Lion-OCBC Securities APAC Financials Dividend Plus ETF: Key Information for Investors

The Lion-OCBC Securities APAC Financials Dividend Plus ETF (“the Fund”) is a newly launched exchange-traded fund (ETF) listed on the Singapore Exchange (SGX-ST) as of 13 May 2024. It offers investors exposure to the 30 largest and most tradable financial sector companies in the Asia Pacific region, including real estate investment trusts and business trusts. The ETF is managed by Lion Global Investors Limited, with HSBC Institutional Trust Services (Singapore) Limited acting as trustee, registrar, and fund administration agent, and The Hongkong and Shanghai Banking Corporation Limited as custodian.

Key Points and Features

• Index Tracking: The Fund aims to replicate, before expenses, the performance of the iEdge APAC Financials Dividend Plus Index, compiled and calculated by Singapore Exchange Limited. The Index provides access to stable dividend payouts and growth in the financial sector and excludes companies involved in alcohol, defense weapons, drugs, gambling, and tobacco.
• Investment Approach: The Fund uses a passive management strategy, primarily via direct replication—investing in all or substantially all Index Securities in the same weightings. It may also employ a representative sampling strategy, holding securities with high correlation to Index constituents, when direct replication is impractical.
• Dividend Policy: For the first two years, quarterly distributions of at least 5% per annum of the Issue Price (S\$1.00) will be declared. From the third year onwards, quarterly distributions around 5% per annum of the Net Asset Value (NAV) per unit, less expenses, are intended. Distributions may be paid out of capital, potentially reducing the original investment.
• Currencies and Trading: Units are traded in both SGD and USD, with a board lot size of 1 unit. The ETF’s base currency is SGD, and market makers Flow Traders Asia Pte Ltd and Phillip Securities Pte Ltd facilitate liquidity.
• Index Rebalancing: The Index and Fund holdings are reviewed and rebalanced semi-annually in March and September, based on data from the last business day of February and August, respectively.
• Expense and Turnover Ratios: For the period ending 31 December 2024, the annualised expense ratio is 1.08%, and the turnover ratio is 43%.
• Tax Status: The Fund is currently exempt from Singapore income tax on specified income from designated investments under Section 13D of the Income Tax Act. The Fund intends to apply for Section 13U status in the future, which may change its tax exemption conditions.
• Participating Dealers: Units may be created or redeemed only in application unit sizes (100,000 or multiples of 1,000 units) through Participating Dealers, subject to certain terms and conditions.
• Liquidity: Designated market makers and the nature of underlying securities are expected to provide sufficient liquidity. However, trading may be suspended or delisted under certain circumstances, affecting investor ability to buy or sell units.

Risks and Price-Sensitive Factors

• Sector Concentration: The Fund’s assets are concentrated in the financial sector. This means the Fund is highly sensitive to events, regulations, and profitability changes within this sector, such as interest rate fluctuations, regulatory changes, and credit market conditions. Significant negative developments in the financial sector could materially impact the Fund’s NAV and share price.
• Geographical Concentration: The Fund tracks companies in the Asia Pacific region, exposing it to political, economic, currency, and market volatility specific to this region. Events in select countries could have outsized effects on Fund performance and share price.
• Emerging Markets Exposure: Some constituents may be domiciled in emerging markets, where liquidity and volatility risks are heightened. Regulatory restrictions on repatriation may affect dividend payments or capital return.
• Tracking Error: Fees, imperfect correlation, rounding, changes to the Index, regulatory policies, and foreign ownership restrictions may cause the Fund’s performance to deviate from the Index. Significant tracking errors may impact investor returns and perception of the Fund.
• Dividend Policy Out of Capital: Distributions may be paid out of capital, which could result in erosion of the principal invested. Investors should monitor the sustainability of dividend payouts, as excessive capital distributions may affect the long-term value of units.
• Foreign Exchange Risk: Investments denominated in currencies other than SGD expose the Fund to currency risk. Fluctuations in exchange rates can impact income and NAV, affecting share price in both SGD and USD counters.
• Index Licence and Methodology: The Fund’s ability to track the Index depends on the continued licence with SGX. Termination or changes to the Index methodology, or errors in Index calculation, could materially affect the Fund’s performance and share value.
• Tax Changes: Changes in tax exemption status or interpretation of Singapore tax law could affect Fund returns and distributions, potentially impacting share price.
• Securities Lending and Borrowing: The Fund may engage in securities lending or repurchase transactions up to 50% of NAV, subject to counterparty, collateral, delivery, and operational risks. Defaults or losses in these transactions could negatively affect Fund value.
• Suspension or Delisting Risk: If trading is suspended or units are delisted from SGX-ST, liquidity may dry up, and investors may be unable to realise value or exit positions, potentially affecting share price.
• New Index Risk: The iEdge APAC Financials Dividend Plus Index is a new index with limited historical performance. Investors face greater uncertainty and risk compared to ETFs tracking established indices.

Other Shareholder Information

• Reporting and Transparency: Audited accounts and annual reports will be available electronically via the Manager’s website. Material information, including changes in index constituents, manager, or major events, will be announced on SGXNET.
• No Certificates: Units are held in book-entry form via CDP; no physical certificates are issued.
• Anti-Money Laundering: The Manager and Trustee may take actions to comply with anti-money laundering regulations, including requesting information and suspending transactions.
• Complaints and Queries: Investors can contact Lion Global Investors for queries or complaints.

Potential Price Moving Factors

• Changes in Dividend Policy: If distributions are cut, paid out of capital excessively, or deviate from stated policy, share price may be affected.
• Major Events in the Financial Sector: Regulatory developments, credit events, or crises in Asia Pacific financial companies could materially impact the Fund’s performance.
• Index Rebalancing: Semi-annual changes in Index constituents and weightings may affect Fund holdings and share price, especially if major companies are added or removed.
• Tax Status Change: Any change to the Fund’s tax exemption status could materially affect net returns and distributions.
• Errors or Methodology Changes in the Index: Significant errors, omissions, or changes in index methodology or calculation could lead to tracking error, NAV discrepancies, and price volatility.
• Suspension or Delisting: If units are suspended or delisted from SGX-ST, liquidity and pricing will be affected.

Disclaimer

Disclaimer: This article is prepared for informational purposes only and does not constitute investment advice, an offer, or solicitation to buy or sell any securities. Investors should review the full Prospectus and consult their financial advisor before investing. The Lion-OCBC Securities APAC Financials Dividend Plus ETF is subject to market risk, sector concentration risk, tracking error, and other risks as detailed above. Past performance is not indicative of future results.

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