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DDH Global Fixed Interest Alpha Fund ARSN 120 591 531

DDH Global Fixed Interest Alpha Fund

Product Disclosure Statement

ARSN 120 591 531

Text Text

D A T E S G O E S H E R E

Issuer: DDH Graham Limited ABN 28 010 639 219 AFSL 226 319

Investment Manager: QIC Limited ACN 130 539 123


Important information

Responsible entity and issuer

This is a Product Disclosure Statement (PDS) for the DDH Global Fixed Interest Alpha Fund ARSN 120 591 531 (Fund) and is dated 15 December 2015. This PDS contains the offer (Offer) for the issue of units (Units) in the Fund.

DDH Graham Limited ACN 010 639 219 (DDH, RE, us, we and our) is the issuer of this PDS. We hold AFS Licence 226 319, issued by ASIC, which authorises us to act as responsible entity of the Fund.

Capital and investment risk

An investment in the Fund is an investment in a registered managed investment scheme. An investment in the Fund is not a bank deposit, bank security, bank liability, and is subject to investment risk, including the loss of, or delays in the payment of, income or capital.

Neither DDH, its related bodies corporate or any of their respective directors or officers, guarantee the repayment of capital from the Fund or the investment performance of the Fund. Investments in the Fund are not guaranteed or underwritten by the RE, its related bodies corporate or any of their respective directors or officers.

In particular, some of the risks involved with an investment in the Fund are considered in section 5.2.

Reliance on PDS only

No person is authorised by us to give any information or to make any representation in connection with the offer of Units to you that is not contained in this PDS or in Updated Information provided by us.

Any information or representation not contained in this PDS or the Updated Information cannot be relied upon as having been authorised by us.

The issue of this PDS is authorised solely by us and none of our subsidiaries or related bodies corporate are responsible for any statement or information contained in this PDS.

PDS available electronically

If you are printing an electronic copy of this PDS, you must first print all pages. If you make this PDS available to another person, you must give them the entire electronic file or print-out. A paper copy of this PDS can also be obtained free of charge on request by calling us on 1800 226 174.

Units cannot be issued unless you use the Application Form. The Application Form contains a declaration that you have personally received the complete and unaltered PDS prior to completing the Application Form. You should read this PDS in its entirety before completing the Application Form.

Offer restrictions

The Offer under this PDS is available to persons receiving the PDS within Australia only. The distribution of this PDS in jurisdictions outside Australia may be restricted by law and persons who come into possession of it should seek advice on and observe any such restrictions. This PDS does not constitute an offer to any person to whom, or in any place in which, it would be illegal to make that offer.

No personal financial product advice

The information contained in this PDS is general information only and does not take into account your individual objectives, financial situation or needs. You should review this PDS carefully and assess whether the information is appropriate for you and talk to a financial adviser before making an investment decision.

Anti-money laundering legislation

We may require further information from you from time to time to comply with our obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). By applying for Units under this PDS, you undertake to provide us with all additional information and assistance that we may reasonably require.

Privacy Act

Please read the privacy statement in section 8.2. By signing and returning the Application Form you consent to the matters outlined in that statement.

Glossary, illustrations and currency

Defined terms and abbreviations used in this PDS are explained in the Glossary. Any assets depicted in photographs in this PDS are for indicative purposes only and are not assets of the Fund unless otherwise noted.

All references in this PDS to ‘$’ are references to Australian dollars unless stated otherwise.

Enquiries

If you have any questions or require assistance with completing the Application Form or additional copies of the PDS, please contact us on 1800 226 174.


Table of contents

1 Key investment features ............................................................................................. 4

2 ASIC benchmarks and disclosure principles ............................................................... 8

3 Key entities involved in the Fund .............................................................................. 12

4 Description of the Fund ............................................................................................ 16

5 Benefits and risks of investing in the Fund ................................................................ 23

6 Investor information .................................................................................................. 29

7 Fees and other costs ................................................................................................ 38

8 Additional information ............................................................................................... 43

9 Glossary ................................................................................................................... 48

10 How to invest and application form ........................................................................... 50


1 Key investment features

The following table summarises the key features of an investment in the Fund and provides section references for further information. You should read this PDS in full to properly understand your investment in the Fund.

Description Summary Refer to section

Key entities involved in the Fund

RE DDH Graham Limited ACN 010 639 219, holder of AFS Licence 226319

3.1

Investment manager QIC Limited (QIC) ACN 130 539 123 is the trustee and manager of the Underlying Fund (QIC GFI Alpha Fund ABN 86 137 522 945)

3.2

Custodian Australian Executor Trustees Limited ABN 84 007 869 794

3.3

Key features

Inception date 12 July 2006

Fund size and performance

For the latest information on the Fund size and performance since inception, please go to www.ddhgraham.com.au/global-fixed-alpha. You should read this information before investing in the Fund. Alternatively, you can obtain this information free of charge by contacting our investor service team:

by phone on 1800 226 174

by email at [email protected]

or you can contact your investment advisor.

Investment strategy The Underlying Fund is actively managed by QIC through a combination of directional and relative interest rate, inflation, active currency management and credit management strategies.

4.2

Investment objective The Fund aims to achieve an investment return (before fees) of at least 5% pa above the Bloomberg AusBond Bank Bill Index, over rolling five year periods, through its investment in the Underlying Fund. However, the nature of the investment mandate implies the underlying investments will bear little resemblance to this benchmark. Please note returns are not guaranteed.

The Underlying Fund’s objective is to generate high risk adjusted returns from directional and relative interest rate, inflation, active currency management and credit management strategies.

4.4

Risk/return profile High - The potential for higher returns than lower risk investments, however there is the higher potential for below-average returns and/or some loss of capital.

The Fund may suit buy and hold investors seeking long-term capital growth, some income, and with a higher tolerance for the risks associated with market volatility.

5.2(b)


Suggested minimum investment timeframe

Five years

Asset allocation of the Fund

Cash 0 – 5%

Units in the Underlying Fund 0 – 100%

Benefits Access to the investment management expertise of QIC, one of the largest wholesale fund managers in Australia with extensive experience and capability in wholesale investing;

Market competitive fees;

Minimum initial investment of $2,000 (for lump sum investments);

Ability to invest via the Regular Savings Plan with a minimum initial investment of $500;

Distributions paid quarterly into an account with a financial institution or reinvested in additional Units;

Ease of administration (reporting, tax, redemptions, switching funds, market commentary, etc);

Redemptions normally paid within seven Business Days of receipt of redemption request (however, please note the Constitution of the Fund allows redemptions to be paid within 30 days or a longer period if certain circumstances occur (refer to section 6.5 for more information)).

5.1

Risks Investment in the Fund is subject to a number of risks, including:

derivative risk;

counterparty risk;

currency risk;

manager risk; and

liquidity risk.

5.2

Distributions Paid quarterly by the third week of July, October, January and April each year, subject to the availability of funds. Distributions will be paid by electronic funds transfer into your nominated Australian financial institution account.

6.6

How much do you need to invest and transact?

Minimum initial investment

$2,000 (lump sum) or $500 (Regular Savings Plan) 6.2

Minimum additional investment

$500 (lump sum) or $100 per month (Regular Savings Plan)

6.2

Minimum balance $500 6.4 and 6.5


Minimum withdrawal $500 6.5

Minimum switch to another DDH Fund in which you already hold an investment

$500 6.4

Minimum switch amount to a DDH Fund in which you do not hold an investment

$2,000 6.4

How to invest

To invest, complete the Application Form available on our website at www.ddhgraham.com.au. or by contacting us on 1800 226 774.

10

What fees will you pay?

Establishment fee Nil 7.2

Contribution fee Nil 7.2

Withdrawal fee Nil 7.2

Termination fee Nil 7.2

Switching fee Nil 7.2

Management costs 1.00% per annum 7.2 and 7.3

Performance fees Nil, however, a performance fee is payable to QIC if certain milestones are achieved by QIC.

7.3

Advisor service fees Nil from the Fund. You can agree with your financial advisor to have an advisor service fee paid directly from your investment in the Fund.

7.3

What other features are available?

Switching Unlimited free switching between the DDH Funds. 6.4

Regular Savings Plan Available for making regular investments automatically. 6.2

Additional information

Who may invest? The Offer is open to all types of investors, including self-managed superannuation funds, individuals, companies and trusts.

6.1

Updated information Updated Information about the Fund and its investments is available via regular Investor updates posted on the website www.ddhgraham.com.au.

8.9

ASIC benchmarks and disclosure principles

ASIC has developed two benchmarks and nine disclosure principles for 'hedge funds' and 'funds of hedge funds' to assist retail investors understand the risks, assess the rewards being offered and decide on whether these investments are suitable for them.

2

Cooling-off A 14-day cooling off period applies to your investment in the Fund.

6.2(d)

http://www.ddhgraham.com.au/


Reporting to investors You will receive:

(a) confirmation of your investment;

(b) regular distribution statements;

(c) an annual taxation summary; and

(d) quarterly and annual periodic statements.

You can elect to be sent, either by post or electronically, annual financial statements for the Fund by marking the appropriate box on the Application Form.

6.7

Tax Investing in the Fund may have taxation consequences for you. We recommend you seek professional tax advice before investing in the Fund.

6.8

Complaints resolution Any complaints can be made:

(a) by post:

Compliance Officer DDH Graham Limited PO Box 330 BRISBANE QLD 4001;

(b) by phone: 1800 226 174;

(c) by email: [email protected]

8.1

How to contact us? Call 1800 226 174 or email us at [email protected].


2 ASIC benchmarks and disclosure principles

2.1 Introduction

ASIC has developed a set of disclosure benchmarks and principles which it says responsible entities of 'fund of hedge funds' should apply. The Fund’s compliance with each of the benchmarks is set out below in Table 1 as at the date of issue of this PDS. Each benchmark identifies a key area that ASIC considers investors should understand before making a decision to invest into the Fund. Where a responsible entity does not meet a particular disclosure benchmark, ASIC requires that the responsible entity explain why the benchmark is not met and what alternative measures it has in place to mitigate the concern underlying the benchmark. Disclosure against each of the disclosure principles as they relate to the Fund is set out below in Table 2.

Any significant changes to the Fund’s compliance with the benchmarks or disclosure principles disclosed in the tables below, will be reported on our website www.ddhgraham.com.au. For those investors who cannot access our website, a paper copy of an updated benchmark and disclosure principle report can be given to you (free of charge) by telephoning 1800 226 174.

2.2 Table 1—ASIC benchmarks

ASIC benchmark Statement Explanation For additional disclosure, see

section

Valuation of assets

The responsible entity has and implements a policy that requires valuations of the hedge fund’s assets that are not exchange traded to be provided by an independent administrator or an independent valuation service provider.

The benchmark for the Fund is not met.

The benchmark for the Underlying Fund is met.

DDH does not implement a policy that requires the Fund's assets to be independently valued as the Fund's assets consist solely of units held in the Underlying Fund and a cash reserve.

The unit price of the Underlying Fund's units is determined by the trustee of the Underlying Fund, QIC Limited, in accordance with the procedure set out in section 6.3(b). This procedure includes the use of an independent valuation service provider.

6.3(b)

Periodic reporting

The responsible entity has and implements a policy to provide periodic reports on certain key information.

The benchmark is met, except as stated.

DDH provides monthly and annual reports which contain key information about the Fund as set out in section 6.7.

Information will not be provided in respect of derivative counterparties engaged by QIC (including capital protection providers), as this information is commercially sensitive. In the case of over-the-counter derivatives, counterparties must have a minimum rating of ‘A-’ by Standard and Poor’s or equivalent rating by Moody’s or Fitch unless QIC determines otherwise.

6.7



2.3 Table 2—ASIC disclosure principles

ASIC disclosure principles

Explanation For additional

disclosure, see section

Investment strategy

The Fund invests predominantly in the QIC GFI Alpha Fund (the Underlying Fund).

The Underlying Fund seeks to capitalise on macro and micro opportunities across global interest rate, credit and inflation markets to deliver positive returns above cash across the economic cycle, regardless of the direction of interest rates. Managed by QIC, the Underlying Fund is a combination of liquid directional (long or short) and relative value strategies.

4

Investment manager

The Underlying Fund is managed by QIC. QIC is a government-owned corporation constituted under the Queensland Investment Corporation Act 1991 (Qld). QIC is regulated by Queensland State Government legislation pertaining to GOCs (Government Owned Corporations Act 1993) in addition to the Australian Corporations Act 2001.

3.2

Fund structure The Fund is structured as a registered managed investment scheme and a unit trust. Information on the fund structure is contained in section 4.1 and information about the fees and costs relating to an investment in the Fund are contained in section 7.

Information about the key service providers involved in the operation of the Fund is set out in sections 3.2 to 3.6. There are no related party relationships within the investment structure: all transactions related to the operations of the Fund are conducted on an arm’s length basis.

Both the Fund and Underlying Fund are domiciled in Australia. The Fund’s Custodian is domiciled in Australia. The Northern Trust Company (acting through its Australian branch) has been appointed to hold the assets of the Underlying Fund under a Custody Agreement. There are risks of holding assets through third party service providers such as the Custodian. These

risks are outlined in section 5.3.

3.2-3.6, 4.1, 7

Valuation, location and custody of assets

Refer to section 6.3 for information on valuation polices in respect of the Fund and Underlying Fund.

The Underlying Fund may invest in a selection of Australian and global securities as set out under the disclosure principle Investment strategy and in section 4.

The Fund’s assets are held in Australia and the Underlying Fund typically holds assets in Australia, New Zealand and G7 Countries. The Underlying Fund has no restriction on where it may hold assets.

The Responsible Entity has appointed Australian Executors Trustees Limited, as the custodian of the Fund. QIC has appointed Northern Trust Company, Melbourne Branch as custodian for the Underlying Fund. The role of the custodians of the Fund and the Underlying Fund is to hold the legal title to the assets of the Fund or Underlying Fund as agent of DDH and QIC respectively, and to act on DDH's and QIC’s instructions.

4,6.3





Liquidity The liquidity of the Fund is dependent upon the liquidity of the Underlying Fund. In the event the Underlying Fund becomes illiquid, withdrawals from the Fund will be suspended.

At the Underlying Fund level, the degree of liquidity across portfolios is monitored daily and managed to ensure client obligations are met with positions typically taken in liquid derivative markets or highly liquid physical bonds.

To assess the Underlying Fund’s portfolio liquidity, as well as set appropriate limits for daily liquidity, assets are categorised according to the following levels:

Level 1—Quoted prices in active markets for identical assets and liabilities. Level 1 input must be used without adjustment whenever available.

Level 2—Inputs not included within Level 1 that are observable for asset or liability, either directly or indirectly.

Level 3—Unobservable inputs, including the entity’s own data, which are adjusted if necessary to reflect market participants’ assumptions.

DDH reasonably expects that it will be able to realise at least 80% of the assets of the Fund, at the value ascribed to those assets in calculating the Fund’s net asset value, within 10 days.

6.5

Leverage The Fund does not borrow money to generate financial leverage. The Underlying Fund will not be levered by direct borrowing but it may have leverage through the use of derivatives. The net physical cash exposure of the Underlying Fund will always be positive.

4.10

Derivatives Investments in derivatives are subject to the following parameters:

(a) Derivatives are subject to QIC’s internal controls, as set out in its statement of risk management practices and internal controls (including in relation to derivatives) accompanied by an audit certificate issued by QIC’s auditor.

(b) Derivative positions are monitored daily.

(c) In the case of over-the-counter derivatives, unless otherwise determined by QIC, for bilateral Over The Counter derivative and repurchase transactions the following credit quality guidelines apply to the counterparties:

Credit rating BBB+ or BBB: counterparty must have executed an ISDA Master Agreement and Credit Support Annexes to an ISDA Master Agreement.

Credit rating A- or higher: counterparty must have executed an ISDA Master Agreement with QIC. A Credit Support Annexure to an ISDA Master Agreement is preferred, but not required.

Should a counterparty be downgraded to BBB- or lower, no new transactions are permitted. Treatment of an existing exposure is to be determined by QIC.

(d) Investment in derivatives are made within the boundaries of the mandate and when considered appropriate to:

enhance the return of the relevant fund;

construct synthetic interest rate and inflation investments;

manage bond groups and credit risks;

4.7, 5.2





alter the allocation to credit;

construct long / short strategies;

enhance liquidity or provide opportunities to gain risk free arbitrage returns;

hedge foreign currency exposure into Australian dollars;

alter the domestic versus international mix of the Fund; and

construct active currency strategies

Short selling The Fund does not engage in short selling.

The Underlying Fund is able to take both long and short positions. Short positions are implemented via derivative instruments across interest rates, credit, inflation and currency.

4, 5.2

Withdrawals The Fund processes withdrawals on a daily basis. Daily withdrawal requests are required to be received by DDH by 12.00 p.m. AEST on any Business Day.

The liquidity of the Fund is dependent upon the liquidity of the Underlying Fund. In the event the Underlying Fund becomes illiquid, withdrawals from the Fund will be suspended. If the withdrawal requirements are altered you will be notified in writing.

6.5


3 Key entities involved in the Fund

3.1 The RE—DDH Graham Limited

(a) About

DDH Graham Limited is an unlisted public company which holds AFS Licence number 226319.

DDH is a Queensland-based funds management firm founded in 1981. DDH has considerable experience in trust management and administration. It is the responsible entity or trust manager for a number of financial asset trusts and property trusts and operates a money market product.

(b) Role

Our AFS Licence authorises us to operate the Fund as a registered management investment scheme.

As responsible entity, we are responsible for the day-to-day operation of the Fund in accordance with our AFS Licence, the Constitution, Compliance Plan and Corporations Act.

We are responsible, for example, for asset allocation of the Fund, unit pricing, and investor reporting.

As responsible entity for the fund and as an AFS licensee, we must:

(i) act honestly;

(ii) exercise the degree of care and diligence that a reasonable person would exercise if they were in our position;

(iii) act in the best interests of Investors and if there is a conflict between Investors' interests and our interests, give priority to Investors' interests;

(iv) treat Investors who hold interests of the same class equally and Investors who hold interests of different classes fairly; and

(v) comply with the Fund's Compliance Plan.

(c) Directors and senior management

(i) David D H Graham B.Com (University of Queensland), B.Econ (Hons) (University of Queensland), MBA (Lehigh University, Pennsylvania USA), MTaxFinPlan (University of NSW)

Non-Executive Chairman and Founder

Founded the firm in 1981. David has an extensive background in corporate advisory and trust management.

(ii) Peter B Lockhart B.Econ (Monash University), MBA (University of Queensland)

Joint Managing Director, Funds Management

Peter has been a director since 1988 and has extensive experience in funds management, superannuation and administration services. He is also a director of DDH superannuation related companies, Acclaim Management Group, ESP Group Pty Ltd and Emplus Superannuation Administration Pty Ltd.


(iii) Ugo C Di Girolamo

Joint Managing Director, Money Market

Ugo has been a director since 2000. Ugo has more than 30 years’ experience in the financial industry and markets with exposure to a number of areas including funding, foreign exchange, fixed interest and risk management.

(iv) Thomas Collier B.Bus (Queensland University of Technology), CPA, AGIA

Chief Financial Officer

Tom has more than 30 years of extensive experience in accounting, secretarial practice, compliance and administration within the banking and financial services industry.

(v) Gavin Blake B.Com (Griffith University), CPA, F Fin

Director, Fund Services

Gavin has more than 20 years in the funds management industry, with extensive experience in fund administration, fund accounting and taxation, investment administration, unit pricing and unit registry, client reporting and regulatory compliance.

(d) Compliance Committee

We have appointed an independent Compliance Committee for the Fund to assist us in meeting our compliance responsibilities. In particular, the Compliance Committee’s role is to monitor our compliance with the Compliance Plan and Constitution in operating the Fund. The Compliance Committee reports directly to the Board and, in certain circumstances, to ASIC.

The Compliance Committee is required to have a minimum of three members, the majority of whom must be external to the RE.

3.2 The investment manager—QIC Limited

(a) About QIC

QIC is a government owned corporation constituted under the Queensland Investment Corporation Act 1991 (Qld). QIC is regulated by Queensland State Government legislation pertaining to government owned corporations (Government Owned Corporations Act 1993) in addition to the Australian Corporations Act 2001. However, QIC does not hold an AFS licence and certain provisions (including the financial product disclosure provisions) of the Corporations Act do not apply to QIC. QIC is a commercial organisation, charging fees for services provided.

QIC’s board is appointed by the Governor-in-Council and the chief executive is appointed by the QIC board with the prior written approval of the shareholding government ministers. Senior executives are appointed by the QIC board. The QIC board, which wholly comprises non-executive directors, is responsible for directing and controlling the activities of QIC. The management team is responsible for providing investment services, funds management services and other financial services to its clients, which include superannuation schemes, government investment funds and other clients.


(b) Role

QIC Limited is the trustee and investment manager for the Underlying Fund. It is responsible for making the investment decisions that affect the performance of the Underlying Fund and therefore the Fund. We have signed an Investment Agreement with QIC which is summarised in section 8.6(c).

(c) Management

QIC's investment team for the Underlying Fund is headed by Ms Susan Buckley, managing director, QIC Global Liquid Strategies, who has over 26 years of industry experience.

Prior to her current role with QIC, Ms Buckley held positions as Head of Strategy, NRMA Asset Management, Senior Vice President, BT Funds Management and Manager, Suncorp Investment Management. Key responsibilities of Ms Buckley include:

(i) Oversight of the investment process;

(ii) Ultimate portfolio management responsibility;

(iii) Allocation and approval of risk budget and limits;

(iv) Lead portfolio manager for the Underlying Fund and associated portfolios.

Ms Buckley is supported by a number of senior professionals from the Global Liquid Strategies business division at QIC.

3.3 The custodian of the Fund—Australian Executor Trustees Limited

(a) About AET

Australian Executor Trustees Limited ABN 84 007 869 794 AFSL No. 240 023 (AET) is the custodian for the Fund. AET is one of Australia’s largest and oldest licensed trustee companies and has been providing custody and trustee services for over 130 years, having been established in 1880.

AET is a member of IOOF Holdings Ltd (IOOF) Group, a leading provider of wealth management products and services in Australia. Listed on the Australian Securities Exchange (ASX: IFL) in the top 200 listed ASX companies, IOOF provides services to over 650,000 clients Australia-wide and is one of the largest non-bank-aligned groups in the financial services industry. IOOF manages in excess of $120 billion on behalf of its clients.

(b) Role

We have appointed the Custodian pursuant to an agreement which sets out the obligations of the Custodian to hold the Fund property on our behalf and to act in accordance with our instructions. It also contains the Custodian's remuneration which is paid out of Fund property (as an expense to the Fund).

The Custodian's day-to-day responsibilities include:

(i) acting on investment instructions received from the RE;

(ii) collecting income for assets; and

(iii) providing safe keeping of assets.


In performing the above functions, it is important to note that the Custodian is an agent of the RE. It may only act in accordance with the terms of the written custody agreement and has no liability or responsibility to investors for any act or omission which is in accordance with proper instructions received from the RE. It has not been involved in the preparation of this document and takes no responsibility for any statements contained in it.

3.4 The custodian of the Underlying Fund—Northern Trust Company

QIC has appointed Northern Trust Company (ABN 62 126 279 918) (NT) pursuant to a master custody agreement which sets out that the obligations of NT are limited to holding the Underlying Fund’s property on QIC’s behalf and acting in accordance with QIC’s instructions. It also contains NT's remuneration which is paid out of the Underlying Fund’s property (as an expense to the Underlying Fund).

NT’s day-to-day responsibilities include:

(a) acting on investment instructions received from QIC;

(b) collecting income for assets; and

(c) providing safe keeping of assets.

In performing the above functions, it is important to note that NT is an agent of QIC. It may only act in accordance with the terms of the written master custody agreement. NT has no supervisory role in relation to the operation of the Underlying Fund and is not responsible for protecting the interests of DDH’s investors. NT has no liability or responsibility to DDH’s investors for any act done or omission made in accordance with the terms of the master custody agreement. NT makes no statement in this PDS and has not authorised or caused the issue of it.

NT holds investments of the Underlying Fund as bare trustee and such investments are not investments of NT or any other member of the NT group of companies (The Northern Trust Corporation). Neither NT, nor any other member of The Northern Trust Corporation, guarantees the performance of the investment or the underlying assets of the Underlying Fund, or provides a guarantee or assurance in respect of the obligations of QIC or its related entities.

3.5 Auditor

The Responsible Entity has engaged HLB Mann Judd as the independent auditor of the financial statements of the Responsible Entity and the Fund and of the Fund's Compliance Plan.

3.6 Selection and monitoring of service providers

At the time the Fund was established in 2006 and prior to entering into the Investment Agreement with QIC, DDH satisfied itself that QIC had the appropriate operating and compliance structures and the investment team in place consistent with the stated investment strategy and objectives of the Underlying Fund. This involved the examination of the past performance of the Underlying Fund, understanding the investment approach of QIC, verification of skills and experience of key personnel and assessment of the reputation of QIC within the financial markets.

The Responsible Entity ensures compliance of service providers with their obligations under the relevant service agreements and applicable laws by requiring completion of quarterly and annual assurance certifications and by conducting onsite visits as necessary.


4 Description of the Fund

4.1 The investment structure

The Fund is a unit trust established by the Constitution. It is a managed investment scheme which has been registered with ASIC.

Under a managed investment scheme, investors’ funds are pooled with those of other investors to facilitate larger scale investments. Investors hold units in the scheme which represent a proportional entitlement in the assets of the scheme based on the amount invested and the application price of the units at the time of entry to the scheme. The unit price reflects the value of the assets in the scheme and may increase or decrease over time with the value of the underlying assets. When you redeem your investment, the units you hold in the scheme are redeemed by the responsible entity.

4.2 Investment strategy

The Fund has been established specifically to invest in global interest rate and credit markets by investing in the Underlying Fund. No other investments are made by the Fund.

The Fund will also hold cash to manage the short term liquidity of the Fund to meet operational expenses and unitholder related payments, including distribution and unitholder withdrawals.


The Underlying Fund is actively managed by QIC through a combination of interest rate, inflation, credit derivative (e.g., futures, options and swaps), and active currency management strategies. This investment strategy can be changed by QIC. However, QIC is required to give DDH 20 Business Days’ notice of any such change, under the terms of the Investment Agreement between the parties.

4.3 Investment philosophy

QIC’s investment philosophy is based on the belief that fundamental factors drive fixed interest markets over medium to longer timeframes. Across shorter timeframes, other influences cause markets to deviate from a fundamental fair value providing opportunities to take scaled positions within fixed interest portfolios.

4.4 Investment objective

The Fund aims to achieve an investment return (before fees) of at least 5% per annum above the Bloomberg AusBond Bank Bill Index, over rolling five year periods, through its investment in the Underlying Fund. However, the nature of QIC's investment mandate implies the investments of the Underlying Fund will bear little resemblance to this benchmark. Please note, returns are not guaranteed. You can obtain information about the past performance for the Fund at www.ddhgraham.com.au/global-fixed-alpha. You should read this information before investing in the Fund and please note that past performance is no guarantee of future performance.

The Underlying Fund’s objective is to generate high risk adjusted returns from interest rate, inflation and credit management strategies.

4.5 Investment timeframe

Financial advisors will have differing views about the minimum investment period you should hold various investments and your own personal circumstances will also affect your decision. We have suggested a minimum investment timeframe for an investment in the Fund of five years. However, this is only a suggestion and you should regularly review your investment decisions with your financial advisor because your investment needs or market conditions may change over time. The minimum suggested investment timeframe should not be considered personal advice.

4.6 Investment process in detail

QIC has the following five step investment process which translates the investment philosophy into portfolio positioning:

(a) Step 1— Research

Research focuses on determining fair values for the financial assets the Underlying Fund is mandated to invest. This provides an assessment of the outlook and identifies markets that are trading at premiums and discounts. Research is split by geography and markets, most notably interest rate, inflation, currency and credit markets.

(b) Step 2—Scorecards

The QIC scorecard collates and quantifies economic and fundamental research to generate a view on expected changes in interest rates, inflation, currency and the credit outlook, and combines valuation signals as well as transitory influences that drive markets away from fair value in this short term.

(c) Step 3—Strategy-based idea generation

The process identifies and sources opportunities across interest rates, credit, currency and inflation.

(d) Step 4—Portfolio construction and risk management.


Portfolio construction and risk management are crucial to the investment process. Once the determined strategies are implemented, continuous monitoring, evaluating and reconciling of fund performance take place.

(e) Step 5—Performance attribution and 24-hour monitoring

Daily performance attribution is undertaken across all portfolios, providing a complimentary and timely tool for breaking down the active returns generated and linking such outcomes to deliberate active positions and strategies.

4.7 What does the Underlying Fund invest in?

The Underlying Fund invests in a broad global range of interest rate, inflation, currency and credit derivative securities and physical fixed interest securities. The Underlying Fund may also hold cash and deposits for portfolio management purposes along with foreign currency deposits, which are used to manage foreign-currency-denominated futures contracts and holdings.

Because opportunities in interest rate, currency and credit markets may vary considerably in a relatively short time frame, the composition of any given asset allocation in the Underlying Fund will also vary considerably over time.

The Underlying Fund can invest in:

(a) Physical assets

(i) bonds or securities issued or guaranteed by any government, sovereign ruler or authority, supreme, local, municipal or statutory authority of any country;

(ii) bonds, notes, commercial paper, obligations or securities of or guaranteed by any corporation, unincorporated body or trust;

(iii) any other bills of exchange, promissory notes and other forms of negotiable instrument;

(iv) monies on deposit with, or loans to a bank, any authorised dealer in the short term money market, any public statutory body, or any corporation;

(v) repurchase agreements and reverse repurchase agreements; and

(vi) inflation-linked securities.

(b) Derivatives and synthetics

The Underlying Fund can purchase or sell Australian or international derivatives including:

(i) interest rate futures contracts, including foreign bond futures;

(ii) bank bill and government bond, exchange traded and over-the-counter option contracts;

(iii) interest rate swap agreements, index swaps, CPI swaps or interest rate swap futures;

(iv) forward rate agreements;

(v) credit derivatives or other synthetically created credit instruments;

(vi) currency options, spot and forward exchange contracts. Active currency positions may be taken in OECD country and emerging market instrument denominations; and

(vii) other synthetically created instruments.


4.8 Investment restrictions

(a) Sector limits

The sectors listed below have limits which will be maintained by QIC in the following bands as a percentage of the total net asset value (NAV) of the Underlying Fund:

Sector % Total NAV

Emerging markets +/-50

High yield +/-50

Emerging markets + high yield +/-75

Inflation-linked bonds +/-75

(b) Duration limits

The Underlying Fund’s Duration will be maintained within the range of +/-seven years. The Duration is managed daily.

(c) Issuer limits

Credit derivative exposures to a single named issuer will be limited to 10% of net asset value.

(d) Leverage

In order to properly account for the differences in risk embedded in various maturities for interest rate and inflation-linked securities, exposures are adjusted to equate the risk of a 10-year duration bond. The adjusted exposure value is used for leverage calculations. See the disclosure principle Leverage in Table 2 and section 4.10 for

more details.

(e) The minimum exposure to Australian dollars in the Underlying Fund will be 70% of the net asset value. The gross exposure to foreign currencies can exceed 30% of the net asset value. A maximum of 10% exposure may be held in emerging market active currency positions.

4.9 Risk management

Consistent with QIC’s investment philosophy and fundamental research-based approach, QIC adopts a dynamic risk budgeting approach to portfolio construction and management of the Underlying Fund.

A number of key controls are employed to enhance the ability to increase downside protection, elevate the investment process to ‘best practice’ and further align portfolio outcomes to client expectations.

4.10 Leverage

The Fund does not borrow money to generate financial leverage. The Underlying Fund uses leverage to increase the amount of exposure obtained from the capital of the Underlying Fund. Leverage, and therefore magnified market exposure, is achieved by investing in derivatives (but not by direct borrowing). The net physical cash exposure of the Underlying Fund will always be positive. The cash holdings of the Underlying Fund are closely monitored.

DDH does not have a policy on the types of leverage the Underlying Fund may use nor does it impose any limits on the Underlying Fund's leverage.


Gross Leverage

Gross Leverage will not exceed 10 times the net asset value of the Fund.

Net Leverage

Net leverage will not exceed 3 times the net asset value of the Fund. For the avoidance of doubt, 1 times net or gross leverage means net (gross) effective market exposure equate to 100% of the Fund’s net asset value and is not considered leveraged.

The maximum leverage allowed in the Underlying Fund is limited as follows:

Limit type Limit Example

Net long leverage Net long leverage must not exceed 3 times the net asset value of the Underlying Fund

For every $100 invested, the Underlying Fund can achieve up to $300 of net long market exposure.

This $300 of net long exposure can be made up of both long and short exposures.

Note: there is no limit on net short leverage.

Gross leverage The absolute value of all leverage (long and short) must not exceed 10 times the net asset value of the Underlying Fund

For every $100 invested, the Underlying Fund can theoretically achieve for example $650 of long exposure and $350 of short exposure resulting in $1,000 of gross exposure.

The maximum loss that can be incurred by an investor in the Underlying Fund is limited to the market value of the investor’s holdings.

For the purpose of calculating gross and net leverage, the exposure of interest rate securities is calculated on a Duration adjusted basis and inflation swaps exposure is calculated on an inflation duration adjusted basis. This is to allow the leverage to be considered on a risk equivalent basis.

The exposure of interest rate securities are adjusted to equate to the interest rate risk of a fixed income security with a Duration of 10 years. As an example, the face value of a $1,000 US Treasury 2 year future with a Duration of 1.9 years is factored down by 0.19 (1.9/10) to $190. This means that the adjustment factors account for the relative risk derived from long Duration securities versus shorter Duration securities. Specifically, if a security has a Duration of greater than 10 years, its individual contribution to portfolio leverage would be greater than if duration adjusted leverage was not applied. The opposite is true for instruments with duration of less than 10 years.

The equivalent adjustment is made to inflation swaps exposure, where inflation duration is replacing Duration in the numerator.

No equivalent adjustment is applied to foreign currency exposure.

For credit securities, there is no duration adjustment factor applied given that the Underlying Fund is exposed to the extent of the notional exposure if the issuer or underlying reference entity is to undergo an event of default.

Controls, including Duration limits and Value at Risk controls, are used to manage risk.

The Underlying Fund has entered into credit support agreements (CSAs) with third parties with whom it enters into derivatives. Generally speaking, under a CSA, the Underlying Fund is obliged to provide collateral to its counterparties if, on a mark-to-market calculation, the Underlying Fund is “out of the money” and the counterparty makes a request.


The Underlying Fund provides collateral by transferring cash to the relevant counterparty on an absolute transfer basis: that collateral ceases to be owned by the Underlying Fund when transferred (instead the Underlying Fund has a contractual right to repayment of an equivalent amount).

Any collateral provided by the Underlying Fund is exposed to set-off rights or other legitimate claims by the Underlying Fund’s counterparties in the event that the Underlying Fund defaults under its derivative contracts (including upon the insolvency of the Underlying Fund).

For the purpose of calculating its limits on gross and net leverage, the Underlying Fund’s exposure to certain classes of securities is adjusted as follows to allow the leverage to be considered on a risk-equivalent basis:

Physical Securities

Instrument type Relevant securities Calculation of exposure for leverage purposes

Non-Duration Adjusted Duration Adjusted

Credit Securities Corporate bonds with an interest rate maturity greater than 1 year.

Market value Market value

Interest rate securities

Government bonds and bonds issued by government related entities (e.g. semi government / agencies); with an interest rate maturity greater than 1 year

Market value Market value *duration / 10

Inflation linked bonds

Inflation linked bonds with time to maturity greater than 1 year

Market value Market value * duration / 10

Units in unit trusts managed by QIC or a QIC subsidiary

Open ended and closed ended investment funds


Derivative Securities

Instrument type Relevant securities Calculation of exposure for leverage purposes

Non-Duration Adjusted Duration Adjusted

Credit Securities Single name credit default swaps (CDS), basket of credit default swaps (e.g. credit indices)

Notional value of instrument

Notional value of instrument

Interest rate securities

Interest rate derivatives (including futures on government bonds and interest rate swaps)

Notional value Market value * duration / 10

Inflation linked swaps

Zero coupon inflation swaps, capital index swaps, other inflation linked swaps

Notional value Market value * inflation duration / 10

Interest rate options

Options on bond futures, options on interest rate swaps (swaptions)

Notional value *delta Notional value*delta*duration of underlying / 10


Options on credit instruments

Single name CDS swaptions, swaptions on index baskets

Notional value *delta Notional value *delta

Inflation options Inflation options, inflations caps and floors

Notional value *delta Notional value*delta*inflation duration of underlying / 10

Foreign Currency Forwards (1)

Foreign currency forwards and swaps


Foreign Currency options

Foreign Currency options Notional value* delta Notional value* delta

(1) Only Currency Forwards positions taken as part of active FX strategies are contributing to the leverage calculation of the Underlying Fund.


5 Benefits and risks of investing in the Fund

5.1 Benefits of investing in the Fund

Some of the benefits of investing in the Fund are summarised as follows:

(a) access to the investment management expertise of QIC, one of the largest wholesale fund managers in Australia with extensive experience and capability in wholesale investing;

(b) market competitive fees;

(c) minimum initial investment of $2,000 (for lump sum investments);

(d) ability to invest via the Regular Savings Plan with a minimum initial investment of $500;

(e) distributions paid quarterly into an account with a financial institution or reinvested in additional Units;

(f) ease of administration (reporting, tax, redemptions, switching funds, market commentary, etc.);

(g) redemptions normally paid within seven Business Days of receipt of redemption request (however, please note the Constitution of the Fund allows redemptions to be paid within 30 days or a longer period if certain circumstances occur (refer to section 6.5 for more information)).

5.2 Risks of investing in the Fund

(a) Investment risk generally

Before deciding whether to invest in the Fund, it is important that you understand the risks that can affect your investment. All investments are subject to risk, and investments may not perform as expected resulting in a loss of capital or income to investors. In particular, you should understand that:

(i) different investment strategies carry different levels of risk depending on the assets that make up the strategy;

(ii) assets with the highest long-term returns may also carry the highest level of short-term risk;

(iii) the value of your investment may go up and down;

(iv) returns are not guaranteed;

(v) you may lose money; and

(vi) previous returns are not necessarily indicative of future performance.

You should give consideration to the risk factors in this section, as well as the other information contained in this PDS before making a decision to invest in the Fund.

(b) Risk versus return

All investments are designed to make a return and are subject to risk. This means that, as well as making money, there is also a chance that you could lose it. You might also think of risk as the possibility that your investments do not achieve your financial objectives. As a general rule, the bigger the potential investment return, the higher the investment risk and the longer the suggested investment timeframe.


The Underlying Fund is expected to experience a negative return over a year in one out of every four years.

The following graph shows the relative risk of an investment in the Fund compared with other asset classes:

(c) Specific Underlying Fund risks

Please note that given the Fund's investment in units of the Underlying Fund, the risks of investing in the Underlying Fund may directly impact on the performance of the Underlying Fund which, in turn, will affect the performance of the Fund.

(i) Leverage risk

The Underlying Fund will not be levered by direct borrowing. However, through the use of derivatives, the actual exposure to markets set by the derivative positions is likely to be greater than the capital value of assets invested to take those positions. This has the potential to magnify investment gains and losses of the Underlying Fund (and therefore the Fund).

(ii) Counterparty risk

As derivatives contracts must be honoured by the party on the opposing side of the trade, the Underlying Fund is exposed to counterparty risk, that is, the risk the counterparty defaults on its obligations. As the Underlying Fund is invested in institutional fixed income products, these products tend not to be listed on exchanges. This means, therefore, that they are over-the-counter transactions and are settled only between the parties to the transaction without the guarantee of an independent clearing house.


(iii) Volatility risk

The highly active investment approach adopted by QIC and levered exposure via derivatives means that the Underlying Fund's (and therefore the Fund's) returns can potentially be volatile.

(iv) Key person risk/investment manager risk

Key person risk refers to the risk that a key decision maker within an organisation leaves, is incapacitated or unavailable for an extended period, potentially impacting achievement of agreed objectives.

QIC's investment team for the Underlying Fund was comprised of around 18 investment professionals as at 31 October 2015. DDH considers there are several senior key professionals whose experience and influence is critical to the operation of the Underlying Fund. The departure of any of these key staff from the team is likely to have an adverse effect on the performance of the Underlying Fund (and therefore, the Fund).

(v) Derivative risk

Derivatives are used extensively by the Underlying Fund to generate returns. As derivatives derive their value from the returns obtained on another reference entity, they are subject to the same risks as the reference entity upon which the derivative is valued (derived).

Besides the risks of the underpinning investments, derivatives are subject to:

(a) Liquidity risk: this is the likelihood that the derivative may not be able to be quickly bought or sold without causing a significant movement in the price (refer to ‘Liquidity risk’ in section 5.2(c)(vi)).

(b) Counterparty risk: this is the likelihood that the counterparty to the derivative contract is unable to meet its financial obligations (refer to ‘Counterparty risk’ in section 5.2(c)(ii)).

In addition, as the notional exposure of derivative positions may be greater than the capital invested to take that position, the risk of capital loss could be magnified (refer to ‘Leverage’ at section 4.10 and ‘Leverage risk' at section 5.2(c)(i)).

(vi) Liquidity risk

Liquidity refers to the ability of an investment to be easily and quickly converted into cash with little or no loss of capital value. If the Underlying Fund is required to sell illiquid investments (for example, due to a redemption request or an alteration in investment strategy), the Underlying Fund may need to realise that investment at a sale price lower than what could have been achieved had a longer sale period been allowed. In some circumstances, QIC may suspend redemptions which would have an adverse effect on the Fund's ability to redeem Units and may cause the RE to freeze redemptions in the Fund.

(vii) Interest rate risk

Interest rate risk refers to the volatility of a security’s return owing to the fluctuation of interest rates. When interest rates rise, the market value of fixed interest securities decline and vice versa.


(viii) Operational risk

Operational risk is the risk of loss or damage resulting from inadequate or failed internal processes, people and systems or from external events.

QIC or the Underlying Fund may experience losses, adverse regulatory consequences or reputational damage due to a variety of operational risks, including inadequate or failed internal or external processes, people or systems, fraud, errors by counterparties under outsourcing arrangements, inadequate business continuity planning and due to key person risk.

(ix) Market risk

Significant losses from financial market investments may occur in the event of extreme market moves.

(x) Currency risk

Currency risk is the potential for adverse movements in exchange rates to reduce the Australian dollar value of investments and deposits held in a foreign currency.

To limit the impact of adverse currency movements, QIC hedges international investments back into Australian dollars for the Underlying Fund. Active currency positions can be held.

QIC manages the currency risk of the Underlying Fund in the following way:

collective investment vehicles controlled by QIC – the performance of managers used in these Trusts is also measured in Australian dollar terms.

(xi) Emerging markets risk

Emerging market risk is the potential risk of adverse movements in market value arising from immature markets and/or products.

5.3 General Fund and investment risks

(a) Market risk

A number of external factors such as changes in the economic, political, technical or social environment can have a significant influence on the market for a particular asset class. These influences may produce changes in the value of markets and the investments which comprise them, which are outside the influence of an investment manager. Such influences may also affect markets in different assets (e.g. equities versus fixed interest) in different ways.

(b) Fund management risk

The performance of the Fund will ultimately depend on the expertise and quality of investment decisions made by QIC as the manager of the Underlying Fund. Past performance of the Underlying Fund is not necessarily an indicator of future performance.

(c) Manager concentration and investment style risk

There is significant reliance on QIC as the manager of the Underlying Fund and on the personnel employed by QIC. This limits any risk reduction associated with manager diversification.

The investment style of the Underlying Fund is “active". Such a style aims to achieve returns in excess of particular benchmarks but generally involves higher risks than a “passive” management style as typically employed by index fund managers.


(d) Concentration risk

The Fund's only investments are in cash and Units in the Underlying Fund. The Fund's investments are not diversified in other investments and so any adverse event affecting the Underlying Fund will have an adverse effect on the performance of the Fund.

(e) Liquidity risk

You should be aware that whilst you may transfer your Units in the Fund to a buyer, there is no secondary market for Units. Under abnormal or difficult market conditions, some normally liquid assets (such as units in the Underlying Fund) may become illiquid, restricting our ability to sell them and to make withdrawal payments or process switches for investors without a potentially significant delay. In certain circumstances, withdrawals may be frozen by us. Please refer to section 6.5 for more information about redemptions.

(f) Compliance risk

If we fail to comply with our AFS Licence conditions, the Constitution, Compliance Plan or Corporations Act it will likely have an adverse impact on you and the value of your investments. In particular, this may occur if ASIC take action to:

(i) wind up the Fund; or

(ii) remove us as the responsible entity.

(g) Investment management risk

This is the risk that changes in our management or the loss of other key personnel may result in us not adequately monitoring and overseeing the approval, management and enforcement of the investments of the Fund and increase the risk of policies and procedures not being adhered to.

(h) Inflation risk

Inflation risk refers to the risk an investor faces of losing the purchasing power of capital invested. Although the nominal value invested may remain, positive inflation will progressively reduce its value relative to what can be purchased by each dollar over time.

(i) Regulatory risk

There is a risk that changes to the regulatory environment for financial services or the finance industry may, either directly or indirectly, affect the value of the investment in the Fund.

(j) Taxation risk

(i) Australian tax laws are constantly in a state of flux with the introduction of various taxation amendments which may affect you.

(ii) Tax liability is your responsibility. We are not responsible for the taxation consequences of an investment in the Fund. You should consult your own taxation adviser to ascertain the tax implications of your investments. See section 6.8 for further information.

(k) Macroeconomic risk

The general state of the Australian and international economies, as well as changes in taxation, monetary policies, interest rates and statutory requirements may have a negative impact on the Fund’s performance and on the value of your investment.


(l) Custodial risk

There is a risk that the custodians of the Fund and Underlying Fund may not undertake their duties in accordance with their contractual terms and this may impact upon the operations and performance of the Fund and Underlying Fund.

This risk is mitigated by the appointment of highly reputable custodians, details set out in sections 3.3 and 3.4 who have the systems and processes in place to execute the required custodial functions.


6 Investor information

6.1 Who can invest?

To be eligible to invest in the Fund, Investors must be Australian residents with a registered address within Australia and must fall into at least one of the following categories:

(a) Individuals (either singly or jointly) over 18 years of age;

(b) Companies;

(c) Trustees and trustee companies;

(d) Partnerships; or

(e) Superannuation funds (including self-managed superannuation funds).

6.2 Initial and additional investment

(a) Initial investment

The minimum initial investment as a lump sum is $2,000 or $500 if investing via a Regular Savings Plan.

Investors may negotiate a contribution fee with their financial advisor of up to 3.3% (including GST). See Section 7.3(j) for more information.

(b) Additional investments

If you already hold Units in the Fund, you can make additional investments. The minimum additional investment is $500 or $100 per month via a Regular Savings Plan (see below).

You will need to make reference to your investor number and clearly state your investment amount.

Before making any additional investment, we recommend you check the Updated Information and the most recent PDS for the Fund which can be found on our website.

(c) Regular Savings Plan (RSP)

You can choose to invest on a regular basis using the RSP offered by the Fund. The RSP can be commenced at any time subject to the minimum investment requirements which are in place at the time.

You can start with a minimum initial investment of $500 in the Fund and then make regular monthly investments from a minimum of $100.

Your regular investments will be debited automatically around the 21st of the month from an account with an Australian bank/financial institution which accepts direct debits.

If you are a new investor and wish to commence an RSP, you should complete the relevant sections of the Application Form when you make your initial investment. If you are an existing investor you should complete a DDH Managed Funds Regular Savings Plan direct debit form and return it to us. A copy of this form is can be obtained by calling us on 1800 226 174 or is available on our website.

After commencing your RSP, you can alter the amount (subject to minimum balance and transaction requirements) or you can cease them at any time by notifying us in writing or by completing an RSP form.


There are no additional fees or charges if you invest via the RSP. Our fees (described in section 7) apply to investments made under the RSP.

Before commencing your RSP, you should read the Direct Debit Request Service Agreement which is included in the RSP Form available from DDH’s website. Any investment you make via the RSP is made on the terms contained in the agreement current at that time.

(d) Cooling-off period

As an Investor in the Fund, you have 14 calendar days from the earlier of the day the confirmation requirement is complied with or the end of the fifth day after the day on which the product was issued or sold (cooling-off period) during which you can have your investment repaid. This applies only to your first investment in a Fund but not an initial investment made through a switch.

The amount that is repaid will be adjusted to take into account any transaction and administration costs and increase or decrease in the value of your investment. The repayment of your investment will constitute a disposal for tax purposes.

Your right to be repaid during the cooling-off period does not apply:

(i) if you are switching between DDH Funds;

(ii) if Units are issued as a result of dividend reinvestment or RSP;

(iii) if you exercise any of your rights as an Investor of the Fund;

(iv) if you are a Wholesale Client; or

(v) if you invest in the Fund via an Investor Directed Portfolio Service (IDPS), IDPS-like scheme or nominee or custody service.

(e) Investing through a master trust or IDPS

(i) You may invest directly in the Fund through an investor directed portfolio service, master fund or portfolio administration service (Portfolio Service) (Indirect Investor). As an Indirect Investor, you may rely on and are authorised to use the information in the PDS to direct the operator of the Portfolio Service (Portfolio Service Operator) to invest in the Fund on your behalf. An Indirect Investor does not become an investor in the Fund.

(ii) Accordingly, an Indirect Investor does not acquire the rights of an investor or acquire any direct interest in the Fund. The Portfolio Service Operator acquires these rights and can exercise, or decline to exercise them on behalf of the person according to the arrangements governing the Portfolio Service. A person who invests in the Fund through a Portfolio Service should ignore the information in the PDS that is relevant only for direct investors.

(iii) This includes information relating to:

(a) Application Form

A person investing in the Fund through a Portfolio Service should not complete the Application Form. An Indirect Investor should complete the application form supplied by the Portfolio Service Operator.

(b) Information

An Indirect Investor will receive no statements, tax information or other information directly from us. An Indirect Investor should receive equivalent information from the Portfolio Service Operator.

(c) Withdrawal / redemption

The provisions of the Constitution which relate to the redemption or withdrawal of the Units will affect the Portfolio Service Operator and not the Indirect Investor.


(f) Change of account details

Once invested in the Fund, Investors can change their details by completing a Change of Request Form available on our website at www.ddhgraham.com.au.

Alternatively, Investors may lodge a signed written request by post or email for a change of details to be processed. Such request must contain the same information as appropriate for the change as set out in the Change of Details Form and be signed by the authorised signatories of the account.

We issue one investor number for each Investor. If an Investor advises us to amend Investor details in respect of the Fund held, we will apply the new details across all DDH Funds in which the Investors holds units.

6.3 Issue of Units and Unit pricing

(a) Issue of Units

If we receive your Application Form and Application Money by 12:00pm (AEST) on a Business Day (“processing cut off time”), the Units in the Fund will be issued on that day. If your Application Form and Application Money are received after 12.00pm (AEST), the Units will be issued on the next Business Day.

Investors will be issued with a number of Units determined by dividing the amount of the Application Money (after deduction of any fee separately negotiated by you with your advisor) by the application price of Units in that Fund (see “Unit pricing” below).

If your correctly completed Application Form and Application Money are received, identified, and accepted by us before the processing cut-off time, the Unit price applicable will be that which reflects the market value of the Fund at the close of business on that day.

Applications receipted, identified and accepted by us after the processing cut-off time (but before the next processing cut-off time) will be processed using the Unit price which reflects the market value of the Fund on the following Business Day.

(b) Unit pricing

(i) The Fund

The assets of the Fund are generally valued daily by DDH and the net asset value is established as per the Constitution of the Fund and DDH's unit pricing policy. Similarly, the investments of the Underlying Fund are generally valued daily by QIC (details set out below).

The investments of the Fund will be valued based on the unit prices issued by QIC in respect of the Underlying Fund.

The Fund’s Unit price is calculated by dividing the net asset value of the Fund by the number of Units on issue in the Fund. The application price is determined by adding the buy costs. The redemption price is obtained by deducting the sell costs. Refer to “Buy-sell spreads” below for more information.

Generally, the net asset value of the Fund is determined each Business Day. It is calculated by taking the market value of the Fund’s assets and deducting the value of its liabilities.

The net asset value of investments in the Fund includes not only the value of unrealised gains, but also any income and realised gains accrued and not yet distributed. It includes all trades notified to the Custodian by the close of each Business Day.



The Unit price for a particular Business Day reflects the market value of the Fund at the close of business on that day. This means that if an investment is made before the processing cut-off time on a particular Business Day, the Unit price applicable to that investment will reflect that day’s closing Fund market values.

For example:

(a) An application accepted at 10:00am (AEST) on Monday will be processed with the application price calculated on Monday’s closing market values.

(b) An application accepted at 4:00pm (AEST) on Friday will be processed with the application price calculated on the following Monday’s closing market values (because the application missed Friday’s processing cut-off time).

A copy of our policy regarding the exercise of discretions under the Constitution that affect Unit price calculations is available free of charge on request.

(ii) The Underlying Fund

The unit price of the Underlying Fund's units is determined by the trustee of the Underlying Fund, QIC Limited, in accordance with the trust deed of the Underlying Fund and QIC's unit pricing policy.

This policy demands that, where available, independently observable market data will be sourced and utilised by third party providers to determine value. Where observable market data is not available or QIC objectively determines independent market data is stale or otherwise unreflective of fair value (as defined in AASB 13 Fair Value Measurement), QIC policy demands that an effective alternative method of valuation be employed following consideration of QIC's valuation policy principles and industry standards.

Any change of valuation method requires the approval of the QIC's Risk and Compliance Sub-Committee.

In determining the most effective alternative method of valuation, QIC policy is to prioritise the use of independently observable inputs where possible.

QIC is not a related party of DDH.

Under the Investment Agreement with QIC, DDH does not have any power to determine QIC’s administration or valuation arrangements; however, DDH does support the use of independent fund administrators and valuation service providers by QIC.

QIC utilises The Northern Trust Company (NT) as a valuation service provider. NT price all assets in the Underlying Fund in accordance with an agreed pricing policy and the subsequent valuations are utilised in the striking of the unit prices for the Underlying Fund. NT sources prices and valuations of the assets from a variety of industry-recognised pricing vendors.

NT is responsible for:

(a) operating a valuation and pricing policy that sets out the process for valuing instruments, pricing sources and methodology and the validation and quality assurance processes that are in place;

(b) providing a robust process whereby QIC may request a specific valuation price or methodology; and


(c) ensuring that the internal controls over the valuation of investments are specifically reviewed on an annual basis by the custodian’s external auditors as part of the review of the custodian’s internal controls report.

(c) Buy-sell spreads

The buy-sell spread represents the transaction costs involved in making or withdrawing from an investment. Transaction costs include brokerage, stamp duty and other taxes or charges incurred in buying or selling the underlying assets within the Fund.

The buy-sell spread is not a management fee – the monetary amount of the spread stays in the Fund to cover necessary transaction costs. It applies only to those Investors entering, exiting or switching between DDH Funds, who pay the transaction costs incurred as these transactions occur. Existing Investors not undertaking transactions are not affected by the buy-sell spread.

Currently, we do not apply a buy-sell spread to application or redemption prices, although under the Constitution we are able to charge up to a maximum of 0.5% of the assets of the Fund. Please refer to section 7 for more information.

6.4 Switching and transferring investments

(a) Switching between DDH Funds

A switch between the Fund to any of the other DDH Funds is a redemption from the Fund and an application for Units in the relevant other DDH Fund.

Investors may make unlimited switches out of the Fund to other DDH Funds in any financial year and no switching fee is charged. A buy-sell spread may be applied in the calculation of the redemption price and the application price. To initiate a switch, you will need to complete the DDH Managed Funds Switching Form. A copy of this form can be obtained by calling us on 1800 226 174 or is available on our website.

You can switch $500 or more to any DDH Fund in which you are already invested, or $2,000 or more to any new DDH Fund. You must continue to hold a minimum balance of at least $500 in each DDH Fund after a switch is made, otherwise the request will be considered a request for a full switch and the balance of your investment will be switched in accordance with your switch instructions.

Copies of the product disclosure statement for each of the other DDH Funds, can be requested by contacting us or accessed via our website. A switch between DDH Funds may have tax implications and Investors should seek their own tax advice in this regard.

(b) Unit transfer

Investors may transfer Units in a Fund to any other person. However we have the discretion to refuse transfers of Units without giving any reasons for this refusal.

To affect a transfer to another person, the following will be required:

(i) a signed and completed standard unit transfer form (with duty paid, if applicable), and

(ii) notification of the transferee’s Investor name and number (or if a new Investor, an Application Form).

Standard unit transfer forms are available by contacting us or from our website.

No buy-sell spread is applied to Unit transfers. A transfer of Units may have tax implications and Investors should seek their own tax advice in this regard.


6.5 Redemptions

Investors may make a redemption by sending us a request in writing. The request should state the:

(a) Investor name;

(b) Investor number;

(c) redemption amount (or state account closure if the case)

and should be signed by the Investor(s) or authorised signatories. Redemption forms are available on our website or by contacting us at [email protected].

The minimum redemption amount is $500. If such redemption would cause your balance to fall below $500, then your entire balance will be redeemed.

Redemption requests should be sent to us at:

DDH Graham Limited Reply Paid 330 Brisbane QLD 4001

or via facsimile to +61 7 3210 6986 or email to [email protected] (please note the text box entitled “Warning” in section 10.5).

If you send a redemption request via facsimile or email and request remittance of an amount to a financial institution whose account details are different to those which we have on file for your account, then your facsimile or email redemption will not be processed until the original document is received (in accordance with processing cut-off times).

The Fund’s processing cut-off time for redemptions is 12:00pm (AEST) each Business Day.

If your redemption request is received at our office prior to the processing cut-off time, the redemption price calculated on that Business Day will be applied to your redemption. Redemption requests receipted and accepted after the processing cut-off time (but before the next processing cut-off time) will be processed using the redemption price of the next Business Day.

Please note that the redemption request must be receipted at our office to be considered for processing. We are not responsible for any postal or service delivery delay or failure.

The proceeds of your redemption are normally available within 7 Business Days of receipt of the redemption request. However, under the Constitution we have up to 30 days to make the redemption payment and we also have the power to suspend the redemption of Units for such period as we reasonably believe is in the best interests of Unitholders taken as a whole.

We may effect redemptions through seeking redemptions from the Underlying Fund. Under the trust deed for the Underlying Fund, the minimum redemption and the minimum holding after a redemption amount are each $100,000. QIC may vary the minimum redemption and holding amounts at its discretion.

QIC can refuse to make a redemption that is less than the minimum redemption and may redeem all units in the Underlying Fund without request if the balance is less than the minimum holding.

In addition to the circumstances described above, QIC can cease redemptions in the following circumstances:

(a) in its absolute discretion;

(b) where it is impractical for QIC to calculate the capital value of the Underlying Fund; or

(c) if the Underlying Fund is terminated.


Redemption payments can be deposited into a nominated Australian-resident bank, building society or credit union account. Please note that our policy is not to make payments to third parties and the nominated Australian-resident bank, building society or credit union account you advise must be in the Investor’s name.

There are no exit fees payable on redemption, however, any government charges payable will be deducted from the redemption proceeds.

6.6 Distributions

A distribution is a payment of the Fund’s taxable income and may include distributions from the Underlying Fund, realised net capital gains and other income. The components of the distribution will vary from period to period. There may also be times when no distribution is paid. Distributions from the Fund are not pro-rated for the duration of the investment during the tax year.

Investors can choose to have distributions:

(a) reinvested in additional Units in the relevant Fund; or

(b) paid in cash.

Distributions will be automatically reinvested in additional Units in the Fund on the next Business Day after the end of the quarter, unless an Investor elects by notice in writing to us to receive a cash distribution.

Please tick the relevant box on the Application Form if you wish to receive your distributions in cash.

Cash distributions will only be paid to an Australian resident bank, building society or credit union account. The account nominated by the Investor must be in the name of the Investor, as it is our policy not to make third party payments.

If payment to your nominated account is rejected by your financial institution, your distribution amount will be reinvested using the application price on the next Business Day after receipt of the notice of rejection from the financial institution.

Investors will need to advise us in writing of any change to distribution nomination and account payment details. For a change to be reflected in the next distribution, such advice must be received by us no later than five Business Days prior to the last day of the quarter.

6.7 Investor reporting

If the Fund becomes a “disclosing entity” under the Corporations Act it will be subject to regular reporting and disclosure obligations under the Corporations Act. These include the preparation of annual reports and half yearly reports. A copy of the audited annual financial report for the Fund is available on our website by the end of September each year.

Copies of documents lodged with ASIC are available to the public and may be obtained from, or inspected at, an ASIC office.

As an Investor in the Fund, you will receive the following advices and reports:

(a) Investment confirmation advice, indicating your initial investment in the Fund and any switches, together with details of application price and number of Units issued (generally sent within 5 Business Days of the acceptance of the application).

(b) Redemption confirmation, providing details of Unit redemptions and redemption prices (generally sent within 5 Business Days of the redemption request being processed).

(c) On a monthly basis, historical and current information in respect of the Fund and Underlying Fund is available on our website, including:

(i) daily unit prices;


(ii) the current total net asset value of the Fund and the redemption value of a Unit as at the date the net asset value was calculated;

(iii) any changes in key service providers if they have changed since the last report given to investors, including any change in their related party status;

(iv) for each of the following matters since the last report on those matters:

(a) the net return on the Fund’s assets after fees, costs and taxes;

(b) any material change in the Fund’s risk profile;

(c) any material change in the Fund’s investment strategy; and

(v) any change in the individuals playing a key role in investment decisions for the Fund.

(d) A quarterly investment report dealing with Fund performance, Unit prices and distributions (generally published to DDH’s website within 20 Business Days of the end of the quarter).

(e) A quarterly periodic statement indicating individual transactions undertaken, distributions made and Unit values (generally sent within 20 Business Days of the end of the quarter).

(f) An annual taxation statement, detailing all relevant taxation information relating to distributions from the Fund required for Investor taxation returns (generally sent by the end of August each year). Included with the statement will be historical and current financial information of the Fund.

(g) Included in the monthly report for the Fund will be information about the following:

(i) the actual allocation to each asset type;

(ii) the liquidity profile of the portfolio assets as at the end of the period;

(iii) the maturity profile of the liabilities as at the end of the period;

(iv) the leverage ratio as at the end of the period;

(v) the monthly or annual investment returns over at least a five-year period; and

(vi) the key service providers if they have changed since the latest report given to investors, including any change in their related party status.

Information will not be provided in respect of derivative counterparties engaged by QIC (including capital protection providers), as this is information is commercially sensitive.

6.8 Taxation information

(a) Taxation

There are taxation implications that arise from investing in the Fund. The following information is intended as a broad overview only of the current legislation.

Investors’ tax liabilities are dependent on their individual circumstances. Therefore it is recommended that professional advice on the taxation implications of investing in the Fund be sought before any such investment is made.

Under existing income tax legislation, the Fund will not generally be liable for tax because of our policy of distributing to Investors all net taxable income of the Fund. Income distributed to Australian resident Investors will generally be assessable and should be included in the Investors’ income tax returns in the financial year when entitlement to that income arises (even if distributions are reinvested or received in another period). The Fund will also distribute any capital gains, imputation credits and foreign tax credits received. These will also need to be included in Investors’ income


tax returns. The extent to which these credits can be used is dependent on the individual Investor’s circumstances.

Disposal of Units in the Fund may give rise to a capital gains tax liability or a capital loss. Some Investors may be entitled to a capital gains tax discount if Units are held for more than 12 months. The Unit price between distribution dates reflects the return, including income, which has accrued during the period between distributions. When a distribution is made, the Unit price will normally fall by the amount of that distribution. As a consequence if an investment is made shortly before the end of a distribution period, the subsequent distribution the Investor receives may comprise taxable income of the Investor, while the value of the Unit price paid by the Investor would fall by an amount similar to that distribution. Conversely, redemption of an investment prior to a distribution may result in a higher Unit price obtained by the Investor (reflecting the impending distribution), thereby resulting in a higher capital gain (or reduced capital loss) for the Investor.

At the Fund's financial year end, Investors will be sent an annual taxation statement that sets out details of any assessable income, capital gains, credits and other information relevant to the preparation of their income tax returns.

Different taxation circumstances apply to Investors who are not residents of Australia. Tax will be withheld from your distributions at the appropriate rate and taxation law of the appropriate country will apply.

(b) Tax File Number (TFN)

The Application Form provides for the notification by Investors of their TFN, TFN exemption or ABN. It is not compulsory to provide your TFN (or exemption) or ABN. However, tax will be required to be deducted from your income distribution, at the highest marginal tax rate, if we are not provided with this information.

(c) Social Security

An investment in the Fund may have an effect on a social security benefit to which the Investor is entitled and it is recommended that professional advice be sought on the effect of investment on such benefit.

6.9 Overseas investors

No action has been taken to register or qualify the Units or the offer of Units or otherwise permit a public offering of the Units, in any jurisdiction outside Australia. The Units have not been and will not be registered under the United States Securities Act of 1933 (US Securities Act) and may not be offered or sold in the United States (US) or to, or for the account or benefit of US persons except in transactions exempt from the registration requirements of the US Securities Act. The distribution of this PDS in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this PDS comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of those laws.

The PDS does not constitute an offer of Units in any jurisdiction where, or to any person whom, it would be unlawful to issue this PDS. Where this PDS has been dispatched to any persons domiciled outside Australia and where that country’s securities code and legislation require registration, this PDS is provided for information purposes only. It is the responsibility of any overseas applicant to ensure compliance with all the laws of any country relevant to his or her application. The return of any duly completed Application Form will be taken by us to constitute a representation and warranty that there has been no breach of such laws and that all necessary approvals and consents have been obtained.


7 Fees and other costs

7.1 Consumer advisory warning

The Corporations Regulations 2001 requires us to include the following standard consumer advisory warning. This warning is required to be inserted into all product disclosure statements and is not specific to this PDS.

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 $100,000.00 to $80,000.00).

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.moneysmart.gov.au) has a managed investment fee calculator to help you check out

different fee options.

7.2 Fees and other costs

(a) This document shows 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 assets as a whole.

(b) Taxes are set out in another part of this document (refer to section 6.8).

(c) You should read all 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

The fee to open your investment

Nil Not applicable

Contribution fee

The fee on each amount contributed to your investment

Nil Not applicable

Withdrawal fee

The fee on each amount you take out of your investment

Nil Not applicable


Termination fee

The fee to close your investment

Nil Not applicable

Management costs

The fees and costs for managing your investment

Estimated to be 1.00% per annum

These estimated management costs consist of:

management fees

estimated performance fees; and

ordinary expense recoveries.

The method and frequency of deduction of each component differs.

Please refer to ‘Management costs’ in the ‘Additional explanation of fees and costs’ section below for further details.

Service fees

Switching fee

The fee for changing investment options

Nil Not applicable

Advisor Service Fee

Please refer to section 7.3(j) for more details.

A fee for service negotiated with your adviser.

7.3 Additional explanation of fees and costs

(a) Management costs

Management costs include management fees paid to DDH under the Constitution, estimated performance fees payable to QIC, investment management fees payable to QIC, expense recoveries and abnormal operating expenses (if applicable). Management costs are deducted from the assets of the Fund and not charged directly to your account. They do not include contribution fees, transaction costs or additional service fees. The management costs for the Fund is an estimate based on current financial information. It is expressed as a percentage of the Fund's net assets.

Management are the fees payable under the Constitution to DDH for the management of the Fund. Management fees are calculated on the gross assets of the Fund and are payable monthly in arrears from the assets of the Fund. DDH receives a management fee of 1.00% per annum. From this fee, DDH pays QIC's investment management fees and ordinary expense recoveries. For details of the maximum management fees allowed under the Constitution, see section 7.3(k).

(b) Expense recoveries

In addition to receiving a management fee, we are entitled to be reimbursed for expenses and costs incurred in the proper management of the Fund (expense recoveries). The expense recoveries represent the operating expenses incurred in the operation of the Fund. The Fund’s Constitution allows all properly incurred expenses to be recovered from the Fund and does not place any limit on the amount or types of expenses that can be recovered. These expenses include:

(i) fees and costs of the audit of the Fund and the Compliance Plan;

(ii) statutory charges including taxes, government fees and levies;

(iii) registry charges, accounting fees, legal fees, printing of annual reports, postage and handling, Compliance Committee costs, expert and consultant fees;


(iv) all other costs, disbursements and outgoings incurred in connection with the management and administration of the assets and performance of the duties and functions of the responsible entity under the Constitution; and

(v) all costs and expenses we incur in relation to the preparation, due diligence, printing, promotion and distribution of this PDS and any costs incurred in amending or replacing any the Constitution or Compliance Plan or any other aspect of the Fund.

The normal expenses which the Fund incurs will be paid from DDH's management fee while this PDS is current and are therefore effectively capped. Any such expenses in excess of the cap will be borne by DDH from its own resources, on the basis that DDH has the right to be reimbursed for them at a later time, provided that the cap will not be exceeded at the time of reimbursement. DDH may withdraw or replace this PDS at any time.

Extraordinary expenses are expenses that are not normally incurred in the day-to-day operation of the Fund and are not necessarily incurred in any given year. They may include costs associated with holding unitholder meetings, changing the Fund’s Constitution or defending or pursuing legal proceedings. Extraordinary expense recoveries are not included in the cap on expenses described in this section and are not included in the management costs set out in the tables in section 7.2 and 7.4. If the cap on expenses is exceeded because of the payment of extraordinary expenses, you will be notified.

We reserve the right to delay or waive payment of the above fees at our discretion.

(c) Performance fees

DDH does not charge a performance fee on your investment in the Fund. However, QIC is entitled to receive a performance fee if certain performance hurdles are met by it. These fees are charged by QIC to the Fund annually and are reflected in the unit price of the Fund. They therefore affect the value of the Fund's investments.

The performance fee is 20% of earnings of the Underlying Fund above the Underlying Fund's Benchmark, which is the Bloomberg AusBond Bank Bill Index. See the example below:

Net investment amounts in the Fund $50,000 $50,000

Assumed QIC fund net performance 10% 15%

Assumed benchmark performance 7% 7%

Out-performance of benchmark 3% 8%

Net value of investment (pre-performance fee) $55,000 $57,500

Performance fee (20% of out-performance) $300 $800

Net value of investment (post-performance fee) $54,700 $56,700

The estimated performance fee for the Fund is nil based on current financial information. As past performance is no indicator of future performance, the performance fee charged in the future may differ.

(d) Buy/sell spreads

The buy-sell spread represents the transaction costs associated with buying or selling assets when Investors enter or withdraw from the Fund. The buy-sell spread is reflected in the Application Price and Redemption Prices of the Fund. It is not a fee paid to us. Currently, the buy-sell spread for the Fund is nil. However, under the Constitution we may charge up to 0.5% of the assets as transaction costs.


(e) Differential fee arrangements

We may negotiate different fee arrangements, such as fee rebates, waivers or reductions, for Wholesale Clients. Such differential fee arrangements will be by individual negotiation with us.

(f) Fee entitlement

Notwithstanding anything else contained in this PDS, our entitlement to fees and expenses under the Constitution will be deducted from the assets of the Fund, prior to distribution payments being made to investors.

(g) GST and stamp duty

All fees stated in this PDS include (if applicable):

(i) GST less any reduced import tax credits; and

(ii) stamp duty.

(h) Transaction costs

Transaction costs, such as government taxes, duties, levies, bank charges and account transaction charges, associated with the acquisition of assets from funds subscribed by investors are paid from the Fund.

(i) Fees for Indirect Investors

Indirect Investors must also refer to the fees and costs payable for the Portfolio Service they are investing through. The Portfolio Service Operator will be the registered holder of Units and may charge you fees that are different or in addition to the Fund’s fees detailed in this section. You should refer to the offer document for the relevant Portfolio Service for more information.

(j) Advisor service fees

You can agree with your financial advisor to have an advisor service fee, for advice received relating to your investment in the Fund, paid directly from your investment in the Fund. The adviser service fee (including GST) will be paid to your current adviser or any subsequent adviser on your investment.

The adviser service fee can either be charged as an ongoing fee or a one-off fee, or both. The maximum upfront fee we would hold and then remit to your adviser is 3.3% (GST inclusive) of your Application Money. An ongoing fee can be charged as a percentage of your account value or a set dollar amount, provided it does not exceed 2.2% (including GST) per annum of the value of your investment in the Fund. This ongoing fee will be deducted from your investment on a quarterly basis by redeeming a sufficient number of your Units to cover the fee. These redemptions occur as at the fifth Business Day at the end of each quarter.

DDH may in our discretion refuse to deduct an advisor service fee or refuse to record or deal with your advisor at any time. Please contact your advisor directly regarding the negotiation of the adviser service fee.

Details of the advisor service fees deducted from your investment will be included in your statements and will be disclosed to you by your adviser in the Statement of Advice which your adviser must give you if they provide you with personal financial product advice.


(k) Maximum fees

Under the Constitution for the Fund, the Responsible Entity is entitled to be paid the following maximum fees (including GST if applicable):

Fee Maximum

Contribution fee up to 5% of the Application Money

Redemption fee up to 5% of the Redemption Price of each Unit withdrawn

Management fee up to 5% per annum of the value of the assets of the Fund

Whilst not a fee payable to the Responsible Entity, we may apply transaction costs of up to 0.5% of the value of the assets of the Fund to the Application Price and Redemption Price formulae.

The Constitution provides that we may accept lower fees than those to which we are entitled or to defer payment for any period.

(l) Increases or alterations to the fees

We may vary the management fees used to calculate the management costs set out in the table in section 7.2 at any time at our absolute discretion, without your consent, within the limits prescribed in each option’s Constitution. If the variation is an increase in a fee or charge, we will give you 30 days' prior written notice.

7.4 Example of annual fees and costs

This table gives an example of how the fees and costs of the Fund can affect your investment over a one year period. You should use this table to compare this product with other managed investment products.

Balance of $50,000 with total contributions of $5,000 during year1

Contribution Fees Nil For every additional $5,000 you put in you will be charged $0.

PLUS Management costs 1.00% per annum2

And, for every $50,000 you have in the Fund, you will

be charged $500 each year.

EQUALS Cost of fund If you had an investment of $50,000 at the beginning of the year and you put in an additional $5,000 during that year, you would be charged fees of between $500 and $5503

What it costs you will depend on the fees you negotiate with the fund or financial adviser.

1 It is a requirement of the Corporations Regulations that the above example assumes a balance of $50,000 and an

additional contribution of $5,000. 2 Certain additional costs may apply, such as abnormal expense recoveries. For more information, please refer to the

explanation of 'Management costs' in the 'Additional explanation of fees and costs' section above. 3 Additional fees may apply such as any upfront or ongoing fees you agree to pay your advisor.


8 Additional information

8.1 Complaints resolution

If you have a complaint about any aspect of your investment in the Fund, please write to us at:

The Compliance Officer DDH Graham Limited PO Box 330 BRISBANE QLD 4001

Alternatively, you can phone us on 1800 226 174 or email us at [email protected].

We are a member of, and participate in, the Financial Ombudsman Service Limited (FOS), membership number 10355, an independent complaints resolution organisation. If you feel your complaint has not been satisfactorily resolved, you are entitled to make a complaint to FOS at:

Financial Ombudsman Service Limited GPO Box 3 MELBOURNE VIC 3001 Telephone: 1300 780 808 Facsimile: (03) 9613 6399

8.2 Privacy

The privacy of your personal information is important to us. The purpose of collecting your information on the Application Form is to process your application and manage your investment in the Fund.

If you use the financial adviser who recommended you invest in the Fund, details of your investment will be provided to your financial adviser.

From time to time, we may wish to advise you about other services and products which could suit your needs. By making an application, you agree that we may disclose your personal information to other corporations specifically, but not solely, for marketing purposes.

All personal information collected will be collected, used and stored by us in accordance with our privacy policy, a copy of which is available on request.

You are entitled to request reasonable access to your personal information. We reserve the right to charge an administration fee for collating the information requested.

For a copy of our privacy policy, please visit our website at www.ddhgraham.com.au.

8.3 Anti-money laundering

Under Australian legislation, the Anti-Money Laundering and Counter- Terrorism Financing Act 2006 (AML/ CTF Act), certain additional identification is required from Investors. We are obliged under this legislation to satisfy thorough Investor identification and verification requirements prior to accepting an application for Units in the Fund. The processing of applications may be delayed until any requested documentation is received in a satisfactory form and the identity of the Investor is verified.

If an Applicant invests in the Fund through a dealer, IDPS or financial advisor, then they will request and collect any verification materials from the Applicant. Applicants who invest in the Fund directly must provide us with the relevant identification material, along with a completed Application Form.


We may request additional information from Applicants where we reasonably consider it necessary to satisfy our obligations under the AML/CTF Act.

8.4 Labour standards and social, ethical and environmental considerations

QIC is taking an active role in environmental, social and governance (ESG) factors and believes they are likely to have an increasingly material impact on the long-term returns of investment portfolios. QIC became a signatory to the United Nations-backed ‘Principles for Responsible Investment’ initiative in 2008. The six Principles for Responsible Investment provide guidance on how QIC can integrate the consideration of ESG factors into its investment decision-making practices.

8.5 Interests of the RE and its directors

Pursuant to the Constitution, our employees and officers are entitled to apply for Units. It is our policy to review any such application, which must be on the same basis as that of other applicants.

The Directors (or their associated entities) are the owners of all the shares in the RE.

The Fund may invest in other products for which we act as responsible entity, manager or agent.

8.6 Material documents

We consider that certain documents are material to the operations of the Fund and may be relevant to you. A description of material documents, together with a summary of the more important details of each of these documents, is set out below.

(a) Constitution

(i) The Constitution establishes the Fund and governs your rights and obligations as an investor in the Fund. Investors are bound by the provisions of the Constitution. The Constitution and the Corporations Act regulate the operation of the Fund and set out the rights and liabilities of investors and of our responsibilities and duties as the responsible entity.

(ii) The Constitution includes provisions which relate to:

(a) the responsible entity’s powers, duties and obligations;

(b) the rights and obligations of investors;

(c) the ability of investors to remove the responsible entity;

(d) the issue of Units and the procedure for the redemption of Units;

(e) the transfer and transmission of Units;

(f) the valuation of the Fund;

(g) fees payable to the responsible entity;

(h) the responsible entity’s right to be indemnified by the Fund for expenses, losses and liabilities arising in its capacity as responsible entity providing it has properly performed its duties;

(i) the winding up of the Fund;

(j) meetings of investors;

(k) complaints and procedures in relation to the Fund; and

(l) the responsible entity’s limitation of liability (subject to the Corporations Act).

(iii) We may amend the Constitution without investor consent where we reasonably believe the amendment will not adversely affect investors’ rights.


Otherwise, the Constitution can only be amended where at least 75% of votes cast by investors (at a meeting convened in accordance with the Constitution and the Corporations Act) vote in favour of the amendment.

(iv) We may retire or be removed as responsible entity by investors in accordance with the Corporations Act.

(v) Investors may view a copy of the Constitution at our registered office during business hours. A copy of the Constitution may be obtained by searching ASIC records or by written request to us

(b) Compliance Plan

(i) We have prepared a Compliance Plan which has been lodged with ASIC. The Compliance Plan is a document that outlines the principles and procedures in relation to the conduct of the Fund that we follow to ensure we comply with the provisions of the Corporations Act, ASIC policies and the Constitution.

(ii) The Compliance Plan deals with a wide range of issues including:

(a) that the assets of the Fund are identified as assets of the Fund;

(b) the assets of the Fund are valued at appropriate regular intervals; and

(c) accurate records of the Fund’s operations are kept.

(iii) Each year, adherence to the Compliance Plan is audited by an external Compliance Plan auditor and the audit report is lodged with ASIC.

(iv) The Compliance Plan may be viewed at our offices during normal business hours.

(c) Investment Agreement with QIC

We have entered into an Investment Agreement with QIC. The agreement provides a mandate for us to invest in a number of QIC managed wholesale funds (QIC Funds). The fee payable to QIC for investment management services (other than performance fees where applicable) is paid from the DDH's management fee and is not an additional fee payable by Investors.

Our right to invest in the QIC Funds is dependent upon the Investment Agreement. Under the Investment Agreement, each of the DDH Funds including the Fund (but excluding the DDH Cash Fund) must be entirely invested in a QIC fund (other than a cash reserve).

QIC may determine to wind up or terminate a QIC fund at any time. If this occurs the Responsible Entity will give Investors in any affected DDH Fund notice of this fact and the Responsible Entity will work together with QIC to seek to invest in another QIC fund of a similar nature.

Either QIC or DDH may terminate the Investment Agreement by giving 20 Business Days' notice. The termination of the Investment Agreement will not affect any investment held by the Fund in the Underlying Fund and the Fund may continue to hold those units until DDH makes a request for redemption or the Underlying Fund is terminated.

(d) Custody agreement

We have entered into a Custody Agreement in respect of the Fund.

The Custodian is to enter into contracts to purchase and hold assets on our behalf. The Custodian’s duties also include opening and maintaining bank accounts to hold


Application Money and other income of the Fund, maintaining records of the assets and providing reports to us. The Custodian’s liability under the Custody Agreement is limited, except in the case of fraud, negligence or breach of the Custody Agreement by the Custodian.

The Custodian is entitled to compensation for expenses incurred in connection with the proper performance of its duties and the exercise of its powers. The Custody Agreement continues until terminated. Either party may terminate the agreement on two months’ written notice unless a different period is agreed. Either party may terminate the agreement immediately on the occurrence of certain other events, including changes in corporate control, acts of insolvency, and material breaches of the agreement.

8.7 Investors' liability

The Constitution seeks to limit the liability of investors to the amount of their investment plus other moneys payable to us or the Fund pursuant to the Constitution (if any). However, because this is a matter which can only ultimately be determined by the courts, no assurance or guarantee is given that investors' liability will be limited in a manner discussed above.

8.8 Indemnity for DDH

To the extent permitted by the Corporations Act and the law, we, as responsible entity, are indemnified out of the Fund against any claim, action, damage, loss, liability, cost, expense or payment which we incur or are liable for, provided that it does not arise from our employees or fraud, negligence or wilful default.

8.9 Updated information

Where there is a change to information which is not material to investors this updated information will be made available on our website at www.ddhgraham.com.au (Updated Information). If you require a paper copy of any Updated Information please contact us on

1800 226 174 and it will be provided without charge on request.

While this PDS and any Updated Information are up to date at the time of preparation, changes may be made to the Fund from time to time. Investors should ensure that they keep up to date with the latest information on the Fund.

To obtain this information either:

(a) visit our website at www.ddhgraham.com.au; or

(b) phone us on 1800 226 174.

A paper copy of the most recent information will be sent to you free of charge on request.

8.10 Disclosing entity

(a) The Fund may become a disclosing entity in which case the following arrangements will apply.

(b) As a disclosing entity, the Fund will be subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC may be obtained from, or inspected at, an ASIC office. You will have the right to obtain various financial reports lodged with ASIC for the Fund.

(c) We will satisfy our continuous disclosure obligations for the Fund by publishing material information on our website at www.ddhgraham.com.au.

(d) Any material information affecting the Fund will be placed on our website.

(e) Accordingly, given the disclosure of material information will be made on our website, we will not be required to lodge continuous disclosure notices for the Fund with ASIC.

http://www.investorsexchange.com.au/


8.11 Electronic PDS

(a) This PDS is available in electronic form at www.ddhgraham.com.au. We will send, on request, any person receiving this PDS electronically, a paper copy of the PDS (and an Application Form) free of charge during the period of the Offer. Applications must be made by completing a paper copy of the Application Form.

(b) We will not accept a completed Application Form if we have reason to believe that the applicant has not received a complete paper copy or electronic copy of the PDS, or if we have reason to believe that the Application Form or electronic copy of the PDS has been altered or tampered with in any way.

(c) While we believe that it is extremely unlikely that during the period of the Offer the electronic version of this PDS will be tampered with or altered in any way, we cannot give any absolute assurance that this will not occur. If you are in doubt about the validity or integrity of an electronic copy of the PDS you should immediately request a copy of the PDS directly from us or your adviser.

8.12 Declarations and consents

We are the issuer of this PDS. None of the persons named below has authorised or caused the issue of this PDS. None of the persons named below has:

(a) withdrawn their written consent to be named in this PDS in the form and context in which they are named; or

(b) withdrawn their written consent to the inclusion in this PDS of the following information in the form and context in which it is included.

Australian Executor Trustees Limited has not withdrawn its consent to be named in this PDS as custodian of the Fund in the form and context in which it is named. Australian Executor Trustees Limited does not make, or purport to make, any statement that is included in this PDS and there is no statement in this PDS which is based on any statement by Australian Executor Trustees Limited.

To the maximum extent permitted by law, Australian Executor Trustees Limited expressly disclaims and takes no responsibility for any part of this PDS other than the references to its name. Australian Executor Trustees Limited does not guarantee the repayment of capital or any particular rate of capital or income return.

QIC has given consent to being named as trustee and manager of the Underlying Fund and to the inclusion of its logo and information attributable to QIC in this PDS. QIC has not been involved in the preparation of, and has not authorised or caused the issue of this PDS. QIC does not guarantee the success of the Fund or the Underlying Fund nor the repayment of capital or any particular rate of capital or income return.

QIC expressly disclaims and takes no responsibility for any other part of the PDS and has not authorised or caused the issue of or takes any responsibility for the contents of this PDS. QIC does not guarantee the success of the Fund or the Underlying Fund nor the repayment of capital or any particular rate of capital or income return.

8.13 Directors’ authorisation

Each of the Directors has consented to, and authorised, the issue of this PDS.


9 Glossary

AFS Licence an Australian financial services licence issued by ASIC;

Application Form the DDH Managed Funds Application Form;

Application Money the money payable by an applicant on submitting the Application Form;

Application Price the price at which Units are issued. This price rises and falls with changes in value of the underlying assets held in the Fund. A Buy/Sell spread may be included in the application price;

ASIC the Australian Securities and Investments Commission;

Benchmark when setting objectives and monitoring portfolio performance, benchmarks are used. These are typically market indicators that measure the performance of the market as a whole and allow us to compare a portfolio’s performance with the overall movement in the market;

Board the RE’s board of directors;

Business Day a day other than a Saturday, Sunday or public holiday in Brisbane, Queensland;

Buy/sell spread the difference between the Fund’s Application and Withdrawal Prices. It is used to defray the transaction costs incurred in buying and selling the underlying assets of the Fund. The buy/sell spread may be charged to an Investor on application, withdrawal and when switching between DDH Funds. It is not a management fee paid or payable to DDH or QIC;

Compliance Committee

the committee established by the RE in accordance with the Corporations Act, as described in section 3.1(d);

Compliance Plan the compliance plan for the Fund;

Constitution the constitution for the Fund;

Corporations Act the Corporations Act 2001 (Cth);

Custodian an entity appointed from time to time by the Responsible Entity to hold certain assets of the Fund as its agent;

Custody Agreement the agreement pursuant to which the Responsible Entity has appointed the Custodian to act as custodian in relation to the Fund;

DDH Funds Each of:

(a) DDH Conservative Growth Fund;

(b) DDH Balanced Growth Fund

(c) DDH Aggressive Growth Fund;

(d) DDH Australian Shares Fund;

(e) DDH Fixed Interest Fund;

(f) the Fund; and

(g) DDH Cash Fund;


Directors the directors of the RE, from time to time;

Duration sensitivity to a change in interest rate expectations;

Fund DDH Global Fixed Interest Alpha Fund ARSN 120 591 531;

G7 Countries means Japan, France, Germany, Italy, UK, Canada and the USA;

Indirect Investor an investor that invests in the Fund through a Portfolio Service;

Investment Manager

QIC in its capacity as manager and trustee of the underlying QIC wholesale funds in which the Fund invests;

Investor a member of the Fund;

Offer the offer of Units made in this PDS;

PDS this product disclosure statement;

Portfolio Service an investor-directed portfolio service, wrap account or master trust;

Portfolio Service Operator

the manager of a Portfolio Service;

QIC QIC Limited ACN 130 539 123;

RE, DDH, us, our and we

DDH Graham Limited ACN 010 639 219;

Regular Savings Plan

a plan which permits regular additional investments in the Fund, as described in section 6.2(c);

Reinvestment Price the price at which Units are issued when an Investor elects to have their distribution reinvested as additional Units in the Fund;

Underlying Fund QIC GFI Alpha Fund ABN 86 137 522 945;

Unit a unit in the Fund;

Updated Information

is explained in section 8.9;

Value at Risk a statistical technique used to measure and quantify the level of financial risk within an investment portfolio over a specific time frame;

Wholesale Client has the meaning given in sections 761G and 761GA of the Corporations Act;

Withdrawal Price the price at which Units are redeemed. This price rises and falls with changes in the value of the underlying assets held in the Fund. A Buy/Sell spread may be included in the Withdrawal Price;

you and your a person who subscribes for and is issued a Unit.


10 How to invest and application form

10.1 Complete Application Form

Investors may apply for Units in the Fund by completing and returning the Application Form available in electronic form at www.ddhgraham.com.au. Alternatively a paper copy can be requested by contacting us on 1800 226 774.

10.2 Customer identification requirements

All applications for Units must be accompanied by the appropriate AML/CTF information (“AML Forms”) and supporting documents required by the AML/CTF Act. If you are:

(a) investing through a financial adviser, they will provide you with the necessary forms and help you to complete them; or

(b) not investing through a dealer, IDPS or other financial adviser (or if you are investing through a financial adviser who is not authorised as an agent of DDH for AML/CTF Act purposes) you must provide DDH with appropriate identification material through providing the relevant AML/CTF information set out in the DDH Managed Funds Application Form available on our website or by contacting us on 1800 226 174 and forwarding it to DDH together with certified copies of any supporting documents required. This will enable DDH to properly identify you and meet the requirements of the legislation.

In accordance with the AML/CTF Act, we are required to identify, and verify the identity of, Investors. In order to do this, we must collect certain information from Investors relating to their identity and the source of their funds. We must then verify this information by citing certain verifying documentation. If you do not provide us with this information, we may not be able to process your application.

10.3 Return completed Application Form

Applications to invest in the Fund can only be accepted if a completed Application Form is lodged with an accompanying cheque or electronic funds transfer for the amount of the investment (refer to section 10.4).

The Application Form must be completed and sent, along with your payment, to us at the address below.

DDH Graham Limited Reply Paid 330 Brisbane QLD 4001

You can also fax us the Application Form although we ask you to phone us to verify receipt (refer to “Warning” in section 10.5).

Care should be taken to ensure you provide all details on the Application Form together with appropriate supporting documentation.

We will reject an application where the required information is not completed on the Application Form and also where supporting documentation is not provided.

10.4 Payments

You can forward your Application Money by cheque or electronic transfer. If you (or your agent) use electronic funds transfer, then you must notify us (refer to “Identifying your Application Money” below).

Cheques must be made payable to “DDH Graham Limited Application Account”. Payments are to be made in Australian dollars.


For electronic transfer, the bank account details are:

Account name: DDH Graham Limited Application Account Bank: Bank of Queensland BSB: 124-001 Account number: 9987 51333

10.5 Identifying your Application Money

If you (or your agent) forward Application Money to us by electronic funds transfer, you will need to advise us prior to the processing cut-off time so that we can identify your money. If your money has not been receipted or identified by our bank or us, then we cannot process your application.

Any money received by electronic funds transfer without being separately advised to the Responsible Entity may be rejected and returned to the paying financial institution.

Any fees charged by a financial institution, in relation to identifying or rejecting money, will be passed on to the Investor or deducted from the Application Money.

If a cheque or electronic deposit dishonours subsequent to Units being issued, those Units are deemed not to have been created.

WARNING

Electronic instructions - facsimile

Investors who use electronic means to provide instructions (e.g. applications and redemptions) to us do so at their own risk. We will not take any responsibility for not receiving a request, despite any electronically generated confirmation an Investor may have. Electronic communication is inherently unreliable and confirmation of physical receipt by us should be verbally sought by phoning 1800 226 174.

In sending any electronic instruction, the Investor releases us from, and indemnifies us against, any loss or liability arising as a result of processing an instruction that bears the Investor’s account number and a signature apparently that of the Investor or authorised signatory on the account.

10.6 Interest on application monies

Until Units are issued, Application Monies will be held on trust in the bank account detailed in section 10.4. The account will be established and kept for the purpose of depositing Application Monies and retaining those funds for as long as required under the Corporations Act. Any interest accrued on Application Monies will not be returned to Investors where Units are not allotted.

10.7 Allocation and allotment of Units

Allotment of Units will be made as soon as practicable after an application has been processed. DDH reserves the right to allot Units in full for any Application or to allot any lesser number and to decline any Application received.

Where the number of Units allotted is less than the number applied for, the surplus Application Monies will be returned by cheque within 14 days. Where no allotment is made, the amount tendered on application with the relevant Application Form will be returned in full by cheque within 14 days.


10.8 Foreign persons

By lodging an Application Form the applicant is taken to confirm that they are not a “foreign person” within the meaning of the Foreign Acquisitions and Takeovers Act or under the age of 18 at the time of the application. If the Applicant is a foreign person they should complete the appropriate section on the Application Form. This may mean the application will be rejected, depending on the applicant’s interest in the Fund and the application of the Foreign Acquisitions and Takeovers Act.

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