H3 Commodities Fund Product Disclosure Statement
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H3
Commodities
FundH3
Commodities
Fund
Product Disclosure Statement
Dated 8 August 2011
Issuer and Responsible Entity: Ascalon Capital Managers Limited
ACN 093 660 523
AFSL 300 697
Investment Manager: H3 Global Advisors Pty Limited
ACN 074 254 425
AFSL 233 811
Important Notices
This Product Disclosure Statement (“PDS”) dated 8 August 2011 provides including possible delays in repayment and loss of income and principal
details of the H3 Commodities Fund 128 538 081 (“Fund”), a registered invested. Neither Westpac nor any of its related entities guarantees the
managed investment scheme. This PDS replaces the Supplemental PDS investment performance or the capital value of the Fund.
dated 24 December 2010 and the PDS dated 17 April 2008; and includes up
to date information on the Fund at the time of preparation. General information in this PDS is subject to change. Certain information that
is not materially adverse may be updated without issuing a supplementary
The Fund will invest into an Australian Dollar (AUD) share class (Class B PDS. Such updated information may be obtained from Ascalon’s website
Shares) of the H3 Global Commodities Fund, the Investment Manager at www.ascalon.com.au. A paper copy of any updated information will be
of which is H3 Global Advisors Pty Limited ABN 78 093 660 523 AFSL provided on request free of charge.
233811 (“H3”; “Manager”). References to the “Underlying Fund” refers to
the Class B Shares of the H3 Global Commodities Fund. The H3 Global In this PDS, all references to monetary amounts are in Australian Dollars,
Commodities Fund is a Cayman Islands registered mutual fund incorporated unless otherwise specified.
as an exempted company with limited liability under the provisions of the
Companies Law (as amended) of the Cayman Islands. Ascalon is bound by the terms and conditions of its Privacy Policy. Details
of the Privacy Policy can be found in the “Additional Information” section of
This PDS is issued by Ascalon Capital Managers Limited ACN 093 660 523 this PDS.
AFSL 300697, the responsible entity of, and issuer of units in, the Fund.
Ascalon is a wholly owned subsidiary of the Westpac Banking Corporation If any part of the PDS (such as a term or condition) is invalid or
ABN 33 007 457 141 (“Westpac”) and is responsible for the day to day unenforceable under the law, it is excluded so that it does not in any way
operations of the Fund. Ascalon has a minority ownership interest in affect the validity or enforceability of the remaining parts.
H3. Information on Ascalon can be obtained on Ascalon’s website www.
ascalon.com.au.
Important Contacts
References in this PDS to ”we”, ”us”, ”our”, “Responsible Entity” and
”Ascalon” are to Ascalon Capital Managers Limited as the responsible entity Investment Manager
of the Fund. References to ”you” or ”your” are to investors (and, when the
context requires, prospective investors) in the Fund.
References to “H3”, “H3 Global Advisors”, “Investment Manager” or
“Manager” are to H3 Global Advisors Pty Limited.
References to “Administrator” or “Custodian” are to the HongKong and
Shanghai Banking Corporation Limited (“HSBC”).
“Business Day” means a day (other than a Saturday or Sunday) on which
banks are open for general banking business in Sydney.
This PDS is intended solely for the use of the person to whom it has been H3 Global Advisors Pty Limited
delivered for the purpose of evaluation of a possible investment by the ACN 074 254 425
recipient in the units described in it. This PDS is not to be reproduced or AFSL 233 811
distributed to any other person (other than professional advisers of the Level 1, 122 Pitt Street
prospective investors receiving it). Sydney NSW 2000
Ascalon has authorised the use of this PDS as disclosure to investors and Responsible Entity
prospective investors of an investor directed portfolio service, master trust,
wrap account or an investor directed portfolio service-like scheme (“IDPS”). For further information on the Fund or any investor enquiries,
Indirect Investors investing through an IDPS may rely on the information please contact Ascalon:
contained in this PDS in instructing IDPS operators to invest in the Fund
on their behalf. Ascalon accepts no responsibility where the IDPS operator Ascalon Capital Managers Limited
does not provide Indirect Investors investing through an IDPS with a current ACN 093 660 523, AFSL 300697
version of this PDS or any supplementary or replacement PDS. Indirect Level 18, 15 Castlereagh Street
Investors investing through an IDPS do not acquire the rights of a unit holder Sydney NSW 2000
in the Fund. The rights of Indirect Investors are set out in the IDPS guide or
other offer document for the relevant IDPS. Visit our website at:
www.ascalon.com.au
The information in this PDS is general information only. It does not take
into account your individual objectives, tax and financial situation or Or send an e-mail to: ascalon@ascalon.com.au
particular needs. Prospective investors should read and understand By telephone – (toll free) during business hours
this PDS in its entirety, rely upon their own enquiries and seek their own (Sydney time): 1300 303 933
financial and taxation advice in deciding whether to invest. Ascalon, the By facsimile: 02 9017 9766
Custodian, the Administrator, H3, their related entities, shareholders,
directors or officers do not guarantee the performance of the Fund, the Administrator and Custodian
return of an investor’s capital or any specific rate of return. This PDS is not
a recommendation to invest. The Hongkong and Shanghai Banking Corporation Limited,
Sydney Branch (“HSBC”)
No person is authorised to give any information or to make any ABN 65 117 925 970 AFSL 301737
representation in connection with the investment opportunities described
in this PDS, which are not contained in this PDS. Any information or HSBC Securities Services
representation not so contained may not be relied upon as having been HSBC Centre, 580 George Street
authorised in connection with this investment. Sydney, NSW 2000
Australia
This PDS should be read in conjunction with the Constitution of the Fund,
which is available from Ascalon. The offer made in this PDS is only available www.hsbc.com
to investors receiving it (electronically or otherwise) in Australia. Applications
from outside Australia will not be accepted.
An investment in the Fund is not a deposit with, or liability of Westpac or
any other company of the Westpac Group and is subject to investment risk,
2 H3 Commodities Fund PDS
Contents
The Fund At A Glance 4
About H3 Global Advisors 5
About The H3 Commodities Fund 6
How The Fund Works 8
Investment Risks 9
How To Apply & Redeem 11
Fees & Other Costs 14
16
Additional Explanation Of Fees & Costs
19
Unit Pricing, Distributions & Taxation
21
Additional Information
Anti-Money Laundering (Aml) / Counter Terrorism Financing (Ctf) Terms
Completing The Application Form
Application Form
Service Providers
3
The Fund at a Glance
Objective The investment objective of the Fund is to provide investors with an actively
managed commodities portfolio that seeks to generate returns that are equal or
superior to that of major global commodity indices with the same or lower volatility,
after fees and expenses, over a medium to long-term time horizon.
Benchmark Dow Jones – UBS Commodity Index (Total Return)
Minimum Investment Amount $50,000
Minimum Additional Investment $10,000
Minimum Withdrawal Amount $10,000 – subject to the minimum investment amount being maintained.
Management Costs As at the date of this PDS, management costs relating to the Fund comprise the
following components:
1. Management Fee: 1.45% per annum
2. Performance Fee: 15% of the amount (if any) by which the Underlying Fund’s
investment performance (before fees) exceeds the Hurdle
Hurdle Dow Jones – UBS Commodity Index (Total Return) plus the Management Fee of
1.45% p.a.
Estimated Expense Recoveries Nil
Buy/Sell Spread +/- 0.10%
Withdrawal fee Nil
Applications Applications can be made by completing the Application form attached to this PDS.
Additional Investments Additional deposits can be made at any time.
Withdrawals You can request a withdrawal at any time.
The above table is a general summary of certain key features only. An investment in the Fund is subject to the terms and conditions as set
out in this PDS in its entirety.
4 H3 Commodities Fund PDS
About H3 Global Advisors
H3 Global Advisors Pty Limited (“H3”) is an Australian
company founded in 1996. H3 holds an Australian Financial
Services Licence (Licence No. 233811).
Majority owned by founders, H3 has a highly experienced
investment team with an extensive history of active portfolio
management. The principals at H3 have over 50 years
combined portfolio management experience.
H3 has a highly rated process and manages assets on behalf
of institutional and retail clients, utilising their expertise in
quantitative investment strategies and bespoke mandates.
Ascalon owns a minority stake in H3 Global Advisors Pty
Limited.
Mathew Kaleel and Andrew Kaleel are founding
principals of H3.
Mathew and Andrew formed Gibran Securities in 1995, a
private investment and research company. During this time,
they actively traded in the futures markets, which enabled
them to develop the management and risk models that form
the core of H3’s strategies. From the founding of H3 in 1996
through to 1998, Mathew and Andrew continued to research
and trade proprietary funds to refine the models that are now
used by H3. At H3, they are jointly responsible for all trading
decisions made by H3, including trading, execution, risk
management as well as ongoing development and research
of the trading models.
Mathew: From 1992 to 1995, Mathew worked for several
large construction management companies in the areas of
risk assessment, project management and finance. Mathew
holds a degree in Economics and a degree in Construction
Management, and is registered as a principal and as an
associated person of the Investment Manager.
Andrew: From 1990 to 1995, Andrew worked at State
Street Bank and Trust, BNP Paribas Funds Management and
Deutsche Asset Management. During Andrew’s tenure, BNP
was rated one of the top performing Australian equity fund
managers. At Deutsche Asset Management, Andrew and
his team were responsible for overseeing the management
of international equities, currency hedging, money market,
foreign exchange and derivatives programs.
5About The H3 Commodities Fund
The H3 Commodities Fund has been established as a Investment Process
registered managed investment scheme under the Corpora-
tions Act 2001. The Fund provides investors exposure to a H3 has developed a trading program that targets returns
commodities strategy managed by H3 Global Advisors. The uncorrelated with those of traditional asset classes while
strategy is otherwise only available for investment by institu- minimising and controlling risk by:
tional or other wholesale investors.
• Diversification across global commodity markets
The Fund will access H3’s commodities strategy through Maximising opportunities for profit and spreading
the Underlying Fund. References in this PDS to investments, risk over more than 20 of the world’s most liquid
objectives, risks and other characteristics of the Fund include commodity markets.
those associated with the Fund as a result of its investment
in the Underlying Fund. • Ongoing research and testing
Using thoroughly researched and tested trading models
Fund Objective and Timeframe which have been applied to more than 20 years of
historical data and actual trading since 1996.
The investment objective of the Fund is to provide investors
with an actively managed commodities portfolio that seeks • Diversification of trading programs
to generate returns that are equal or superior to that of Diversifying investment strategies through the use of
major global commodity indices with the same or lower trading programs which have been designed to capture
volatility, after fees and expenses, over a medium to long- short, medium and long term trends in the global
term time horizon. commodity markets.
The suggested investment timeframe is five years or more. • Limiting value at risk to predetermined levels
Monitoring the exposure of each market and the total
Why invest in commodities? investment portfolio on an ongoing basis to ensure
predetermined levels of risk are maintained as volatility
• Growth: exposure to potential positive performance of changes in the underlying markets.
commodities prices.
• Disciplined trading approach
• Portfolio diversification: commodity prices generally The exposure is actively managed on a daily basis and
have a low correlation to share markets, helping computerised risk management models are used to
investors balance their portfolio against poor equity ensure the portfolio invests within clearly defined risk
performance. and exposure parameters on a market, sector and total
portfolio basis.
• Useful inflation hedge: as commodity prices are
based on real assets, exposure to commodities may
provide a good hedge for rising inflation.
Investment Strategy
The Fund provides investors with access to an actively
managed portfolio of commodity futures contracts.
The portfolio is managed using a well-developed quantitative
model, which identifies trends through analysis of price
momentum, liquidity, volatility and roll yield in the various
commodity markets. This information is then used to select
commodities that are likely to provide favourable risk-
adjusted returns in the future.
In addition, the Fund is able to quickly allocate to cash
in response to certain market conditions. This provides
the ability for the Fund to outperform in down markets by
reducing exposure to commodity markets when they are not
performing well.
6 H3 Commodities Fund PDSInvestments In The Fund Borrowings
H3 invests in over 20 of the world’s most liquid Whilst Fund’s Constitution permits borrowing, the Fund
commodity markets, including energy, industrial and does not intend to borrow other than to meet short term
precious metals, and agriculture including livestock, cash requirements.
grains and soft commodities.
The use of leverage is not part of the Fund’s investment
Commodities as an asset class have historically strategy.
demonstrated returns that are negatively correlated with
returns of stocks and bonds and that are positively correlated Derivatives
with inflation measures.
H3 primarily uses exchange traded futures contracts to
These characteristics imply that an allocation to a commodity access returns of the underlying commodities. By using
portfolio in a diversified equity and bond portfolio can futures, H3 is able to actively manage exposures without
improve the risk and return characteristics of the portfolio. costs such as transport and storage usually associated with
physical holdings in commodities.
An example of the commodity markets currently traded are
listed in the table below. As the Fund utilises a short-term H3 also uses currency futures contracts to hedge the US
trading overlay, commodity positions is likely to change dollar exposure in the underlying commodities. From time
from day-to-day. H3 regularly reviews other commodities for to time, H3 may also use Over-The-Counter (OTC) financial
inclusion in the trading program. products such as forwards and swaps to manage positions
outside of exchange trading hours or if trading on an
exchange has been halted.
Energy Industrial Metals
Crude Oil Aluminium Derivatives will not be used to leverage (gear) the Fund
RBOB Unleaded Gas Copper although gross exposures may exceed the net asset value of
Heating Oil Zinc the Fund from time to time.
Natural Gas Nickel
Brent Crude Oil Lead
Gas Oil Tin
Livestock Precious Metals
Live Cattle Gold
Lean Hogs Silver
Palladium
Platinum
Softs Grains
Sugar Corn
Cotton Wheat
Coffee Soybeans
Cocoa Soybean Oil
Benchmark
The Dow Jones – UBS Commodity Index (total return) is
designed to be a liquid and diversified benchmark to the
commodity futures market. The Manager has adopted
this benchmark for its trading strategy and relative
performance analysis.
H3 does not use the Benchmark for position sizing. Rather,
the Manager allocates exposure to commodities with similar
risk return expectations, irrespective of their weight in the
Benchmark. The Manager will also trade commodities not
included in the Benchmark.
7How The Fund Works
The Fund is a registered managed investment scheme under Key benefits of investing in the Fund
the Corporations Act 2001. This means that investors’ funds
are pooled and managed in accordance with a set objective • Exposure is diversified across the world’s most liquid
and strategy. An investor acquires an interest in the Fund in commodity markets, including energy, industrial and
the form of units. precious metals, grains, livestock and other soft
commodities.
When you invest in the Fund, you will be issued with units.
Each unit entitles the unit holder to a proportionate beneficial • The strategy invests in highly liquid futures markets
interest in the Fund’s portfolio of assets. A unit does not give to gain access to commodities. These markets trade
you any interest in any underlying asset in the Fund. around the clock.
The Constitution of the Fund allows for more than one class • The investment team is highly experienced in commodity
of units to be offered to investors. Where this is the case, futures trading and has been actively investing in the
the rights of investors in different classes of units may vary commodities market since 1996.
between classes.
• H3 strategically allocates between cash and commodity
Investing in a managed investment scheme can offer a exposure. Therefore, the Fund is expected to exhibit
number of benefits to you. These benefits include: lower volatility when compared with major global
commodity indices.
• Increased purchasing power: The sheer size of a
managed investment scheme means it can potentially Changes to the Fund
buy and sell assets at a cheaper cost than an individual
investing directly; Ascalon has the right to change the Fund’s objective and
investment strategy at its discretion and in some cases,
• Investment opportunities: Managed investment without prior notice. Investors will be informed of any material
schemes give you the opportunity to access a range of changes to the Fund either by the next regular investor
international assets that you may not normally be able to communication or as otherwise required by law. Please refer
access as an individual investor; and to page 13 on how to receive up to date information.
• Professional investment management: Your money Labour Standards, Environmental, Social and Ethical
is managed by a team of professionals who use their Considerations
resources, experience and specialist skills to make the
investment decisions on behalf of all investors in the Fund. Whilst the Responsible Entity and Investment Manager intend
to conduct their affairs in an ethical and sound manner, the
The number of units you will receive is dependent on the investment criteria employed by the investment manager
amount of money invested and the unit price as at the date does not take into account labour standards, environmental,
of application. social or ethical considerations for the purpose of selecting,
retaining or realising any investment of the Fund.
Investors should weigh up the potential benefits against
the risks of investing (see the following section titled “Risk
and Return”).
8 H3 Commodities Fund PDSInvestment Risks
Significant Risks of Investing in the Fund Generally, the higher an investment’s expected return, the
higher the expected risk. Traditionally, listed shares have
IMPORTANT NOTE generally been considered to be more volatile, that is, will
experience greater fluctuations in value, than property, while
The significant risks of the Fund discussed below do not property has generally been more volatile than fixed interest
purport to be a complete explanation of all the risks of and cash. However, higher risk asset sectors such as shares
investing in this Fund. and property securities have historically produced higher long
term returns than fixed interest and cash.
Your investment in the Fund is not guaranteed. The
value of your investment will rise and fall in line with the An investment, such as the Fund, which invests in long
changing value of the underlying investments. term growth assets, generally produces relatively higher
investment returns. Historically, growth assets have been
Each investor has their own particular investment characterised by volatility in the short-term and capital
objectives, financial situation and particular needs. You growth in the long-term. Investors should understand that
should consult with your financial and taxation adviser the value of investments may go up or go down. Investments
before investing and from time to time, to ensure your in the Fund are not guaranteed.
investment is, and remains, appropriate to your needs.
To assess whether the Fund is suitable for you, please
consult your financial adviser.
Risk And Return
Prospective investors should consider the risks summarised
All investments carry some level of risk. In investment terms, below and speak to their financial advisers when determining
risk is the variability in short term returns and the potential whether an investment in the Fund is suitable for them.
to lose your capital. There is also a risk that an investment
manager may not perform according to expectations. Risks associated with investment into the Fund
Investment risk means it is not possible to predict the Risks can be minimised but not entirely eliminated. You
investment returns that an investment will achieve. should be prepared to accept the risks before investing in
Investment returns are not guaranteed and past performance the Fund. The primary risks associated with investment in the
is not an indicator of future performance. Fund are outlined as follows:
Type of Risk Risk Explained
Market & strategy risk The value of your investment may be affected by factors such as financial market volatility, economic
cycles, political events, legislation, tax, interest rates and individual company factors. Different factors may
affect the prices of individual positions or particular asset classes or futures positions at different times.
Risks are involved in the trading activities generally undertaken by H3. Increasing competition may limit
H3’s ability to take advantage of trading opportunities in rapidly changing markets. No assurance can
be given that the Fund will realise a profit or that it will not lose some or all of its equity value. In addition,
the Fund may be subject to margin calls in the event that the assets on deposit in its trading account are
insufficient to satisfy margin requirements. Because of the nature of trading activities, the results of these
activities may fluctuate from month to month and from period to period. Accordingly, investors should
understand that the results of a particular period are not indicative of future results.
Nature of investments The Fund’s investments involve a high degree of financial risk. Markets in which the Fund is anticipated
to invest are subject to a high degree of volatility. There can be no assurance that the Fund’s investment
objectives will be realised or that unit holders in the Fund will receive any return on their investment.
As a result of the nature of investments, an investor may lose part or all of their investment in the Fund.
Derivatives Risk Derivatives form an integral part of the investment process. Derivatives such as options, futures and
swaps, are used by the Fund to:
• implement an investment strategy in a cost efficient manner;
• substitute for direct investment in securities and assets; and
• manage risk (such as hedging currency exposure) or gain exposure to investments;
Risks of derivatives include:
• the value of the derivative failing to move in line with the underlying asset or as expected;
• potential illiquidity;
• the possibility that the derivative position is difficult or costly to reverse; and
• counterparty risk.
9Investment Risks Continued
Type of Risk Risk Explained
Counterparty (Default & Counterparty risk refers to risk of loss arising from the failure of the other party to a contract to meet its
Credit) Risk obligations. This may arise in derivatives, fixed interest securities and mortgage securities. Entry into transac-
tions such as swaps creates counterparty risk. Substantial losses could be incurred if a counterparty fails
to deliver on its contractual obligations, or experiences financial difficulties. For this reason the Manager
engages with counterparties believed to exhibit creditworthiness at the time of execution.
In most financial contracts, counterparty risk is also known as “default” or “credit” risk.
Country, legal, tax and This is the risk of being exposed to the regulatory (including tax and legal), economic and/or political climate
regulatory risk in the countries in which the Fund invests or has exposure to. These risks may adversely affect investments
held in those countries as well as impact on the Fund’s performance.
Where there are material changes in relevant jurisdictions, these changes may result in the Fund being un-
able to achieve its stated investment objectives.
Securities in which the Fund may trade or invest are also subject to certain risks arising from government or
regulatory intervention in the relevant capital markets. Such regulation or intervention could adversely affect
the Fund’s performance or the viability of its investment strategy.
Liquidity of Investments Investing has the inherent risk that a given security or asset cannot be traded quickly enough to prevent a
loss (or make the required profit). Also, the Fund’s inability to readily dispose of its underlying investments
may limit the Fund’s ability to meet withdrawal requests.
For example, securities of companies may, from time to time, exhibit limited liquidity. This may also extend
to any swap transaction, structured security or derivative contract which provides exposure to assets which
may be difficult to access directly.
If significant redemptions of units in the Fund are requested, it may not be possible to liquidate the Fund’s
underlying investments at the time such withdrawals are requested or may be able to do so only at prices
which Ascalon believes do not reflect the true value of such investments, resulting in an adverse effect on
the return to remaining investors. In addition, although it is expected on termination of the Fund to liquidate
all of its underlying investments and distribute only cash to the unit holders in the Fund, there can be no as-
surance that this objective will be attained.
Manager Risk Although Ascalon has the ultimate authority for the management of the Fund, all the decisions relating to the
investment of the Fund’s assets will be made by H3. The Fund’s investment process is largely dependent on
the continuation of the services and skills of H3’s officers and employees. The loss of H3’s services (or that
of one or more of its key personnel) could materially and negatively impact the value of the Fund as it may
lead to the loss of the use of any proprietary investment methodology developed by H3.
H3 may fail to meet the Fund’s objective, such as not producing returns that compare favourably against the
major global commodity indices.
Currency Risk Investments in global markets which are denominated in foreign currencies give rise to foreign currency
exposure. This means that the Australian Dollar (AUD) value of these investments will vary depending on
changes in the exchange rate.
Currency movements can disguise the return from the underlying investments and consequently the Fund
intends to hedge the currency exposure to the AUD. However, despite the intention to hedge, an offsetting
transaction may not perfectly hedge the currency exposure.
Limited Diversification The Fund’s investments are concentrated and may give rise to higher risk than the reference securities repre-
sented by the Benchmark.
Product Risk Ascalon may make changes to the Fund at any time, including:
• closing or terminating the Fund;
• the Fund’s objective, investment strategy or method of exposure; and
• the rules that govern the Fund (e.g. fees, notice periods or withdrawing features).
In some cases, we can do these things without prior notice to investors.
10 H3 Commodities Fund PDSHow to Apply & Redeem
Applications appropriately completed the Application Form attached to
this PDS.
Minimum Initial Investment
Investing through an IDPS
The minimum initial investment is $50,000. Ascalon
may in its discretion raise or lower the minimum initial Ascalon authorises the use of this PDS as disclosure to
investment amount. persons seeking to access the Fund indirectly through an
Investor Directed Portfolio Service, or investor directed
Minimum Additional Investment portfolio service-like schemes including master trusts and
wrap accounts (“IDPS”). Investors investing in the Fund via
The minimum amount for additional investments is $10,000, an IDPS do not themselves become investors in the Fund,
subject to Ascalon’s discretion to accept a lower amount. and accordingly have no rights as a unit holder (“Indirect
Investors”). The offer document for your IDPS should have
Application Acceptances further details. If you are an Indirect Investor, generally the
relevant scheme operator acquires the rights of a unit holder.
Applications are accepted (in whole or in part) at the
absolute discretion of Ascalon. Rejected, invalid or Your rights and liabilities will be governed by the terms of
incomplete applications will be returned to applicants the relevant IDPS, which you should read carefully prior to
as soon as possible. Interest is not payable on rejected directing the relevant operator to invest in the Fund.
application monies.
Indirect Investors complete application forms for the IDPS,
Application Process and Cut-Off Times not the Fund, and receive reports from their operator.
Inquiries should be directed to that operator or your
Applications can be made by completing the Application financial adviser.
Form attached to this PDS (see below instructions for IDPS
investors). Applications (including application money) and Minimum investment and withdrawal requirements may
cleared funds must be received by 12 noon on a Business not always be relevant to Indirect Investors because the
Day; otherwise the application will generally be processed IDPS operator may invest on behalf of a number of Indirect
on the following Business Day. If the application is accepted, Investors. Indirect Investors will also incur the fees and
the price will be the unit price that is determined for that expenses applicable to the IDPS, as well as the Fund’s fees
Business Day. and expenses. The tax information in this PDS does not
specifically cater for Indirect Investors.
A copy of the original executed and completed Application
Form may be faxed to HSBC on 02 8987 5943, but no Cooling-Off Period
applications will be processed until HSBC has received a
properly completed original. Investors can change their mind within a 14-day period of
their initial investment. The 14-day period commences on
If paying by fund transfer or direct credit, cleared funds must the earlier of either the date you receive confirmation of your
be electronically transferred into the application account. investment or the end of the 5th Business Day after the
day on which Ascalon issues the units to you. The realised
The application account details are as follows: market value of the units will be refunded, less any taxes and
reasonable administrative costs.
BSB 342-011
The proceeds refunded may be less or greater than the
Account Number 358 348 021
amount invested, since units in the Fund are subject to
Account Name AFS Subscription Trust Account market movement from the time they are acquired.
Bank HSBC Bank Australia Limited
Cooling-off rights will not apply to “wholesale” clients as
defined by the Corporations Act 2001 or in certain limited
Any interest earned on application money (less applicable situations, such as if the issue is made under a distribution
withholding tax) paid in advance of a Business Day will reinvestment plan, where the Fund is illiquid or where an
be retained by Ascalon and paid to HSBC; it will not be issue represents additional contributions required under an
credited in favour of the applicant. existing agreement.
Subsequent additional investments may be effected by Also, cooling-off rights do not apply in respect of any
properly completing the Application Form and sending this investment acquired through an IDPS. However, Indirect
to HSBC as described above. Investors should contact their operator and read the operator’s
offer document for more information on any cooling off rights
Units in the Fund cannot be issued unless you have that may apply in relation to the relevant IDPS.
11How to Apply & Redeem Continued
Redemptions Please note that these times are a guide only and as
specified in the Fund’s Constitution, we may take up to 30
Minimum Redemption days to process your redemption request.
The minimum redemption is $10,000 (or such lesser amount Facsimile Arrangements
as Ascalon may determine). A requested partial redemption
which would cause the investor’s investment to fall below Where Application Forms are initially sent by facsimile, the
the minimum holding of $50,000 (or such lesser amount as original signed Application Forms must also be sent to
Ascalon may determine) will not be permitted. HSBC. None of HSBC, Ascalon or their duly appointed
agents will be responsible to an applicant for any loss
Redemptions Processes and Cut Off Times resulting from the non-receipt or illegibility of any application
initially sent by facsimile or for any loss caused in respect
Redemptions are generally processed by the following of any action taken as a consequence of such facsimile
Business Day provided the request is received by HSBC by believed in good faith to have originated from properly
12 noon on a Business Day. Ascalon may at its discretion authorised persons.
allow redemptions at other times and with longer or shorter
notice periods. The redemption price will be the unit price A redemption request must be made via a written request,
as at that Business Day. If the request is received after the and it must be signed by the unit holders or the authorised
deadline for receipt of requests, it will be treated as a request signatories. Redemption requests may be initially sent by
for redemption received on the next relevant Business Day. facsimile, however, payment of redemption proceeds will not
be made until after HSBC’s receipt of the original completed
Investors may redeem all or part of their investments in the redemption request. If unit holders choose to send initially
Fund by notifying Ascalon in writing. The original signed copy redemption requests by facsimile, they bear the risk of such
of the request for redemption should be sent to HSBC. A requests not being received. None of HSBC or Ascalon
copy may also be faxed to HSBC on 02 8987 5943 with the accepts any responsibility or liability for any loss caused as
original to follow. a result of non-receipt or illegibility of any facsimile notice
or for any loss caused in respect of any action taken as a
Fax Instructions should be forwarded to: consequence of such facsimile instructions believed in good
faith to have originated from properly authorised persons.
Ascalon Capital Managers Limited
C/- The Hongkong and Shanghai Banking Corporation Ascalon reserves the right to add additional requirements to
Limited, Sydney Branch the fax conditions at any time.
Attention: Fund Services – Transfer Agency Department Restrictions on Redemptions
Fax: (02) 8987 5943 (Dealing) Ascalon may, under the Constitution, suspend or delay
redemptions in certain prescribed cases, including where any
Original instructions should be mailed to*: of the following occur:
Ascalon Capital Managers Limited • the Fund is illiquid (as defined by the Corporations Act
C/- The Hongkong and Shanghai Banking Corporation 2001);
Limited, Sydney Branch
HSBC Securities Services • where large redemption requests are received on a
HSBC Centre, 580 George Street Business Day;
Sydney, NSW 2000
Australia • Ascalon has taken all reasonable steps to realise
sufficient Fund assets to satisfy a redemption request
Attention: Fund Services – Transfer Agency Department and is unable to do so;
*Original instruction must be provided after the initial faxed • Ascalon is unable to calculate the redemption price or to
instruction has been sent. fairly determine the net asset value due to one or more
circumstances outside its control; or
Withdrawals will generally be paid within 20 business days
after HSBC receives a properly completed redemption • Ascalon otherwise determines that it is in the best
request. Proceeds from redemptions will be electronically interests of unit holders to extend the period.
credited to your bank account. Note that normal bank
charges apply.
12 H3 Commodities Fund PDSIf the Fund is illiquid, withdrawals from the Fund will only be Indirect Investors
possible if we make a withdrawal offer in accordance with
the Corporations Act 2001. You will only be able to withdraw The IDPS operator will provide Indirect Investors with reports
on the terms of any such current withdrawal offer which we on the progress of the Fund.
are not require to make unless we have so determined.
Continuous disclosure
For further details on the circumstances where Ascalon may
delay or suspend redemptions, please contact Ascalon on Investors have the right to obtain a copy of the following
1300 303 933 or refer to the Fund Constitution, a copy of documents free of charge:
which is available free of charge by contacting Ascalon.
• the Annual Financial Report most recently lodged with
Investor Communication ASIC;
As an investor in the Fund, you will normally receive the • any half year financial report lodged with ASIC after the
following reports. lodgement of the Annual Financial Report and before the
date of this PDS; and
Confirmations
• any continuous disclosure notices given by the Fund
You will receive confirmations of all applications and after lodgement of the Annual Financial Report. We
redemptions. intend to post continuous disclosure notices on our
website. Our website address is www.ascalon.com.au.
Monthly Report
In addition, the Fund may become a “disclosing entity”
A monthly report showing the unit price and performance of under the Corporations Act 2001. When that occurs, the
the Fund will be made available on Ascalon’s website. Fund will be subject to regular reporting and disclosure
obligations. Copies of documents lodged with ASIC may
Tax, Distribution and Annual Statements be obtained from or inspected at, an ASIC office and are
available on our website. A monthly report showing the unit
Taxation and distribution statements are forwarded to all price and performance of the Fund will be made available
investors annually. In addition an annual statement which on Ascalon’s website.
contains the transaction history of an investor for the year is
also sent to all investors.
Audited Financial Statements
Audited financial statements of the Fund are issued
annually for the year ending 30 June. They will be prepared
in accordance with Accounting Standards applicable to
general financial statements in Australia to the extent that
the Fund is required to comply with those standards by
the Corporations Act 2001 or under the Constitution.
The audited financial statements are made available to
investors online at www.ascalon.com.au. A hard copy may
be requested free of charge by contacting Ascalon on
1300 303 933 during business hours on any Business Day.
Audited financial statements will not be mailed to investors
unless specifically requested.
13Fees and Other Costs
*The below disclaimer is standardised and does not provide specific information on fees and charges. Please refer to below
for specific information on Fund fees and charges.
Did you know?
Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns.
For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year
period (for example, reduce it from $100,000 to $80,000).
You should consider whether features such as superior investment performance or the provision of better member services justify higher fees
and costs.
You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial adviser.
To Find Out More
If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments
Commission (ASIC) website (www.fido.asic.gov.au) has a managed investment fee calculator to help you check out different fee options.
The following table shows the fees and other costs that you may be charged. These fees and costs may be deducted from
your money, from the returns on your investment or from the Fund’s assets as a whole.
Information on taxation is set out in the section entitled “Taxation”.
You should read all of the information about fees and costs because it is important to understand their impact on your
investment.
Type Of Fee Or Cost Amount How And When Paid
Fees when your money moves in or out of the Fund
Establishment fee Nil No fee is charged.
The fee to open your investment
Contribution fee Nil1 No fee is charged.
The fee on each amount contributed to your
investment
Withdrawal fee Nil No fee is charged.
The fee on each amount you take out of your
investment
Termination fee Nil No fee is charged.
The fee to close your investment
Management Costs
The fees and costs for managing your As at the date of this PDS, the Management
investment Costs of the Fund consist of the following
components:
1. Management Fee2: The Management Fee is payable to the
1.45% per annum Investment Manager. It is calculated and ac-
crued daily, and paid monthly in arrears out
of the assets of the Underlying Fund.
2. Performance Fee3: 15% of the amount The Performance Fee (if any) is payable to
(if any) by which the Underlying Fund’s in- the Investment Manager and is calculated
vestment performance (before fees) exceeds and accrued daily in the price of the Under-
the Hurdle4. lying Fund. If applicable, the fee is payable
to the Investment Manager on a quarterly
basis.
Service fees
Investment switching fee No fee is charged.
The fee for changing investment options
Notes:
1. A buy/sell spread will generally apply (see “Transaction Costs and Buy/Sell Spread” in the “Additional Explanation of Fees and Costs” section below).
2. Please refer to the explanation of “Management Costs” and “Expenses” in the “Additional Explanation of Fees and Costs” section below.
3. See “Performance Fee” in the “Additional Explanation of Fees and Costs” section below for a dollar worked example.
4. The Hurdle is the Dow Jones – UBS Commodity Index (Total Return) plus the Management Fee for that day.
14 H3 Commodities Fund PDSExample of Annual Fees and Costs for the Fund
This table gives an example of how the fees and costs in the Fund can affect your investment over a 1 year period. You
should use this table to compare this product with other managed investment products.
Example Balance Of $50,000 With A Contribution Of $5,000 During
The Year
Contribution Fees Nil. For every additional $5,000 you put in, you will be charged nil.
PLUS Management Fee And, for every $50,000 you have in the Fund you will be
Management Costs charged $725.00 each year.
$50,000 X 1.45% = $725
Important information
Example assumes the Fund has outperformed the Hurdle by
Estimated Performance Fee at 15%
5% as shown in Scenario 2 (see “Performance fee” below).
$50,000 X 5% X 15% = $375 This estimate is provided for illustrative purposes only and is
not an indication of actual or future performance. The actual
Performance fee (and therefore Management costs) charged in
the future may vary over time depending on the performance of
the Fund.
EQUALS If you had an investment of $50,000 at the beginning of the year
Cost of fund and you put in an additional $5,000 during that year and the
Fund outperformed the Hurdle by 5%, you would be charged
fees of:
$1,100
What it costs you will depend on the fees you negotiate
with the Fund or financial adviser.
Please refer to the following explanation of “Transaction Costs and Buy/Sell Spread” for a buy spread that may apply in respect of the $5,000 contributed. For
illustrative purposes, the above example assumes that management costs were calculated on a balance of $50,000 and the value remains constant at $50,000
for the entire year. It does not take account of management costs that would be charged on the additional $5,000 contributed during the year (as this will depend
on when the additional $5,000 is contributed).
15Additional Explanation of Fees and Costs
Management Cost of the Fund The Hurdle is the return of the Dow Jones – UBS Commodity
Index (Total Return) plus the Management Fee for that day.
The Management Cost relating to the Fund comprise the
Management Fee and Performance Fee charged by the This means that a Performance Fee will only be charged
Underlying Fund. if the Underlying Fund’s investment performance after
management fees has exceeded the Benchmark return.
Management Fee
Where the daily calculated Performance Fee is negative it is
A Management Fee of 1.45% per annum is payable in applied to reduce any accrued Performance Fee from the
respect of the Fund. The fee is calculated and accrued as previous day, or, where there is no accrued Performance Fee
at each Valuation Day1, and is payable to the Investment from the previous day, carried forward as a “Performance
Manager monthly in arrears. This will be paid out of the Deficit”. Any Performance Deficit will need to be offset by
assets of the Underlying Fund and you will not be charged future positive Performance Fees before any Performance
directly. The Management Fee however will ultimately be Fee becomes payable. This means that the Underlying Fund
reflected in the value of the unit price you receive and will must make up any under-performance (in dollar terms) from
affect the return on your investment. previous periods before a Performance Fee can be accrued
and reflected in the unit price.
The Management Fee covers the costs for managing your
investment and includes fees and charges related to the The Performance Fee is calculated each Valuation Day based
operation and administration of your investment such as the on the daily performance and the value of the Underlying
fees paid to external service providers. Transaction costs, Fund on that day and, where positive, accrued and reflected
buy-sell spread and other infrequent administration costs are in the Net Asset Value of the Underlying Fund, and will
not covered by the Management Fee. affect the return on investment in the Fund. If applicable, the
Performance Fee is paid quarterly (following the end of June,
Ascalon will be paid a fee of up to 0.10% for its services as September, December and March) out of the Underlying
responsible entity of the Fund. This is paid by H3 and is not Fund and you will not be charged directly.
an additional cost to you or the Fund.
It is important to note that the Performance Fee is charged
Performance Fee at the Underlying Fund as a whole during each year and
does not necessarily reflect the performance of any individual
In addition to the Management Fee, a Performance Fee unitholder’s investment.
equal to 15% of the amount (if any) by which the gross
investment performance of the Underlying Fund exceeds
1
Valuation Day means the close of business each day in the market (or mar-
kets) relevant for the valuation of assets and liabilities of the Underlying Fund.
the Hurdle during the quarter may be payable to the
Investment Manager.
Examples of performance fees for the Fund
These examples show the dollar effect for a hypothetical investor. Investor A has $50,000 invested in the Fund on the first day
of the period where a Performance Fee was calculated and has made no transactions during that period. Please note that in
these examples, the Fund returns include the Management Fee. The examples assume the investor has held the investment
in the Fund continuously over the entire period (and for Scenario 3, 2 subsequent periods) for which the Performance Fee
was calculated. This fee is charged by the Underlying Fund and reflected in the cost of your investment.
Scenario Performance Fee
Scenario 1 No performance fee is charged.
- Fund’s gross return is 6%
- Hurdle return is 6%
- The Fund return in excess of the Hurdle return is 0%.
Scenario 2 A performance fee of $375 is charged
- Fund’s gross return is 11% ($50,000 X 5% X 15% = $375)
- Hurdle return is 6%
- The Fund return in excess of the Hurdle return is 5% (11% – 6%).
16 H3 Commodities Fund PDSScenario 3 A performance fee will not be
- The Fund has been in existence for 2 periods (Period 1 and Period 2) charged because the Fund’s
- Investor A has been invested in the Fund continuously during Period 1 and Period 2. outperformance in Period 2
has been offset by the Fund’s
Period 1 underperformance in Period 1.
- Fund’s gross return is 0%
- Hurdle return is 6%
- The Fund underperforms the Hurdle, no Performance fee is charged in Year 1
- This performance deficit of 6% will be carried forward to Period 2.
Period 2
- Same details as Scenario 2
- The Fund’s gross outperformance of 5% is offset by the Fund’s underperformance of 6% in
Period 1, resulting in net underperformance (relative to the Hurdle) of 1% at the end of Period 2.
- This remaining performance deficit of 1% will be carried forward to the next Period.
Important note regarding examples of performance fees for the Fund: These examples are provided for illustrative purposes only and do not represent any actual
or prospective performance of the Fund. It is not possible to estimate the actual performance fee payable for any given period as we cannot accurately forecast
the Fund’s performance. We do not provide any assurance that the Fund will achieve the performance used in the example and you should not rely on this in
determining whether to invest in the Fund.
Differential Fees Transaction costs are costs related to buying and selling
assets such as brokerage, settlement costs and stamp
Ascalon may from time to time enter into special duties. The buy/sell spread is not a fee paid to Ascalon or
arrangements regarding differential fees in relation to H3, but paid to the Fund to cover transaction costs incurred.
investments made by investors who are ”wholesale clients”
(within the meaning of the Corporations Act 2001). Such Currently the Fund charges 0.10% for the buy spread and
negotiations would be subject to compliance with legal 0.10% for the sell spread. These amounts may change if, for
requirements and any applicable Australian Securities and example, transaction costs change. The dollar value of these
Investments Commission relief. Please contact us or your costs based on an application or withdrawal of $50,000 is
adviser for details of negotiating any fee rebates or waivers. $50 for each individual transaction.
Expenses The spread of the Fund may be reviewed by Ascalon and
altered or waived from time to time, without advance notice
The Constitution of the Fund allows Ascalon to be to investors. Ascalon may also determine a reasonable
reimbursed for expenses incurred in the proper performance estimate of the actual amount necessary to avoid an
of the Fund’s day to day operations and also additional adverse impact on other unit holders due to the acquisition
“one-off” expenses which are incurred by the Fund such as or disposal of assets carried out because of a particular
unitholder meetings, constitutional amendments or certain application or redemption request and apply this as the buy/
investor communications. sell spread for that particular application or redemption.
As at the date of this PDS, it is intended that the A copy of our unit pricing policy, including details of any
Management Fee charged covers fees and expenses discretions that we may exercise in various circumstances
incurred in the management and administration of the Fund (including in respect of transaction costs), is available without
including but not limited to external service providers and charge upon request.
other expenses but excludes buy-sell spread, transactions
costs, large “abnormal” expenses and bank fees. Increases to Fees and Other Costs
In the future, we may decide to deduct expenses in addition Investors will be given 30 days’ written notice if there are
to the Management Fee increases to fees and expenses charged in relation to your
investment.
Transaction Costs and Buy / Sell Spread
Separately, the Fund’s Constitution sets out the maximum
A buy spread is charged by the Fund when entering the fees that may be charged. Ascalon is not permitted to charge
Fund (buying units) and a sell spread is charged when exiting more than the maximum amount of the fees that are set out
the Fund (selling units) to cover the transaction costs. in the Constitution. Any change to the Fund’s Constitution
would require Unitholders’ approval by special resolution.
17Additional Explanation of Fees and Costs Continued
Can we charge fees not currently levied? Commissions, Adviser Fees, Product Payments
The Constitution of the Fund provides that we can charge Commissions and Soft Dollar Payments
the following fees. At the date of this PDS, we do not charge
these fees but, if we introduce them, we will give direct Ascalon and H3 do not pay any upfront or trailing
investors 30 days written notice: commissions to financial advisers. However, the dealer
group to which your adviser belongs and your IDPS operator
Maximum may receive certain payments or other non-monetary
Fee Description Allowable benefits from us, such as business and technical support,
professional development and entertainment. The provision
Management Fee The fee and costs
of such benefits is governed by our Soft Dollar Policy.
for managing your 3%
investment
These payments and benefits are not an additional cost to
Entry fee The fee on each you.
amount contributed 5%
to your investment We also maintain a register in compliance with the
Exit fee The fee on each Industry Code of Practice summarising alternative forms of
amount you take out 5% remuneration that are paid or provided to advisers.
of your investment
If you would like to review this register, please contact
Adminstration fee Fee on your
Ascalon on 1300 303 933 during business hours.
application amount 3% p.a. for
as an alternative to an 4 years
Adviser Service Fee
Entry Fee
Subject to Ascalon’s discretion and certain terms and
Fees for Indirect Investors conditions, it may be possible for you to arrange for an
adviser service fee to be deducted directly from your
For Indirect Investors accessing the Fund through an IDPS, investment and paid to your financial adviser.
additional fees and costs may apply. These fees and costs
are stated in the offer document provided by the relevant If you would like further information, please contact Ascalon
IDPS operator. on 1300 303 933.
Product Access Payments
Ascalon may enter into arrangements to pay administration
fees to IDPS operators in connection with the listing of this
Fund on their investment menus. This fee is paid by Ascalon
and not by the Fund. It is not charged out of the assets of
the Fund and is not an additional charge to investors.
18 H3 Commodities Fund PDSUnit Pricing, Distributions and Taxation
Unit Pricing and Valuation Process are treated fairly. Prior notice of special distributions will not
ordinarily be provided.
When you invest in the Fund you are allocated a number
of units in the Fund. Each of these units represents an Distributions are automatically reinvested unless you instruct
equal undivided part of the Fund’s Net Asset Value (NAV). the Administrator otherwise in the Application Form. If you do
As a result, each unit has a dollar value or unit price. not nominate a bank account for payment of distributions,
Generally, unit prices are calculated each Business Day we will treat this as a request to reinvest your distributions.
and are calculated by dividing the Fund’s NAV by the You may change your distribution option by notifying the
total number of units held by investors on that day. All Administrator in writing at least 30 Business Days prior to the
unit prices are calculated to four (4) decimal places. The relevant distribution date.
number of units issued is calculated and rounded to the
nearest whole number. Distributions are generally assessable income and can be
made up of both income and realised capital gains, and will
The NAV of the Fund includes the assets (including income vary depending on the factors that influence the performance
accumulated since the previous distribution), less any of the Fund (such as interest rates and market conditions)
liabilities (including borrowings and expenses). and may not be paid at all. Please refer to the explanation of
“Taxation” below for further information.
The entry unit price is usually higher than the exit unit price
as a result of the buy/sell spread. For more information Distributions are calculated in accordance with the Fund’s
please refer to the section on “Transaction Costs and Buy/ Constitution. Undistributed gains accrue in the unit price of
Sell Spread”. the Fund during the relevant distribution period.
Entry and exit prices will usually be available in relation to the This means that if an investment is made just before the
previous Business Day at www.ascalon.com.au. This may end of a distribution period, you may receive some of the
not be achievable due to matters outside the Responsible investment back immediately as income.
Entity’s control such as a delay in the valuation of the
Underlying Fund assets. Immediately following a distribution the Fund’s unit price
will usually fall because the income and realised gains
Distributions will be reinvested using the entry price for accumulated during the distribution period have been
the last Business Day of the relevant distribution period, distributed. Distributions may include a part return of capital.
adjusted to exclude the income to be distributed for the Details will be provided in the investor’s tax statement.
distribution period and any buy/sell spread that would
otherwise be included. Taxation
Ascalon has adopted a unit pricing policy that sets out There are tax implications when investing, withdrawing
policies and procedures when exercising discretions under and receiving income from the Fund. Ascalon cannot
the Fund’s Constitution. For the purpose of calculating the give tax advice and we recommend that you consult your
NAV of the Fund, Ascalon shall, and shall be entitled to, rely professional tax adviser as the tax implications for the Fund
on, and will not be responsible for the accuracy of, financial can impact investors differently.
data furnished to it by the Fund’s prime brokers, market
makers and/or independent third party pricing services. Below is a general outline of some key tax considerations
Ascalon may also use and rely on industry standard financial for Australian resident investors. This information is based
models in pricing any of the Fund’s securities or other assets. on our current interpretation of the relevant taxation laws. As
such, investors should not place reliance on this as a basis
A copy of our unit pricing policy is available free of charge for making their decision as to whether to invest.
by contacting Ascalon on 1300 303 933 or by visiting our
website www.ascalon.com.au. Income earned by the Fund, whether distributed or
reinvested, can form part of the assessable income for
Distributions investors in the year of entitlement.
Distributions will usually be determined annually as at 30 At the end of the Fund’s tax year we will send to you the
June each year. Distributions will generally be paid within 60 details of assessable income, capital gains, tax credits
days after the distribution date. and any other relevant tax information to include in your
tax return.
Ascalon may also pay a special distribution at other times
where we consider it appropriate; for example, where there The Fund will seek to pass on any benefits of franking credits
is a large redemption we may distribute income and capital in respect of distributions including franked dividends from
before processing the redemption so that remaining investors the Fund. Investors receiving distributions including franked
19You can also read
