies
          Corporate  shareholders  (other than certain  insurance  companies and
          companies  which  hold  shares on trading  account)  are not liable to
          corporation  tax or income tax in respect of dividends  received  from
          the Company.
          UK resident gross funds/charities
          There is no entitlement,  for either a gross fund or charity, to a tax
          credit and  consequently  no claim to recover  the tax credit  will be
          possible.
          Non-UK residents
          Generally,  non-UK residents will not be subject to any UK taxation in
          respect of UK  dividend  income  nor will they be able to recover  the
          associated tax credit.
          Non-UK  resident  shareholders  may be subject  to tax on UK  dividend
          income  under any law to which that person is subject  outside the UK.
          Non-UK  resident  shareholders  should  consult their own tax advisers
          with  regard to their  liability  to  taxation  in respect of the cash
          dividend.
          There are special rules which apply to non-UK resident discretionary
          trusts in receipt of UK dividends.
    (ii)  Scrip dividends
          UK resident individuals
          The tax  consequences  of  electing to receive new shares in lieu of a
          dividend are similar to those of receiving cash dividends.
          Individual  shareholders  who elect to receive new shares in lieu of a
          cash dividend will be treated as having  received  income of an amount
          which,  when reduced by income tax at the starting rate  (currently 10
          per  cent) is equal to the 'cash  equivalent'  which  would  have been
          received had they not elected to receive new shares.  For example if a
          shareholder  elected  to  receive  new  shares in lieu of a US$90 cash
          dividend,  they would for UK tax  purposes  be  treated  as  receiving
          income of US$100 and as having paid tax equivalent to US$10.
          Individual  shareholders  who are liable to income tax at the starting
          rate or basic  rate only will have no further  tax to pay.  Individual
          shareholders  liable to tax at the  higher  rate will be liable to pay
          additional  tax at the rate of 22.5 per cent of the  aggregate  of the
          cash  equivalent  and  associated  tax  credit  (which  equates to the
          sterling equivalent of US$22.50 in the example above).
          For income tax  purposes,  HM Revenue & Customs  will  substitute  the
          market  value of the  shares on the first day they are dealt in on the
          London Stock  Exchange  for the 'cash  equivalent'  if the  difference
          between the cash  dividend  and the market  value equals or exceeds 15
          per cent of the market value.
          For  capital  gains tax  purposes  the new shares will be treated as a
          separate  holding.  The base cost of these shares will equal the 'cash
          equivalent' or, if  substantially  different,  the market value on the
          first day of dealing.

          UK resident trustees
          Trustees of  discretionary  trusts liable to account for income tax on
          the  income of the trust  will be  treated  as having  received  gross
          income  equal to the 'cash  equivalent'  as described  above.  Any tax
          liability will be calculated in line with the cash dividend  treatment
          described above (tax at a rate of 32.5 per cent being partially offset
          by the effective 10 per cent tax credit).
          UK resident companies
          Corporate  shareholders  will not be liable to corporation  tax on the
          receipt of new shares. For capital gains tax purposes the base cost of
          these shares will be nil.
          UK resident gross funds/charities
          There is no entitlement,  for either a gross fund or charity, to a tax
          credit and  consequently  no claim to recover  the tax credit  will be
          possible.
          Non-UK residents
          Individual  shareholders will be treated for UK tax purposes as having
          received income of an amount which,  when reduced by income tax at the
          starting  rate   (currently  10  per  cent)  is  equal  to  the  'cash
          equivalent'  which  would have been  received  had they not elected to
          receive  new  shares.  No UK tax  assessment  will  be  made  on  such
          individuals, but the tax credit cannot be recovered.
          However,  a non-UK  resident  shareholder may be subject to tax on the
          new  shares  received  under any law to which  that  person is subject
          outside the UK. Non-UK resident  shareholders should consult their own
          tax advisers with regard to their  liability to taxation in respect of
          the new shares.
          Residual dividend entitlement
          Under  current  legislation,  a UK  resident  shareholder  will not be
          subject to UK tax on any amount carried forward as a residual dividend
          entitlement  until  either a new  share or cash is  received.  The tax
          treatment  of the new  ordinary  share will be the same as that of any
          other new ordinary share issued at the same time as a scrip  dividend.
          Any payment in cash will be taxed as a cash dividend.





                                Timetable of events
________________________________________________________________________________
                                                             
   American Depositary Shares quoted ex-dividend in New York    21 November 2006
   Shares quoted ex-dividend in London, Hong Kong and Bermuda   22 November 2006
   Record date for the first interim dividend for 2005          24 November 2006
   Shares quoted ex-dividend in Paris                           27 November 2006
   FINAL DATE FOR RECEIPT BY REGISTRARS OF FORMS OF ELECTION
   AND REVOCATIONS OF STANDING INSTRUCTIONS FOR SCRIP DIVIDENDS   3 January 2007
   Exchange rate determined for payment of dividends in sterling
   and Hong Kong dollars                                          8 January 2007
   Payment date - dividend warrants mailed; new share
   certificates or Bermuda Overseas
   Branch Register Transaction Advices and Notional
   Tax Vouchers mailed; shares credited to stock
   accounts in CREST                                             18 January 2006

   Expected first day of dealings in new shares in London,
   Hong Kong, Paris and Bermuda; and in American Depositary
   Shares in New York                                            18 January 2007
________________________________________________________________________________



Further  copies of this  letter,  replacement  Forms of  Election  and a Chinese
translation of this and future documents may be obtained from the Registrars



                                                        
Principal Register                                         Hong Kong Overseas Branch Register
Computershare Investor Services PLC                        Computershare Hong Kong Investor Services Limited
PO Box 1064                                                Hopewell Centre, 46th Floor
The Pavilions                                              183 Queen's Road East
Bridgwater Road                                            Wan Chai
Bristol                                                    Hong Kong SAR
BS99 3FA
United Kingdom
Telephone: (44) 0870 702 0137 (calls cost from 8p/min)     Telephone: 2862 8555
Email: web.queries@computershare.co.uk                     Email: hkinfo@computershare.com.hk

Bermuda Overseas Branch Register                           US Shareholder helpline
Corporate Shareholder Services                             Telephone: 1 866 299 4242
The Bank of Bermuda Limited
6 Front Street
Hamilton HM 11
Telephone: 299 6737



Within this  document  the Hong Kong Special  Administrative  Region of the
People's  Republic of China has been  referred to as 'Hong Kong'.

The  Directors of HSBC  Holdings plc are S K Green,  Baroness  Dunn*,  Sir Brian
Moffat+, M F Geoghegan, Lord Butler+, R K F Ch'ien+, J D Coombe+, R A Fairhead+,
D  J  Flint,  W  K  L  Fung+,  S  Hintze+,  J  W  J  Hughes-Hallett+,  Sir  Mark
Moody-Stuart+,  G Morgan+, S W Newton+, S M Robertson+,  H Sohmen* and Sir Brian
Williamson+.

* Non-executive Director
+ Independent non-executive Director



                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                               HSBC Holdings plc

                                                By:
                                                Name:  P A Stafford
                                                Title: Assistant Group Secretary
                                                Date:  05 December 2006