Key Features of the Lion-OCBC Securities Singapore Low Carbon ETF

The Lion-OCBC Securities Singapore Low Carbon ETF is a unique investment product listed on the SGX-ST, designed to track the iEdge-OCBC Singapore Low Carbon Select 40 Capped Index. This index focuses on the top 40 companies by free-float market capitalization domiciled or incorporated in Singapore, with a specific emphasis on reducing carbon intensity. The ETF adopts a direct investment policy, aiming to replicate the performance of the index as closely as possible before expenses.

• Listing Details: The ETF is available in SGD and USD classes (stock codes: ESG and ESU), with a board lot size of 1 unit.
• Expense Ratio: Capped at 0.45% per annum until April 2026. The Manager will absorb any expenses above this cap during this period, after which the cap will be removed.
• Index Methodology: The index excludes companies involved in fossil fuels and implements a carbon performance exclusion criteria based on Scope 1 and 2 GHG emissions per unit revenue. ESG metrics are provided by Sustainalytics.
• Rebalancing: The index constituents and their weightings are reviewed and rebalanced semi-annually, in March and September, with changes effective on the Index Business Day immediately following the Rebalance Implementation Day.
• Investment Strategy: The ETF primarily uses a direct replication strategy, but may switch to a representative sampling strategy if necessary. It invests in substantially all index securities in similar weightings.
• Trading: Units can be bought and sold on SGX-ST throughout the trading day, but market prices may differ from net asset value. Designated market makers (Phillip Securities and Flow Traders Asia) are appointed to ensure liquidity.

Important Considerations for Shareholders

Investors and shareholders should pay close attention to several key points, some of which may have price-sensitive implications and could potentially influence the ETF’s market value:

• Index Changes: The composition and weighting of the index can change at each semi-annual review. If the index methodology is altered or the licence to use the index is terminated (and a suitable replacement is not found), the ETF may be terminated. Such events would be announced on SGXNET and could significantly impact share values.
• Expense Ratio Cap: The expense ratio is capped at 0.45% until April 2026. After the cap expires, expenses may increase, affecting returns. The removal of the cap and any subsequent increase in expenses will be announced to investors.
• ESG and Regulatory Risks: The ETF’s focus on low-carbon companies and ESG criteria means it may underperform broader market funds, especially if the selected sectors or companies lag in performance. The evolving regulatory environment for ESG metrics could lead to changes in index methodology or disclosures, potentially impacting the ETF’s composition and performance.
• Concentration Risk: The ETF is concentrated in Singapore-based companies. Any adverse economic, political, or regulatory developments in Singapore could disproportionately affect the fund’s value.
• Tracking Error: The ETF may experience tracking error due to fees, imperfect correlation with the index, changes in index constituents, or market disruptions. These discrepancies could impact returns relative to the benchmark.
• Liquidity Risk: While designated market makers provide liquidity, trading could be affected during market disruptions, exchange closures, or periods of low trading volume, potentially leading to wider spreads and price volatility.
• Taxation: The Fund is structured to minimize Singapore income tax exposure by investing in designated investments. However, changes in tax laws or interpretations could impact distributions or net asset value.
• Securities Lending & Repurchase Transactions: The ETF may lend securities or engage in repurchase transactions up to 50% of its net asset value for efficient portfolio management. While such activities can generate additional income, they introduce counterparty, liquidity, and collateral risks.
• No Certificates Issued: Units are held in book-entry form via CDP. Investors are the beneficial owners as recorded by CDP, not the legal owners.
• Redemption Mechanisms: Only Participating Dealers can create or redeem units in application unit sizes (100,000 units or multiples of 1,000). Retail investors must buy/sell units on the SGX-ST unless they are clients of a Participating Dealer.
• Disclosures and Announcements: All material information, including changes in index constituents, expense ratio, manager or trustee changes, and other price-sensitive events, will be announced on SGXNET and the Manager’s website.
• Potential for ETF Termination: The ETF may be terminated if the index licence is revoked or if regulatory changes render continued operation unviable. In such cases, units will be redeemed according to Trust Deed provisions.

Potential Price-Moving News

The following developments could potentially impact the share price of the ETF:

• Index Rebalancing: Semi-annual changes to index constituents and weightings may cause significant shifts in ETF holdings. Removal or inclusion of major companies can affect performance and liquidity.
• Expense Ratio Cap Removal: The scheduled removal of the expense ratio cap in April 2026 may lead to an increase in expenses and reduced returns, which could be price-sensitive.
• ESG Data and Methodology Changes: Reliance on third-party ESG data (Sustainalytics) carries risk of inaccuracies or inconsistencies, which could alter the ETF’s constituent selection and performance.
• Regulatory Changes: Amendments to Singapore’s financial regulations, tax laws, or ESG disclosure requirements could impact the ETF’s operations, expenses, or eligibility as an Excluded Investment Product.
• Termination Risk: Termination of the index licence or inability to find a suitable replacement index would lead to fund closure and compulsory redemption, impacting investors.

Summary

The Lion-OCBC Securities Singapore Low Carbon ETF offers investors a unique exposure to Singapore’s top 40 companies with a low-carbon focus, but carries risks related to index methodology, concentration, regulatory changes, expense management, and liquidity. Regular reviews and rebalancing, capped expenses (until 2026), and strict ESG criteria may impact performance and share values. Investors should remain vigilant for announcements regarding index changes, expense ratio adjustments, and regulatory developments, as these may materially affect the ETF’s market price and future prospects.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any securities. Investors should read the full prospectus and consult their professional advisers before making any investment decision. The Lion-OCBC Securities Singapore Low Carbon ETF is subject to market risks, tracking error, regulatory changes, and other risks as detailed above. Past performance is not indicative of future results.

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