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Shareholder Rights Directive II (“SRD II”)

SRD II aims to promote effective stewardship and improve transparency in how asset owners (life insurers) and asset managers set their long-term investment strategies and how they communicate these when working together.

A. Shareholder engagement policy

HSBC Life maintains an Investment Policy in relation to HSBC Life Assets which is updated annually. Policy does not currently include Equity Investment and no direct or indirect exposure to Equities are held by the HSBC Life to match long term liabilities. There are currently no plans to widen the Investment Policy to include Equity Investments. HSBC Life does not exercise any Voting Rights on any Company Assets.

HSBC Life does not therefore appoint a Fund Manager to manage Equity Investments on its behalf. HSBC Life does appoint a Fund Manager to manage Equity Investments for its unit linked funds which support Life Products.

A unit linked fund is an investment, which combines your money with money from other investors and buys units in a fund which invests directly and indirectly in shares traded in a regulated market.

Currently, HSBC Life unit linked funds are managed by HSBC Global Asset Management (“the Fund Manager”) on a discretionary fund management basis. The funds have a mandate in place to ensure the funds are managed in line with customer expectations as set out in the relevant fund objectives.

The Fund Manager’s engagement policy may be found using the following link:

B. Investment strategy and arrangements with asset managers

Under the FCA rules we are required to provide the following public disclosures regarding our arrangements with Fund Managers:

ConsiderationsHSBC Life approach
1. How the arrangement with the Fund Manager incentivises the Fund Manager to align its investment strategy and decisions with the profile and duration of the liabilities of the life insurer’s long term liabilities.Investment strategy and decisions for the unit linked funds are made by the Fund Managers in accordance with the mandate for each fund.

HSBC Life does not exercise voting rights on any Equity Investments in its unit linked funds, either directly or through the Fund Manager.
2. How that arrangement incentivises the Fund Manager to make investment decisions based on assessments about medium to long-term financial and non-financial performance of the investee company and to engage with investee companies to improve their performance in the medium to long-term.The unit linked funds are managed by the Fund Manager against benchmarks and target performance set for each fund within the mandate, not for the financial performance of HSBC Life. HSBC Life charges policyholders an Annual Management Charge under policy terms and conditions and this is based on fund size but this is not a consideration that the Fund Manager takes into account in its investment decisions.
3. How the method and time-horizon of the evaluation of the Fund Manager’s performance and the remuneration for fund management services are in line with the profile and duration of the liabilities of HSBC Life, in particular, long-term liabilities, and take absolute long-term performance into account.We conduct regular reviews of the unit linked funds managed by the Fund Manager, to ensure they are being managed in line with the fund objective and investment policy, and to ensure any performance issues are raised and addressed. This is for policyholder benefit only and not with reference to HSBC Life’s own liabilities.

The Fund Managers remuneration is based on Asset Values within the unit linked funds which incentivises them to grow the funds on behalf of policyholders.
4. How HSBC Life monitors portfolio turnover costs incurred by the Fund Manager and how it defines and monitors a targeted portfolio turnover or turnover range.We do not currently monitor portfolio turnover as this is not subject to limits in the investment policy and fund agreement with the relevant Fund Manager. However, turnover costs will be reflected in investment performance and therefore monitored indirectly.
5. The duration of the arrangement with the Fund Manager.Our current arrangements with Fund Managers will continue until such time as the relevant fund agreement and mandate are amended.

The above statements will be reviewed on an annual basis and updated in the event of any material changes.