For professional clients only

Securities lending programmeHSBC ETFs plc

Contents Exchange traded funds and securities lending 1

Key features of HSBC ETFs plc’s securities lending programme 2

Lending agent: HSBC Securities Services 2

Investment manager: HSBC Global Asset Management (UK) Limited 3

Maximum percentage of securities on loan 3

Indemnification by HSBC Bank plc 3

Counterparty risk selection and monitoring 4

Collateral and haircut policy 4

Operating flow 5

Revenue sharing 5

Transparency of the programme 5

1

Exchange traded funds and securities lending

In order to enhance fund performance, a number of HSBC ETFs plc sub-funds engage in securities lending. Securities lending involves the temporary loan of securities (such as equities or bonds) to another institution in exchange for a fee. The borrowing institution is then required to post collateral to cover the value of the securities on loan. Securities lending is a well established process within the investment management industry, utilised by pension funds, mutual funds, and ETFs.

Potential benefits of securities lendingThe fees charged for securities lending generate additional income for ETFs with limited risk, as long as the process and any conflict of interest are properly managed. This additional income is incorporated into the net asset value and can add to the fund’s performance.

Potential risks of securities lendingSecurities lending is not without any risk. The main concern is the possibility of the securities on loan not being returned because of borrower default, and that the collateral held is insufficient to cover the outstanding exposure. In order to mitigate this risk, robust securities lending programmes will only lend securities to borrowers with a strong credit rating, and have comprehensive risk management processes and controls in place.

With all the benefits in mind, investors should consider both the risk management and the transparency of the securities lending programme in their investment decision making process.

2

Key features of HSBC ETFs plc’s securities lending programme

HSBC ETFs plc runs a robust securities lending programme that delivers positive returns with conservative risk control:

• Indemnification by HSBC Bank plc In the event of a third party counterparty default, HSBC Bank plc will reinstate the lent securities or cash to the funds

• Cap on the maximum % stock on loan Lending limit is capped at 20% of AUM per sub-fund for the existing ETFs

• High quality collateral Only high quality government bonds are accepted as collateral

• Securities lent out are collateralised by at least 105% Counterparty exposure is over-collateralised and marked to market daily

• Minimum of 85% gross revenue generated by lending fees is paid to the fund • Minimal disruption to dealing

All loans are callable by the sub-fund at any time • Transparency

Securities lending reports are published on the website monthly

Lending agent HSBC Securities ServicesHSBC Securities Services (‘HSS’), a division of HSBC Bank plc, has been appointed by the independent board of directors of HSBC ETFs plc (the “Board”) to be the lending agent for the ETF range. HSS has been a lending agent for over 40 years and offers competitive levels of return in an operationally seamless and low risk manner through its provision of market leading borrower default indemnification. It provides a range of tailor made products from its centres in London and Hong Kong to a very diverse range of clients globally including fund managers, sovereign wealth funds, insurance companies and pension funds. Throughout its entire history no HSS client has ever suffered any capital loss whatsoever.

To ensure the safety of the assets, HSBC ETFs plc holds the legal title over the collateral assets, and all of the HSS collateral accounts are held separately to the HSBC Bank plc’s own assets, in accordance with regulatory requirements. Where an HSBC affiliate is the borrower of securities, the transaction is undertaken “at arm’s length” with a robust ‘Chinese Wall’ in operation between HSS (lending agent) and HSBC Global Banking & Markets (borrower), in accordance with regulatory requirements and the HSBC Group’s conflict of interest policy. HSBC Global Banking & Markets as a borrower has to comply with the same high standard of collateral requirements as any other borrower.

Not all HSBC ETF sub-funds actively lend out securities. With the board taking overall decision for the programme, HSS provides the investment manager with the cost benefit evaluation for each fund and the sub-funds will only engage in securities lending if it is sufficiently profitable for the shareholders

Securities lending agent arranges to liquidate

collateral pool

Securities lending agent starts to purchases

replacement securities

Does the lending agent successfully

buy back securities?

Within 5 Business days

from credit event

Securities on loan are returned

to the fund

Equivalent cash value is returned

to the fund

YES

Credit Event

NO

3

1 The shareholder capital is as of 31 December 20122 Ranked by Standard & Poor’s (long-term); as at 10 December 2012

Investment manager HSBC Global Asset Management (UK) Limited

The Board has delegated the oversight and monitoring responsibility to the investment manager, HSBC Global Asset Management (UK) Limited. The investment manager carries out oversight responsibility by ensuring that the lending agent operates efficiently and complies with the securities lending agreement. In addition, the investment manager ensures that the revenue from securities lending is maximised within the agreed limitations and assesses the performance of the programme. Risk control is also in place to periodically and independently verify the collateral valuation provided by HSS, and the investment manager has discretion to challenge the quality and valuation if in disagreement.

Maximum percentage of securities on loanWith shareholders’ best interest in mind, HSBC ETFs plc limits the maximum percentage of securities on loan to 20% for all the existing equity ETFs. That is to say, on a daily basis, the value of securities lent out can not exceed 20% of the fund’s assets under management. This policy is the first step to significantly limit the potential counterparty exposure.

Indemnification by HSBC Bank plcEvery loan that HSBC ETFs enter into with external counterparties is indemnified by HSBC Bank plc, supported by the group’s $194 billion of shareholder capital1. HSBC Bank plc has a credit rating of AA- by S&P2.

In the unlikely event of an external borrower default, HSS will reinstate the securities on loan to the funds within five London business days. In the event that HSS is unable to fulfil such obligation within five London business days, it will deposit the equivalent cash in the relevant custody account at its own expense.

4

3 The discount applied to the market value of collateral received in order to compensate for potential changes in value4 HSBC Institutional Trust Services (Ireland) Limited5 HSBC Securities Services (Ireland) Limited

Counterparty risk selection and monitoring

The programme employs a robust counterparty monitoring policy. In accordance with UCITS requirements, all approved borrowers of the programme must have a minimum credit rating of A2 or equivalent or be deemed to have an implied rating of A2.

In addition, HSBC Group Credit & Risk Management and the relevant Global Relationship Managers are responsible for borrower limit authorisation and on-going credit monitoring. All borrowers undergo a regular and comprehensive due diligence process to ensure they consistently meet minimum HSBC Group standards.

HSBC has direct banking relationships with almost every borrower across multiple business lines and is therefore in a unique position to gain an intimate view of their creditworthiness. This is a distinct advantage because much of the information on which risk limits are based is not available to external parties, including rating agencies.

HSS employs strict divisional risk policies and has additional robust monitoring procedures in place. Comprehensive daily reporting is reviewed by senior managers to ensure full and broad oversight of lending activities.

In addition, the Board has the right to remove borrowers from the eligible list or request a higher ‘haircut’3 , if the Board considers that the perceived risk has increased

Collateral and haircut policyThe borrowers participating in the programme are required to post collateral to mitigate the credit risk. All securities on loan are over-collateralised by at least 5%, and only liquid, high quality government debt is accepted as collateral. The Board determines what is eligible for use as collateral and currently operates a more restrictive collateral policy than that required by UCITS regulation. Eligible collateral is currently limited to G14 government debt, and the 5% minimum haircut is increased when warranted by market conditions and/or counterparty concerns. Cash collateral is only accepted on an intraday basis pending the delivery of non-cash collateral.

Both the lending agent and the investment manager monitor the collateral policy closely in the light of market events. For example, in 2011, the programme proactively removed Irish, Spanish and Italian government bonds from the list of eligible collateral because of risk concerns.

Collateral is monitored and marked to market daily by HSS. Regular reporting is provided to the trustees4, administrator5, investment manager, and the Board. As with counterparty selection, the Board has the mandate to amend or remove the list of eligible collateral.

Haircut At least 5%

Eligible collateral Government debt of Austria, Belgium, Canada, Denmark, Finland, France, Germany, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom or United States of America

5

Operating flow

All securities on loan by HSBC ETFs are callable at any time. This is important because the sub-fund’s cash flow or replication strategy could be jeopardised if it enters into a fixed term contract with a borrower and consequently is unable to return the redemption money on time to the shareholders. As a result, redemptions received by sub-funds will not be disrupted by their securities lending activities.

The loan settlement process is a pre-collateral process, i.e. no securities can be delivered to the borrower without there being sufficient collateral available in the accounts to cover the exposure plus the minimum haircut of 5%.

Pre-collateral

1. Collateral: at least 105% value in limited government bonds

2. Securities: no more than 20% of the fund AUM

Dividends, Corporate Actions

Lending feesDaily Mark-to-Market

BorrowerLender

Revenue sharingThe sub-funds share the fee revenue generated by the securities lending programme with the lending agent, in recognition of the services that they provide. Currently, all HSBC ETFs plc’s sub-funds retain a minimum of 85% of securities lending gross revenue for the benefit of the shareholders. The revenue retained is incorporated into the net asset value and consequently has a positive affect on tracking difference.

Oversight

HSBC ETFs PlcHSBC Securities

Services

HSBC Global Asset Management

(UK) Limited

Borrower(s)

Securities

Collateral

85% Fees

(Legal ownership)

Securities

Collateral

Gross Fees

Transparency of the programmeAs well as employing stringent risk controls on the securities lending programme, HSBC ensures that the process is as transparent as possible.

To this end, the Annual Report and Audited Financial Statements disclose the securities lending fees and the revenue generated, the value of the securities on loan, and the amount of collateral held.

More detailed securities lending information is also published monthly on the website (www.etf.hsbc.com).

6

Risks

The value of investments and any income from them can go down as well as up, and investors may not get back the amount originally invested. Where overseas investments are held, the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Stock market investments should be viewed as a medium to long-term investment and should be held for at least five years. Any performance information shown refers to the past and should not be seen as an indication of future returns.

Please see the supplement for full information. To help improve our services and in the interests of security, we may record and/or monitor your communications with us. HSBC Global Asset Management (UK) Limited provides information to institutions, professional advisers and their clients on the investment products and services of the HSBC Group.

7

Important information

This document is intended for professional clients only and should not be distributed to or relied upon by retail clients.

The material contained herein is for information purposes only and does not constitute investment advice or a recommendation to any reader of this material to buy or sell investments. Care has been taken to ensure the accuracy of this document, but HSBC Global Asset Management (UK) Limited accepts no responsibility for any errors or omissions contained therein.

Fund informationHSBC ETFs are sub-funds of HSBC ETFs plc, an investment company with variable capital and segregated liability between sub-funds, incorporated in Ireland as a public limited company, and authorised by the Central Bank of Ireland. The company is constituted as an umbrella fund, with segregated liability between sub-funds.

Shares purchased on the secondary market cannot usually be sold directly back to the Company. Investors must buy and sell shares on the secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current Net Asset Value per share when buying shares and may receive less than the current Net Asset Value per Share when selling them.

For investors in FranceAll applications are made on the basis of the current HSBC ETFs plc prospectus, relevant Document d’Informations Clés pour l’Investisseur (DICI), supplement, and most recent annual and semi-annual reports, which can be obtained on our website: www.etf.hsbc.com\fr or upon request free of charge from CACEIS France, the centralising correspondent in France, 1/3 Place Valhubert, 75013 Paris. Investors and potential investors should read and note the risk warnings in the prospectus, relevant Document d’Informations Clés pour l’Investisseur (DICI), and fund supplement.

For investors in the UKAll applications are made on the basis of the current HSBC ETFs plc Prospectus, relevant Key Investor Information Document (“KIID”), Supplementary Information Document (SID) and Fund supplement, and most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ. UK, or from a stockbroker or financial adviser. Investors and potential investors should read and note the risk warnings in the prospectus, relevant KIID, SID and Fund supplement. UK-based investors in HSBC ETFs plc are advised that they may not be afforded some of the protections conveyed by the Financial Services and Markets Act (2000), (‘the Act’). The company is recognised in the United Kingdom by the Financial Conduct Authority under section 264 of the Act.

For investors in SwitzerlandPlease refer to the Swiss version of the full prospectus for a complete list of all subfunds admitted for public distribution in or from Switzerland. This material must exclusively be directed towards qualified investors in the meaning of Art. 10 para. 3 of the Federal Collective Investment Schemes Act. All applications are made on the basis of the current HSBC ETFs plc prospectus and most recent annual and semi-annual reports. The prospectus, Key Investor Information Document (KIID) of the afore mentioned sub-fund and (semi-) annual reports of the Company can be obtained free of charge at the Swiss office of the Swiss representative of the fund: ACOLIN Fund Services AG, Stadelhoferstrasse 18, CH-8001 Zurich. Paying agent in Switzerland: HSBC Private Bank (Suisse) S.A., Quai Général Guisan 2, P.O. Box 3580, 1211 Geneva 3. The documents can also be obtained from CACEIS France, the centralising correspondent in France, 1/3 Place Valhubert, 75013 Paris. There are risks involved with this type of investment. Investors and potential investors should read and note the general risk warnings in the prospectus, and the specific risk factors in the relevant KIID.

For investors in SpainAll applications are made on the basis of the current HSBC ETFs plc prospectus, the relevant Key Investor Information Document (‘KIID’) and fund supplement, and the most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (France) Sucursal en España, Plaza Pablo Ruiz Picasso, 1, Torre Picasso floor 21, Madrid 28020, Spain. Investors and potential investors should read and note the risk warnings in the prospectus, relevant Key Investor Information Document (‘KIID’) and fund supplement. The company is recognised in Spain by the Comisión Nacional del Mercado de Valores.

For investors in ItalyThe commercialisation in Italy of the HSBC ETFs sub-funds is subject to Consob’s authorisation. All applications are made on the basis of the current HSBC ETFs Plc Prospectus, the relevant Key Investor Information Document (“KIID”), supplement and the most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (France) Italian Branch (the “Company”) - Piazzetta Bossi, 1 – 20121 Milano, Italy. Investors and potential investors should read and note the risk warnings in the Prospectus, relevant KIID and fund supplement. The Company is recognized in Italy by Banca d’Italia.

8

For investors in SwedenThe commercialisation in Sweden of the HSBC ETFs sub-funds is subject to FSA’s authorisation. All applications are made on the basis of the current HSBC ETFs Plc Prospectus, the relevant Key Investor Information Document (“KIID”), supplement and the most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (France) S.A. Stockholm Branch (“the Company”) - Birger Jarlsgatan 2 SE-114 34 Stockholm, Sweden. Investors and potential investors should read and note the risk warnings in the Prospectus, relevant KIID and fund supplement. The Company is recognized in Sweden by Finansinspektionen.

For investors in GermanyThis document is designed for sales and marketing purposes for the introduced ETF and is not an offer or invitation to make an application to invest in this fund. All statutory requirements concerning impartiality of financial analysis are unaffected. A prohibition of trading concerning mentioned financial products before publishing this document does not exist. This document replaces neither a professional investment advice nor a relevant public prospectus or any actual semi-annual and annual reports. It is not an offer for subscription. This document is only directed to persons who have a permanent residence in the Federal Republic of Germany. It is not determined to addressees in any other jurisdictions or to citizens of the USA. This document is only intended for the recipient. The document or parts of it may not be disclosed to any third party or used for any other purpose without prior written consent. This document is based on information obtained from sources we believe to be reliable but which have not been independently verified; therefore we accept no responsibility for accuracy and/or completeness. The ETF is not suitable for every investor. It can not be excluded that an investment in the fund could lead to losses for the investor. It is also possible that an investor might lose all of its initial investment as well as possible amendments. All information within this document do neither replace the official legal documents for the fund nor the simplified prospectuses respectively the Key Investor Information Documents and the most recent annual and semi-annual reports. Actual Prospectuses, Key Investor Information Documents and the latest annual and semiannual reports can be obtained upon request and free of charge from HSBC Trinkaus & Burkhardt AG, Koenigsallee 21/23, 40212 Duesseldorf, Germany. They are also available on the internet via www.assetmanagement.hsbc.com/de.

For investors in NetherlandsAll applications are made on the basis of the current HSBC ETFs plc Prospectus, relevant Key Investor Information Document (“KIID”), Fund supplement, and most recent annual and semi-annual reports, which can be obtained on our Internet website: http://www.assetmanagement.hsbc.com/kiid?lang=en&country=gb or upon request free of charge from HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London,E14 5HQ. UK. Investors and potential investors should read and note the risk warnings in the prospectus, relevant Key Investor Information Document (“KIID”) and fund supplement.

RestrictionsThe shares in HSBC ETFs plc have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United States persons. Affiliated companies of HSBC Global Asset Management (UK) Limited may make markets in HSBC ETFs plc.

This document is approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who is authorised and regulated by the Financial Conduct Authority. Copyright © HSBC Global Asset Management (UK) Limited 2013.

All rights reserved.

www.assetmanagement.hsbc.com/uk

FP13-0836

Designed and produced by HSBC Global Publishing Services_130516_55167

For investors in the UK

Tel: +44 (0) 207 024 0773broker.sales@hsbc.comwww.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>

For investors in Germany

Tel: +49 (0)211 910 4784fonds@hsbc.comwww.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>

For investors in Switzerland

Tel: +41 44 206 26 00swiss.investorservices@hsbc.comwww.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>

For investors in France

and Netherlands

Tel: +33 1 41 02 52 26www.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>

Further information on HSBC ETFs

For investors in Spain

Tel: +34 91 456 69 79asset.management.spain@hsbc.comwww.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>

For investors in Sweden

Tel: +46 (0)8 454 54 00www.assetmanagement.hsbc.com/sewww.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>

For investors in Italy

Tel: +39 02 72437 496hsbc-am.italy@hsbc.comwww.etf.hsbc.comBloomberg:MSG ETF HSBC <GO>