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Business SummaryBermuda 2011

Global reachLocal commitment

HSBC Bank Bermuda Limited is a leading provider of financial services in Bermuda, fulfilling the needs of individuals, institutions and corporations locally and globally.

Contents

Message from the CEO 4

Performance and Financials 6

Why HSBC Bermuda 10

Service 13

Community 14

Strategic Focus 16

Our People 18

Message from the CEO

Bermuda continues, as other jurisdictions, to experience a period of unprecedented economic challenge. This state is likely to persist for the next 18 to 24 months and, when recovery occurs, we expect nominal growth rates. Accordingly, our current and ongoing focus is to strengthen our client relationships as we remain

ready to meet their needs. Our business is well managed and our conservative customer-centric strategy is appropriate for the current environment.

On a consolidated basis for the year ended 31 December 2011, we achieved a net profit of US$152 million, total

HSBC Bermuda’s capital strength, liquidity, local knowledge, global reach and commitment to our community enable us to effectively serve the needs of our customers.

Philip M. Butterfield, Chief Executive Officer

HSBC Bermuda Business Summary 20114

operating income of US$423 million, cost efficiency of 55% and our balance sheet reached US$14,881 million. These results affirm our resiliency, the strength of the HSBC brand and our delivery of world-class value propositions to our local and international customers.

When HSBC first established its presence in Bermuda, there were three commitments that we made; improve our ability to offer an expanded set of products and services to our clients; afford our staff the opportunity for more significant professional skills improvement, and enhance the reputation of Bermuda as an international financial centre. I am proud that we have successfully achieved these goals and that we continue to develop as Bermuda’s leading financial institution.

Our introduction last year of a new investment option – structured products – is an example of our ability to successfully tailor solutions for individual customers. Corporate clients also continue to realise the benefits of our global capabilities, as we deliver unique cross-border solutions to support their local and international business requirements.

We are proud of our colleagues whose commitment and dedication enable our success. We have provided opportunities for them to work throughout the HSBC network, gaining valuable work experience and expertise, thereby accelerating their professional development. These pathways are essential steps in building successful careers for our staff. The 21st century financial services industry requires market knowledge, product expertise, creativity, selling skills and a passion for excellence, all of which we are committed to provide.

The keystone of our client-centric approach is listening to our customers and

asking for their feedback. This not only strengthens our customer relationships but also provides us with the opportunity to improve our business. To ensure that we have multiple ways to hear the voice of our customers, we have taken steps to provide additional touch points for our clients to tell us how we are doing. We are listening and our management team is ensuring that we act upon this feedback.

HSBC Bermuda knows that our success is tied to that of the community we serve and last year we donated more than US$1 million to worthy causes. Employees have volunteered over 6900 hours since 2006 in support of education, environmental and community projects, including the restoration of Cooper’s Island and the homework academy at T.N. Tatem Middle School. It is through our long-standing commitment to Bermuda that we ensure the future success of our people, our island and our business.

As announced in December, I will be stepping down as CEO in May of this year after 8 years. It has been my privilege to lead our business in enabling the ambitions of our clients, developing the professional skills of our colleagues and supporting the needs of our community. I say thank you to each of my co-workers for your dedication and support. You have inspired me every day.

I would also like to extend a special thank you to John Campbell, who will be retiring after serving with distinction as our Chairman for the past 7 years. I am looking forward to my new role as Chairman of the Board, and continuing to work with my colleagues to ensure that we maintain our competitive advantage as Bermuda’s leading financial services provider.

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A fragile global economy presented many challenges, both in forecasting trends and providing appropriate solutions for our clients. We approached these challenges with knowledge, insight and a keen understanding of what our clients need.

Financial Results (USD million)

Tier 1 Capital (USD million)

Underlying Total Operating Income $423 +6%

Underlying Net Profit $152 +3%

Cost Efficiency Ratio 55% -2%

2009 20092010 2010

2011 2011

$10,757 $1,474 $1,624

$14,881 $1,662

Awards

The Banker Magazine – Bank of the Year Bermuda 2011

Global Finance Magazine – Best Developed Market Bank 2011

Euromoney Magazine – Best Bank in Bermuda 2011

Rating A+/Stable/A-1 Standard & Poor’s

Performance andFinancials:2011 Review

$11,847

Total Assets (USD million)


Individuals

55,000 Consumer and Small Business Relationships

4 Retail Branches

US$0.5 billion in Assets Under Management

US$1.8 billion in Loans

US$3.7 billion in Deposits

Companies

4100 Business Banking Clients

3900 Corporate Clients

US$1.8 billion in Loans

US$9.2 billion in Deposits

Trusts

1200 Clients

US$29.9 billion in Assets Under Administration

Our customers provide the foundation for everything we do:

2011 has been a year of challenge and change for Bermuda.

The Bank had a resilient result, but economic headwinds made 2011 a challenging year.

Underlying profitability was in line with previous years, led by strong interest income of US$264 million – a 12% increase. Underlying operating expenses were lower than the prior year by 4%, as we turned a keen eye to managing expenses and increasing efficiency in the way we do business.

As the global and local economic environment steadily deteriorated, we saw a material increase in instances of loan impairment. By the end of the year, our loan provisions grew to US$37.9 million, versus US$10.8 million one year earlier.

Our capital position is strong. We saw an increase in our total assets of 26% versus the prior year. Our Tier 1 ratio, a key indicator of financial strength from the perspective of our regulators, stood at 33% on December 31.

Strong progress was made in our Cayman operations, both with our individual client propositions (HSBC Premier and HSBC Advance) as well as with corporate clients. As part of our strategic focus, we divested the HSBC insurance management business in Cayman and Bermuda. This transaction positions our resources to concentrate on key client areas and relationship building.

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Craig Tucker, Senior Relationship Manager, Commercial Banking

HSBC continued to add value and stability to Bermuda in 2011.

Delivery of strong results as a financial services organisation is dependent upon having a clear customer focus. The ability to connect our clients to solutions that provide value has allowed us to continue supporting our clients’ needs.

Helping clients manage their assets

As the low interest rate environment and global economic turmoil continues, our clients have sought ways to get the most from their money. During 2011, one of the innovative ways in which HSBC Bermuda helped individuals is by providing additional options to manage their money, through the offer of structured certificates of deposit. With this innovative solution, personal clients are offered participation in certain financial markets (e.g. equities and rates) with the surety of protection of principal. Combining this with our suite of wealth management solutions means that there are even more ways to satisfy client needs.

Providing confidential wealth preservation solutions

Our Private Bank offers clients the flexibility of custom estate management strategies. During the year, HSBC Bermuda was able to win substantial trust business by showing the ability to provide swift responses during critical client negotiations, combined with the willingness to meet clients on their own turf – wherever that may be. This approach has allowed our Private Bank team to provide for the complex wealth preservation needs of clients – including trust and investment management – in one stop.


Tahkeesha Welch, Relationship Manager, Commercial Banking

This keen focus on delivery against changing client needs earned us the privilege of being named as Bank of the Year by The Banker magazine for an amazing 5th year running as well as Best Developed Market Bank 2011 by Global Finance Magazine. We are proud to be the bank that demonstrates clear examples of service, innovation and client-driven solutions.

Moving Bermuda business ahead

HSBC Bermuda seeks to keep Bermuda businesses moving ahead. Our commercial Relationship Managers have continued to work with our clients by offering guidance and solutions to help their businesses progress through challenging conditions. Part of our commitment is ensuring that we continue to provide quality products and services while making sure that our policies are fair and responsible. HSBC maintains its support of local business in the North Hamilton Economic Empowerment Zone through dedicated financial solutions and advice.

Leading solutions for corporates

We continue to utilise our global resources to develop compelling solutions for Bermuda’s international business market. As 2011 saw further innovation within the insurance industry, HSBC responded to the growth in special purpose insurers by building upon our cross-border capabilities to meet changing client needs. Through collaboration with our colleagues in New York and London we enhanced our reinsurance and collateral trust proposition resulting in a convenient solution to meet client needs across markets. Our leading cash management and liquidity products, along with diverse asset management capabilities and foreign exchange solutions continue to support Bermuda’s position as a leading insurance market.

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Why HSBC Bermuda As a part of the HSBC Group, we are a member of one of the largest banking and financial services organisations in the world. HSBC has a truly international network of around 7200 offices in over 80 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. HSBC is one of the world’s best capitalised and most liquid banks, with assets totalling US$2.6 trillion as of 31 December 2011, and was recently named the World’s Most Valued Banking Brand in the Brand Finance® Banking 500 2012 report.

HSBC Bermuda therefore has unrivalled global connectivity. Having affiliated

offices located in all major financial centres allows us to take a global approach in the management of our client relationships, by giving clients who require innovative cross-border solutions access to that network.

This international connectivity provides HSBC Bermuda with further advantages, as we access this network to enhance our products and services. Our teams focus on the customer experience and leverage this vast pool of expertise to bring innovation to Bermuda. By taking the strength of our global access and translating it to the local market, we provide solutions that suit our customer needs.

Global connectivityLocal knowledge and expertise


Innovative products and servicesLocal knowledge and expertise

Retail Banking Wealth Management

Retail Banking Wealth Management combines day-to-day banking with the provision of wealth management expertise to provide a broad range of products and services to the community. Retail Banking Wealth Management (RBWM) provides customers with comprehensive financial solutions. We also leverage advances in technology and the HSBC Group’s global platform, to ensure clients can conduct their banking in whatever manner they choose – whether through our branch network, our telephone call centre, our broad ATM network or our robust online channel. Our goal is to be the leading provider of world-class retail banking and wealth management solutions for individuals.

HSBC Private Bank

HSBC Private Bank provides tailored, discreet services to clients locally and around the world. The Private Bank integrates the benefits of a full-service private banking and trustee capability with the global reach of HSBC to deliver comprehensive solutions to clients with complex, multi-jurisdictional and multi-generational wealth. Private Bank’s wealth management and wealth preservation services include private banking, credit, treasury services, trust and fiduciary services, company incorporation and

In Bermuda and Cayman, our teams stand ready to provide solutions that enable your growth.

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management services, philanthropy services, investment management and private family office services.

Commercial Banking

By leveraging our local expertise and international network, Commercial Banking delivers unique capabilities to support Bermuda’s business market. Our knowledge of the island’s key industries combined with access to expertise from around the globe drives development of specialised solutions to meet client needs.

From local businesses looking to expand their operations to larger international businesses operating across borders, we work closely with our clients to understand their needs and deliver innovative solutions to aid their success. We achieve this by providing a dedicated point of contact and connections to the right specialists and products – both locally and globally.

Global Banking & Markets

Global Banking and Markets offers extensive expertise and market-leading solutions to support the needs of all HSBC Bermuda clients. Detailed knowledge of international markets drives our capability to deliver a range of solutions to clients in areas such as debt/equity capital markets, debt financing, advisory, foreign exchange, credit, interest rates, equities, principal protected investments and custody.

It’s an increasingly interconnected world. This is why we value the importance of giving our clients access to knowledge from around the globe. With support from colleagues overseas combined with our on-island expertise, we provide a broad range of research services complemented by tailored advice and strategies.

12 HSBC Bermuda Business Summary 2011

Shauntia Steede, Relationship Manager, Commercial Banking

Providing quality service is more than having someone available to take your call (although we also consider this very important). Here are some of the ways that we deliver great customer service every day:

We provide relationship management to partner with clients in their success

We provide expert guidance during times of challenge

We provide a broad range of solutions to suit the changing needs of our clients

We provide 24-hour call centre, internet or telephone banking access for basic issues

The consistency of our service delivery is key to ensuring that we have satisfied clients. Our clients expect us to provide our core services at a high standard, each and every time. Are we 100% successful

in everything we do? Of course not. However, we are making great strides to ensure that our overall levels of client satisfaction are high. Some of the newer initiatives to track and improve our service delivery include:

Creation of a senior management- led Client Experience team

Increased internal training on complaints tracking and resolution

We have launched a new customer feedback section on our public web site

Appointment of a Customer Advocate to track customer complaints and assure fair, timely resolution

Continuous improvement to our service quality – part of our commitment to being the financial services provider of choice.

ServiceTo us, customer service is about more than completing transactions. It’s also about our clients’ experience with us. Our commitment to our clients is a consistent, high level of attention to their needs. We know that our clients will not accept anything less.

Service is more than transactions. It is also about advice and options.

Community Corporate Social ResponsibilityHSBC in our community

HSBC is a committed supporter of the Bermuda community, firmly believing that businesses have a responsibility to the communities in which they operate. In 2011 HSBC Bermuda donated over US$1 million to the local community, helping organisations and charities develop excellence in young people and preserve

the health of the environment and the vitality of the community.

Investing in Bermuda’s youth

HSBC recognises that committing now to the positive development of Bermuda’s youth will secure the future success of the island. Through community partnerships


280 staff participated in 2011

1100 volunteer hours in 2011

2011 Community Projects: Cooper’s Island Restoration, Economic Empowerment Zone Beautification & T.N. Tatem Homework Academy

2116 total staff participants since 2006

Over 6900 total volunteer hours since 2006

17 community projects completed since 2006

with the Family Centre and the T.N. Tatem Middle School, Bermuda Employer’s Council, the Adult Educational School, the National Dance Foundation of Bermuda, the Menuhin Foundation, Caron Bermuda and community-wide youth football programmes, HSBC helps to build a firm foundation on which our young people can develop academically and socially, to become the best that they can be.

Preserving the environment

In celebration of Bermuda’s 400th anniversary in 2009, HSBC Bermuda made significant contributions to the restoration of an acre of land at the Cooper’s Island Nature Reserve in St. David’s and to the development of the Madagascar Exhibit at the Bermuda Aquarium Museum and Zoo (BAMZ). On 16 June 2011, the Bank’s one acre of parkland was opened to the general public for the exploration and enjoyment of everyone. BAMZ, in partnership with HSBC Bermuda, officially opened the Madagascar Exhibit on 11 November, educating its visitors on the importance of the preservation of island environments.

The Bank helps to promote the preservation and protection of the island by supporting environmental projects and educational programmes. With the Bank’s support, the Bermuda Environmental Alliance, the Daddy and I Explore Children’s Book Series and the Bermuda Institute for Ocean Sciences continue to educate our community on important environmental issues, helping to preserve our island for future generations.

Partnering with our community

A strong community stands together. Through sponsorships of community-wide events, including the Bermuda Golf Association’s annual tournaments, the Ross “Blackie” Talbot Charity Classic, Bermuda Festival and Cup Match, HSBC encourages unity,

bringing our community together in celebration of our island’s diversity.

HSBC Bermuda is identified in the community as a leading community partner. In 2011, the Bank was recognised by The Bermudian Magazine as the Best Corporate Citizen and was also awarded the Bermudian Award by the Bermuda National Trust for making substantial contributions to the local environment.

Volunteer activity

The Bank continues to encourage volunteerism in the community through our Staff Volunteer Community Action Day Programme. Launched in 2006, the programme provides all staff with a half day off from work per calendar year to participate in pre-selected community projects that benefit the Bermuda community.

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Success in 2011:

Ensured the strength and security of our business by protecting our capital and funding positions

Grew deposits significantly, reflecting the relevance of products offered to our client base, while maintaining the credit quality of our asset book

Our Commitment

Ensure the Bank is well prepared to meet the stringent funding and capital requirements of Basel III

Continually assess the optimal deployment of funding and capital to ensure liquidity and safety

Success in 2011:

Increased momentum in retail banking through compelling wealth management offers, such as structured certificates of deposit

Built on our leading position in Corporate Banking by expanding upon our currency management capabilities

Collaborated across business lines to serve clients’ business and individual needs through our Corporate Employee Banking programme

Our Commitment

Offer guidance and advice to customers when and where they need it, so they can better manage their personal wealth or business enterprise

Ensure that our clients benefit from recent innovations in our products and services

Build on our existing capabilities to support international business needs

How our financial strength and strategy deliver stability through focus on our clients, our people and our community.

As part of our commitment to Bermuda, we focus on ensuring that we have a stable business that delivers advice and solutions which suit our client needs and provide value. To do this, we follow these key guiding principles:

We maintain a strong, liquid balance sheet

Through prudent management of our clients’ assets, we continue to have an enviable position of stability and ability to fund lending activity. This strength gives our clients the confidence that we can weather financial turbulence.

We focus on managing client relationships

The strength of our business is the relationships we have with our clients. Key to this is providing clear advice and offering solutions that suit their circumstances.

Strategic Focus


Success in 2011:

Improved key areas of customer service delivery, including the provision of multi-currency local transfers via our electronic channels

Simplified processes, while ensuring disciplined management of risk

Maintained opportunites to deliver innovation to our clients, by providing robust electronic channels for basic transactional banking and relationship management for more complex needs

Our Commitment

Keep customer experience in the forefront of service and product delivery

Improve core banking systems and electronic channels to maintain our competitive edge

Responsibly manage costs by measuring against the benefit provided to clients

Success in 2011:

Guided our clients through economic challenges

Invested in our people, through leadership and skill development, diversity and volunteering

Addressed our broader responsibility in society through programmes related to education, environment and the community

Our Commitment

Keep delivering on our promise of bringing the benefits of the HSBC Group to Bermuda

Focused delivery of our sponsorship and donations activity

Highlight workforce diversity through initiatives that show measurable results

We work to reduce complexity

HSBC Bermuda understands that managing your finances, whether they are individual or corporate, has become increasingly complex. We have sought to make banking easier.

We commit to the community

HSBC Bermuda has always been a committed partner with our clients, our staff and the community. We do this because we care.

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Our People Board of Directors

John D. Campbell, Q.C., J.P. Chairman

Geoffrey K. Elliott, O.B.E.John R. Charman President & Chief Executive Officer Axis Capital Holdings Limited

L. Anthony Joaquin, F.C.A.

Philip M. Butterfield Chief Executive Officer

Zarir J. Cama Group General Manager Group Management Office, HSBC Holdings plc

Board of Directors

Dennis G. Tucker, J.P. Chief Executive Officer Hotel Pension Trust Fund

Cheryl-Ann Lister, O.B.E., C.F.A. R. Blake Marshall, C.A. President Raphael Limited

Richard J. Moseley Deputy Chief Executive Officer

David J. Shaw Adviser to the Board HSBC Holdings plc

Henry B. Smith

Philip M. Butterfield Chief Executive Officer

Richard J. Moseley Deputy Chief Executive Officer

Michael L. Schrum Chief Financial Officer

Calo M. Bucaro Head of Compliance

R. Andy Burrows Head of Commercial Banking

Sonja M. Salmon Chief Risk Officer

Simon L. Des-Etages General Counsel

Judy P. Doidge Corporate Secretary

Management Committee

Guillermo Konecny Head of Global Banking & Markets

Blake D. Hellam Head of Retail Banking, Wealth Management & Marketing

Keith L. Jones Head of Insurance

Linda M. Sutherland Head of HSBC Securities Services Bermuda

Yolanda O. Outerbridge Head of Human Resources

Mary K. Duke Head of Private Wealth Solutions, Americas and Head of Global Private Banking, Bermuda

Andrew C. Roberts Head of Global Markets

Wendy McLeod Chief Technology & Services Officer

Management Committee

Copyright HSBC 2012 All rights reserved

Issued by HSBC Bank Bermuda Limited 6 Front Street, Hamilton HM 11, Bermuda www.hsbc.bm

HSBC Bank Bermuda Limited is licensed to conduct Banking and Investment Business by the Bermuda Monetary Authority.

HSBC Private Bank is a division of HSBC Bank Bermuda Limited and is the brand name for the principal Private Banking and Trust Business of the HSBC Group. Bermuda Trust Company Limited and HSBC International Trustee Limited, Bermuda Branch are licensed to conduct Trust Business by the Bermuda Monetary Authority.

HSBC Bank (Cayman) Limited is licensed to conduct Banking and Investment Business by the Cayman Islands Monetary Authority.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of HSBC Bank Bermuda Limited.

HSBC Bank Bermuda Limited

6 Front Street, HamiltonBermuda HM 11441 295 4000

www.hsbc.bm

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