AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 2002
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
(ACN 100 346 898)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
------------------
LEVEL 28
367 COLLINS STREET
MELBOURNE VIC, 3000
AUSTRALIA
TELEPHONE: 613-9612-1111
(ADDRESS, INCLUDING ZIP CODE/POST CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
AGENT FOR SERVICE
ROBIN LAPETERS
CT CORPORATION SYSTEM
111 EIGHTH AVENUE
13TH FLOOR
NEW YORK, NY 10011
TELEPHONE: (212) 590-9100
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------
WITH A COPY TO:
VERNON SPENCER DIANE CITRON, ESQ.
DIRECTOR MAYER, BROWN, ROWE & MAW
INTERSTAR SECURITIES (AUSTRALIA) PTY LIMITED 1675 BROADWAY
LEVEL 28, 367 COLLINS STREET NEW YORK, NEW YORK 10019
MELBOURNE, VICTORIA 3000, AUSTRALIA
PAUL WEIFFENBACH
ORRICK, HERRINGTON & SUTCLIFFE
4 BROADGATE
LONDON EC2M 2DA
UNITED KINGDOM
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of the registration statement, as
determined by market conditions.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED MAXIMUM MAXIMUM REGISTRATION
OFFERING PRICE AGGREGATE FEE
PER UNIT OFFERING PRICE*
- ---------------------------------------------------------------------------------------------------------------------
Class A2 Mortgage Backed Floating Rate
Notes............................... $1,000,000 100% $1,000,000 $92
=====================================================================================================================
* Estimated for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
(sidebar)
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
(end sidebar)
SUBJECT TO COMPLETION DATED JUNE 10, 2002
US$
INTERSTAR MILLENNIUM SERIES 2002-1G TRUST
CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED (ACN 100 346 898)
Trust Manager
PERPETUAL TRUSTEES VICTORIA LIMITED (ABN 42 004 027 258)
Issuer Trustee
The Class A2 notes will be collateralized by a pool of housing loans
secured by properties located in Australia. The Interstar Millennium Series
2002-1G Trust will be governed by the laws of New South Wales, Australia.
The Class A2 notes are not deposits and neither the Class A2 notes nor
the underlying housing loans are insured or guaranteed by any governmental
agency or instrumentality. The Class A2 notes represent obligations of Perpetual
Trustees Victoria Limited solely in its capacity as trustee of the Interstar
Millennium Series 2002-1G Trust and do not represent obligations of, or
interests in, Interstar Securitisation Management Pty Limited or Perpetual
Trustees Victoria Limited in any other capacity, and are not guaranteed by
Interstar Securitisation Management Pty Limited or Perpetual Trustees Victoria
Limited.
INVESTING IN THE NOTES INVOLVES RISKS - SEE "RISK FACTORS" ON PAGE [17].
UNDERWRITING
INITIAL PRINCIPAL INITIAL PRICE TO DISCOUNTS AND PROCEEDS TO
BALANCE INTEREST RATE PUBLIC COMMISSIONS* ISSUER TRUSTEE*
three-month
Class A2 notes...............US$ LIBOR+[*]% US$[*] or [*]% US$[*] or [*]% US$[*] or [*]%
An application has been made to have the Class A2 notes listed on the
Luxembourg Stock Exchange and the Australian Stock Exchange.
Delivery of the Class A2 notes in book-entry form through The
Depository Trust Company, Clearstream, Luxembourg and the Euroclear System will
be made on or about [*], 2002.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Class A2 notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
BARCLAYS CAPITAL
[o] [o]
The date of this prospectus is [*] 2002
- ----------
*The underwriting discounts and commissions will be paid separately by Interstar
Securities (Australia) Pty Limited and not from the proceeds to the issuer
trustee.
TABLE OF CONTENTS
PAGE
Disclaimers with Respect to Sales to Non-U.S. Investors........................1
Australian Disclaimers.........................................................4
Summary........................................................................5
Parties to the Transaction.................................................5
Summary of the Notes.......................................................9
Structural Overview.......................................................10
Credit Enhancements.......................................................10
Liquidity Enhancement.....................................................11
Redraws...................................................................12
Hedging Arrangements......................................................12
Optional Redemption.......................................................13
Prefunding................................................................13
The Housing Loan Pool.....................................................14
Withholding Tax...........................................................15
U.S. Tax Status...........................................................15
Australian Tax Status.....................................................15
Legal Investment..........................................................15
ERISA Considerations......................................................15
Book-Entry Registration...................................................15
Collections...............................................................16
Interest on the Notes.....................................................16
Principal on the Notes....................................................17
Allocation of Cash Flows..................................................17
Distribution of Available Income on Each Monthly Payment Date.................18
Distribution of Mortgage Principal Repayments and
Surplus Liquidity on Each Monthly Payment Date............................20
Risk Factors..................................................................21
Capitalized Terms.............................................................34
U.S. Dollar Presentation......................................................34
The Issuer Trustee, the Trust Manager and the Servicer........................34
The Issuer Trustee......................................................34
The Trust Manager.......................................................35
The Servicer............................................................35
The Sellers.............................................................37
The Backup Servicers....................................................38
Description of the Trust......................................................39
Interstar Millennium Trusts Securitization Program......................39
Interstar Millennium Series 2002-1G Trust...............................39
Description of the Assets of the Trust........................................39
Assets of the Trust.....................................................39
The Housing Loans.......................................................40
Acquisition of Housing Loans after the Closing Date.....................40
Transfer and Assignment of the Housing Loans............................41
Representations, Warranties and Eligibility Criteria....................41
Breach of Representations and Warranties................................46
Other Features of the Housing Loans.....................................46
Details of the Housing Loan Pool........................................46
Housing Loan Information......................................................48
Analysis of the Housing Loan Pool.......................................48
Housing Loans by Occupancy..............................................49
Housing Loans by LVR (Loan-to-Value Ratio)..............................50
Housing Loans by Product Types..........................................51
Housing Loans by Geographic Distribution................................52
Housing Loans by Loan Size..............................................53
Housing Loans by Postcode Concentration-Top 10 by Loan Amount...........54
Housing Loans by Loan Seasoning.........................................55
Housing Loans by Maturity...............................................56
Housing Loans by Mortgage Insurer.......................................57
Housing Loans by Mortgage Insurer and LVR - PMI Indemnity Limited.......58
Housing Loans by Mortgage Insurer and LVR - Royal & Sun Alliance LMI....59
Housing Loans by Mortgage Insurer and LVR - GE Capital Mortgage
Insurance...........................................................60
Housing Loans by Mortgage Insurer and LVR - PMI Mortgage Insurance Ltd..61
Housing Loans by Mortgage Insurer and LVR - Commonwealth Of Australia...62
Housing Loans by Current Coupon Rates...................................63
Housing Loans by Months Remaining to Maturity...........................64
Interstar Residential Loan Program............................................65
Origination Process.....................................................65
Approval and Underwriting Process.......................................65
General Features of the Housing Loans...................................68
Special Features of the Housing Loans...................................69
The Mortgage Insurance Policies...............................................71
General.................................................................71
Certain Provisions of Mortgage Insurance Policies.......................71
Description of the Mortgage Insurers....................................73
The Title Insurance Policies..................................................76
Cover...................................................................76
Period of Cover.........................................................76
Refusal or Reduction in Claim...........................................77
Exclusions..............................................................77
Description of Title Insurer............................................78
Description of the Class A2 Notes.............................................79
General.................................................................79
Form of the Class A2 notes..............................................79
Distributions on the Notes..............................................83
Key Dates and Periods...................................................84
i
Calculation of Income...................................................86
Income..................................................................86
Application of Capital and Liquid Authorized Investments to Available
Income..............................................................86
Distribution of Available Income........................................87
Additional Income Payments..............................................89
Interest on the Notes...................................................89
Calculation of LIBOR....................................................90
Publication of Interest Rate............................................90
Mortgage Principal Repayments...........................................90
Principal Distributions.................................................91
Payments into US$ Account...............................................92
Payments out of US$ Account.............................................92
Notices.................................................................92
The Fixed-Floating Rate Swap............................................93
The Currency Swap and Currency Swap Guarantee...........................95
Withholding or Tax Deductions..........................................101
Redemption of the Notes for Taxation or Other Reasons..................102
Redemption of the Notes upon an Event of Default.......................103
Optional Redemption of the Notes.......................................103
Final Maturity Date....................................................104
Final Redemption of the Notes..........................................104
Termination of the Trust...............................................105
Prescription...........................................................106
Reports to Noteholders.................................................106
Voting and Consent of Noteholders......................................107
Description of the Transaction Documents.....................................108
Trust Accounts.........................................................108
Modifications..........................................................108
The Issuer Trustee.....................................................109
The Trust Manager......................................................112
The Note Trustee.......................................................114
Note Trustee's Annual Report...........................................115
List of Noteholders....................................................115
Reports................................................................115
The Security Trust Deed................................................115
The Check Account and Direct Paperless Entry Facilities Agreement......123
The Investment Management Agreement....................................124
The Backup Servicer Agreements.........................................128
The Servicer.................................................................130
Servicing of Housing Loans.............................................130
Collection and Enforcement Procedures..................................130
Collection and Foreclosure Process.....................................131
Servicer Delinquency Experience........................................132
Prepayment and Yield Considerations..........................................134
General................................................................134
Prepayments............................................................134
Weighted Average Lives.................................................135
Use of Proceeds..............................................................140
Legal Aspects of the Housing Loans...........................................140
General................................................................140
Nature of Housing Loans as Security....................................140
Strata Title...........................................................141
Urban Leasehold........................................................141
Taking Security over Land..............................................142
Enforcement of Registered Mortgages....................................142
Penalties and Prohibited Fees..........................................143
Bankruptcy.............................................................144
Environmental..........................................................144
Insolvency Considerations..............................................145
Tax Treatment of Interest on Australian Housing Loans..................145
Consumer Credit Legislation............................................145
United States Federal Income Tax Matters.....................................147
Overview...............................................................147
General................................................................148
Sale of Notes..........................................................148
Market Discount........................................................148
Premium................................................................150
Backup Withholding.....................................................150
Australian Tax Matters.......................................................151
Payments of Principal, Premiums and Interest...........................151
Note Transfers.........................................................152
Profit on Sale.........................................................152
Goods and Services Tax.................................................153
Other Taxes............................................................154
Tax Reform Proposals...................................................155
Debt & Equity..........................................................155
Enforcement of Foreign Judgments in Australia................................155
Exchange Controls and Limitations............................................156
ERISA Considerations.........................................................157
Legal Investment Considerations..............................................158
Available Information........................................................159
Ratings of the Notes.........................................................159
Plan of Distribution.........................................................160
Underwriting...........................................................160
Offering Restrictions..................................................161
General Information..........................................................164
Listing................................................................164
Authorization..........................................................164
Litigation.............................................................164
Euroclear And Clearstream, Luxembourg..................................164
Transaction Documents Available for Inspection.........................164
Announcement.................................................................165
Legal Matters................................................................165
Glossary.....................................................................166
ii
DISCLAIMERS WITH RESPECT TO SALES TO NON-U.S. INVESTORS
This section applies only to the offering of the Class A2 notes in
countries other than the United States of America. In this section, references
to Perpetual Trustees Victoria Limited are to that company only in its capacity
as trustee of the Interstar Millennium Series 2002-1G Trust, and not its
personal capacity or as trustee of any other trust. Perpetual Trustees Victoria
Limited is not responsible or liable for this prospectus in any capacity.
Interstar Securitisation Management Pty Limited is solely responsible for this
prospectus. Interstar Securitisation Management Pty Limited, as trust manager,
has taken all reasonable care to ensure that the information contained in this
prospectus is true and accurate in all material respects and that in relation to
this prospectus there are no material facts the omission of which would make
misleading any statement herein, whether fact or opinion.
Other than in the United States of America, no person has taken or will
take any action that would permit a public offer of the Class A2 notes in any
country or jurisdiction. The Class A2 notes may be offered non-publicly in other
jurisdictions. The Class A2 notes may not be offered or sold, directly or
indirectly, and neither this prospectus nor any form of application,
advertisement or other offering material may be issued, distributed or published
in any country or jurisdiction, unless permitted under all applicable laws and
regulations. The underwriters have represented that all offers and sales by them
have been in compliance, and will comply, with all applicable restrictions on
offers and sales of the Class A2 notes. You should inform yourself about and
observe any of these restrictions. For a description of further restrictions on
offers and sales of the Class A2 notes, see "Plan of Distribution".
This prospectus does not and is not intended to constitute an offer to
sell or a solicitation of any offer to buy any of the Class A2 notes by or on
behalf of Perpetual Trustees Victoria Limited in any jurisdiction in which the
offer or solicitation is not authorized or in which the person making the offer
or solicitation is not qualified to do so or to any person to whom it is
unlawful to make an offer or solicitation in such jurisdiction.
None of Perpetual Trustees Victoria Limited, in its personal capacity
and as issuer trustee, Perpetual Trustee Company Limited, as security trustee,
Interstar Securities (Australia) Pty Limited, as servicer, The Bank of New York,
New York branch, as note trustee, principal paying agent and calculation agent,
The Bank of New York (Luxembourg) S.A., as Luxembourg paying agent and
Luxembourg transfer agent, the underwriters, National Australia Bank Limited, as
fixed-floating rate swap provider, Zurich Capital Markets Australia Limited, as
currency swap provider, ZCM Matched Funding Corp., as currency swap guarantor or
PMI Mortgage Insurance Ltd, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd, PMI Indemnity Limited, Royal & Sun Alliance Lenders
Mortgage Insurance Limited or the Commonwealth of Australia as mortgage insurers
accept any responsibility for any information contained in this prospectus and
none of them has separately verified the information contained in this
prospectus or makes any representation, warranty or undertaking, express or
implied, as to the accuracy or completeness of any information contained in this
prospectus or any other information supplied in connection with the Class A2
notes.
Perpetual Trustees Victoria Limited, in its personal capacity and as
issuer trustee, Interstar Securitisation Management Pty Limited, as trust
manager, Interstar Securities
1
(Australia) Pty Limited as servicer, Perpetual Trustee Company Limited, as
security trustee, The Bank of New York, New York branch, as note trustee,
principal paying agent and calculation agent, The Bank of New York (Luxembourg)
S.A., as Luxembourg paying agent and Luxembourg transfer agent, National
Australia Bank Limited, as fixed-floating rate swap provider, Zurich Capital
Markets Australia Limited, as currency swap provider, ZCM Matched Funding Corp.,
as currency swap guarantor, PMI Mortgage Insurance Ltd, GE Capital Mortgage
Insurance Corporation (Australia) Pty Ltd, PMI Indemnity Limited, Royal & Sun
Alliance Lenders Mortgage Insurance Limited or the Commonwealth of Australia as
mortgage insurers and the underwriters do not recommend that any person should
purchase any of the Class A2 notes and do not accept any responsibility or make
any representation as to the tax consequences of investing in the Class A2
notes.
Each person receiving this prospectus acknowledges that he or she has
not relied on the entities listed in the preceding paragraph nor on any person
affiliated with any of them in connection with his or her investigation of the
accuracy of the information in this prospectus or his or her investment
decisions; acknowledges that this prospectus and any other information supplied
in connection with the Class A2 notes is not intended to provide the basis of
any credit or other evaluation; acknowledges that the underwriters have
expressly not undertaken to review the financial condition or affairs of the
trust or any party named in the prospectus during the life of the Class A2
notes; should make his or her own independent investigation of the trust and the
Class A2 notes; and should seek its own tax, accounting and legal advice as to
the consequences of investing in any of the Class A2 notes.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection with
the issue or sale of the Class A2 notes. If such information or representation
is given or received, it must not be relied upon as having been authorized by
Perpetual Trustees Victoria Limited or the underwriters.
Neither the delivery of this prospectus nor any sale made in connection
with this prospectus shall, under any circumstances, create any implication
that:
o there has been no material change in the affairs of the trust or any
party named in this prospectus since the date of this prospectus or the
date upon which this prospectus has been most recently amended or
supplemented; or
o any other information supplied in connection with the Class A2 notes is
correct as of any time subsequent to the date on which it is supplied
or, if different, the date indicated in the document containing the
same.
Perpetual Trustees Victoria Limited's liability to make payments of
interest and principal on the notes is limited to its right of indemnity from
the assets of the trust. All claims against Perpetual Trustees Victoria Limited
in relation to the notes may only be satisfied out of the assets of the trust
and are limited in recourse to the assets of the trust.
This prospectus will be available free of charge at the office of
The Bank of New York (Luxembourg) S.A.
2
The Luxembourg Stock Exchange takes no responsibility for the contents
of this prospectus, makes no representation as to its accuracy or completeness
and expressly disclaims any liability whatsoever for any loss however arising
from or in reliance upon the whole or any part of the contents of this
prospects.
None of the rating agencies have been involved in the preparation of
this prospectus.
THIS DOCUMENT MAY NOT BE COMMUNICATED IN THE UNITED KINGDOM OTHER THAN
TO PERSONS AUTHORIZED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000 OR
OTHERWISE HAVING PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND
QUALIFYING AS INVESTMENT PROFESSIONALS UNDER ARTICLE 19, OR PERSONS QUALIFYING
AS HIGH NET WORTH PERSONS UNDER ARTICLE 49, OF THE FINANCIAL SERVICES AND
MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2001, AS AMENDED, NOR MAY ANY NOTES
BE OFFERED OR SOLD IN THE UNITED KINGDOM EXCEPT TO PERSONS WHOSE ORDINARY
ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF
INVESTMENTS, AS PRINCIPAL OR AGENT, FOR THE PURPOSES OF THEIR BUSINESS OR WHO IT
IS REASONABLE TO EXPECT WILL ACQUIRE, HOLD, MANAGE OR DISPOSE OF INVESTMENTS, AS
PRINCIPAL OR AGENT, FOR THE PURPOSES OF THEIR BUSINESS OR OTHERWISE IN
CIRCUMSTANCES THAT DO NOT RESULT IN AN OFFER TO THE PUBLIC WITHIN THE MEANING OF
THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995, AS AMENDED. THIS DOCUMENTS IS
NOT AVAILABLE TO OTHER CATEGORIES OF PERSONS IN THE UNITED KINGDOM AND NO ONE
FALLING OUTSIDE SUCH CATEGORIES IS ENTITLED TO RELY ON, AND MUST NOT ACT ON, ANY
INFORMATION IN THIS DOCUMENT. THE TRANSMISSION OF THIS DOCUMENT TO ANY PERSONS
IN THE UNITED KINGDOM OTHER THAN THE CATEGORIES STATED ABOVE IS UNAUTHORIZED AND
MAY CONTRAVENE THE FINANCIAL SERVICES AND MARKETS ACT 2000.
3
AUSTRALIAN DISCLAIMERS
o The notes do not represent deposits or other liabilities of Interstar
Securitisation Management Pty Limited or associates of Interstar
Securitisation Management Pty Limited.
o The holding of the notes is subject to investment risk, including possible
delays in repayment and loss of income and principal invested.
o None of Interstar Securitisation Management Pty Limited, any associate of
Interstar Securitisation Management Pty Limited, Perpetual Trustees
Victoria Limited, Perpetual Trustee Company Limited, The Bank of New York,
New York branch, as note trustee, principal paying agent and calculation
agent, The Bank of New York (Luxembourg) S.A., as Luxembourg paying agent
and Luxembourg transfer agent nor the underwriters in any way stands behind
the capital value or the performance of the notes or the assets of the
trust except to the limited extent provided in the transaction documents
and the swap agreements for the trust.
o None of Interstar Nominees (B) Pty Limited, Interstar Nominees (N) Pty
Limited or Interstar Nominees (R) Pty Limited in their individual
capacities and as sellers, Perpetual Trustees Victoria Limited, Interstar
Securitisation Management Pty Limited, as trust manager, Interstar
Securities (Australia) Pty Limited, as servicer, Perpetual Trustee Company
Limited, as security trustee, The Bank of New York, New York branch, as
note trustee, principal paying agent and calculation agent, The Bank of New
York (Luxembourg) S.A., as Luxembourg paying agent and Luxembourg transfer
agent, National Australia Bank Limited, as fixed-floating rate swap
provider, Zurich Capital Markets Australia Limited, as currency swap
provider, ZCM Matched Funding Corp., as currency swap guarantor or the
underwriters guarantees the payment of interest or the repayment of
principal due on the notes.
o None of the obligations of Perpetual Trustees Victoria Limited, in its
capacity as trustee of the trust, are guaranteed in any way by Interstar
Securitisation Management Pty Limited or any associate of Interstar
Securitisation Management Pty Limited or by any associate of Perpetual
Trustees Victoria Limited.
4
SUMMARY
This summary highlights selected information from this document and
does not contain all of the information that you need to consider in making your
investment decision. This summary contains an overview of some of the concepts
and other information to aid your understanding. All of the information
contained in this summary is qualified by the more detailed explanations in
other parts of this prospectus.
PARTIES TO THE TRANSACTION
TRUST............................................ Interstar Millennium Series 2002-1G Trust
ISSUER TRUSTEE................................... Perpetual Trustees Victoria Limited, (ABN 47 004 027 258), in its
capacity as trustee of the trust
TRUST MANAGER.................................... Interstar Securitisation Management Pty Limited, (ACN 100 346
898), of Level 28, 367 Collins Street, Melbourne, Victoria, 3000,
telephone (613) 9612-1111
NOTE TRUSTEE..................................... The Bank of New York, New York branch
SECURITY TRUSTEE................................. Perpetual Trustee Company Limited, (ABN 42 000 001 007)
SERVICER......................................... Interstar Securities (Australia) Pty Limited, (ABN 72 087 271 109)
PRIMARY BACKUP SERVICER.......................... Zurich Capital Markets Australia Structured Finance Pty Limited
(ABN 99 095 545 887)
SECONDARY BACKUP SERVICER........................ KPMG Corporate Finance (Australia) Pty Limited (ABN 43 007 363 215)
SELLERS.......................................... Interstar Nominees (B) Pty Limited, (ABN 15 075 329 412)
Interstar Nominees (N) Pty Limited, (ABN 11 092 095 648)
Interstar Nominees (R) Pty Limited, (ABN 57 092 315 716)
PRINCIPAL PAYING AGENT........................... The Bank of New York, New York branch
LUXEMBOURG PAYING AGENT.......................... The Bank of New York (Luxembourg) S.A.
LUXEMBOURG TRANSFER AGENT........................ The Bank of New York (Luxembourg) S.A.
CALCULATION AGENT................................ The Bank of New York, New York branch
RESIDUAL BENEFICIARY............................. Interstar Securities (Australia) Pty Limited
UNDERWRITERS..................................... Barclays Capital, Inc.
[*]
[*]
LUXEMBOURG LISTING AGENT......................... The Bank of New York (Luxembourg) S.A.
5
MORTGAGE INSURERS................................ PMI Indemnity Limited, (ABN 49 000 781 171), PMI Mortgage
Insurance Ltd, (ABN 70 000 511 071), GE Capital Mortgage
Insurance Corporation (Australia) Pty Ltd, (ABN 52 081 488 440),
Royal & Sun Alliance Lenders Mortgage Insurance Limited, (ABN 55
001 825 725) and the Commonwealth of Australia
TITLE INSURER.................................... First American Title Insurance Company of Australia Pty Limited,
(ABN 64 075 279 908)
FIXED-FLOATING RATE SWAP PROVIDER................ National Australia Bank Limited, (ABN 12 004 044 937) or any
other acceptable fixed-floating rate swap provider
CURRENCY SWAP PROVIDER........................... Zurich Capital Markets Australia Limited, (ABN 99 095 545 887)
CURRENCY SWAP GUARANTOR.......................... ZCM Matched Funding Corp.
RATING AGENCIES.................................. Moody's and S&P
6
STRUCTURAL DIAGRAM
BORROWERS
SELLERS SECURITY TRUSTEE
Perpetual Trustee
Interstar Nominees (B) Pty Limited A$ Housing Company Limited
Interstar Nominees (N) Pty Limited and Loan Payments
Interstar Nominees (R) Pty Limited
COLLECTIONS BANK
National Australia First ranking floating charge
Bank Limited over the assets of the trust
TRUST MANAGER Equitable MORTGAGE INSURERS
Interstar Securitisation assignment of PMI Indemnity Limited
Management Pty Limited housing loans PMI Mortgage Insurance Ltd
GE Capital Mortgage Insurance
Corporation (Australia) Pty Ltd
Royal & Sun Alliance Lenders
Mortgage Insurance Limited
Commonwealth of Australia
PRIMARY BACKUP
SERVICER ISSUER TRUSTEE
Zurich Capital Perpetual Trustees Payments from Mortgage
Markets Austrialia Victoria Limited Insurance Policies
Structured
Finance Pty SERVICER TITLE INSURER
Limited Interstar Interstar Millenium Series 2002- First American Title
Securities 1G Trust Insurance Company
(Australia) Pty of Australia Pty Limited
SECONDARY Limited
BACKUP SERVICER Payments on the Payments from
KPMG Corporate Class A2 notes The Title
Finance Insurance Policy
(Australia) Pty
Limited CURRENCY SWAP PROVIDER BENEFICIARY
Zurich Capital Markets Australia Interstar Securities
Limited (Australia) Pty Limited
FIXED-FLOATING Payments on the
RATE SWAP PROVIDER Class B notes
National Australia PRINCIPAL PAYING AGENT
Bank Limited The Bank of New York,
New York branch CLASS B NOTEHOLDERS
CURRENCY SWAP
GUARANTOR THE DEPOSITARY TRUST
ZCM Matched Funding Corp COMPANY CLEARING SYSTEM CLASS A2 NOTES
CLASS A2 NOTE OWNERS NOTE TRUSTEE
The Bank of New York,
New York branch
7
ORGANIZATIONAL DIAGRAM
Vernon Spencer
& family
Shareholders
ARCTURUS MANAGEMENT
Pty Limited
100% of Capital
INTERSTAR SECURITIES
HOLDINGS PTY LTD
100% of Capital
INTERSTAR SECURITIES
(AUSTRALIA) PTY LTD
Perpetual Trustee
Victoria Limited,
as trustee
WAREHOUSE
TRUSTS
Interstar Nominees Interstar Nominees Interstar Nominees
(B) Pty Limited, (N) Pty Limited, (R) Pty Limited,
as trustee as trustee as trustee
Star Bee Star Enn Star Arr
Managed Trust Managed Trust Managed Trust
Macquarie Bank National Australia Barclays Bank PLC
Bank
8
SUMMARY OF THE NOTES
The issuer trustee will also issue Class B notes and may issue Class A1
notes collateralized by the same pool of housing loans as the Class A2 notes.
The Class B notes and the Class A1 notes have not been and will not be
registered in the United States and are not being offered by this prospectus.
The term "notes" when used in this prospectus will mean the Class A notes, being
together the Class A1 notes and the Class A2 notes, and the Class B notes.
- ------------------------------------------------------------------------------------------------------------------------
CLASS A2 CLASS B
- ------------------------------------------------------------------------------------------------------------------------
Aggregate Initial Principal Amount US$1,000,000,000 A$[*]
- ------------------------------------------------------------------------------------------------------------------------
% of Total* [93]% [7]%
- ------------------------------------------------------------------------------------------------------------------------
Anticipated Ratings:
Moody's Aaa Not rated
S&P AAA AA-
- ------------------------------------------------------------------------------------------------------------------------
Interest rate from the closing date three-month one-month Australian Bank Bill Rate
up to but excluding the step-up LIBOR +[*]% plus a margin
margin date
- ------------------------------------------------------------------------------------------------------------------------
Interest rate from and including three-month one-month Australian Bank Bill Rate
the step-up margin dated LIBOR +[*]% plus a margin
- ------------------------------------------------------------------------------------------------------------------------
Minimum Denomination US$100,000 and thereafter, A$10,000 (with initial minimum
minimum increments of US$1,000 subscription of A$500,000)
- ------------------------------------------------------------------------------------------------------------------------
Interest Accrual Method: actual/360 actual/365
- ------------------------------------------------------------------------------------------------------------------------
Monthly/Quarterly Quarterly Payment Dates: the 7th Monthly Payment Dates: the 7th day of
Payment Dates: day or, if the 7th day is not a each calendar month or, if the 7th
business day, then the next business day is not a business day, then the
day of each January, April, July and next business day, unless that business
October unless that business day falls day falls in the next calendar month, in
case the in the next calendar month, which case the monthly payment date will
in which quarterly payment date will be the preceding business day, of each
be the preceding business day. The calendar month. The first monthly payment
first quarterly payment date will be in date will be in August 2002.
October 2002.
- ------------------------------------------------------------------------------------------------------------------------
Clearance/Settlement: DTC/Euroclear/Clearstream, Offered in Australia only
Luxembourg
- ------------------------------------------------------------------------------------------------------------------------
Initial Cut-Off Date: Close of business [*], 2002
- ------------------------------------------------------------------------------------------------------------------------
Pricing Date: On or about [*], 2002
- ------------------------------------------------------------------------------------------------------------------------
Closing Date: On or about [*], 2002
- ------------------------------------------------------------------------------------------------------------------------
Step-Up Margin Date: The quarterly payment date falling in July 2009
- ------------------------------------------------------------------------------------------------------------------------
Maturity Date: The quarterly payment date falling in July 2034
- ------------------------------------------------------------------------------------------------------------------------
Pre-Funding Period For the period from the closing date through, but excluding, the first
quarterly payment date, the issuer trustee may acquire additional housing
loans by applying the money on deposit in the prefunding account.
- ------------------------------------------------------------------------------------------------------------------------
* All amounts are approximate.
- ------------------------------------------------------------------------------------------------------------------------
9
STRUCTURAL OVERVIEW
The Interstar Millennium Trusts securitisation program was established
pursuant to a master trust deed dated December 1, 1999 among Perpetual Trustees
Victoria Limited and Interstar Securities (Australia) Pty Limited. The master
trust deed provides the general terms and structure for securitisations under
the program. A series notice among the issuer trustee, Interstar Nominees (B)
Pty Limited (ABN 15 075 329 412), Interstar Nominees (N) Pty Limited (ABN 11
092 095 648) and Interstar Nominees (R) Pty Limited (ABN 57 092 315 716), as
sellers, Interstar Securitisation Management Pty Limited, as trust manager,
Interstar Securities (Australia) Pty Limited, as servicer, The Bank of New York,
New York branch, as note trustee and Perpetual Trustee Company Limited, as
security trustee, will set out the specific details of the Interstar Millennium
Series 2002-1G Trust and the notes, which may vary from the terms set forth in
the master trust deed. Each securitisation under the program is a separate
transaction with a separate trust. The assets of the Interstar Millennium Series
2002-1G Trust will not be available to pay the obligations of any other trust,
and the assets of other trusts will not be available to pay the obligations of
Perpetual Trustees Victoria Limited as trustee of the Interstar Millennium
Series 2002-1G Trust. See "Description of the Trust".
The Interstar Millennium Series 2002-1G Trust involves the
securitisation of housing loans originated by Interstar Securities (Australia)
Pty Limited in the name of Perpetual Trustees Victoria Limited, as trustee of a
number of warehouse trusts, and secured by mortgages over residential property
located in Australia. Each of Interstar Nominees (B) Pty Limited, Interstar
Nominees (N) Pty Limited and Interstar Nominees (R) Pty Limited, as
beneficiaries of the relevant warehouse trusts, will equitably assign its
beneficial interest in the housing loans to Perpetual Trustees Victoria Limited
as trustee of the trust, which will in turn issue the notes to fund the
acquisition of the housing loans.
The issuer trustee will grant a first ranking floating charge over all
assets which are subject to the trust under the security trust deed in favor of
Perpetual Trustee Company Limited, as security trustee, to secure the issuer
trustee's payment obligations to the noteholders and its other creditors. A
first ranking floating charge is a first priority security interest over a class
of assets, but does not attach to specific assets unless or until it
crystalizes, which means it becomes a fixed charge. The charge will crystalize
if, among other events, an event of default occurs under the security trust
deed. Once the floating charge crystalizes, the issuer trustee will no longer be
able to dispose of or create interests in the assets of the trust without the
consent of the security trustee. For a description of floating charges and
crystallization see "Description of the Transaction Documents -- The Security
Trust Deed -- Nature of the Charge".
Payments of interest and principal on the notes will come only from the
housing loans and other assets of the trust. The assets of the parties to the
transaction are not available to meet the payments of interest and principal on
the notes. If there are losses on the housing loans, the trust may not have
sufficient assets to repay the notes.
CREDIT ENHANCEMENTS
Payments of interest and principal on the Class A2 notes will be
supported by the following forms of credit enhancement.
10
SUBORDINATION
The Class B notes will be subordinated to the Class A2 notes in their
right to receive interest and principal payments. No Class A2 notes will be
issued until all of the Class B notes have been issued.
The credit support provided by the Class B notes is intended to enhance
the likelihood that the Class A2 notes will receive expected monthly payments of
interest and principal. The following chart describes the initial credit support
provided by the Class B notes:
INITIAL SUPPORT
CLASS CREDIT SUPPORT PERCENTAGE
- ----- -------------- ----------
A2 B [7]%
The initial support percentage in the preceding table is the initial
balance of the Class B notes as a percentage of the Australian dollar equivalent
of the principal balance of all of the notes on the closing date.
In certain circumstances, the issuer trustee may issue Class A1 notes.
See "--Redraws" and "Interstar Residential Loan Program -- Special Features of
the Housing Loans -- Redraws". If issued, Class A1 notes will, prior to the
occurrence of an event of default and enforcement of the charge under the
security trust deed, rank equally with the Class A2 notes in their right to
receive interest payments and will rank in priority to the Class A2 notes in
their right to receive principal payments. Following the occurrence of an event
of default and enforcement of the charge under the security trust deed, the
Class A1 notes will rank equally with the Class A2 notes in their right to
receive both interest and principal payments.
MORTGAGE INSURANCE POLICIES
Mortgage insurance policies issued by, or transferred to, PMI Indemnity
Limited, GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd, PMI
Mortgage Insurance Ltd, Royal & Sun Alliance Lenders Mortgage Insurance Limited
and the Commonwealth of Australia will provide full coverage for the balance
outstanding on each housing loan irrespective of its LVR. The mortgage insurance
policies are subject to some exclusions from coverage and rights of termination
which are described in "The Mortgage Insurance Policies".
TITLE INSURANCE POLICIES
Some housing loans may be covered by title insurance policies issued by
First American Title Insurance Company of Australia Pty Limited. Title insurance
will provide 100% coverage for losses arising as a result of a relevant mortgage
being subject to a prior encumbrance, not being validly registered or being
invalid or unenforceable. The title insurance policies are subject to some
exclusions from coverage and rights of termination which are described in "The
Title Insurance Policies".
LIQUIDITY ENHANCEMENT
To enable the issuer trustee to make timely payments of interest on the
notes and other trust expenses payable from interest collections on the housing
loans, the trust manager is required to ensure that the trust has an amount
equal to at least one percent of the Australian dollar equivalent of the
outstanding principal amount of the notes invested in highly-rated, short-term
investments. These liquid authorized
11
investments are available to make interest payments on the notes and to pay some
other expenses of the trust if there are not enough interest collections from
the housing loans available to make those payments. In addition, principal
collections on the housing loans will be available to make interest payments on
the notes and to pay some other expenses of the trust if there are not enough
interest collections from the housing loans and liquid authorized investments to
make those payments. Any principal collections used to make interest payments on
the notes or to pay other expenses of the trust will be replenished on future
monthly payment dates from excess interest collections, to the extent available.
Each mortgage insurance policy includes timely payment cover for losses
as a result of a borrower under a housing loan failing to pay all or part of a
payment when due. This timely payment cover comprises at least twelve months of
missed payment installments for each housing loan.
REDRAWS
Under the terms of each variable rate housing loan, a borrower may, at
the absolute discretion of the trust manager, redraw previously prepaid
principal. Provided the loan is not in arrears at the time of the request for a
redraw, a borrower may redraw an amount equal to the difference between the
scheduled principal balance of the loan and the current principal balance of the
loan. The issuer trustee will be reimbursed for any redraws it advances to
borrowers from principal collections on the housing loans. The amount that the
issuer trustee may advance to a borrower in respect of a particular housing loan
from time to time is limited to the difference between the scheduled principal
balance of the loan and the current principal balance of the loan and may only
be advanced in the circumstances described under "Interstar Residential Loan
Program--Special Features of the Housing Loans -- Redraws".
Any redraws of previously prepaid principal will be funded first from
principal collections on the housing loans. If, on a monthly payment date,
principal collections on the housing loans for the collection period before that
monthly payment date are insufficient to fund redraws for that collection
period, then the trust manager may give the issuer trustee a direction to, and
the issuer trustee must, issue a series of Class A1 notes. The trust manager
must not give this direction unless it has received written confirmation from
each rating agency that the issue of the Class A1 notes would not result in a
downgrade or withdrawal of a rating of any note then outstanding. See "Interstar
Residential Loan Program -- Special Features of the Housing Loans".
HEDGING ARRANGEMENTS
To hedge its interest rate and currency exposures, the issuer trustee
will enter into the following hedging arrangements:
o a fixed-floating rate swap to hedge the basis risk between the interest
rate on the housing loans which are subject to a fixed rate of interest
and the floating rate obligations of the trust, which includes the
issuer trustee's interest payments to the currency swap provider under
the currency swap. On the closing date, none of the housing loans will
be fixed rate loans and no fixed-floating rate swap will be entered
into by the issuer trustee. If, in the future, any fixed-rate housing
loans are added to the housing loan pool or if a borrower converts a
floating rate loan to a fixed-rate loan, a fixed
12
floating rate swap will be entered into by the issuer trustee.
o a currency swap to hedge the currency risk between, on one hand, the
collections on the housing loans and the amounts received by the issuer
trustee under the fixed-floating rate swap, which are denominated in
Australian dollars, and, on the other hand, the obligation of the trust
to pay interest and principal on the Class A2 notes, which are
denominated in U.S. dollars, together with the basis risk between, on
one hand, amounts in respect of interest calculated under the
fixed-floating rate swap by reference to the Australian bank bill rate
and, on the other hand, amounts in respect of interest calculated under
the Class A2 notes by reference to LIBOR. Under a guarantee dated as of
March 26, 2001 the currency swap guarantor will guarantee the payment
obligations of the currency swap provider under the currency swap.
OPTIONAL REDEMPTION
The trust manager will have the option to direct the issuer trustee to
redeem all of the notes on any quarterly payment date when the total outstanding
principal amount of the notes is equal to or less than 10% of the total initial
principal amount of the notes. If the trust manager directs the issuer trustee
to redeem the notes, the issuer trustee must so redeem the notes and the
noteholders will receive a payment equal to the outstanding principal amount of
the notes plus any outstanding interest on the notes.
The trust manager will have the option to direct the issuer trustee to,
and upon being so directed the issuer trustee must - subject to ratings
confirmation - redeem all of a class of notes on or after the step-up margin
date. The issuer trustee must not redeem the Class B notes unless the Class A
notes have been repaid in full or all notes are to be redeemed. If the issuer
trustee so redeems a class of notes, the relevant noteholders will receive a
payment equal to the outstanding principal amount of the class of notes plus any
outstanding interest on the class of notes.
If the trust manager satisfies the issuer trustee and the note trustee
prior to giving notice to the noteholders that on the next quarterly payment
date the currency swap provider would be required to deduct or withhold from any
payment under the currency swap any amount on account of any taxes, duties,
assessments or governmental charges, then the issuer trustee must, when so
directed by the trust manager, in its sole discretion, redeem all of the notes
at their outstanding principal amount, together with accrued interest.
PREFUNDING
If on the closing date the total aggregate purchase price for the
housing loans is less than the amount received in Australian dollars by the
issuer trustee from the proceeds of the issue of the notes, the issuer trustee
will retain the difference between the two amounts, to the extent it is not
invested in liquid authorized investments, in the prefunding account. The
balance of the prefunding account must not at any time exceed the Australian
dollar equivalent of US$250,000,000 or 25% of the Australian dollar equivalent
of the initial outstanding principal amount of the Class A2 notes as of the
closing date. See "Description of the Assets of the Trust--Acquisition of
Housing Loans after the Closing Date".
13
THE HOUSING LOAN POOL
The housing loan pool will consist of residential housing loans bearing
either a fixed rate or variable rate of interest, secured by mortgages on owner
occupied and non-owner occupied residential properties. The housing loans will
have original terms to stated maturity of no more than 30 years. The pool of
housing loans has the following characteristics:
SELECTED HOUSING LOAN POOL DATA AS OF
CLOSE OF BUSINESS ON MAY 31, 2002
Housing Loan Pool Size...................................... A$[1,569,460,814]
Total Number of Housing Loans............................... [9,042]
Average Housing Loan Balance................................ A$[173,575]
Maximum Housing Loan Balance................................ A$[947,377]
Minimum Housing Loan Balance................................ A$[0]
Total Valuation of the Properties .......................... A$[3,042,553,139]
Maximum Remaining Term to Maturity in months................ [352]
Weighted Average Remaining Term to Maturity in months....... [336]
Weighted Average Seasoning.................................. [7]
Weighted Average Original Loan-to-Value Ratio............... [73.66]%
Weighted Average Current Loan-to-Value Ratio................ [69.99]%
Maximum Current Loan-to-Value Ratio......................... [90.00]%
The original loan-to-value ratio of a housing loan is calculated by
comparing the initial principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan. Thus, if
collateral has been released from the mortgage securing a housing loan or if the
property securing the housing loan has been revalued, the original loan-to-value
ratio may not reflect the actual loan-to-value ratio at the origination of that
housing loan.
Before the issuance of the notes, housing loans may be added to or
removed from the housing loan pool. New housing loans may also be substituted
for housing loans that are removed from the housing loan pool. This addition,
removal or substitution of housing loans may result in changes in the housing
loan pool characteristics shown in the preceding table and could affect the
weighted average lives and yields of the notes. The sellers will not add, remove
or substitute any housing loans prior to the closing date if this would result
in a change of more than 5% in any of the characteristics of the pool of housing
loans described in the above table, unless a revised prospectus is delivered to
prospective investors.
14
WITHHOLDING TAX
Payments of principal and interest on the Class A2 notes will be
reduced by any applicable withholding taxes assessed on the issuer trustee or
any paying agent and could be reduced if any withholding taxes are assessed in
respect of payments under the housing loans. Neither the issuer trustee nor any
paying agent nor any borrower is obliged to pay any additional amounts to the
Class A2 noteholders to cover any withholding taxes.
If the Commonwealth of Australia or any other applicable jurisdiction
requires the withholding of amounts:
o from payments of principal or interest to the noteholders;
o from payments by the issuer trustee to the currency swap provider under
the currency swap; or
o from payments by borrowers under the housing loans,
due to taxes, duties, assessments or other governmental charges, the issuer
trustee must, when so directed by noteholders representing at least 75% of the
outstanding principal amount of the notes and provided that the trust manager
certifies to the issuer trustee that it is able to do so, redeem all of the
notes. See "Description of the Class A2 Notes -- Redemption of the Notes for
Taxation or Other Reasons".
U.S. TAX STATUS
In the opinion of Mayer, Brown, Rowe & Maw, special U.S. tax counsel to
the trust manager, the Class A2 notes will be characterized as debt for U.S.
federal income tax purposes. Each Class A2 noteholder, by acceptance of a Class
A2 note, agrees to treat the notes as indebtedness. See "United States Federal
Income Tax Matters".
AUSTRALIAN TAX STATUS
[KPMG please provide]
LEGAL INVESTMENT
The Class A2 notes will not constitute "mortgage-related securities"
for the purposes of the Secondary Mortgage Market Enhancement Act of 1984. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or to
review by regulatory authorities. You are urged to consult with your own legal
advisors concerning the status of the Class A2 notes as legal investments for
you. See "Legal Investment Considerations".
ERISA CONSIDERATIONS
In general, the Class A2 notes will be eligible for purchase by
retirement plans subject to the Employee Retirement Income Security Act of 1974,
as amended. Investors should consult their counsel with respect to the
consequences under ERISA and the United States Internal Revenue Code of 1986, as
amended, of the plan's acquisition and ownership of the Class A2 notes. See
"ERISA Considerations."
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the Class A2 notes
will hold their Class A2 notes through The Depository Trust Company in the
United States or Clearstream, Luxembourg or
15
Euroclear outside of the United States. Transfers within The Depository Trust
Company, Clearstream, Luxembourg or Euroclear will be in accordance with the
usual rules and operating procedures of the relevant system. Crossmarket
transfers between persons holding directly or indirectly through The Depository
Trust Company, on the one hand, and persons holding directly or indirectly
through Clearstream, Luxembourg or Euroclear, on the other hand, will take place
in The Depository Trust Company through the relevant depositories of
Clearstream, Luxembourg or Euroclear.
COLLECTIONS
The issuer trustee will receive for each collection period the
following amounts, which are known as collections:
o payments of interest, principal and fees, including prepayments of
principal under the housing loans;
o proceeds from the enforcement of the housing loans and registered
mortgages relating to those housing loans;
o amounts received under the fixed-floating rate swap and the currency
swap;
o amounts received under mortgage insurance policies and title insurance
policies;
o income in respect of authorized investments of the trust; and
o interest on amounts in the collection account.
Collections will be allocated between income and capital. Collections
attributable to interest and fees are known as income. The collections
attributable to principal are known as capital.
Income is normally used to pay fees and expenses of the issuer trustee
in connection with the trust, together with interest on the notes. Capital is
normally used to pay principal on the notes. However, if there is not enough
income to pay certain fees and expenses of the issuer trustee and interest on
the notes for a period, capital will be treated as income and applied to pay
such unpaid fees, expenses and interest. Any capital used to make interest
payments on the notes or to pay other fees and expenses of the issuer trustee
will be replenished on future monthly payment dates from excess income, to the
extent available.
INTEREST ON THE NOTES
Interest on the Class A2 notes will be payable quarterly in arrears on
each quarterly payment date. Interest on the Class B notes and the Class A1
notes will be payable in arrears on each monthly payment date. Amounts available
to pay interest payments on the notes will be allocated to pay interest on the
Class A notes before any allocation is made to pay interest on the Class B
notes. Interest on each class of notes is calculated for each interest period as
follows:
o at the note's interest rate;
o on the outstanding principal amount of that note at the beginning of
that interest period, after giving effect to any payments of principal
with respect to that note on that day; and
o on the basis of the actual number of days in that interest period and a
year of 360 days for the Class A2 notes, or 365 days for the Class B
notes and the Class A1 notes.
16
PRINCIPAL ON THE NOTES
Principal on the Class A2 notes will be payable on each quarterly
payment date. Principal on the Class B notes and the Class A1 notes will be
payable on each monthly payment date. Principal will be paid first on the Class
A1 notes, if any have been issued, and then on the Class A2 notes. The Class B
notes will not receive any principal payments unless amounts allocated to pay
principal on the Class A notes are sufficient to repay the outstanding principal
balance of the Class A notes in full. On each quarterly payment date, the
outstanding principal amount of the Class A2 notes will be reduced by the amount
of the principal payment made on that date on the Class A2 notes. On each
monthly payment date on or after the date sufficient funds have been allocated
to pay the Class A notes in full, the outstanding principal amount of the Class
B notes will be reduced by the amount of the principal payment made on that date
on the Class B notes. If the security trust deed is enforced after an event of
default, the proceeds from the enforcement will be distributed pro rata among
all of the Class A1 notes and Class A2 notes prior to any distributions to the
Class B notes.
ALLOCATION OF CASH FLOWS
On each monthly or quarterly payment date, as appropriate, the issuer
trustee will repay principal and interest to each noteholder to the extent that
there are collections received for those payments on that monthly or quarterly,
as appropriate, date. The charts on the next two pages summarize the flow of
payments.
17
DISTRIBUTION OF AVAILABLE INCOME ON EACH MONTHLY PAYMENT DATE
AVAILABLE INCOME = INCOME + CAPITAL ALLOCATIONS + LIQUIDITY ALLOCATIONS
Pay to each seller the Accrued Interest Adjustment for that seller
Pay any taxes
Pay pro rata:
o the issuer trustee's fee
o any fees payable to the note trustee
Pay pro rata:
o any fees payable pro rata to the paying agents
o any fees payable to the calculation agent
Pay the expenses of the trust other than any fees payable to the issuer trustee,
the note trustee, the paying agents, the calculation agent and the trust manager
- in relation to the collection period
Pay the expenses of the trust - other than any fees payable to the issuer
trustee, the note trustee, the paying agents, the calculation agent and the
trust manager - which the trust manager or the issuer trustee reasonably
anticipates will be incurred prior to the next monthly payment date
Pay the expenses of the trust - other than any fees payable to the issuer
trustee, the note trustee, the paying agents, the calculation agent and the
trust manager - not covered by the two boxes above which have already been
incurred prior to that monthly payment date but which have not previously been
paid or reimbursed
Pay the trust manager's fee
Pay pro rata:
o any amounts payable to the fixed floating rate swap provider under the fixed
floating rate swap other than any break costs in respect of the termination
of the fixed floating rate swap
o any interest for the interest period ending on that monthly payment date to
the Class A1 noteholders
o the A$ Interest Amount for that monthly payment date (1) to the currency
swap provider for conversion to U.S. dollars, and reciprocal payment by the
currency swap provider is thereafter to be applied towards payment of
interest on the Class A2 notes on the related quarterly payment date or (2)
to the note trustee for purchase of U.S. dollars at the spot exchange rate
to be applied towards payment of interest on the Class A2 notes on the
related quarterly payment date
o to the currency swap provider any break costs payable under the currency
swap other than in respect of the termination of the currency swap where the
currency swap provider is the defaulting party
Pay any interest for the interest period ending on that
monthly payment date to the Class B noteholders
Where any part of Capital has been applied to supplement an Income Shortfall,
by application to replenish the assets of the trust of an amount equal to
the Capital so applied
18
Pay pro rata break costs to:
o the fixed-floating rate swap provider
o the currency swap provider in respect of the termination of the currency swap
where the currency swap provider is the defaulting party
Pay pro rata fees payable to the sellers
Pay pro rata the balance to each holder of a residual income unit
19
DISTRIBUTION OF MORTGAGE PRINCIPAL REPAYMENTS AND SURPLUS LIQUIDITY ON
EACH MONTHLY PAYMENT DATE
Apply in funding redraws
Apply Capital to Available Income to make up any Income Shortfall
Payments of principal on the Class A1 notes
Pay the A$ Equivalent of the Currency Swap Notional Amount for that monthly
payment date to (1) the currency swap provider, and any reciprocal payment
by the currency swap provider is thereafter to be applied in repaying
principal on the Class A2 notes on the related quarterly payment date or (2)
the note trustee for conversion at the spot exchange rate to be applied in
repaying principal on the Class A2 notes on the related quarterly payment
date, in each case until such time as all Class A2 notes have been redeemed
in full.
Payments of principal on the Class B notes
Payment as a distribution to the holder of the residual capital unit
20
RISK FACTORS
The Class A2 notes are complex securities issued by a foreign entity
and secured by property located in a foreign jurisdiction. You should consider
the following risk factors in deciding whether to purchase any Class A2 notes.
There may be other unforeseen reasons why you might not receive principal or
interest on your Class A2 notes. You should also read the detailed information
set out elsewhere in the prospectus.
THE NOTES WILL BE PAID o The notes are debt obligations of the issuer
ONLY FROM THE ASSETS trustee only in its capacity as trustee of the
OF THE TRUST trust. The notes do not represent an interest
in or obligation of any of the other parties
to the transaction. The assets of the trust
will be the sole source of payments on the
notes. The issuer trustee's other assets will
only be available to make payments on the
notes if the issuer trustee is negligent or
commits fraud or a wilful default. Therefore,
if the assets of the trust are insufficient to
pay the interest and principal on your notes
when due, there will be no other source from
which to receive these payments and you may
not get back your entire investment or the
yield you expected to receive.
THERE IS NO WAY TO PREDICT o The rate of principal and interest payments
THE ACTUAL RATE AND TIMING on pools of housing loans varies among pools,
OF PAYMENTS ON THE HOUSING and is influenced by a variety of economic,
LOANS demographic, social, tax, legal and other
factors, including prevailing market interest
rates for housing loans and the particular
terms of the housing loans. Australian
housing loans have features and options that
are different from housing loans in the
United States, and thus will have different
rates and timing of payments from housing
loans in the United States. There is no
guarantee as to the actual rate of prepayment
on the housing loans, or that the actual rate
of prepayments will conform to any model
described in this prospectus. The rate and
timing of principal and interest payments on
the housing loans and the ability to redraw
principal on the housing loans will affect
the rate and timing of payments of principal
and interest on your notes. The performance
of relevant counterparties under each
mortgage insurance policy, each title
insurance policy, the fixed-floating rate
swap and the currency swap will also have a
key impact on such payments in terms of both
the timeliness of such payments and the
amount of such payments. Unexpected
prepayment rates could have the following
negative effects:
21
o if you bought your notes for more than
their face amount, the yield on your
notes will drop if principal payments
occur at a faster rate than you expect;
or
o if you bought your notes for less than
their face amount, the yield on your
notes will drop if principal payments
occur at a slower rate than you expect.
LOSSES AND DELINQUENT o If borrowers fail to make payments of
PAYMENTS ON THE HOUSING interest and principal under the housing
LOANS MAY AFFECT THE RETURN loans when due and the credit enhancements
ON YOUR NOTES described in this prospectus are not enough
to protect your notes from the borrowers'
failure to pay, then the issuer trustee may
not have enough funds to make full payments
of interest and principal due on your notes.
Consequently, the yield on your notes could
be lower than you expect and you could suffer
losses.
ENFORCEMENT OF THE HOUSING o Substantial delays could be encountered in
LOANS MAY CAUSE DELAYS IN connection with the liquidation of a housing
PAYMENT AND LOSSES loan, which may lead to shortfalls in
payments to you to the extent those
shortfalls are not covered by a mortgage
insurance policy or title insurance policy or
if the relevant mortgage insurer or title
insurer fails to perform its obligations
under the relevant mortgage insurance policy
or title insurance policy.
o Further, enforcement expenses such as legal
fees, real estate taxes and maintenance and
preservation expenses, to the extent not
covered by a mortgage insurance or title
insurance policy, will reduce the net amounts
recoverable by the issuer trustee from an
enforced housing loan or mortgage. If the
proceeds of the sale of a mortgaged property,
net of these expenses, are less than the
amount due under the related housing loan,
the issuer trustee may not have enough funds
to make full payments of interest and
principal due to you, unless the difference
is covered under a mortgage insurance policy
or title insurance policy. In addition, even
if these risks are covered by a mortgage
insurance policy or title insurance policy
there is no guarantee that the mortgage
insurer or title insurer will promptly make
any payment under any mortgage insurance
policy or title insurance policy or that the
mortgage insurer or title insurer will have
the necessary financial
22
capacity to make any such payment at the
relevant time.
CERTAIN PROVISIONS OF THE o The liability of a mortgage insurer is
MORTGAGE INSURANCE POLICIES governed by the terms of the relevant
MAY AFFECT THE RETURN ON mortgage insurance policy, which contains
YOUR NOTES certain exclusions that may allow that
mortgage insurer to reduce a claim or
terminate mortgage insurance cover in respect
of a housing loan in certain circumstances.
See "The Mortgage Insurance Policies". Any
such reduction or termination may affect the
ability of the issuer trustee to pay you
principal and interest in full.
CERTAIN PROVISIONS OF THE o The liability of the title insurer is
TITLE INSURANCE POLICIES MAY governed by the terms of the title insurance
AFFECT THE RETURN ON YOUR policy, which contains certain exclusions
NOTES which may allow the title insurer to reduce a
claim or not provide title insurance policy
cover in respect of a relevant mortgage
relating to a housing loan. See "The Title
Insurance Policies". Any such reduction or
termination may affect the ability of the
issuer trustee to recover all moneys secured
by the relevant mortgage and thereby affect
the ability of the issuer trustee to pay you
principal and interest in full.
THE CLASS B NOTES PROVIDE o The amount of credit enhancement provided
ONLY LIMITED PROTECTION through the subordination of the Class B
AGAINST LOSSES notes to the Class A2 notes is limited and
could be depleted prior to the payment in
full of the Class A2 notes. If the principal
amount of the Class B notes is reduced to
zero, you may suffer losses on your notes.
YOU MAY NOT BE ABLE TO o The underwriters are not required to assist
RESELL YOUR NOTES you in reselling your notes. A secondary
market for your notes may not develop. If a
secondary market does develop, it might not
continue or might not be sufficiently liquid
to allow you to resell any of your notes
readily or at the price you desire. The
market value of your notes is likely to
fluctuate, which could result in significant
losses to you.
YOU MAY EXPERIENCE SOME o The issuer trustee will exchange payments it
LOSSES ON YOUR NOTES DUE TO receives from the borrowers on the housing
THE QUARTERLY PAYMENT loans in Australian dollars for U.S. dollars
OBLIGATIONS OF THE CURRENCY with the currency swap provider. Under the
SWAP PROVIDER currency swap, the issuer trustee will be
required to pay the currency swap provider
the Australian dollar interest and principal
amount on each monthly payment date while
the currency swap provider will be
23
required to pay the U.S. dollar interest and
principal amount to the issuer trustee on
each quarterly payment date. If the currency
swap provider becomes insolvent or is
otherwise unable to meet its obligations
under the currency swap before paying the
U.S. dollar interest amount to the issuer
trustee on a quarterly payment date, you may
not be paid the full amount of payments due
to you on the next quarterly payment date.
THE TERMINATION OF ANY OF o The issuer trustee will exchange the interest
THE SWAPS MAY SUBJECT YOU TO payments from the fixed rate housing loans
LOSSES FROM INTEREST RATE OR for variable rate payments based upon the
CURRENCY FLUCTUATIONS one-month Australian bank bill rate. If the
fixed-floating rate swap is terminated or the
fixed-floating rate swap provider fails to
perform its obligations, you will be exposed
to the risk that the floating rate of
interest payable with respect to the notes
will be greater than the discretionary fixed
rate set by the servicer on the fixed rate
housing loans, which may lead to losses to
you. See "Description of the Class A2 Notes
--The Fixed-Floating Rate Swap" below.
o The issuer trustee will receive payments from
the borrowers on the housing loans and the
fixed-floating rate swap provider in
Australian dollars - calculated, in the case
of payments by the fixed-floating rate swap
provider, by reference to the Australian bank
bill rate - and make payments to you in U.S.
dollars, calculated, in the case of payments
of interest, by reference to LIBOR. Under the
currency swap, the currency swap provider
will exchange Australian dollar receipts for
U.S. dollars payments, and in the case of
interest, amounts calculated by reference to
the Australian bank bill rate for amounts
calculated by reference to LIBOR pursuant to
the currency swap. If the currency swap
provider fails to perform its obligations or
if the currency swap is terminated, the
issuer trustee might have to exchange its
Australian dollars for U.S. dollars, and its
Australian bank bill rate obligations for
LIBOR obligations, at a relevant spot
exchange rate that does not provide
sufficient U.S. dollars to make payments to
you in full.
PREPAYMENTS DURING A o If a prepayment is received on a housing loan
COLLECTION PERIOD MAY during a collection period, interest on the
RESULT IN YOU NOT RECEIVING housing loan will cease to accrue on that
YOUR FULL INTEREST PAYMENTS portion of the housing loan that has been
prepaid, starting on the date of prepayment.
The amount prepaid will be invested in
investments
24
that may earn a rate of interest lower than
that paid on the housing loan. If it is less,
the issuer trustee may not have sufficient
funds to pay you the full amount of interest
due to you on the next quarterly payment
date.
THE PROCEEDS FROM THE o If the security trustee enforces the security
ENFORCEMENT OF THE SECURITY interest over the assets of the trust after
TRUST DEED MAY BE INSUFFICIENT an event of default under the security trust
TO PAY AMOUNTS DUE TO YOU deed, there is no assurance that the market
value of the assets of the trust will be
equal to or greater than the outstanding
principal and interest due on the notes, or
that the security trustee will be able to
realize the full value of the assets of the
trust. The issuer trustee, the security
trustee, the note trustee, the swap providers
and other service providers will generally be
entitled to receive the proceeds of any sale
of the assets of the trust, to the extent
they are owed fees and expenses, before you.
Consequently, the proceeds from the sale of
the assets of the trust after an event of
default under the security trust deed may be
insufficient to pay you principal and
interest in full.
IF THE TRUST MANAGER DIRECTS o If the trust manager directs the issuer
THE ISSUER TRUSTEE TO REDEEM trustee to redeem the notes early as
THE NOTES EARLY, THE YIELD ON described in "Description of the Class A2
YOUR NOTES MAY BE LOWER THAN Notes--Optional Redemption of the Notes", the
EXPECTED purchase of the housing loans will result in
the early retirement of your notes, which
will shorten their average lives and
potentially lower the yield on your notes.
THE IMPOSITION OF A o If a withholding tax is imposed on payments
WITHHOLDING TAX WILL REDUCE by the issuer trustee or any paying agent of
PAYMENTS TO YOU AND MAY LEAD interest on your notes, you will not be
TO AN EARLY REDEMPTION OF THE entitled to receive grossed-up amounts to
NOTES compensate for such withholding tax. Thus,
you will receive less interest than is
scheduled to be paid on your notes.
o In addition, upon the occurrence of such an
event, the issuer trustee must, when so
directed by noteholders representing 75% of
the outstanding principal amount of the
notes, provided that the trust manager will
certify to the issuer trustee that it is able
to do so, on the next quarterly payment date
redeem in whole, but not in part, the
aggregate outstanding principal amount plus
accrued interest on the notes. If the option
to redeem the notes affected by a withholding
tax is exercised, you may not be able to
reinvest the redemption
25
payments at a comparable interest rate.
THE FEATURES OF THE HOUSING o The features of the housing loans, including
LOANS MAY CHANGE, WHICH COULD their interest rates, may be changed by the
AFFECT THE TIMING AND AMOUNT servicer, either on its own initiative or at
OF PAYMENTS TO YOU a borrowers' request. Some of these changes
may include the addition of newly developed
features which are not described in this
prospectus. As a result of these changes and
borrowers' payments of principal, the
concentration of housing loans with specific
characteristics is likely to change over
time, which may affect the timing and amount
of payments you receive.
o If the servicer changes the features of the
housing loans, borrowers may elect to
refinance their loan with another lender to
obtain more favorable features. The
refinancing of housing loans could cause you
to experience higher rates of principal
prepayment than you expected, which could
affect the yield on your notes.
THERE ARE LIMITS ON THE o If the interest collections during a
AMOUNT OF AVAILABLE LIQUIDITY collection period and liquid authorized
TO ENSURE PAYMENTS OF INTEREST investments are insufficient to cover fees,
TO YOU expenses and the Australian dollar interest
payments due with respect to the Class A2
notes on the next monthly payment date,
principal collections collected during the
collection period may be used to cover these
amounts. In the event that there is not
enough money available from principal
collections, you may not receive a full
payment of interest on the related quarterly
payment date, which will reduce the yield on
your Class A2 notes.
THE USE OF PRINCIPAL o If principal collections are drawn upon to
COLLECTIONS TO COVER cover shortfalls in interest collections, and
LIQUIDITY SHORTFALLS MAY LEAD there is insufficient excess interest
TO PRINCIPAL LOSSES collections in succeeding collection periods
to repay those principal draws, you may not
receive full repayment of principal on your
notes.
A DECLINE IN AUSTRALIAN o The Australian economy has been experiencing
ECONOMIC CONDITIONS MAY LEAD a prolonged period of expansion with
TO LOSSES ON YOUR NOTES relatively low and stable interest rates and
steadily increasing property values. If the
Australian economy were to experience a
downturn, an increase in interest rates, an
increase in unemployment, a fall in property
values or any combination of these factors,
delinquencies or losses on
26
the housing loans may increase, which may
cause losses on your notes.
CONSUMER PROTECTION LAWS MAY o Some of the housing loans are regulated by
AFFECT THE TIMING OR AMOUNT Consumer Credit Legislation. Under that
OF INTEREST OR PRINCIPAL legislation, a borrower may have a right to
PAYMENTS TO YOU apply to a court to:
o vary the terms of their housing loan on
the grounds of hardship or that it is an
unjust contract;
o reduce or cancel any interest rate
payable on the housing loan which is
unconscionable;
o have certain provisions of the housing
loan or relevant mortgage which are in
breach of the legislation declared
unenforceable;
o obtain an order for a civil penalty; or
o obtain restitution or compensation, in
relation to any breaches of the Consumer
Credit Legislation in relation to the
housing loan or relevant mortgage.
o Any such order may affect the timing or
amount of interest or principal repayments
under the relevant housing loan, which may in
turn affect the timing or amount of interest
or principal payments to you under the notes.
o In addition, a mortgagee's ability to enforce
a mortgage which is subject to the Consumer
Credit Legislation is limited by various
demand and notice procedures which are
required to be followed. For example, as a
general rule enforcement cannot occur unless
the relevant default is not remedied within
30 days after a default notice is given.
Borrowers may also be entitled to initiate
negotiations with the mortgagee for a
postponement of enforcement proceedings. Any
order under the Consumer Credit Legislation
may affect the timing or amount of interest
or principal payments or repayments under the
relevant housing loan, which may in turn
affect the timing or amount of interest or
principal payments or repayments to you under
the notes.
27
THE CONCENTRATION OF HOUSING o The trust contains a high concentration of
LOANS IN SPECIFIC GEOGRAPHIC housing loans secured by properties located
AREAS MAY INCREASE THE within New South Wales and Victoria. Any
POSSIBILITY OF LOSS ON YOUR deterioration in the real estate values or
NOTES the economy of either of those states could
result in higher rates of delinquencies,
foreclosures and loss than expected on the
housing loans. In addition, either of these
states may experience natural disasters,
which may not be fully insured against and
which may result in property damage and
losses on the housing loans. These events may
in turn have a disproportionate impact on
funds available to the trust, which could
cause you to suffer losses.
THE CONTINUING UNCERTAINTY o Since July 1, 2000, a goods and services tax
OVER THE INTERPRETATION OF is payable by all entities which make taxable
THE NEW GOODS AND SERVICES supplies in Australia subject to certain
TAX IN AUSTRALIA MAY DECREASE transitional rules. Some service providers to
THE FUNDS AVAILABLE TO THE the issuer trustee may be subject to GST in
TRUST TO PAY YOU respect of the services provided to the trust
and may pass on that additional cost to the
issuer trustee. The issuer trustee may also
be subject to GST on services provided by it.
To the extent that it has a net GST
liability, the issuer trustee will have less
trust funds available to meet its
obligations, and you may suffer losses. See
"Australian Tax Matters -- Goods and Services
Tax" below.
YOU WILL NOT RECEIVE PHYSICAL o Your ownership of the notes will be
NOTES REPRESENTING YOUR NOTES, registered electronically through DTC,
WHICH CAN CAUSE DELAYS IN Euroclear and/or Clearstream, Luxembourg. The
RECEIVING DISTRIBUTION AND lack of physical certificates could:
HAMPER YOUR ABILITY TO
PLEDGE OR RESELL YOUR NOTES
o cause you to experience delays in
receiving payments on the notes because
the principal paying agent will be
sending distributions on the notes to
DTC instead of directly to you;
o limit or prevent you from using your
notes as collateral; and
o hinder your ability to resell the notes
or reduce the price that you receive for
them.
AUSTRALIAN TAX REFORM o The Australian federal government proposes to
PROPOSALS COULD AFFECT THE reform business taxation as part of its
TAX TREATMENT OF THE TRUST current tax reform program. There are several
proposed measures, including the taxation of
trusts as companies, that, if enacted in
their current form, could impact upon the tax
28
treatment of the trust. See "Australian Tax
Matters -- Tax Reform Proposals".
SINCE THE TRUST MANAGER, THE o Each of Interstar Securitisation Management
ISSUER TRUSTEE AND THE Pty Limited, Perpetual Trustees Victoria
SERVICER ARE AUSTRALIAN Limited and Interstar Securities (Australia)
ENTITIES, THERE REMAINS Pty Limited is an Australian company and has
UNCERTAINTY AS TO THE agreed to submit to the jurisdiction of the
ENFORCEABILITY OF JUDGMENTS New York State and United States federal
OBTAINED BY CLASS A2 courts for purposes of any suit, action or
NOTEHOLDERS IN U.S. COURTS proceeding arising out of the offering of the
BY AUSTRALIAN COURTS Class A2 notes. Generally, a final and
conclusive judgment obtained by noteholders
in U.S. courts would be recognized and
enforceable against the trust manager, the
issuer trustee or the servicer, as the case
may be, in the relevant Australian court
without reexamination of the merits of the
case. However, because of the foreign
location of the trust manager, the issuer
trustee and the servicer and their directors,
officers and employees and their respective
assets, it may be difficult to effect service
of process over these persons or to enforce
against them judgments obtained in United
States courts based upon the civil liability
provisions of the U.S. federal securities
laws. See "Enforcement of Foreign Judgments
in Australia".
THE ISSUANCE OF CLASS A1 o The issuer trustee may issue Class A1 notes
NOTES MAY AFFECT THE TIMING to fund redraws of previously prepaid
AND AMOUNT OF PAYMENTS MADE principal under the housing loans if
ON YOUR CLASS A2 NOTES principal collections on the housing loans
are not sufficient. See "Interstar
Residential Loan Program--Special Feature of
the Housing Loans--Redraws". The Class A1
notes will be senior to the Class A2 notes
with respect to payments of principal and
rank equally with the Class A2 notes with
respect to payments of interest before the
enforcement of the charge pursuant to the
security trust deed and rank equally in all
respects thereafter. If the proceeds of
enforcement of the charge pursuant to the
security trust deed are not sufficient to pay
all obligations of the issuer trustee under
the terms and conditions of the notes, the
risk to you of a loss on your investment in
the Class A2 notes is greater if any Class A1
notes are outstanding at that time.
PREPAYMENTS COULD RESULT FROM o If there is any principal amount remaining in
PREFUNDING the prefunding account following the
acquisition of additional housing loans by
the trust during the period from the closing
date up to but excluding the first
29
quarterly payment date, that amount will be
applied in repayment of principal to the
noteholders in the priority described in
"Description of the Class A2 Notes --
Principal Distributions". Any prepayment will
shorten the average weighted life of the
notes so prepaid. The greater the prepayment,
the shorter the weighted average life of the
affected notes which may in turn affect the
yield on your Class A2 notes.
THE SERVICER'S RESPONSIBILITY o The servicer is obligated under the
TO MANAGE THE INTEREST RATE transaction documents to set the interest
EXPOSURE MAY AFFECT THE RATE rates on the housing loans at a rate to
OF PREPAYMENTS AND THE YIELD ensure that at all times the issuer trustee
ON YOUR INVESTMENT has sufficient cash available to pay all
interest payable on the notes and otherwise
comply with its duties and obligations under
the transaction documents. If the servicer
increases the interest rates on the housing
loans, borrowers may be unable to make their
required payments under the housing loans. In
addition, if the interest rates are increased
above market rates, borrowers may refinance
their housing loans with other lenders to
obtain lower rates. This could cause higher
rates of principal prepayment and delinquent
payments by borrowers than you expected and
affect the yield on your Class A2 notes.
TERMINATION PAYMENTS RELATING o Upon termination of a swap, a termination
TO A CURRENCY SWAP OR THE payment will be due either from the issuer
FIXED-FLOATING RATE SWAP ARE trustee to the swap provider or vice versa.
SUBJECT TO CREDIT RISKS If the swap provider is required to make a
termination payment to the issuer trustee
upon the termination of a swap, then the
trust will be exposed to credit risk in
relation to the capacity of that swap
provider to make that termination payment.
30
CURRENCY SWAP TERMINATION o If the currency swap terminates before its
PAYMENT TO THE CURRENCY SWAP scheduled termination date, a termination
PROVIDER MAY REDUCE PAYMENTS payment by either the issuer trustee or the
ON YOUR CLASS A2 NOTES currency swap provider will be payable based
on the mid-market cost of a replacement
currency swap. Any termination payment could,
if the Australian dollar/United States dollar
exchange rate has changed significantly, be
substantial. Any termination payment owing by
the issuer trustee to the currency swap
provider will be payable out of assets of the
trust. If a currency swap terminates early
under circumstances where the currency swap
provider is the defaulting party, any payment
due by the issuer trustee will have a lower
priority than payments of interest on the
notes. If the currency swap terminates early
under any other circumstances, any payment
due by the issuer trustee will have an equal
priority with interest payments on the Class
A2 notes.
THIS PROSPECTUS PROVIDES o This prospectus describes only the
INFORMATION REGARDING ONLY A characteristics of the housing loan pool as
PORTION OF THE HOUSING LOAN of May 31, 2002. While they must satisfy
POOL, AND ADDITIONAL HOUSING the criteria specified in this prospectus,
LOANS ADDED TO THE HOUSING the housing loans acquired on the closing
LOAN POOL COULD HAVE DIFFERENT date, and any additional housing loans
CHARACTERISTICS transferred to the trust during the
prefunding period, may not have the
characteristics or statistical composition of
the housing loan pool described in this
prospectus. For example, such housing loans
may be of a different credit quality or
seasoning. The trust manager does not expect
the characteristics or statistical
composition of the housing loan pool acquired
on the closing date or the additional housing
loans acquired after the closing date to
differ materially from the characteristics of
the housing loan pool described in this
prospectus. If you purchase a Class A2 note,
you must not assume that the characteristics
of the housing loan pool, including the
additional housing loans acquired after the
closing date, will be identical to the
characteristics of the housing loan pool
disclosed in this prospectus.
31
RATINGS OF THE CLASS A2 NOTES o It is a condition to the issuance of the
DO NOT INSURE THEIR PAYMENT Class A2 notes that they be rated Aaa by
AND WITHDRAWAL OF ANY RATINGS Moody's and AAA by S&P and that the Class B
MAY AFFECT THE VALUE OF THE notes be rated at least AA- by S&P. A rating
CLASS A2 NOTES is not a recommendation to purchase, hold or
sell the Class A2 notes, inasmuch as such a
rating does not address the market price or
the suitability for a particular investor of
a security. The rating of the Class A2 notes
addresses the likelihood of the payment of
principal and interest on the Class A2 notes
pursuant to their terms. There is no
assurance that a rating will remain for any
given period of time or that a rating will
not be lowered or withdrawn entirely by a
rating agency, if in its judgment
circumstances in the future so warrant. The
ratings of the Class A2 notes will be based
primarily on the creditworthiness of the
housing loans, the subordination provided by
the Class B notes with respect to the Class A
notes, the mortgage insurance policies and
the creditworthiness of the swap providers
and the mortgage insurers.
FAILURE OF THE SERVICER TO o The servicer under the investment management
PERFORM ITS OBLIGATIONS MAY agreement has been appointed as initial
AFFECT THE TIMING OF servicer of the housing loans. Following a
PAYMENTS ON YOUR CLASS servicer event of default under the
A2 NOTES investment management agreement, the issuer
trustee must immediately terminate the
investment management agreement. Although
under the backup servicer agreement the
backup servicer has agreed to carry out the
duties of the servicer if the servicer is
removed, there is no guarantee that a
replacement servicer will be found who would
be willing to service the housing loans on
the terms of the investment management
agreement or that it will be able to service
the housing loans with the same level of
skill and competence as the initial servicer.
A failure by the servicer to properly perform
its servicing obligations may have an impact
on the timing of funds received by the issuer
trustee in respect of the housing loans.
CERTAIN HOUSING LOANS MAY NOT o The trust manager will make certain
HAVE THE CHARACTERISTICS AS representations and warranties to the issuer
SET OUT IN THE REPRESENTATIONS trustee, to each noteholder and to the
AND WARRANTIES MADE BY THE security trustee in relation to the housing
TRUST MANAGER loans to be assigned to the issuer trustee,
as at the cut-off date and the closing date
for those housing loans. The issuer trustee
has not investigated or made any enquiries
regarding the accuracy of the representations
32
and warranties.
o No independent investigation of whether each
and every housing loan offered for sale at
the issue date or any other closing date
complies with the eligibility requirements
set forth in "Description of the Assets of
the Trust -- Representations, Warranties and
Eligibility Criteria" has been conducted.
ASSETS OF THE TRUST WILL NOT o The trust manager, not the issuer trustee,
BE AVAILABLE TO COVER ANY takes responsibility for the prospectus. As a
LOSSES SUFFERED BY YOU FOR result, in the event that a person suffers
ANY MISLEADING STATEMENT OR loss due to any information contained in this
OMISSION OF A MATERIAL MATTER prospectus being inaccurate or misleading, or
IN THIS PROSPECTUS omitting a material matter or thing, that
person will not have recourse to the assets
of the trust.
33
CAPITALIZED TERMS
The capitalized terms used in this prospectus, unless defined elsewhere
in this prospectus, have the meanings set forth in the Glossary starting on page
[142].
U.S. DOLLAR PRESENTATION
In this prospectus, references to "U.S. dollars" and "US$" are
references to U.S. currency and references to "Australian dollars" and "A$" are
references to Australian currency. Unless otherwise stated in this prospectus,
any translations of Australian dollars into U.S. dollars have been made at a
rate of US$0.5724 = A$1.00, the exchange rate as displayed on the Bloomberg
Service under AUD currency HP on June 5, 2002. Use of such rate is not a
representation that Australian dollar amounts actually represent such U.S.
dollar amounts or could be converted into U.S. dollars at that rate.
THE ISSUER TRUSTEE, THE TRUST MANAGER AND THE SERVICER
THE ISSUER TRUSTEE
The issuer trustee was incorporated on October 21, 1884 as The
Australian Executors and Trustees Association Limited under the Companies
Statute 1864 of Victoria as a public company. The name was changed to Perpetual
Trustees Victoria Limited on June 30, 1989 and it now operates as a limited
liability company under the Corporations Act 2001 of Australia. The Australian
Business Number of Perpetual Trustees Victoria Limited is 47 004 027 258 and its
registered office is Level 4, 333 Collins Street, Melbourne, Victoria,
Australia.
Perpetual Trustees Victoria Limited has 4,500,000 shares on issue with
a paid amount of A$0.50 each and an amount due and payable of A$0.50 each. The
shares are held by Perpetual Trustees Australia Limited.
The principal activities of Perpetual Trustees Victoria Limited are the
provision of trustee and other commercial services. Perpetual Trustees Victoria
Limited is an authorized trustee corporation and holds a securities dealers
license under the Corporations Act 2001 of Australia.
Perpetual Trustees Victoria Limited and its related companies provide a
range of services including custodial and administrative arrangements to the
funds management, superannuation, property, infrastructure and capital markets.
Perpetual Trustees Victoria Limited and its related companies are leading
trustee companies in Australia with in excess of A$100 billion under
administration.
34
DIRECTORS
The directors of the issuer trustee are as follows:
NAME BUSINESS ADDRESS PRINCIPAL ACTIVITIES
- ---------------------------- ------------------------------------- ---------------------------
Phillip Vernon Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
Michael Stefanovski Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
Gai McGrath Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
Rohan Mead Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
THE TRUST MANAGER
Interstar Securitisation Management Pty Limited was incorporated on
April 26, 2002, and continues to exist and operate as a limited liability
company under the Corporations Act 2001 of Australia. The registered office of
Interstar Securitisation Management Pty Limited is Level 28, 367 Collins Street,
Melbourne, Australia and the telephone and facsimile numbers for its registered
office are (613) 9612 1111 and (613) 9621 2368 respectively.
Interstar Securitisation Management Pty Limited has 1 share on issue
with a paid amount of A$1.00. The share is ultimately held by Arcturus
Management Pty Limited, (ABN 41 054 485 415), which is ultimately beneficially
owned and controlled by Vernon Spencer, an Australian individual, and his
immediate family.
DIRECTORS
The directors of Interstar Securitisation Management Pty Limited are
Vernon Spencer and Sam Kyriacou. Please refer to their descriptions below.
THE SERVICER
Interstar Securities (Australia) Pty Limited was incorporated on April
29, 1999, and continues to exist and operate as a limited liability company
under the Corporations Act 2001 of Australia. The registered office of Interstar
Securities (Australia) Pty Limited is Level 28, 367 Collins Street, Melbourne,
Australia and the telephone and facsimile numbers for its registered office are
(613) 9612 1111 and (613) 9621 2368 respectively.
Interstar Securities (Australia) Pty Limited has 1 share on issue with
a paid amount of A$1.00. The share is ultimately held by Arcturus Management Pty
Limited, (ABN 41 054 485 415), which is ultimately beneficially owned and
controlled by Vernon Spencer, an Australian individual, and his immediate
family.
35
Interstar Securities (Australia) Pty Limited was incorporated as a
result of the corporate reconstruction of Interstar Securities Pty Limited, (ABN
32 054 485 380), incorporated in 1992, and its parent, Stargate Corporation Pty
Limited, (ACN 004 851 110), incorporated in 1970, which took place during 1999.
All of these entities are ultimately owned and controlled by Vernon Spencer, an
Australian individual and his immediate family.
Interstar Securities (Australia) Pty Limited is a wholly Australian
owned, privately held investment management firm which specializes in the
structuring and ongoing management of residential mortgage loan portfolios and
mortgage-backed securities. The Stargate Corporation Group has been actively
involved in the mortgage loan origination and management business for the past
27 years.
The operations of Interstar Securities (Australia) Pty Limited are
directed by an experienced senior management team, comprising full-time
directors and divisional heads of loan origination, loan processing and
compliance, customer service, investment and credit management and information
technology. This team is supported by 120 administrative, marketing, and
technical staff.
Since December 1989, Interstar Securities Pty Limited and Interstar
Securities (Australia) Pty Limited have issued approximately A$7.8 billion of
rated mortgage-backed securities.
As at May 31, 2002, Interstar Securities (Australia) Pty Limited
managed a housing loan portfolio of approximately A$6.3 billion.
DIRECTORS
The directors of Interstar Securities (Australia) Pty Limited are as
follows:
o VERNON SPENCER has been Executive Chairman and Managing Director
of Interstar Securities Pty Limited and Interstar Securities
(Australia) Pty Limited since their inception, and retired from
the latter role on July 1, 1999. He is a Fellow of The Institute
of Chartered Accountants in Australia, a member of The Securities
Institute of Australia, a Fellow of the Mortgage Industry
Association of Australia, and a former Member of The Stock
Exchange of Melbourne Limited. He is also Immediate Past Chairman
of the Board of Directors of SOCIETAS -- The International
Institute for Real Estate Finance, headquartered in Washington,
D.C., USA, and has served on the International Committee of the
Mortgage Bankers Association of America. He was a co-founder of
the Mortgage Industry Association of Australia, its National
President from 1986 until 1988, and its Victorian State President
from 1984 until 1998. He was awarded Life Membership of the
Association in 1998. He has been actively involved with all
aspects of the mortgage industry for the past 30 years, and is
presently responsible for the strategic direction of the Interstar
Securities Group.
o SAM KYRIACOU has been a Director and the Chief Financial Officer
of Interstar Securities (Australia) Pty Limited since its
inception, and was appointed Managing Director and Chief Executive
Officer on July 1, 1999. He holds a Bachelor of Commerce degree
from Melbourne University and is an Associate of
36
the Institute of Chartered Accountants in Australia. He is
responsible for all aspects of the operations of Interstar
Securities (Australia) Pty Limited, including wholesale mortgage
loan origination, loan product development and wholesale funding
programs.
o BASIL CARIDAKIS has been a Director of Interstar Securities
(Australia) Pty Limited since its inception and is responsible for
retail loan origination and marketing. He has been involved with
mortgage lending and financial services for the past 25 years and
is an Associate of the Mortgage Industry Association of Australia.
He has been responsible for marketing and origination of mortgage
loan products, liaison with loan originators and retailers and
direct contact with borrowers for Interstar Securities Pty Limited
since 1992 and for Interstar Securities (Australia) Pty Limited
since its inception.
o ANDREW MOBILIA has been a Director of Interstar Securities
(Australia) Pty Limited since its inception and is responsible for
lending and loan administration. He has been involved with all
aspects of secured lending, administration and credit control for
the past 25 years and is an Associate of the Mortgage Industry
Association of Australia. He has been responsible for all aspects
of managed asset compliance, loan review and underwriting and
arrears management for Interstar Securities Pty Limited since 1992
and for Interstar Securities (Australia) Pty Limited since its
inception.
o BRUCE BAKER has been a Director of Interstar Securities
(Australia) Pty Limited since January 2001 and is responsible for
all business development activities. He has been involved with
lending and mortgage insurance for the past 21 years and is an
Associate of the Mortgage Industry Association of Australia. He
has been National Underwriting and Business Development manager of
Interstar Securities Pty Ltd since 1994 and for Interstar
Securities (Australia) Pty Limited since its inception.
Interstar Securities (Australia) Pty Limited is currently ranked as a
"Strong" residential loan servicer in Australia by S&P, and has been approved by
S&P as a "Global Select Servicer" for structured finance transactions.
THE SELLERS
INTERSTAR NOMINEES (B) PTY LIMITED
Interstar Nominees (B) Pty Limited was incorporated on August 21, 1996,
and continues to exist and operate as a limited liability company under the
Corporations Act 2001 of Australia.
Interstar Nominees (B) Pty Limited has 1 share on issue with a paid
amount of A$1.00. The share is ultimately held by Arcturus Management Pty
Limited, (ABN 41 054 485 415).
Interstar Nominees (B) Pty Limited is the trustee of the Star Bee
Managed Trust, which is not a trust within the Interstar Millennium Trusts
securitization program. In this capacity, it
37
borrows money from Macquarie Bank Limited to enable it to fund the acquisition
of housing loans.
INTERSTAR NOMINEES (N) PTY LIMITED
Interstar Nominees (N) Pty Limited was incorporated on March 21, 2000,
and continues to exist and operate as a limited liability company under the
Corporations Act 2001 of Australia.
Interstar Nominees (N) Pty Limited has 1 share on issue with a paid
amount of A$1.00. The share is ultimately held by Arcturus Management Pty
Limited, (ABN 41 054 485 415).
Interstar Nominees (N) Pty Limited is the trustee of the Star Enn
Managed Trust, which is not a trust within the Interstar Millennium Trusts
securitization program. In this capacity, it borrows money from National
Australia Bank Limited to enable it to fund the acquisition of housing loans.
INTERSTAR NOMINEES (R) PTY LIMITED
Interstar Nominees (R) Pty Limited was incorporated on April 4, 2000,
and continues to exist and operate as a limited liability company under the
Corporations Act 2001 of Australia.
Interstar Nominees (R) Pty Limited has 1 share on issue with a paid
amount of A$1.00. The share is ultimately held by Arcturus Management Pty
Limited, (ABN 41 054 485 415).
Interstar Nominees (R) Pty Limited is the trustee of the Star Arr
Managed Trust, which is not a trust within the Interstar Millennium Trusts
securitization program. In this capacity, it borrows money from Barclays Bank
PLC to enable it to fund the acquisition of housing loans.
THE BACKUP SERVICERS
KPMG CORPORATE FINANCE (AUSTRALIA) PTY LIMITED
KPMG is a global network of professional advisory firms. It has offices
in 750 cities in 152 countries. Its services include assurance, financial
advisory services, tax and legal. KPMG Corporate Finance (Australia) Pty Limited
is contracted to be the backup servicer for Interstar Securities (Australia) Pty
Ltd.
ZURICH CAPITAL MARKETS (AUSTRALIA) STRUCTURED FINANCE PTY LIMITED
Zurich Capital Markets (Australia) Structured Finance Pty Limited
("ZCMAL") is a limited liability company incorporated in Australia with its
principal place of business at Level 47, 2 Park Street, Sydney NSW 2000. It is a
wholly owned indirect subsidiary of Zurich Financial Services ("ZFS"). ZCMAL
manages operations throughout the Asian region to develop capital markets and
banking operations for Zurich Capital Markets, a subsidiary of ZFS.
38
DESCRIPTION OF THE TRUST
INTERSTAR MILLENNIUM TRUSTS SECURITIZATION PROGRAM
The Interstar Millennium Trusts securitization program was established
pursuant to a master trust deed for the purpose of enabling Perpetual Trustees
Victoria Limited, as trustee of each trust established pursuant to the Interstar
Millennium Trusts securitization program, to invest in pools of housing loans
originated from time to time by the servicer. The master trust deed provides for
the creation of an unlimited number of trusts. The master trust deed establishes
the general framework under which trusts may be established from time to time.
It does not actually establish any trusts. The Interstar Millennium Series
2002-1G Trust is a separate and distinct trust from any other trust established
under the master trust deed. The assets of the Interstar Millennium Series
2002-1G Trust are not available to meet the liabilities of any other trust and
the assets of any other trust are not available to meet the liabilities of the
Interstar Millennium Series 2002-1G Trust.
INTERSTAR MILLENNIUM SERIES 2002-1G TRUST
The detailed terms of the Interstar Millennium Series 2002-1G Trust
will be as set out in the master trust deed and the series notice. To establish
the trust, Interstar Securities (Australia) Pty Limited, the trust manager and
the issuer trustee will execute a notice of creation of trust.
The series notice, which supplements the general framework under the
master trust deed with respect to the trust, does, among other things, the
following:
o specifies the details of the notes;
o establishes the cash flow allocation;
o sets out the various representations and undertakings of the
parties specific to the housing loans, which supplement those in
the master trust deed; and
o amends the master trust deed to the extent necessary to give
effect to the specific aspects of the trust and the issue of the
notes.
DESCRIPTION OF THE ASSETS OF THE TRUST
ASSETS OF THE TRUST
The assets of the trust will include the following:
o the pool of housing loans, including all of the issuer trustee's
interest in and title to:
o principal payments paid or payable on the housing loans at any
time from and after the applicable cut-off date; and
o interest payments paid or payable on the housing loans after the
closing date;
o rights under the:
39
o mortgage insurance policies issued by, or transferred to, PMI
Indemnity Limited, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd, PMI Mortgage Insurance Ltd, Royal & Sun
Alliance Lenders Mortgage Insurance Limited and the Commonwealth
of Australia;
o the title insurance policies; and
o the individual property insurance policies covering the mortgaged
properties relating to the housing loans;
o amounts on deposit in the accounts established in connection with the
creation of the trust and the issuance of the notes, including the
collection account, and any instruments in which these amounts are
invested; and
o the issuer trustee's rights under the transaction documents,
including its rights under any fixed-floating rate swaps and the
currency swap agreements.
THE HOUSING LOANS
The housing loans are secured by registered first ranking mortgages on
properties located in Australia. The housing loans have been originated in the
name of Perpetual Trustees Victoria Limited directly by Interstar Securities
(Australia) Pty Limited through an Australia-wide network of mortgage brokers,
accounting firms, legal firms, financial and investment advisors and other
sources referred to Interstar Securities (Australia) Pty Limited in the ordinary
course of its business under the Interstar Millennium Trusts securitization
program. On the closing date, Perpetual Trustees Victoria Limited will cease to
hold the pool of housing loans for the various warehouse trusts and will instead
hold them for the trust. Each housing loan was funded by Perpetual Trustees
Victoria Limited in its capacity as trustee of a warehouse trust of which a
seller is the beneficiary, and so Perpetual Trustees Victoria Limited is the
legal owner of all relevant housing loans. Each housing loan will be one of the
types of products described in "Interstar Residential Loan Program -- General
Features of the Housing Loans". The housing loans bear either a fixed rate of
interest or a variable rate of interest, or a combination of both. Each housing
loan is secured by a registered first ranking mortgage over the related
mortgaged property. The mortgaged properties consist of owner-occupied
properties and non-owner occupied properties, but do not include mobile homes
which are not permanently affixed to the ground, commercial properties or
unimproved land.
ACQUISITION OF HOUSING LOANS AFTER THE CLOSING DATE
THE PRE-FUNDING PERIOD
If on the closing date the total aggregate purchase price for the
housing loans is less than the amount received in Australian dollars by the
issuer trustee from the proceeds of the issue of the notes, the issuer trustee
will retain the difference between the two amounts, to the extent it is not
invested in Liquid Authorized Investments, in an account designated as the
PREFUNDING ACCOUNT. Before amounts on deposit in the Prefunding Account are
invested in acquiring or originating additional housing loans as described below
they will be invested in Liquid Authorized Investments. The balance of the
Prefunding Account must not at any time exceed the
40
Australian dollar equivalent of US$250,000,000 or 25% of the Australian dollar
equivalent of the initial outstanding principal amount of the Class A2 notes as
of the closing date. At any time during the period up to but excluding the first
quarterly payment date after the closing date the issuer trustee will apply the
money on deposit in the Prefunding Account to:
o acquire additional housing loans from the sellers; or
o originate additional housing loans in the ordinary course of Interstar
Securities (Australia) Pty Limited's business, provided that any
additional housing loan acquired or originated must:
o comply with the eligibility criteria; and
o not result in a downgrade or withdrawal of the rating of any notes by
any rating agency.
On the first quarterly payment date after the closing date, the balance
of the Prefunding Account that has not been used to acquire or originate
additional housing loans as described above will be applied as Mortgage
Principal Repayments as described in the section headed "Description of the
Class A2 Notes--Principal Distributions."
TRANSFER AND ASSIGNMENT OF THE HOUSING LOANS
On the closing date, the housing loans purchased by the trust will be
specified in sale notices from the sellers, in their capacities as sellers of
the housing loans, to the issuer trustee.
Each seller will equitably assign its beneficial interest in the
relevant housing loans, the mortgages securing those housing loans and the
mortgage insurance policies, title insurance policies and insurance policies on
the mortgaged properties relating to those housing loans to the issuer trustee
pursuant to the sale notice. Both before and after the assignment, Perpetual
Trustees Victoria Limited will hold legal title to the housing loans and the
ancillary rights specified in each sale notice. Before the assignment, Perpetual
Trustees Victoria Limited will hold each of the housing loans and ancillary
rights in its capacity as trustee of a warehouse trust. After the assignment, it
will hold the housing loans and ancillary rights in its capacity as trustee of
the Interstar Millennium Series 2002-1G Trust.
REPRESENTATIONS, WARRANTIES AND ELIGIBILITY CRITERIA
Interstar Securities (Australia) Pty Limited, as the servicer, will
make various representations and warranties to the issuer trustee, each
noteholder and the security trustee as of the closing date with respect to the
housing loans being equitably assigned to the issuer trustee, including that:
o it has not done, or omitted to do, anything which would prevent each
housing loan from being valid, binding and enforceable against the
relevant borrower in all material respects except to the extent that it
is affected by laws relating to creditors rights generally, or
doctrines of equity;
41
o it has not done, or omitted to do, anything which would prevent the
relevant borrower from being the sole legal owner of the mortgaged
property and registered as the sole proprietor of the mortgaged
property;
o each housing loan is the subject of a valid, binding and enforceable
mortgage insurance policy from PMI Indemnity Limited, GE Capital
Mortgage Insurance Corporation (Australia) Pty Ltd, PMI Mortgage
Insurance Ltd, Royal & Sun Alliance Lenders Mortgage Insurance Limited
or the Commonwealth of Australia for its scheduled term;
o the officers of the servicer who have responsibility for the
transactions contemplated by the transaction documents do not have
actual notice that any mortgage insurer under any mortgage insurance
policy or any title insurer under any title insurance policy in
relation to a housing loan is insolvent or will be unable to pay a
valid claim;
o there has been no fraud, dishonesty, material misrepresentation or
negligence on the part of the servicer in connection with the selection
and offer to the issuer trustee of any of the housing loans;
o as at the applicable cut-off date, none of the housing loans were
satisfied, cancelled, discharged or rescinded and the mortgaged
property relating to each housing loan had not been released from the
relevant mortgage;
o the housing loans are assignable and all consents required in relation
to the assignment of the housing loans and ancillary rights have been
obtained;
o between the applicable cut-off date and the closing date the
servicer dealt with the housing loans in the ordinary course of
its business;
o as of the applicable cut-off date, each housing loan satisfies the
following eligibility criteria:
o it is denominated and payable only in Australian dollars
in Australia;
o the interest rate applicable to the housing loan is
either:
o a variable rate based upon any determinant as may
be considered appropriate by the servicer in its
absolute discretion;
o a fixed rate provided that:
o the fixed rate does not apply for a
continuous period exceeding five years from:
o the settlement date of the housing loan,
where the housing loan bears a fixed
rate of interest from the date it is
settled; or
o the date on which the housing loan
starts to bear a fixed rate of interest,
where that housing loan either:
42
o bears a floating rate of interest and is
converting to a fixed rate of interest;
or
o bears a fixed rate of interest which is
scheduled to convert to a floating rate
of interest but - with the approval of
the relevant mortgage insurer - the
borrower elects to pay a new fixed rate
of interest; and
o the fixed rate cash flows are swapped to
a floating rate pursuant to a
fixed-floating rate swap and the
floating rate payable by the
fixed-floating rate swap provider is set
on the same dates as the interest rate
is set on the notes; or
o a combination of the variable rate and the fixed rate
described above;
o all security documents have been:
o prepared by law firms or title insurers appointed by and
acting for the relevant seller and the servicer;
and
o prepared in accordance with applicable Consumer Credit
Legislation;
o with respect to housing loans acquired by the issuer trustee and
included in the housing loan pool:
o at least 90% of the aggregate mortgaged property of all
housing loans held by the issuer trustee will be located
in metropolitan areas of the capital cities and major
regional centers of Australia; and
o not more than 15% of the aggregate amount outstanding
under the housing loans will comprise individual housing
loans each with an amount outstanding exceeding
A$500,000 and secured by a mortgage over a single
property;
o the relevant seller is the beneficial owner of the housing loan
and mortgage at the time of the equitable assignment;
o the issuer trustee will be the beneficial owner of the housing
loan and mortgage after that assignment, free of any encumbrances;
o the housing loan and mortgage are valid and enforceable;
o all applicable stamp duties have been paid on the mortgage
securing the housing loan;
o the housing loan and mortgage securing the housing loan will form
part of the assets of the trust;
o the whole of the right, title and interest of the mortgagee under
the mortgage securing the housing loan will be acquired by the
issuer trustee;
43
o the housing loan has been serviced and managed in accordance with
the requirements of the servicer's policy and procedures manual;
o the mortgage insurance policy and any title insurance policy in
relation to the housing loan and the mortgage securing the housing
loan does not restrict the assignment to the issuer trustee;
o the housing loan is not in arrears over 30 days at the applicable
cut-off date;
o the housing loan is subject to monthly, fortnightly or weekly
payments which fully amortize the housing loan over its term;
o the loan agreement and the mortgage securing the housing loan
comply in all material respects with all applicable laws,
including any Consumer Credit Legislation;
o the loan agreement and the mortgage securing the housing loan are
assignable by the relevant seller in equity without prior consent
being required from, or notice of the assignment needing to be
given to, the mortgagor, the borrower or any other person;
o the loan agreement and the mortgage securing the housing loan have
been duly authorized and are in full force and effect and
constitute legal, valid and binding obligations of the relevant
borrower and mortgagor enforceable against that borrower and
mortgagor in accordance with their terms and are not subject to
any dispute, offset or counterclaim;
o it is covered by a valid, binding and enforceable mortgage
insurance policy;
o it has a borrower - and where the trust manager so requires, a
guarantor- that is a natural person or a corporation;
o it was approved and originated by the servicer in the ordinary
course of its business;
o the borrower is required to repay the housing loan by no later
than October, 2032;
o it does not require, nor does the relevant loan agreement require,
the issuer trustee to provide any redraws or other advances once
the initial funding has been provided under the relevant loan
agreement; and
o the housing loan is secured by a mortgage that constitutes a first
ranking mortgage over freehold land or Crown leasehold land in
Australia which is or will be registered under the relevant law
relating to the registration, priority or effectiveness of any
mortgage over land in an Australian jurisdiction and satisfies the
following criteria:
o the amount secured or to be secured by the mortgage does not
exceed A$1,500,000;
o in respect of a mortgage:
44
o to secure a housing loan for a principal amount:
o not exceeding A$300,000 - the loan-to-value ratio in
respect of that housing loan does not exceed 95%; and
o exceeding A$300,000 but not exceeding A$500,000 - the
loan-to-value ratio in respect of that housing loan does
not exceed 90%; and
o exceeding A$500,000 but not exceeding A$1,000,000 - the
mortgaged property must constitute a single property
within the metropolitan areas of Sydney, Melbourne,
Brisbane, Adelaide or Perth and the loan-to-value ratio
in respect of that housing loan does not exceed 80%; and
o exceeding A$1,000,000 but not exceeding A$1,250,000 -
the mortgaged property must constitute a single property
within the metropolitan areas of Melbourne or Sydney and
the loan-to-value-ratio in respect of that housing loan
does not exceed 75%; and
o exceeding A$1,250,000 - the mortgaged property must
constitute a single property within the metropolitan
areas of Melbourne or Sydney and the loan-to-value-ratio
in respect of that housing loan does not exceed 65%;
o the housing loan is secured by a mortgage over a property
which has erected on it a residential dwelling which dwelling
is covered by fire and general insurance by an insurer
approved by the trust manager; and
o the mortgaged property is valued by a valuer approved by the
servicer unless:
o the loan-to-value ratio does not exceed 80%;
o the amount outstanding under the housing loan does not
exceed:
o A$250,000 when secured over a single property
within the metropolitan area of Sydney;
o A$200,000 when secured over a single property
within any other city and metropolitan areas of
Australia; or
o A$150,000 when secured over a single property
within any other areas of Australia.
The issuer trustee has not investigated or made any inquiries regarding
the accuracy of these representations and warranties and has no obligation to do
so. The issuer trustee is entitled to rely entirely upon the representations and
warranties being correct, unless an officer involved in the administration of
the trust has actual notice to the contrary.
45
BREACH OF REPRESENTATIONS AND WARRANTIES
If a seller, the servicer or the issuer trustee becomes aware that a
representation or warranty relating to any housing loan or mortgage is
incorrect, it must notify the other parties and the rating agencies within 10
business days of becoming aware. If the breach is not waived or remedied to the
satisfaction of the issuer trustee within five business days of the notice or
such longer time as the issuer trustee permits then, without any action being
required by either party, the relevant seller shall be obligated to repurchase
the affected housing loan for an amount equal to its Unpaid Balance. There can
be no assurance that the relevant seller will have sufficient funds to
repurchase such housing loans in such event.
Upon payment of the Unpaid Balance, Perpetual Trustees Victoria Limited
will continue to hold a legal interest in the affected housing loan and mortgage
and the relevant seller shall hold the beneficial interest in such housing loan
and mortgage and be entitled to all interest and fees that are paid in respect
of them from, and including, the date of repurchase.
OTHER FEATURES OF THE HOUSING LOANS
The housing loans have the following features.
o Interest is calculated daily and charged monthly in arrears.
o Payments can be on a monthly, bi-weekly or weekly basis. Payments from
borrowers are made by electronic funds transfer directly from each
borrower's bank account to a trust drawings account at National
Australia Bank Limited.
o They are governed by the laws of the Commonwealth of Australia and one
of the following Australian States or Territories:
o New South Wales;
o Victoria;
o Western Australia;
o Queensland;
o South Australia;
o Northern Territory; or
o the Australian Capital Territory.
DETAILS OF THE HOUSING LOAN POOL
The information in the following tables set out various details
relating to the housing loans to be sold to the trust on the closing date. The
information is provided as of the close of business on May 31, 2002. All amounts
have been rounded to the nearest Australian dollar. The sum in any column may
not equal the total indicated due to rounding.
46
Note that these details may not reflect the housing loan pool as of the
closing date because a seller may substitute loans proposed for sale with other
eligible housing loans or add additional eligible housing loans. A seller may do
this if, for example, the loans originally selected are repaid early.
A seller will not add, remove or substitute any housing loans prior to
the closing date if this would result in a change of more than 5% in any of the
characteristics of the pool of housing loans described in the table on page
[12], unless a revised prospectus is delivered to prospective investors.
47
HOUSING LOAN INFORMATION
ANALYSIS OF THE HOUSING LOAN POOL
Total pool size........................................... $1,569,460,814
Total number of loans..................................... 9,042
Average loan size......................................... $173,575
Maximum loan size......................................... $947,377
Total property value (current)............................ $3,042,553,139
Weighted Average current LVR.............................. 69.99%
% of pool with loans > 80% LVR............................ 32.39%
Weighted Average Term to Maturity (months)................ 335.84
Weighted Average Seasoning (months)....................... 6.67
Maximum Remaining Term to Maturity (months)............... 352
% of pool with loans > $300,000 (by number)............... 13.51%
% of pool with loans > $300,000 (by loan amount).......... 30.50%
% of pool in arrears (by loan amount):....................
1-30 days................................................. 1.16%
31-60 days................................................ 0.00%
61+ days.................................................. 0.00%
Total................................................ 1.16%
48
HOUSING LOANS BY OCCUPANCY
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
Owner Occupied - House....... 4,807 53.16% 758,281,854 48.32% 157,745 67.15%
Owner Occupied - Unit........ 645 7.13% 110,425,978 7.04% 171,203 73.00%
Investment - House........... 2,400 26.54% 461,540,049 29.41% 192,308 71.07%
Investment - Unit............ 1,190 13.16% 239,212,933 15.24% 201,019 75.46%
----- ------ ------------- ------- ------- ------
Total................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
49
HOUSING LOANS BY LVR (LOAN-TO-VALUE RATIO)
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)=20%.............. 530 5.86% 23,776,292 1.51% 44,861 13.92%
>20% and =(less than)25%..... 210 2.32% 17,916,692 1.14% 85,318 22.77%
>25% and =(less than)30%..... 258 2.85% 25,368,184 1.62% 98,326 27.68%
>30% and =(less than)35%..... 232 2.57% 26,053,854 1.66% 112,301 32.48%
>35% and =(less than)40%..... 345 3.82% 43,924,676 2.80% 127,318 37.82%
>40% and =(less than)45%..... 357 3.95% 48,954,357 3.12% 137,127 42.47%
>45% and =(less than)50%..... 314 3.47% 46,273,668 2.95% 147,368 47.51%
>50% and =(less than)55%..... 328 3.63% 52,582,487 3.35% 160,312 52.42%
>55% and =(less than)60%..... 404 4.47% 66,480,980 4.24% 164,557 57.69%
>60% and =(less than)65%..... 532 5.88% 96,340,999 6.14% 181,092 62.75%
>65% and =(less than)70%..... 596 6.59% 108,322,456 6.90% 181,749 67.31%
>70% and =(less than)75%..... 881 9.74% 172,039,367 10.96% 195,277 72.78%
>75% and =(less than)80%..... 1,610 17.81% 333,109,939 21.23% 206,901 77.53%
>80% and =(less than)85%..... 1,062 11.75% 228,964,328 14.59% 215,597 80.96%
>85% and =(less than)90%..... 1,383 15.29% 279,352,535 17.80% 201,990 88.78%
>90% and =(less than)95%..... 0 0.00% 0 0.00% 0 0.00%
>95%......................... 0 0.00% 0 0.00% 0 0.00%
----- ----- ------------- ------ ------- -------
Total................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
50
HOUSING LOANS BY PRODUCT TYPES
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
Variable - Principal & Interest... 5,349 59.15% 916,574,498 58.40% 171,354 70.43%
Variable - Interest Only.......... 2,977 32.92% 589,384,808 37.55% 197,979 70.29%
Variable - Line of Credit......... 716 7.92% 63,501,509 4.05% 88,689 60.76%
Fixed............................. 0 0.00% 0 0.00% 0 0.00%
----- ------ ------------- ------ ------- -----
Total........................ 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
51
HOUSING LOANS BY GEOGRAPHIC DISTRIBUTION
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
NSW (Metro)................... 3,793 41.95% 806,524,681 51.39% 212,635 69.64%
NSW (Regional)................ 517 5.71% 74,333,329 4.74% 143,778 67.51%
NSW (Country)................. 278 3.07% 39,347,154 2.51% 141,537 71.08%
ACT (Metro)................... 119 1.32% 15,334,829 0.98% 128,864 70.82%
ACT (Regional)................ 0 0.00% 0 0.00% 0 0.00%
ACT (Country)................. 0 0.00% 0 0.00% 0 0.00%
VIC (Metro)................... 1,534 16.97% 263,699,626 16.80% 171,903 68.63%
VIC (Regional)................ 54 0.60% 6,595,161 0.42% 122,133 69.42%
VIC (Country)................. 419 4.63% 57,221,708 3.65% 136,567 70.82%
QLD (Metro)................... 466 5.15% 73,657,972 4.69% 158,064 74.58%
QLD (Regional)................ 622 6.88% 90,256,577 5.75% 145,107 72.49%
QLD (Country)................. 82 0.91% 9,749,406 0.62% 118,895 73.28%
SA (Metro).................... 803 8.88% 89,162,635 5.68% 111,037 72.54%
SA (Regional)................. 0 0.00% 0 0.00% 0 0.00%
SA (Country).................. 66 0.73% 7,136,574 0.45% 108,130 76.72%
WA (Metro).................... 5 0.06% 955,678 0.06% 191,136 69.54%
WA (Regional)................. 0 0.00% 0 0.00% 0 0.00%
WA (Country).................. 269 2.97% 34,112,946 2.17% 126,814 65.70%
TAS (Metro)................... 0 0.00% 0 0.00% 0 0.00%
TAS (Regional)................ 0 0.00% 0 0.00% 0 0.00%
TAS (Country)................. 0 0.00% 0 0.00% 0 0.00%
NT (Metro).................... 13 0.14% 1,135,120 0.07% 87,317 61.71%
NT (Regional)................. 0 0.00% 0 0.00% 0 0.00%
NT (Country).................. 2 0.02% 237,418 0.02% 118,709 74.23%
----- ------ ------------- ------ ------- -----
Total.................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
52
HOUSING LOANS BY LOAN SIZE
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)=100,000...................... 2,696 29.81% 154,857,735 9.86% 57,440 53.57%
> 100,000 and (less than)= 150,000....... 1,729 19.12% 215,705,745 13.75% 124,758 66.89%
> 150,000 and (less than)= 200,000....... 1,557 17.21% 271,213,198 17.29% 174,190 70.53%
> 200,000 and (less than)= 250,000....... 1,053 11.65% 234,732,348 14.96% 222,918 72.35%
> 250,000 and (less than)= 300,000....... 785 8.68% 214,337,340 13.66% 273,041 74.40%
> 300,000 and (less than)= 350,000....... 454 5.02% 145,777,719 9.29% 321,096 72.60%
> 350,000 and (less than)= 400,000....... 335 3.70% 124,881,318 7.96% 372,780 74.56%
> 400,000 and (less than)= 500,000....... 306 3.38% 135,575,413 8.64% 443,057 74.25%
> 500,000 and (less than)= 750,000....... 116 1.28% 63,459,566 4.04% 547,065 70.40%
> 750,000 and (less than)= 950,000....... 11 0.12% 8,920,432 0.57% 810,948 70.67%
> 950,000................................ 0 0.00% 0 0.00% 0 0.00%
----- ------ ------------- ------ ------- -----
Total .............................. 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
53
HOUSING LOANS BY POSTCODE CONCENTRATION-TOP 10 BY LOAN AMOUNT
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
POSTCODE LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
-------- ----- ----- ------------- ------ ------- -----
Rouse Hill............... 2155 67 0.74% 16,842,547 1.07% 251,381 73.89%
Cabramatta............... 2166 91 1.01% 16,789,244 1.07% 184,497 77.19%
Liverpool South.......... 2170 90 1.00% 16,251,046 1.04% 180,567 74.27%
St Johns Park............ 2176 71 0.79% 15,788,622 1.01% 222,375 74.81%
Benowa................... 4217 79 0.87% 12,981,526 0.83% 164,323 70.53%
Fairfield................ 2165 81 0.90% 12,825,415 0.82% 158,338 76.31%
Greystanes............... 2145 72 0.81% 12,325,647 0.79% 171,190 69.33%
Marrickville South....... 2204 45 0.50% 11,747,775 0.75% 261,062 72.64%
Carnes Hill.............. 2171 50 0.55% 10,866,987 0.69% 217,340 68.28%
Ashcroft................. 2168 54 0.60% 10,130,780 0.65% 187,607 77.78%
--- ---- ----------- ---- ------- -----
Total............... 700 7.75% 136,549,590 8.70% 195,071 73.68%
=== ==== =========== ==== ======= =====
54
HOUSING LOANS BY LOAN SEASONING
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)= 3 months.................... 4,642 51.34% 831,348,384 52.97% 179,093 71.06%
> 3 and (less than)= 6 months............ 2,715 30.03% 505,177,061 32.19% 186,069 70.36%
> 6 and (less than)= 12 months........... 518 5.73% 93,225,636 5.94% 179,972 70.49%
> 12 and (less than)= 18 months.......... 40 0.44% 7,799,424 0.50% 194,986 68.09%
> 18 and (less than)= 24 months.......... 16 0.18% 3,513,007 0.22% 219,563 69.65%
> 24 and (less than)= 36 months.......... 35 0.39% 6,834,077 0.44% 195,259 66.17%
> 36 and (less than)= 48 months.......... 1,010 11.17% 112,537,551 7.17% 111,423 61.65%
> 48 and (less than)= 60 months.......... 41 0.45% 6,037,675 0.38% 147,260 54.99%
> 60 months.............................. 25 0.28% 2,987,999 0.19% 119,520 49.14%
----- ------ ------------- ------ ------- -----
Total............................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
55
HOUSING LOANS BY MATURITY
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
October 15, 2014......... 5 0.06% 333,834 0.02% 66,767 45.23%
October 15, 2020......... 43 0.48% 4,337,781 0.28% 100,879 39.53%
October 15, 2022......... 300 3.32% 31,976,872 2.04% 106,590 57.98%
October 15, 2023......... 777 8.59% 93,611,650 5.96% 120,478 63.34%
October 15, 2028......... 839 9.28% 143,349,684 9.14% 170,858 66.00%
October 15, 2030......... 3,285 36.33% 593,062,041 37.79% 180,536 71.04%
October 15, 2031......... 3,793 41.95% 702,788,951 44.78% 185,286 71.54%
----- ----- -------------- ----- ------- -----
Total 9,042 100.00% $1,569,460,814 100.00% 173,575 69.99%
===== ====== ============== ====== ======= =====
56
HOUSING LOANS BY MORTGAGE INSURER
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
PMI Indemnity Limited.......... 2,708 29.95% 435,300,482 27.74% 160,746 67.27%
Royal & Sun Alliance LMI....... 2,949 32.61% 545,078,129 34.73% 184,835 70.64%
PMI Mortgage Insurance......... 127 1.40% 18,425,223 1.17% 145,080 66.29%
GE Mortgage Insurance.......... 3,228 35.71% 568,560,383 36.23% 176,134 71.67%
Commonweatlh of Australia...... 30 0.33% 2,096,598 0.13% 69,887 42.59%
----- ------ ------------- ------ ------- -----
Total..................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
57
HOUSING LOANS BY MORTGAGE INSURER AND LVR - PMI INDEMNITY LIMITED
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)=20%.......................... 174 6.43% 7,587,035 1.74% 43,604 13.76%
>20% and =(less than)25%................. 63 2.33% 6,060,681 1.39% 96,201 23.06%
>25% and =(less than)30%................. 92 3.40% 8,820,483 2.03% 95,875 27.50%
>30% and =(less than)35%................. 76 2.81% 8,292,986 1.91% 109,118 32.39%
>35% and =(less than)40%................. 124 4.58% 14,962,434 3.44% 120,665 37.68%
>40% and =(less than)45%................. 117 4.32% 17,436,573 4.01% 149,031 42.56%
>45% and =(less than)50%................. 110 4.06% 15,099,002 3.47% 137,264 47.27%
>50% and =(less than)55%................. 106 3.91% 16,720,543 3.84% 157,741 52.35%
>55% and =(less than)60%................. 149 5.50% 22,146,685 5.09% 148,635 57.68%
>60% and =(less than)65%................. 172 6.35% 28,625,312 6.58% 166,426 62.71%
>65% and =(less than)70%................. 222 8.20% 38,366,955 8.82% 172,824 67.28%
>70% and =(less than)75%................. 267 9.86% 50,071,480 11.51% 187,534 72.68%
>75% and =(less than)80%................. 461 17.02% 89,702,218 20.61% 194,582 77.15%
>80% and =(less than)85%................. 291 10.74% 58,399,076 13.42% 200,684 81.02%
>85% and =(less than)90%................. 284 10.49% 53,009,019 12.18% 186,651 88.40%
>90% and =(less than)95%................. 0 0.00% 0 0.00% 0 0.00%
>95%..................................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total............................... 2,708 100.00% 435,300,482 100.00% 160,746 67.27%
===== ====== =========== ====== ======= =====
58
HOUSING LOANS BY MORTGAGE INSURER AND LVR - ROYAL & SUN ALLIANCE LMI
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)=20%.......................... 170 5.76% 7,988,670 1.47% 46,992 14.23%
>20% and =(less than)25%................. 63 2.14% 5,496,963 1.01% 87,253 22.96%
>25% and =(less than)30%................. 73 2.48% 7,354,689 1.35% 100,749 27.80%
>30% and =(less than)35%................. 77 2.61% 8,918,778 1.64% 115,828 32.65%
>35% and =(less than)40%................. 117 3.97% 16,040,012 2.94% 137,094 38.03%
>40% and =(less than)45%................. 114 3.87% 14,893,610 2.73% 130,646 42.39%
>45% and =(less than)50%................. 103 3.49% 16,095,601 2.95% 156,268 47.72%
>50% and =(less than)55%................. 114 3.87% 18,561,187 3.41% 162,817 52.36%
>55% and =(less than)60%................. 125 4.24% 22,504,012 4.13% 180,032 57.64%
>60% and =(less than)65%................. 174 5.90% 34,246,462 6.28% 196,819 62.62%
>65% and =(less than)70%................. 175 5.93% 34,201,913 6.27% 195,440 67.35%
>70% and =(less than)75%................. 283 9.60% 58,442,689 10.72% 206,511 72.83%
>75% and =(less than)80%................. 506 17.15% 114,107,246 20.94% 225,508 77.80%
>80% and =(less than)85%................. 352 11.93% 80,265,695 14.73% 228,028 80.83%
>85% and =(less than)90%................. 503 17.05% 105,960,602 19.44% 210,657 88.88%
>90% and =(less than)95%................. 0 0.00% 0 0.00% 0 0.00%
>95%..................................... 0 0.00% 0 0.00% 0 0.00%
----- ----- ----------- ------ ------- -----
Total............................... 2,949 100.00% 545,078,129 100.00% 184,835 70.64%
===== ====== =========== ====== ======= =====
59
HOUSING LOANS BY MORTGAGE INSURER AND LVR - GE CAPITAL MORTGAGE INSURANCE
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)=20%.......................... 164 5.08% 7,584,016 1.33% 46,244 14.06%
>20% and =(less than)25%................. 75 2.32% 5,603,442 0.99% 74,713 22.31%
>25% and =(less than)30%................. 87 2.70% 8,216,730 1.45% 94,445 27.68%
>30% and =(less than)35%................. 74 2.29% 8,283,873 1.46% 111,944 32.30%
>35% and =(less than)40%................. 98 3.04% 12,192,336 2.14% 124,412 37.75%
>40% and =(less than)45%................. 121 3.75% 16,237,868 2.86% 134,197 42.49%
>45% and =(less than)50%................. 97 3.00% 14,720,807 2.59% 151,761 47.51%
>50% and =(less than)55%................. 103 3.19% 16,556,235 2.91% 160,740 52.58%
>55% and =(less than)60%................. 117 3.62% 20,170,767 3.55% 172,400 57.79%
>60% and =(less than)65%................. 178 5.51% 32,215,786 5.67% 180,988 62.92%
>65% and =(less than)70%................. 191 5.92% 34,400,113 6.05% 180,105 67.30%
>70% and =(less than)75%................. 313 9.70% 60,590,018 10.66% 193,578 72.84%
>75% and =(less than)80%................. 622 19.27% 126,280,127 22.21% 203,023 77.58%
>80% and =(less than)85%................. 401 12.42% 86,918,167 15.29% 216,754 81.04%
>85% and =(less than)90%................. 587 18.18% 118,590,098 20.86% 202,027 88.87%
>90% and =(less than)95%................. 0 0.00% 0 0.00% 0 0.00%
>95%..................................... 0 0.00% 0 0.00% 0 0.00%
----- ----- ----------- ------ ------- -----
Total............................... 3,228 100.00% 568,560,383 100.00% 176,134 71.67%
===== ====== =========== ====== ======= =====
60
HOUSING LOANS BY MORTGAGE INSURER AND LVR - PMI MORTGAGE INSURANCE LTD
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -------
(less than)=20%.......................... 15 11.81% 390,333 2.12% 26,022 10.93%
>20% and =(less than)25%................. 4 3.15% 470,323 2.55% 117,581 21.97%
>25% and =(less than)30%................. 4 3.15% 907,924 4.93% 226,981 28.31%
>30% and =(less than)35%................. 4 3.15% 510,245 2.77% 127,561 33.90%
>35% and =(less than)40%................. 2 1.57% 163,155 0.89% 81,578 37.07%
>40% and =(less than)45%................. 3 2.36% 283,474 1.54% 94,491 40.50%
>45% and =(less than)50%................. 4 3.15% 358,258 1.94% 89,565 47.68%
>50% and =(less than)55%................. 3 2.36% 584,164 3.17% 194,721 51.78%
>55% and =(less than)60%................. 9 7.09% 1,344,738 7.30% 149,415 57.11%
>60% and =(less than)65%................. 8 6.30% 1,253,438 6.80% 156,680 62.87%
>65% and =(less than)70%................. 8 6.30% 1,353,475 7.35% 169,184 67.28%
>70% and =(less than)75%................. 16 12.60% 2,717,446 14.74% 169,840 72.46%
>75% and =(less than)80%................. 21 16.54% 3,020,347 16.39% 143,826 76.86%
>80% and =(less than)85%................. 18 14.17% 3,381,391 18.35% 187,855 81.05%
>85% and =(less than)90%................. 8 6.29% 1,686,512 9.15% 210,814 88.39%
>90% and =(less than)95%................. 0 0.00% 0 0.00% 0 0.00%
>95%..................................... 0 0.00% 0 0.00% 0 0.00%
--- ----- ---------- ----- ------- -----
Total............................... 127 100.00% 18,425,223 100.00% 145,080 66.29%
=== ====== ========== ====== ======= =====
61
HOUSING LOANS BY MORTGAGE INSURER AND LVR - COMMONWEALTH OF AUSTRALIA
NUMBER OF TOTAL NO. TOTAL $ AVERAGE WGT AVG
LOANS OF LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- -------- ------------- ------ ------- -----
=(less than)20%.......................... 7 23.33% 226,239 10.79% 32,320 8.97%
>20% and =(less than)25%................. 5 16.67% 285,283 13.61% 57,057 23.23%
>25% and =(less than)30%................. 2 6.67% 68,357 3.26% 34,179 28.73%
>30% and =(less than)35%................. 1 3.33% 47,972 2.29% 47,972 34.26%
>35% and =(less than)40%................. 4 13.33% 566,740 27.03% 141,685 37.40%
>40% and =(less than)45%................. 2 6.67% 102,832 4.90% 51,416 41.63%
>45% and =(less than)50%................. 0 0.00% 0 0.00% 0 0.00%
>50% and =(less than)55%................. 2 6.67% 160,359 7.65% 80,180 51.90%
>55% and =(less than)60%................. 4 13.33% 314,777 15.01% 78,694 57.68%
>60% and =(less than)65%................. 0 0.00% 0 0.00% 0 0.00%
>65% and =(less than)70%................. 0 0.00% 0 0.00% 0 0.00%
>70% and =(less than)75%................. 2 6.67% 217,735 10.39% 108,868 72.62%
>75% and =(less than)80%................. 0 0.00% 0 0.00% 0 0.00%
>80% and =(less than)85%................. 0 0.00% 0 0.00% 0 0.00%
>85% and =(less than)90%................. 1 3.33% 106,304 5.07% 106,304 87.14%
>90% and =(less than)95%................. 0 0.00% 0 0.00% 0 0.00%
>95%..................................... 0 0.00% 0 0.00% 0 0.00%
-- ------ --------- ------ ------ -----
Total............................... 30 100.00% 2,096,598 100.00% 69,887 42.59%
== ====== ========= ====== ====== =====
62
HOUSING LOANS BY CURRENT COUPON RATES
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -----
(less than)=5.00......................... 29 0.32% 4,483,157 0.29% 154,592 78.39%
>5.00% and =(less than)5.50%............. 1,013 11.20% 183,577,140 11.70% 181,221 70.09%
>5.50% and =(less than)6.00%............. 3,117 34.47% 586,038,435 37.35% 188,014 71.50%
>6.00% and =(less than)6.50%............. 2,408 26.63% 408,339,568 26.02% 169,576 73.88%
>6.50% and =(less than)7.00%............. 1,121 12.40% 178,165,611 11.35% 158,935 63.22%
>7.00% and =(less than)7.50%............. 951 10.52% 145,451,333 9.27% 152,946 61.63%
>7.50% and =(less than)8.00%............. 252 2.79% 38,346,410 2.44% 152,168 66.10%
>8.00% and =(less than)8.50%............. 87 0.96% 13,886,611 0.88% 159,616 72.27%
>8.50% and =(less than)9.00%............. 18 0.20% 4,429,855 0.28% 246,103 71.13%
>9.00%................................... 46 0.51% 6,742,694 0.43% 146,580 69.49%
----- ------ ------------- ------ ------- -----
Total............................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
63
HOUSING LOANS BY MONTHS REMAINING TO MATURITY
% OF TOTAL % OF
NUMBER OF NO. OF TOTAL $ AVERAGE WGT AVG
LOANS LOANS DOLLAR AMOUNT AMOUNT BALANCE LVR %
----- ----- ------------- ------ ------- -----
=(less than) 144 months.................. 0 0.00% 0 0.00% 0 0.00%
> 144 and =(less than) 156 months........ 5 0.06% 333,834 0.02% 66,767 45.23%
> 156 and =(less than) 168 months........ 0 0.00% 0 0.00% 0 0.00%
> 168 and =(less than) 180 months........ 0 0.00% 0 0.00% 0 0.00%
> 180 and =(less than) 192 months........ 0 0.00% 0 0.00% 0 0.00%
> 192 and =(less than) 204 months........ 0 0.00% 0 0.00% 0 0.00%
> 204 and =(less than) 216 months........ 0 0.00% 0 0.00% 0 0.00%
> 216 and =(less than) 228 months........ 43 0.48% 4,337,782 0.28% 100,879 39.53%
> 228 and =(less than) 240 months........ 0 0.00% 0 0.00% 0 0.00%
> 240 and =(less than) 252 months........ 300 3.32% 31,976,872 2.04% 106,590 57.98%
> 252 and =(less than) 264 months........ 777 8.59% 93,611,650 5.96% 120,478 63.34%
> 264 and =(less than) 276 months........ 0 0.00% 0 0.00% 0 0.00%
> 276 and =(less than) 288 months........ 0 0.00% 0 0.00% 0 0.00%
> 288 and =(less than) 300 months........ 0 0.00% 0 0.00% 0 0.00%
> 300 and =(less than) 312 months........ 0 0.00% 0 0.00% 0 0.00%
> 312 and =(less than) 324 months........ 839 9.28% 143,349,684 9.13% 170,858 66.00%
> 324 and =(less than) 336 months........ 0 0.00% 0 0.00% 0 0.00%
> 336 and =(less than) 348 months........ 3,285 36.33% 593,062,041 37.79% 180,536 71.04%
> 348 and =(less than) 360 months........ 3,793 41.95% 702,788,951 44.78% 185,286 71.54%
>360 months.............................. 0 0.00% 0 0.00% 0 0.00%
----- ------ ------------- ------ ------- -----
Total............................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
64
INTERSTAR RESIDENTIAL LOAN PROGRAM
ORIGINATION PROCESS
The housing loans included in the assets of the trust were originated
by Interstar Securities (Australia) Pty Limited from loan applications received
through its national network of independent accredited mortgage brokers and
funded by the sellers as described above. The mortgage brokers will receive an
originator's fee for approved loans, which will equal a portion of the interest
payments on the housing loans, throughout the term of such approved housing
loan. Interstar Securities (Australia) Pty Limited accepts applications for both
the purchase of acceptable residential security properties and the refinance of
existing housing loans.
APPROVAL AND UNDERWRITING PROCESS
Each lending service officer must attend ongoing in-house training
courses conducted by Interstar Securities (Australia) Pty Limited. This program
covers the duties, requirements and office procedures expected of each lending
service officer with particular emphasis on regulatory matters such as the
Consumer Credit Legislation and the Privacy Act. The lending service officer's
performance is constantly monitored and reviewed by his or her superiors to
ensure the maintenance of quality in the underwriting process. As part of his or
her ongoing review, the lending service officer is also provided with further
staff training particularly highlighting any changes to information technology
or legislative aspects that would impact on the day to day operation of the
business.
Housing loan applications are assessed by a lending service officer and
where an application is outside the current authority of the lending service
officer or the file has been declined it is referred to the lending service
officer's immediate superior for review. Where it is considered appropriate,
approval may be granted subject to the provision of further information.
All housing loan applications, including the applications relating to
the housing loans included in the assets of the trust, must satisfy Interstar
Securities (Australia) Pty Limited's credit policy and procedures described in
this section. Interstar Securities (Australia) Pty Limited, like lenders in the
Australian residential housing loan market, does not divide its borrowers into
groups of differing credit quality for the purposes of setting standard interest
rates for its residential housing loans. All borrowers must satisfy Interstar
Securities (Australia) Pty Limited's underwriting criteria described in this
section. Borrowers are not charged different rates of interest based on their
credit quality.
The approval process consists of determining the value of the proposed
security property, verifying the borrower's financial and credit history details
and ensuring these details satisfy Interstar Securities (Australia) Pty
Limited's underwriting criteria. The initial assessment of the applicant is
conducted by the mortgage broker on behalf of Interstar Securities (Australia)
Pty Limited, with the application then being submitted for approval, to
Interstar Securities (Australia) Pty Limited based upon it meeting satisfactory
credit standards. Approval of the loan application is at the total discretion of
Interstar Securities (Australia) Pty Limited.
All proposed security properties are required to be valued, subject to
a number of exceptions, by a valuer approved by Interstar Securities (Australia)
Pty Ltd. See
65
"Description of the Assets of the Trust - Representations, Warranties and
Eligibility Criteria". The valuer must be a current member of the Australian
Property Institute, have at least 5 years experience in the geographical area in
which the proposed security property is situated and have the necessary
professional indemnity insurance policy in force.
The valuation report must include the following details:
o the age, condition and size of the security property;
o comparable sale prices to other properties;
o the cost of any repair work required to the security property;
o the insurance replacement value of the security property; and
o any environmental factor that would have an adverse effect on the value
of the security property.
Where a valuation is not required, a copy of the stamped executed
contract of sale confirming actual purchase price of the property must be
provided prior to settlement.
Where more than one property is provided as security, the combined
value of the properties is taken into account.
Verification of an applicant's information is central to the approval
process. The mortgage broker obtains such information as tax returns, employer
confirmation letter, credit checks and a full and detailed current assets and
liabilities statement. This information is then submitted to Interstar
Securities (Australia) Pty Limited for assessment within its current lending
criteria.
The prospective borrower must have a satisfactory credit history,
stable employment, evidence of a genuine savings pattern and a minimum 5%
deposit in genuine savings. Gifts, inheritance and money borrowed from other
sources are not genuine savings and are not considered as part of the minimum
"5% deposit" requirement.
Interstar Securities (Australia) Pty Limited requires all borrowers to
satisfy a minimum disposable income level after all commitments, including
allowances for living expenses of the borrower and all dependents and the
proposed housing loan. To further safeguard that the borrower has the capacity
to meet all of his or her commitments, the assessment of the home loan
application is calculated at a rate 2% higher than the applicable rate.
Upon acceptance of the loan application by Interstar Securities
(Australia) Pty Limited, mortgage insurance coverage must be obtained by the
borrower. All loans through Interstar Securities (Australia) Pty Limited must
have 100% mortgage insurance coverage with the appropriate cash flow cover. This
mortgage insurance coverage remains in force from the date of settlement until
the earliest of discharge, full repayment of the housing loan or payment of a
claim. Full details of the mortgage insurance companies and their respective
ratings are set out separately in this prospectus.
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All borrowers in respect of housing loans are natural persons or
corporations. Housing loans to corporations may also be secured by guarantees
from directors. Guarantees may also be obtained in other circumstances.
Upon acceptance of the risk by the mortgage insurer, Interstar
Securities (Australia) Pty Limited then instructs one of its panel solicitors or
settlement agents to prepare the necessary mortgage documentation and forward
same to the borrower for execution. The mortgage documents comprise of a loan
agreement document together with a general terms and conditions booklet. Upon
receipt of the executed mortgage documentation, certification of title will then
occur and settlement will take place. Upon settlement, the mortgage is
registered and the documents stored in the safe custody of the issuer trustee. A
condition of settlement is that the mortgagor establish and maintain full
replacement property insurance on the security property for the term of the
housing loan.
Interstar Securities (Australia) Pty Limited's credit policies and
approval procedures are subject to constant review. Improvements in procedures
are continuous. Credit policy may change from time to time due to business
conditions and legal or regulatory changes.
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GENERAL FEATURES OF THE HOUSING LOANS
The housing loans may consist of one or more of the following types:
Name of Housing Loan General Characteristics of Housing Loan
Interstar "Premium" Amortizing principal and interest repayment (P&I) loans
Access Account with an interest rate variable at the discretion of the
servicer and incorporating limited "redraw"
facilities that will be available to borrowers only at
the sole discretion of the trust manager.
Interstar "Fix'n Float" Amortizing "P&I" loans with an interest rate fixed for
Access Account a specific initialperiod of up to five years after
which the interest rate converts to a variable rate at
the discretion of the servicer.
Interstar "IO Float" Non-amortizing loans requiring interest only repayments
Access Account by the borrowers for a specific initial period of up to
ten years with an interest rate variable at the
discretion of the servicer. At the expiration of
the initial period the loans convert to the standard
amortizing "P&I" loans with an interest rate variable
at the discretion of the servicer.
Interstar "IO Fixed" Non-amortizing loans requiring interest only repayments
Access Account by the borrowers for a specific initial period of up to
five years with an interest rate fixed for this initial
period. At the expiration of the initial period the
loans convert to the standard amortizing "P&I" loans
with an interest rate variable at the discretion of the
servicer.
Interstar "Gold" Amortizing line of credit "P&I" loans with an interest
Access Account rate variable at the discretion of the servicer,
and incorporating facilities that allow borrowers to:
o draw funds up to a pre-determined amortizing
limit;
o repay some or all of those funds; and
o redraw those funds again up to the then-current
amortized limit subject always to such right to
redraw funds being at the absolute discretion of
the servicer,
during the life of the loan facility.
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Interstar "Split" A combined facility which:
Access Account
o as to a specified dollar proportion of the
facility has the general characteristics of one
type of housing loan as referred to above; and
o as to the remaining dollar proportion of the
facility has the general characteristics of
another type of housing loan as referred to above.
Each housing loan may have some or all of the features described in this
section. In addition, during the term of any housing loan the servicer may agree
to change any of the terms of that housing loan from time to time at the request
of the borrower.
SPECIAL FEATURES OF THE HOUSING LOANS
REDRAWS
Most housing loans, excluding fixed rate loans, provide borrowers with
a facility which allows borrowers to be provided with redraws. These redraws may
be accessed by way of direct credit to the relevant borrower's nominated bank
account, by electronic funds transfer or by check payments. This facility is
provided to a borrower at the absolute discretion of the servicer.
If a borrower makes any repayments under its housing loan which are in
addition to those that he or she is legally obliged to make under the terms of
the housing loan agreement then the issuer trustee must provide a redraw of
principal repayments made in excess of the scheduled principal repayments to the
borrower, upon being so directed by the servicer in its absolute discretion, and
subject to the servicer certifying to the issuer trustee that:
o the redraw to be provided to the borrower together with the current
Unpaid Balance of the housing loan will not exceed the scheduled
balance of the housing loan;
o after allowing for all payments which the issuer trustee is then
required to make or which the servicer reasonably expects that the
issuer trustee will be required to make, there is or will be sufficient
cash in the assets of the trust for the issuer trustee to provide that
redraw; and
o the housing loan is not in arrears at the time of the request for the
redraw by the borrower.
A redraw will not result in the housing loan being removed from the
trust.
DIRECT DEBIT AUTHORITY
The servicer has arranged for the borrowers to execute a direct debit
authority so that payments under the borrower's mortgage loan will be directly
debited from the borrower's
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designated checking account. In certain cases the servicer has arranged for
National Australia Bank Limited to provide checking account and direct entry
paperless services in order to offer borrowers an expanded range of financial
services that are directly linked to the borrower's mortgage loan account. The
provision of these facilities has been documented in a Check Deposit and Direct
Paperless Entry Facilities Agreement between National Australia Bank Limited,
the servicer and the issuer trustee. All mortgage loan payments deducted from a
borrower's checking account, whether with National Australia Bank Limited,
another bank or other financial institutions, will be credited to a trust
account in Perpetual Trustees Victoria Limited's name established with National
Australia Bank Limited.
PAYMENT HOLIDAY
There is no provision for payment holidays to be granted to borrowers
in circumstances where excess principal has been repaid by the borrowers.
EARLY REPAYMENT
Partial repayments, or early repayments, can be made by borrowers in
respect of all housing loans, excluding fixed rate loans. Early repayment fees
will apply if a borrower:
o repays 50% or more of the principal balance of the housing loan in the
first year of its term; or
o discharges the housing loan within the first 5 years of its term.
INTEREST RATE SWITCHING
A borrower may elect, in respect of a housing loan, to switch from a
variable rate of interest to a fixed rate of interest at any time, provided that
the relevant housing loan will bear a fixed rate of interest for a maximum
period of 5 years. While the interest rate of the housing loan remains fixed,
the borrower is not entitled to make any additional principal repayments, and
the payments from the borrower will consist solely of interest or, in the case
of the Interstar "Fix'n Float" Access Account, principal and interest. At the
end of that period, the housing loan will bear a variable rate of interest and
principal repayments will recommence, calculated to ensure that the entire loan
balance is repaid in full no later than the maturity date of the mortgage,
unless the relevant mortgage insurer so approves and the trust manager offers a
further fixed rate of interest in relation to the housing loan and such rate is
accepted by the relevant borrower.
ADDITIONAL FEATURES
As part of its policy of continuous loan product improvement and
development, the servicer may from time to time offer additional features and
products not referred to in this prospectus. Before doing so, the servicer must
ensure that the introduction of any additional features and/or products would
not affect any relevant mortgage insurance policy and would not cause the
downgrade or withdrawal of the rating of any notes.
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THE MORTGAGE INSURANCE POLICIES
GENERAL
Each housing loan acquired by the trust will be insured by one of PMI
Indemnity Limited - formerly CGU Lenders Mortgage Insurance Limited - GE Capital
Mortgage Insurance Corporation (Australia) Pty Ltd, the Commonwealth of
Australia, PMI Mortgage Insurance Ltd or Royal & Sun Alliance Lenders Mortgage
Insurance Limited. The mortgage insurance policy in relation to each housing
loan is provided by the mortgage insurer at the time that the housing loan is
originated. The issuer trustee is the insured party under each mortgage
insurance policy in respect of each housing loan. The insurance provided under
each mortgage insurance policy covers 100% of the principal balance and any
unpaid interest on the housing loan insured regardless of the LVR of that
housing loan. This section is a summary of the general provisions of the
mortgage insurance policies.
CERTAIN PROVISIONS OF MORTGAGE INSURANCE POLICIES
RESTRICTIONS AND CANCELLATION
The amount recoverable under each mortgage insurance policy will
generally be:
o the whole of the loan amount due under the housing loan;
o any reasonable expenses incurred in enforcing the housing loan and any
mortgage and/or guarantee securing that housing loan;
o any unpaid interest calculated at the interest rate applicable if
interest is paid on the due date; and
o the timely payment for a period of at least 12 months after the date
upon which a claim is made under that contract of interest payments
under the housing loan which remain outstanding for a period of 14
days.
The actual amounts recoverable, and the amounts to be deducted, vary
between the policies. For example, rent on the mortgaged property and insurance
proceeds not spent on restoration or repair which are received by the issuer
trustee may reduce amounts payable by the insurer under a mortgage insurance
policy.
There are a number of requirements and restrictions imposed on the
insured under each mortgage insurance policy which may entitle the relevant
insurer to cancel the policy or reduce the amount of a claim. Depending on the
mortgage insurance policy, these may include:
o the existence of an encumbrance or other interest which affects or has
priority over the relevant mortgage;
o the relevant mortgage, the relevant housing loan or a guarantee or
indemnity relating to the housing loan ceasing to be effective;
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o if there is a material omission or misstatement by the insured in
relation to the policy;
o that any premium is not paid when due or within the relevant grace
period, if any;
o if there is physical damage to the relevant mortgaged property;
o a breach by the insured of the policy; and
o certain circumstances which affect the insured's rights or recoveries
under the relevant housing loan or mortgage.
EXCLUSIONS
A mortgage insurance policy may not, depending on its terms, cover any
loss arising from specified events, such as war, nuclear occurrence and
contamination.
UNDERTAKING
Under a mortgage insurance policy, the insured may have an obligation
to, among other things:
o report arrears or other defaults on the relevant housing loan;
o report amounts outstanding under that relevant housing loan;
o report procedures being taken in respect of a defaulted housing loan,
including enforcement of the relevant mortgage or the taking of
possession of any relevant mortgaged property;
o make all claims within a particular period and in a particular form;
and
o ensure that the terms of the relevant housing loan require that a
general insurance policy is in place in respect of the relevant
mortgaged property.
PERIOD OF COVER
All mortgage insurance policies provide cover with effect from the date
of settlement of a housing loan until the discharge, the full repayment of the
housing loan or payment of a claim, whichever is the earliest. See "Interstar
Residential Loan Program - Approval and Underwriting Process".
VARIATIONS
Variations in respect of a mortgage insurance policy may be made with
the approval of the relevant mortgage insurer.
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VARIANCE BETWEEN POLICIES
Each mortgage insurance policy has different provisions. The above is a
summary of certain provisions - some may not relate to, or may differ from, a
particular mortgage insurance policy.
TRUST MANAGER UNDERTAKINGS WITH RESPECT TO INSURANCE POLICIES
Under the series notice, the trust manager undertakes:
o not to take any action in respect of a housing loan which is contrary
to the terms of any mortgage insurance policy without the approval of
the relevant mortgage insurer; and
o to take such steps as are reasonably available to it to ensure that a
mortgage insurer is not relieved from its liability under a mortgage
insurance policy.
DESCRIPTION OF THE MORTGAGE INSURERS
PMI INDEMNITY LIMITED - FORMERLY CGU LENDERS MORTGAGE INSURANCE LIMITED
PMI Indemnity Limited, previously named CGU Lenders Mortgage Insurance
Limited, was formed in 1971 as a specialist insurer to provide mortgage lenders
with protection against loss arising from borrower default. PMI Indemnity
Limited currently insures approximately 225,253 mortgage loans in excess of
A$25.1 billion. The business address of PMI Indemnity Limited is Level 23, 50
Bridge Street, Sydney, New South Wales, Australia.
On September 14, 2001 the acquisition by PMI Mortgage Insurance
Australia (Holdings) Pty Ltd of CGU Lenders Mortgage Insurance Limited was
completed. CGU Lenders Mortgage Insurance Limited changed its name to PMI
Indemnity Limited on September 14, 2001.
PMI Indemnity Limited's ability to meet claims under its mortgage
insurance policies is, in addition to its capital and reserves, supported by
reinsurance contracts with international reinsurance companies. These contracts
are reviewed annually and the level of cover provided complies with the
Australian Prudential Regulation Authority's conditions of authorization.
As of December 31, 2001, PMI Indemnity Limited had total assets of
A$171 million, shareholders' equity of A$89 million and statutory reserves -
claims equalization reserve - of A$34 million. PMI Indemnity Limited has a
financial strength rating of Aa3 by Moody's, AA by Fitch, and AA- by S&P. Since
September 14, 2001, PMI Indemnity Limited's obligations to its policyholders
have been managed by PMI Mortgage Insurance Ltd. PMI Indemnity Limited will
cease, except for increased advances on current insurance in force, writing new
business from July 1, 2002. Insurance in force as at July 1, 2002 will be
maintained.
PMI MORTGAGE INSURANCE LTD
PMI Mortgage Insurance Ltd ("PMI"), previously known as MGICA Ltd., has
been providing lenders' mortgage insurance in Australia since 1965 and in New
Zealand since 1988.
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PMI insures approximately 408,750 mortgage loans in excess of A$46.6 billion.
The business address of PMI is Level 23, 50 Bridge Street, Sydney, New South
Wales Australia.
PMI's parent is PMI Mortgage Insurance Australia (Holdings) Pty Ltd, a
subsidiary of PMI Mortgage Insurance Co. that is a subsidiary of The PMI Group
Inc. PMI Mortgage Insurance Co. is a leading monoline mortgage insurer in the
United States currently having claims paying ability ratings of AA+ by S&P and
Fitch and Aa2 by Moody's.
As of December 31, 2001, PMI Mortgage Insurance Ltd had total assets of
A$434 million, shareholders' equity of A$230 million and statutory reserves -
claims equalization reserve - of A$66 million. PMI Mortgage Insurance Ltd has a
financial strength rating by S&P of AA, by Fitch of AA and by Moody's of Aa3.
GE CAPITAL MORTGAGE INSURANCE CORPORATION (AUSTRALIA) PTY LIMITED AND
COMMONWEALTH OF AUSTRALIA
Housing Loans Insurance Corporation was an Australian Commonwealth
Government statutory authority established under the Housing Loans Insurance Act
1965 and was, prior to its abolition, Australia's leading lenders' mortgage
insurer with approximately 50% of the Australia lenders' mortgage insurance
market.
On December 12, 1997, the Commonwealth Government:
o transferred the liabilities of Housing Loans Insurance Corporation in
relation to contracts of insurance entered into by Housing Loans
Insurance Corporation before December 12, 1997 to the Commonwealth
Government;
o appointed a new corporation, Housing Loans Insurance Corporation Ltd,
ABN 61 071 466 334, which has since changed its name to Housing Loans
Insurance Corporation Pty Ltd, to manage these contracts of insurance
on behalf of the Commonwealth of Australia; and
o sold Housing Loans Insurance Corporation Pty Ltd to GE Capital
Australia Ltd, ABN 60 008 562 534, an indirect wholly-owned subsidiary
of the General Electric Company, a corporation chartered under the laws
of the State of New York with its corporate headquarters in Fairfield,
Connecticut.
Housing Loans Insurance Corporation Pty Ltd changed its name to GE
Mortgage Insurance Pty Ltd as of February 14, 2000.
GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd, ABN 52
081 488 440, commenced operations in March 1998. Along with GE Mortgage
Insurance Pty. Ltd., it is a wholly-owned subsidiary of GE Capital Australia
Limited, whose ultimate parent is General Electric Company. General Electric
Company is a diversified industrial and financial services company with
operations in over 100 countries. General Electric Company is currently rated
AAA by S&P and Aaa by Moody's. General Electric Company is the indirect owner of
lenders' mortgage insurance businesses in the United States, United Kingdom,
Canada and Australia which collectively insured over US$165 billion of loans
worldwide.
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As of December 31, 2001, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd had total assets of A$375.2 million, shareholders' equity of
A$172.2 million and statutory reserves - claims equalization reserve - of A$8.8
million. GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd currently
has a claims paying ability rating of AA by S&P and Fitch and Aa2 by Moody's.
The Commonwealth of Australia currently has a local currency rating of
AAA by S&P and Fitch and Aaa by Moody's.
The business address of GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd is Level 23, 259 George Street, Sydney, New South Wales.
ROYAL & SUN ALLIANCE LENDERS MORTGAGE INSURANCE LIMITED
Following the merger of Sun Alliance Australia and Royal Insurance
Australia in 1992, Sun Alliance Mortgage Insurance Limited became known as Royal
& Sun Alliance Lenders Mortgage Insurance Limited. It has been operating in the
lenders' mortgage insurance market in Australia since 1989.
Following the merger, Royal & Sun Alliance Lenders Mortgage Insurance
Limited business displayed solid and profitable growth. It operates within a
Strategic Business Unit of the General Insurances Division of the Royal & Sun
Alliance Australia group. Royal & Sun Alliance Lenders Mortgage Insurance
Limited is a subsidiary of Royal and Sun Alliance Insurance Australia Limited,
which is one of the 5 largest insurers in Australia.
As of December 31, 2000, Royal and Sun Alliance Lenders Mortgage
Insurance Limited held assets of A$464 million and it had shareholders' equity
of A$270 million, including statutory reserves- claims equalization reserve - of
A$48 million. Royal and Sun Alliance Lenders Mortgage Insurance Limited has a
claims paying ability rating of AA- by S&P and Fitch and A2 by Moody's.
The business address of Royal & Sun Alliance Lenders Mortgage Insurance
Limited is 465 Victoria Avenue, Chatswood, New South Wales, Australia.
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THE TITLE INSURANCE POLICIES
COVER
Some housing loans that are acquired may be secured by mortgages which
will be the subject of a title insurance policy. Title insurance provides 100%
coverage for losses arising, among other things, as a result of a relevant
mortgage:
o being subject to any prior encumbrance;
o not being validly registered; or
o being invalid or unenforceable.
The issuer trustee will be the insured party under each title insurance
policy in respect of each mortgage securing a housing loan.
The insurer for any housing loan insured under a title insurance policy
will be:
o First American Title Insurance Company of Australia Pty Limited; or
o any other entity approved from time to time by the trust manager and
which each rating agency has confirmed will not cause a downgrade or
withdrawal of the rating of any note.
The trust manager will undertake:
o not to take any action in respect of a housing loan where such action
would be contrary to the terms of the title insurance policy covering
that housing loan unless it is approved by the relevant title insurer;
and
o to take such steps as are reasonably available to it to ensure that a
title insurer is not relieved from its liability under its title
insurance policy.
PERIOD OF COVER
The title insurance policy in respect of each mortgage securing a
housing loan commences on the date that the relevant title insurance policy for
that mortgage is issued and continues for so long as:
o the issuer trustee owns the relevant mortgage;
o the issuer trustee retains an estate or interest in the relevant
mortgage; or
o the issuer trustee, as a mortgagee exercising its power of sale, has a
liability to a purchaser regarding the title to the land under a
contract of sale for the land or the issuer trustee holds a debt
secured by a mortgage given to the issuer trustee by a purchaser of the
land.
The policy also continues to provide protection if:
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o the issuer trustee acquires all or part of the estate or interest in
the relevant property by foreclosure or any other legal manner which
discharges the relevant mortgage;
o a successor acquires an interest in the relevant mortgage; or
o a successor acquires the relevant mortgage or the estate or interest in
the relevant property by operation of law and not purchase.
REFUSAL OR REDUCTION IN CLAIM
Title insurance policies may not provide cover, or may provide a
reduced amount of cover, for losses arising as a result of, among other things:
o any material misstatement, omission or misrepresentation in connection
with obtaining the policies; or
o any material breach of the terms and conditions of the policies.
EXCLUSIONS
The title insurer will not provide cover under the title insurance
policy resulting from, among other things:
o restrictions or rights that are noted on the title to the land on the
policy date;
o the existence of laws which restrict or prohibit the use of the land or
the breach of those laws;
o environmental contaminants or hazardous waste under the land;
o native title claims in relation to the land;
o risks which:
o the insured at any time created, allowed or agreed to;
o were known to the insured but not to the title insurer on or
prior to the policy date;
o cause no loss to the insured;
o come into existence or are recorded in any public records
after the date upon which the relevant mortgage is
registered; or
o result in any loss of priority because the insured makes
further advances despite knowing the existence of subsequent
charges;
o if the relevant mortgage is or is claimed to be unenforceable or
otherwise affected because the insured failed to comply with or
breached the Consumer Credit Legislation or laws relating to the doing
of business and the providing of credit; or
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o if the insured is liable to pay compensation, penalties etc to any
person because the insured failed to comply with or breached any credit
laws.
DESCRIPTION OF TITLE INSURER
The title insurer is a subsidiary of First American Title Insurance
Company, a specialist title insurer. The parent company was founded over 110
years ago and has revenues approaching US$3 billion and more than 18,000
employees operating in the United States, Canada, the United Kingdom and
Australia.
First American Title Insurance Company is publicly traded on the New
York Stock Exchange through its holding company, the First American Financial
Corporation.
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DESCRIPTION OF THE CLASS A2 NOTES
GENERAL
The issuer trustee will issue the Class A2 notes on the closing date
pursuant to a direction from the trust manager to the issuer trustee to issue
the notes and the terms of the master trust deed, the series notice and the note
trust deed. The notes will be governed by the laws of New South Wales,
Australia. The following summary describes the material terms of the Class A2
notes. The summary does not purport to be complete and is subject to the terms
and conditions of the transaction documents.
FORM OF THE CLASS A2 NOTES
BOOK-ENTRY REGISTRATION
The Class A2 notes will be issued only in permanent book-entry format
in minimum denominations of US$100,000 and multiples of US$1,000 in excess of
that amount. Unless definitive notes are issued, all references to actions by
the Class A2 noteholders will refer to actions taken by the Depository Trust
Company (DTC) upon instructions from its participating organizations and all
references in this prospectus to distributions, notices, reports and statements
to Class A2 noteholders will refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered noteholder, for distribution
to owners of the Class A2 notes in accordance with DTC's procedures.
Class A2 noteholders may hold their interests in the notes through DTC,
in the United States, or through Clearstream Banking, societe anonyme
(CLEARSTREAM, LUXEMBOURG) or the Euroclear System (EUROCLEAR), in Europe, if
they are participants in those systems, or indirectly through organizations that
are participants in those systems. Cede & Co., as nominee for DTC, will be the
registered noteholder of the Class A2 notes. Clearstream, Luxembourg and
Euroclear will hold omnibus positions on behalf of their respective
participants, through customers' securities accounts in Clearstream,
Luxembourg's and Euroclear's names on the books of their respective
depositaries. The depositaries in turn will hold the positions in customers'
securities accounts in the depositaries' names on the books of DTC.
DTC has advised the trust manager and the underwriters that it is:
o a limited-purpose trust company organized under the New York Banking
Law;
o a "banking organization" within the meaning of the New York Banking
Law;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
o a "clearing agency" registered under the provisions of Section 17A of
the United States Securities Exchange Act of 1934 (the EXCHANGE ACT).
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DTC holds securities for its participants and facilitates the clearance
and settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts. This eliminates the need for physical
movement of securities. DTC participants include securities brokers and dealers,
banks, trust companies, clearing corporations and other organizations. Indirect
access to the DTC system is also available to others including securities
brokers and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
rules applicable to DTC and its participants are on file with the Securities and
Exchange Commission (the SEC).
Transfers between participants on the DTC system will occur in
accordance with DTC rules. Transfers between participants on the Clearstream,
Luxembourg system and participants on the Euroclear system will occur in
accordance with their rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg participants or Euroclear participants, on the other, will be
effected by DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by that system's depositary. However, these
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines,
European time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream, Luxembourg participants and Euroclear participants may not deliver
instructions directly to their system's depositary.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant will
be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date. The credits for any transactions
in these securities settled during this processing will be reported to the
relevant Clearstream, Luxembourg participant or Euroclear participant on that
business day. Cash received in Clearstream, Luxembourg or Euroclear as a result
of sales of securities by or through a Clearstream, Luxembourg participant or a
Euroclear participant to a DTC participant will be received and available on the
DTC settlement date. However, it will not be available in the relevant
Clearstream, Luxembourg or Euroclear cash account until the business day
following settlement in DTC.
Purchases of Class A2 notes held through the DTC system must be made by
or through DTC participants, which will receive a credit for the Class A2 notes
on DTC's records. The ownership interest of each actual Class A2 noteholder is
in turn to be recorded on the DTC participants' and indirect participants'
records. Class A2 noteholders will not receive written confirmation from DTC of
their purchase. However, noteholders are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the DTC participant or indirect participant
through which the noteholder entered into the transaction. Transfers of
ownership interests in the Class A2 notes are to be
80
accomplished by entries made on the books of DTC participants acting on behalf
of the Class A2 noteholders. Class A2 noteholders will not receive notes
representing their ownership interest in offered notes unless use of the
book-entry system for the Class A2 notes is discontinued.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of securities with DTC and their registration in the name of Cede &
Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual holders of the Class A2 notes; DTC's records reflect only the identity of
the DTC participants to whose accounts the Class A2 notes are credited, which
may or may not be the actual beneficial owners of the Class A2 notes. The DTC
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
participants, by DTC participants to indirect participants, and by DTC
participants and indirect participants to Class A2 noteholders will be governed
by arrangements among them and by any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote on behalf of the notes.
Under its usual procedures, DTC mails an omnibus proxy to the issuer trustee as
soon as possible after the record date, which assigns Cede & Co.'s consenting or
voting rights to those DTC participants to whose accounts the Class A2 notes are
credited on the record date, identified in a listing attached to the proxy.
Principal and interest payments on the Class A2 notes will be made to
DTC. DTC's practice is to credit its participants' accounts on the applicable
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on that
payment date. Standing instructions, customary practices, and any statutory or
regulatory requirements as may be in effect from time to time will govern
payments by DTC participants to Class A2 noteholders. These payments will be the
responsibility of the DTC participant and not of DTC, the issuer trustee, the
note trustee, the principal paying agent or the Luxembourg paying agent. Payment
of principal and interest to DTC is the responsibility of the issuer trustee,
disbursement of the payments to DTC participants is the responsibility of DTC,
and disbursement of the payments to Class A2 noteholders is the responsibility
of DTC participants and indirect participants.
DTC may discontinue providing its services as securities depository for
the notes at any time by giving reasonable notice to the principal paying agent.
Under these circumstances, if a successor securities depository is not obtained,
definitive notes are required to be printed and delivered.
According to DTC, the foregoing information about DTC has been provided
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
Clearstream, Luxembourg is a company with limited liability
incorporated under the laws of Luxembourg. Clearstream, Luxembourg holds
securities for its participating organizations and facilitates the clearance and
settlement of securities transactions between Clearstream,
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Luxembourg participants through electronic book-entry changes in accounts of
Clearstream, Luxembourg participants, thereby eliminating the need for physical
movement of notes. Transactions may be settled in Clearstream, Luxembourg in any
of 36 currencies, including U.S. dollars.
Clearstream, Luxembourg participants are financial institutions around
the world, including underwriters, securities brokers and dealers, banks, trust
companies, and clearing corporations. Indirect access to Clearstream, Luxembourg
is also available to others, including banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Clearstream, Luxembourg participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
and to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment. This eliminates the
need for physical movement of notes. Transactions may be settled in any of 40
currencies, including U.S. dollars.
Euroclear is owned by Euroclear Clearance System Public Limited Company
and operated through a license agreement by Euroclear Bank S.A./N.V., a bank
incorporated under the laws of the Kingdom of Belgium, the EUROCLEAR OPERATOR.
The Euroclear operator is regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium.
Euroclear participants include banks, including central banks,
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the "Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System". These terms and
conditions govern transfers of securities and cash within Euroclear, withdrawal
of securities and cash from Euroclear, and receipts of payments for securities
in Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific notes to specific securities clearance accounts. The
Euroclear operator acts under these terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions on the Class A2 notes held through Clearstream,
Luxembourg or Euroclear will be credited to the cash accounts of Clearstream,
Luxembourg participants or Euroclear participants in accordance with the
relevant system's rules and procedures, to the extent received by its
depositary. Clearstream, Luxembourg or the Euroclear operator, as the case may
be, will take any other action permitted to be taken by a Class A2 noteholder on
behalf of a Clearstream, Luxembourg participant or Euroclear participant only in
accordance with its rules and procedures, and depending on its depositary's
ability to effect these actions on its behalf through DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Class A2 notes among
participants of DTC,
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Clearstream, Luxembourg and Euroclear, they are under no obligation to perform
or continue to perform these procedures and these procedures may be discontinued
at any time.
DEFINITIVE NOTES
Notes issued in definitive form are referred to in this prospectus as
"definitive notes". Class A2 notes will be issued as definitive notes, rather
than in book entry form to DTC or its nominees, only if one of the following
events occurs:
o the principal paying agent advises the trust manager in writing that
DTC is no longer willing or able to discharge properly its
responsibilities as depository for the Class A2 notes, and the trust
manager is not able to locate a qualified successor;
o the issuer trustee, at the direction of the trust manager, advises the
principal paying agent in writing that it elects to terminate the
book-entry system through DTC; or
o after the occurrence of an event of default, the note trustee, at the
written direction of noteholders holding a majority of the outstanding
principal balance of the Class A2 notes, advises the issuer trustee and
the principal paying agent, that the continuation of a book-entry
system is no longer in the best interest of the Class A2 noteholders.
Definitive notes will be transferable and exchangeable at the offices
of the note registrar, which is initially the principal paying agent located at
101 Barclay Street 21W New York, NY 10286. Definitive notes will also be
transferable and exchangeable at the specified offices of the Luxembourg
transfer agent. The Bank of New York (Luxembourg) S.A., with initial specified
offices located at Aerogolf Center, 1A, Hoehenhof, L-1736 Senningerberg,
Luxembourg, has initially been appointed as the Luxembourg transfer agent. The
note registrar and/or the Luxembourg transfer agent will not impose a service
charge for any registration of transfer or exchange, but may require payment of
an amount sufficient to cover any tax or other governmental charge.
Neither the note registrar nor the Luxembourg transfer agent shall be
required to register the transfer or exchange of any definitive notes within 10
days preceding a quarterly payment date.
DISTRIBUTIONS ON THE NOTES
Collections in respect of interest and principal will be received
during each collection period. Collections include the following:
o payments of interest, principal and fees, including prepayments of
principal under the housing loans;
o proceeds from the enforcement of the housing loans and registered
mortgages relating to those housing loans;
o amounts received under mortgage insurance policies and title insurance
policies;
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o amounts received under the fixed-floating rate swap and the currency
swap;
o income in respect of authorized investments of the trust; and
o interest on amounts in the collection account.
The issuer trustee will make payments on a monthly basis on each
monthly payment date. On each quarterly payment date, the principal paying agent
will distribute, indirectly through DTC and/or the depositaries, principal and
interest, quarterly to the owners of the Class A2 notes as of the date which is
4 business days prior to that quarterly payment date if the Class A2 notes are
held in book-entry form, or, if the Class A2 notes are held in definitive form,
the last day of the prior calendar month.
KEY DATES AND PERIODS
The following are the relevant dates and periods for the allocation of
cashflows and their payments.
COLLECTION PERIOD..............with respect to a monthly payment date, the
period from, and including, the date which is 4
business days before the date that is one
calendar month preceding that monthly payment
date to, but excluding, the date which is 4
business days before that monthly payment date.
However, the first and last collection periods
are as follows:
o first: period from and excluding the initial
cut-off date to and including July 31, 2002.
o last: period from and including the date
which is 4 business days before the monthly
payment date immediately prior to the final
monthly payment date to and excluding the
day which is 4 business days before that
final monthly payment date.
INTEREST PERIOD ...............with respect to a monthly payment date, each
period from and including a monthly payment date
to and excluding the next monthly payment date.
However, the first and last interest periods are
as follows:
o first: period from and including the issue
date to and excluding the first monthly
payment date.
o last: period from and including the monthly
payment date prior to the earlier of the
final maturity date and the date on which
the relevant note is redeemed in full to and
excluding the final maturity date or the
date on which that note is so redeemed.
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with respect to a quarterly payment date, each
period from and including a quarterly payment
date to and excluding the next quarterly payment
date. However, the first and last interest
periods are as follows:
o first: period from and including the issue
date and excluding the first quarterly
payment date.
o last: period from and including the
quarterly payment date prior to the earlier
of the final maturity date and the date on
which the relevant note is redeemed in full
to and excluding the final maturity date or
the date on which that note is so redeemed.
DETERMINATION DATE ............with respect to a monthly payment date, the date
which is 2 business days before that monthly
payment date.
QUARTERLY PAYMENT DATE ........the 7th day or, if the 7th day is not a business
day, then the next business day of each January,
April, July and October unless that business day
falls in the next calendar month, in which case
the quarterly payment date will be the preceding
business day. The first quarterly payment date
will be in October 2002.
MONTHLY PAYMENT DATE ..........the 7th of each calendar month or, if the 7th
day is not a business day, then the next business
day, unless that business day falls in the next
calendar month, in which case the monthly payment
date will be the preceding business day, of each
calendar month. The first monthly payment date
will be in August 2002.
EXAMPLE CALENDAR
The following example calendar for a quarter assumes that all relevant days are
business days.
COLLECTION PERIOD .............July 3rd to August 2nd
MONTHLY INTEREST PERIOD .......July 7th to August 6th
DETERMINATION DATE ............August 5th
MONTHLY PAYMENT DATE ..........August 7th
COLLECTION PERIOD .............August 3rd to September 2nd
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MONTHLY INTEREST PERIOD .......August 7th to September 6th
DETERMINATION DATE ............September 5th
MONTHLY PAYMENT DATE ..........September 7th
COLLECTION PERIOD .............September 3rd to October 2nd
MONTHLY INTEREST PERIOD .......September 7th to October 6th
DETERMINATION DATE ............October 5th
QUARTERLY INTEREST PERIOD......July 7th to October 6th
MONTHLY PAYMENT DATE/QUARTERLY
PAYMENT DATE..............October 7th
CALCULATION OF INCOME
On each Determination Date, the trust manager will calculate the Income
for the immediately preceding collection period.
INCOME
INCOME for a collection period means all moneys, rights and property
which is received by the issuer trustee during that collection period by way of
interest or otherwise in the nature of income in respect of the authorized
investments, including the housing loans, of the trust including:
o amounts attributable to interest received under fixed-floating rate
swaps and currency swaps;
o interest on income and any other moneys received;
o amounts in the nature of, or attributable to, interest derived under a
mortgage insurance policy or title insurance policy;
o interest and fees received from borrowers under the housing loans; and
o break payments received from mortgage insurers or borrowers under the
housing loans.
APPLICATION OF CAPITAL AND LIQUID AUTHORIZED INVESTMENTS TO AVAILABLE INCOME
The trust manager must ensure that, subject to the paragraph below, the
trust shall have Liquid Authorized Investments at any time not less than 1% of
the A$ Equivalent of the outstanding principal amount of all notes at that time,
or such other percentage as determined by the trust manager and confirmed by
each rating agency. Such amount shall be known as the PRESCRIBED MINIMUM LEVEL.
At closing, the Liquid Authorized Investments will be acquired
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with the net proceeds from the sale of the notes and will, to the extent
necessary, be replenished from time to time on each monthly payment date with
Mortgage Principal Repayments to the extent they are available as described
below under "--Mortgage Principal Repayments".
If the trust manager determines on any Determination Date that the
Income of the trust for the collection period ending immediately prior to that
Determination Date is insufficient to meet the Primary Expenses of the trust for
that collection period, then the trust manager will direct the issuer trustee to
apply, first, the Liquid Authorized Investments and, then, if the Liquid
Authorized Investments are insufficient, the Capital of the trust, to cover such
INCOME SHORTFALL to the extent available.
Income received during a collection period and any Capital and Liquid
Authorized Investments applied as described above will constitute AVAILABLE
INCOME.
DISTRIBUTION OF AVAILABLE INCOME
On each monthly payment date, based on the calculations, instructions
and directions provided to it by the trust manager on or before the date which
is 2 business days before that monthly payment date, the issuer trustee must pay
or cause to be paid out of the Available Income for the collection period ending
immediately before that monthly payment date, the following amounts, which
together constitute the PRIMARY EXPENSES, in the following order of priority:
o first, an amount equal to the Accrued Interest Adjustment to each
seller;
o second, any taxes payable in relation to the trust;
o third, in the following order of priority, in monthly payment of:
o pro rata:
o the issuer trustee's fee for the collection period;
o any fees payable to the note trustee for the collection
period;
o pro rata:
o any fees payable pro rata to the paying agents for the
collection period;
o any fees payable to the calculation agent for the
collection period;
o the expenses of the trust - other than any fees payable
to the issuer trustee, the note trustee, the paying
agents, the calculation agent and the trust manager - in
relation to the collection period;
o the expenses of the trust - other than any fees payable
to the issuer trustee, the note trustee, the paying
agents, the calculation agent and the trust manager -
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which the trust manager or the issuer trustee reasonably
anticipates will be incurred prior to the next monthly
payment date;
o the expenses of the trust - other than any fees payable
to the issuer trustee, the note trustee, the paying
agents, the calculation agent and the trust manager -
not covered by the two previous bullet points above
which have already been incurred prior to the monthly
payment date but which have not previously been paid or
reimbursed;
o fourth, the trust manager's fee for the collection period;
o fifth, pro rata:
o any amounts payable to the fixed-floating rate swap
provider under the fixed-floating rate swap other than
any break costs in respect of the termination of the
fixed-floating rate swap;
o any interest for the interest period ending on that
monthly payment date to the Class A1 noteholders;
o to the fixed-floating rate swap provider any amounts
payable under the fixed-floating rate swap;
o the A$ Interest Amount for that monthly payment date (1)
prior to the termination of the currency swap, to the
currency swap provider, and any reciprocal payment by
the currency swap provider is thereafter to be applied
towards payment of interest on the Class A2 notes on the
related quarterly payment date, and (2) in the event of
the termination of the currency swap, to the note
trustee for purchase of U.S. dollars at the prevailing
spot exchange rate in New York City to be applied
towards payment of interest on the Class A2 notes on the
related quarterly payment date; and
o any break costs payable under the currency swap other
than in respect of the termination of the currency swap
where the currency swap provider is the defaulting
party, as such term is defined in the currency swap;
o sixth, any interest for the interest period ending on that monthly
payment date to the Class B noteholders; and
o seventh, where any part of Capital has previously been applied by the
issuer trustee to supplement an Income Shortfall, by application by the
issuer trustee for the purposes of replenishment of the assets of the
trust of an amount equal to the amount of Capital so applied.
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The issuer trustee shall only make a payment described in any of the
preceding bullet points in this section to the extent that any Available Income
remains from which to make the payment after amounts with priority to that
payment have been fully paid.
ADDITIONAL INCOME PAYMENTS
On each monthly payment date, based on the calculations, instructions
and directions provided to it by the trust manager, the issuer trustee must pay
or cause to be paid out of any Income for the collection period available after
paying the Primary Expenses referred to above plus the Liquid Authorized
Investments.
o first, pro rata any break costs to:
o the fixed-floating rate swap provider in respect of the
termination of the fixed-floating swap; and
o the currency swap provider in respect of the termination of
the currency swap where the currency swap provider is the
defaulting party, as such term is defined in the currency
swap;
o second, pro rata any fees payable to the sellers; and
o third, pro rata the balance, if any, to each holder of a residual
income unit.
The issuer trustee shall only make a payment described in any of the
preceding bullet points in this section to the extent that any Income and Liquid
Authorized Investments remain from which to make the payment after amounts with
priority to that payment have been fully paid. Liquid Authorized Investments may
only be used to make a payment described in any of the preceding bullet points
if there is insufficient Income to make the payments in full and then, only to
the extent that the application of Liquid Authorized Investments will not reduce
the value of the Liquid Authorized Investments to less than the Prescribed
Minimum Level.
INTEREST ON THE NOTES
CALCULATION OF INTEREST PAYABLE ON THE NOTES
Up to, and including, the Step-Up Margin Date, the interest rate for
the Class A2 notes for the related Interest Period will be equal to LIBOR on the
related rate reset date plus a margin of [*]%. If the issuer trustee has not
redeemed all of the Class A2 notes by the Step-Up Margin Date then the interest
rate for each related Interest Period commencing on or after that date will be
equal to LIBOR on the related rate reset date plus a margin of [*]%.
The STEP-UP MARGIN DATE means the quarterly payment date falling in
July 2009.
Up to, and including, the Step-Up Margin Date, the interest rate for
the Class B notes for a particular Interest
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Period will be equal to the Bank Bill Rate on the first day of that Interest
Period plus a margin of [*]%. If the issuer trustee has not redeemed all of the
Class B notes by the Step-Up Margin Date then the interest rate for a particular
Interest Period commencing on or after that date will be equal to the Bank Bill
Rate on the first day of that Interest Period plus a margin of [*]%.
The interest rate for the Class A1 notes will be as specified on the
issue date of the Class A1 notes. No Class A1 notes may be issued unless the
rating agencies have confirmed that the issue of the Class A1 notes will not
result in a reduction or withdrawal of the rating of any note outstanding.
With respect to any monthly payment date or quarterly payment date,
interest on the notes will be calculated as the product of:
o the outstanding principal amount of such class as of the first day of
the applicable Interest Period, after giving effect to any payments of
principal made or to be made with respect to such class on such day;
and
o the interest rate for such class of notes; and
o a fraction, the numerator of which is the actual number of days in the
applicable Interest Period and the denominator of which is 360 days for
the Class A2 notes, or 365 days for the Class A1 notes and the Class B
notes.
A note will bear interest until the date that note is finally redeemed.
See "--Final Redemption of Notes" below.
CALCULATION OF LIBOR
On the second banking day in London and New York before the beginning
of each Interest Period, the calculation agent will determine LIBOR for the next
Interest Period. This will be the rate reset date.
PUBLICATION OF INTEREST RATE
The principal paying agent shall publish the interest rate for each
Interest Period and when applicable, any increase in the applicable margin, the
amount payable in respect of each Class A2 note for such Interest Period and the
relevant interest quarterly payment date in accordance with the notice
provisions set forth under the heading "-- Notices" and inform the Luxembourg
Stock Exchange as soon as possible after the determination of such amounts and
date. It is expected that publication will be made on or before the relevant
quarterly payment date.
MORTGAGE PRINCIPAL REPAYMENTS
On each Determination Date, the trust manager must determine the
Mortgage Principal Repayments for the collection period ending immediately prior
to that Determination Date.
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MORTGAGE PRINCIPAL REPAYMENTS for a collection period are all amounts
received by the issuer trustee during that collection period in connection with
a housing loan or mortgage securing that housing loan which are:
o in respect of the repayment of any part of the principal outstanding
under the housing loan;
o any net receipts of a principal or capital nature received in respect
of any enforcement or recovery proceedings in respect of the housing
loan or mortgage securing that housing loan;
o any net receipts of a principal or capital nature received under a
mortgage insurance policy or title insurance policy in respect of the
housing loan or mortgage securing that housing loan; and
o any other amount received on, under or in relation to the housing loan
or mortgage securing that housing loan and which is not Income.
In addition, on the first quarterly payment date which is three months
after the closing date, the balance of the prefunding account that has not been
used to acquire or originate additional housing loans will be applied as
Mortgage Principal Repayments as described below. See "Acquisition of Housing
loans after the Closing Date".
PRINCIPAL DISTRIBUTIONS
On each monthly payment date, in accordance with the calculations,
instructions and directions provided to it by the trust manager and except to
the extent the trust manager directs the issuer trustee that such moneys be
applied or retained for Liquidity Purposes (as described below), the issuer
trustee must distribute or cause to be distributed out of the Mortgage Principal
Repayments, in relation to the collection period ending immediately before that
monthly payment date, and any Surplus Liquidity for the corresponding monthly
payment date prior to the enforcement of the security trust deed, the following
amounts in the following order of priority:
o first, to make up any Income Shortfall. See "--Application of Capital
and Liquid Authorized Investments to Available Income" above;
o second, to Class A1 noteholders in payment of the Principal Amount of
the Class A1 Notes until such time as the Class A1 notes have been
redeemed in full;
o third, the A$ Equivalent of the Currency Swap Notional Amount (1) prior
to the termination of the currency swap, to the currency swap
provider in payment of, for that monthly payment date, and any
reciprocal payment by the currency swap provider is thereafter to be
applied towards payment of the Principal Amount of the Class A2
notes on the related quarterly payment date, and (2) in the event
of the termination of the currency swap, to the note trustee for
purchase of U.S. dollars at the spot exchange rate in New York City.
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to be applied towards payment of the Principal Amount of the
Class A2 Notes on the related quarterly payment date, in each case
until such time as all Class A2 notes have been redeemed in full;
o fourth, to Class B noteholders in payment of the Principal Amount of
the Class B notes until such time as the Class B notes have been
redeemed in full; and
o fifth, the balance, if any, as a distribution to the holder of the
residual capital unit.
LIQUIDITY PURPOSES includes:
o the provision by the issuer trustee of redraws in the manner described
under "Interstar Residential Loan Program -- Special Features of the
Housing Loans -- Redraws" above;
o the provision by the issuer trustee of advances to borrowers under
housing loans which provide for a line of credit facility or revolving
credit facility; and
o replenishing Liquid Authorized Investments to maintain the Prescribed
Minimum Level. See "--Application of Capital and Liquid Authorized
Investments to Available Income".
PAYMENTS INTO US$ ACCOUNT
The principal paying agent shall open and maintain a US$ account into
which the currency swap provider shall deposit on each quarterly payment date
amounts denominated in US$. The issuer trustee shall direct the currency swap
provider to pay all amounts denominated in US$ payable to the issuer trustee by
the currency swap provider under the currency swap into the US$ account or to
the principal paying agent on behalf of the issuer trustee. If any of the issuer
trustee, the trust manager or the servicer receives any amount denominated in
US$ from the currency swap provider under the currency swap, they will also
promptly pay that amount to the credit of the US$ account.
PAYMENTS OUT OF US$ ACCOUNT
At the direction of the trust manager, the issuer trustee shall, or
shall require that the principal paying agent, on behalf of the issuer trustee,
distribute the following amounts from the US$ account in accordance with the
note trust deed and the agency agreement on each quarterly payment date pro rata
between the relevant notes and to the extent payments relating to the following
amounts were made to the currency swap provider:
o interest on the Class A2 notes;
o principal on the Class A2 notes, until their outstanding principal
balance is reduced to zero.
NOTICES
As long as the Class A2 notes are listed on the Luxembourg Stock
Exchange, all notices relating to the Class A2 notes will, unless otherwise
provided for by law or as provided in the
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following paragraph, be validly given if published in a leading newspaper having
general circulation in the Grand Duchy of Luxembourg (which is expected to be
the Luxembourg Wort); provided, however, that publishing such notices will not
discharge any party's obligation to provide notices in any other way or to any
person under the transaction documents. If publication in such manner is
impracticable, notice will be published in a daily newspaper with general
circulation in Europe. Notice will be deemed to have been given on the date of
the first publication.
Any notice to Class A2 noteholders specifying a quarterly payment date,
an interest rate, interest payable, a principal payment--or the absence of a
principal payment, or a principal amount will be deemed to have been properly
given if the information contained in the notice appears on the relevant page of
the Reuters Screen or the electronic information system made available to its
subscribers by Bloomberg, L.P. or any other similar electronic reporting service
as may be approved by the note trustee in writing and notified to Class A2
noteholders and, for as long as the Class A2 notes are listed on the Luxembourg
Stock Exchange and the Luxembourg Stock Exchange so requires, if a copy of the
notice is made available at the offices of the Luxembourg Paying Agent at The
Bank of New York (Luxembourg S.A. Aerogolf Center IA, Hoehenhof L-1736
Senningerberg Luxembourg. This notice will be considered to have been given on
the first date on which it appears on the relevant electronic reporting service.
If it is impossible or impracticable to give notice as stated in this paragraph,
then notice of the matters discussed in this paragraph will be given in the
manner stated in the paragraph above.
THE FIXED-FLOATING RATE SWAP
The issuer trustee will in the future enter into a swap governed by an
ISDA Master Agreement, as amended by a supplementary schedule and confirmed by a
written confirmation, with the fixed-floating rate swap provider, if any
fixed-rate housing loans are added to the housing loan pool or if a borrower
converts a floating rate loan to a fixed rate loan, to hedge the basis risk
between the interest rate on the fixed rate housing loans and the floating rate
obligations of the trust, including the interest due on the notes. The
fixed-floating rate swap will cover the housing loans which bear a fixed rate of
interest as of the applicable cut-off date and those variable rate housing loans
which at a later date convert to a fixed rate of interest.
The issuer trustee will pay the fixed-floating rate swap provider on
each monthly payment date an amount calculated by reference to the applicable
fixed rate on the housing loans which are subject to a fixed rate of interest.
The issuer trustee will also pay the fixed-floating rate swap provider all break
fees from borrowers with fixed rate loans received during the related collection
period.
The issuer trustee will receive from the fixed-floating rate swap
provider on each monthly payment date an amount calculated by reference to the
Bank Bill Rate.
The terms of the fixed-floating rate swap allow for netting of swap
payments for transactions under the one confirmation.
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FIXED-FLOATING RATE SWAP DOWNGRADE
If the fixed-floating rate swap provider's rating falls below:
o a short term credit rating of A-1 by S&P; or
o a long term credit rating of A2 or a short term credit rating of P-1 by
Moody's,
the fixed-floating rate swap provider must:
o at its cost, novate its obligations to a replacement fixed-floating
rate swap provider with a short term credit rating of at least A-1 by
S&P and a short term credit rating of P-1 by Moody's and a long term
credit rating of at least A2 by Moody's; or
o if the fixed-floating rate swap is not novated within 30 days of the
downgrade, cash collateralize its obligations.
Where the fixed-floating rate swap provider must comply with bullet
point 2 above, it will, at its own cost, deposit into a swap collateral account
sufficient funds to ensure that the amount standing to the credit of that
account is equal to the greater of the following--unless otherwise agreed by
the rating agencies:
o an amount sufficient to maintain the rating of the Class A2 notes at
the rating that was applicable to those notes immediately prior to the
rating downgrade of the fixed-floating rate swap provider;
o the amount of the next swap payment due by the fixed-floating rate swap
provider; and
o 1% of the aggregate Principal Amount of the Class A2 notes at that
time.
TERMINATION BY THE FIXED-FLOATING RATE SWAP PROVIDER
The fixed-floating rate swap provider will have the right to terminate
the fixed-floating rate swap in the following circumstances:
o the issuer trustee fails to make a payment under the
fixed-floating rate swap within 10 days after notice of
failure is given to the fixed-floating rate swap provider;
o if due to a change in law it becomes illegal for either party
to make or receive payments, perform its obligations or
comply with any material provision of the fixed-floating rate
swap;
o an Insolvency Event has occurred with respect to the issuer
trustee and the issuer trustee has not novated its
obligations within 30 days of the Insolvency Event and such
substitution will not have caused a downgrade or withdrawal
of the rating of the notes; and
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o if the fixed-floating rate swap provider is downgraded and
fails to comply with the procedures stated above;
The issuer trustee will have the right to terminate the fixed-floating
rate swap in the following circumstances:
o the fixed-floating rate swap provider fails to make a payment
under a swap within 10 days after notice of failure is given
to the issuer trustee;
o if due to a change in law it becomes illegal for either party
to make or receive payments, perform its obligations or
comply with any material provision of the fixed-floating rate
swap.
THE CURRENCY SWAP AND CURRENCY SWAP GUARANTEE
Collections on the housing loans and payments to the issuer trustee
under the fixed-floating rate swap will be denominated in Australian dollars.
The payments to the issuer trustee under the fixed-floating rate swap will be
calculated by reference to the Bank Bill Rate. However, the payment obligations
of the issuer trustee on the Class A2 notes are denominated in United States
dollars and the Class A2 Notes bear interest at a rate calculated by reference
to LIBOR. To hedge its interest rate and currency exposures, the issuer trustee
will enter into a swap agreement with the currency swap provider. Under
a currency swap guarantee dated as of March 26, 2001, the currency swap
guarantor will guarantee to the issuer trustee the payment obligations of the
currency swap provider under the currency swap.
The currency swap will be governed by a standard form ISDA Master
Agreement, as amended by a supplementary schedule and confirmed by a written
confirmation relating to the Class A2 notes.
Under the currency swap, the issuer trustee will pay to the currency
swap provider on each monthly payment date an amount in Australian dollars equal
to that portion of the Mortgage Principal Repayments and any Surplus Liquidity,
if any, to be paid to the noteholders as a payment of principal on the Class A2
notes and the currency swap provider is required on the related quarterly
payment date to pay to, or at the direction of, the issuer trustee an amount
denominated in United States dollars which is equivalent to such Australian
dollar payment. The equivalent United States dollar payment will be calculated
using an exchange rate of US$[*] =A$1.00, which is fixed for the term of the
currency swap.
In addition, under the currency swap on each monthly payment date the
issuer trustee will pay to the currency swap provider the A$ Interest Amount in
respect of the Class A2 notes and the currency swap provider will pay to the
principal paying agent an amount equal to the interest payable in US$ to the
Class A2 noteholders. The currency swap provider will be required to make US
dollar payments to the issuer trustee on each quarterly payment date. Under the
currency swap agreement, the currency swap provider will also be required to pay
grossed-up amounts to the issuer trustee to compensate for withholding taxes
payable under the currency swap. However, the issuer trustee will not be
required to pay grossed-up amounts to the currency swap provider under the
currency swap.
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If on any monthly payment date, the issuer trustee does not or is
unable to make the full floating rate payment, the US$ floating rate quarterly
payment to be made by the currency swap provider, with respect to such
Australian dollar floating rate monthly payment will be reduced by the same
proportion as the reduction in such payment from the issuer trustee.
The purchase price for the Class A2 notes will be paid by investors in
United States dollars, but the consideration for the purchase by the issuer
trustee of an equitable interest in the housing loans will be in Australian
dollars. On the closing date, the issuer trustee will pay to the currency swap
provider the proceeds of the issue of the Class A2 notes in United States
dollars. In return the issuer trustee will be paid by the currency swap provider
the A$ Equivalent of that United States dollar amount.
TERMINATION BY THE CURRENCY SWAP PROVIDER
The currency swap provider shall have the right to terminate the
currency swap in the following circumstances:
o if the issuer trustee fails to make a payment under the currency swap
within ten business days of its due date;
o an Insolvency Event with respect to the issuer trustee occurs or the
issuer trustee merges into another entity without that entity properly
assuming responsibility for the obligations of the issuer trustee under
the currency swap; or
o if due to a change in law it becomes illegal for either party to make
or receive payments or comply with any other material provision of the
currency swap. The currency swap requires such party to make efforts to
transfer its rights and obligations to another office or another
affiliate to avoid this illegality, so long as the transfer would not
result in a downgrade or withdrawal of the rating of the notes. If
those efforts are not successful, then the currency swap provider will
have the right to terminate the currency swap. These provisions
relating to termination following an illegality have been modified so
that they are not triggered by the introduction of certain exchange
controls by any Australian government body.
o if the issuer trustee becomes obligated to make a withholding or
deduction in respect of the Class A2 notes or in respect of payments
under the currency swap or borrowers under the housing loans become
obliged to make a withholding or deduction or in respect of payments
under the housing loans and the Class A2 notes are redeemed as a
result. See "Redemption of Notes for Taxation or Other Reasons" below.
TERMINATION BY THE ISSUER TRUSTEE
There are a number of circumstances in which the issuer trustee has the
right to terminate the currency swap. In each of these cases it is only
permitted to exercise that right with the prior written consent of the note
trustee:
o where the currency swap provider fails to make a payment under the
currency swap within ten business days of its due date or the currency
swap provider becomes insolvent
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or merges into another entity without that entity properly assuming
responsibility for the obligations of the currency swap provider under
the currency swap;
o if due to a change in law it becomes illegal for either party to make
or receive payments or comply with any other material provision of the
currency swap. The currency swap requires such party to make efforts to
transfer its rights and obligations to another office or another
affiliate to avoid this illegality, so long as the transfer would not
result in a downgrade or withdrawal of the rating of the notes. If
those efforts are not successful, then the issuer trustee will have the
right to terminate. These provisions relating to termination following
an illegality have been modified so that they are not triggered by the
introduction of certain exchange controls by any Australian government
body;
o if the issuer trustee becomes obligated to make a withholding or
deduction in respect of the Class A2 notes or in respect of payments
under the currency swap or borrowers under the housing loans become
obliged to make a withholding or deduction in respect of payments under
the housing loans and the Class A2 notes are redeemed as a result. See
"Redemption of Notes for Taxation or Other Reasons" below; or
o after a currency swap downgrade, if the currency swap provider breaches
its obligation to deposit cash collateral with the issuer trustee or to
transfer the currency swap to a replacement currency swap provider or
to enter into another arrangement required by the rating agencies in
accordance with the currency swap.
The issuer trustee may only terminate the currency swap with the prior
written consent of the note trustee. Each party may terminate the currency swap
only after consulting with the other party as to the timing of the termination.
The issuer trustee will exercise such right to terminate at the direction of the
trust manager.
CURRENCY SWAP DOWNGRADE
If, as a result of the withdrawal or downgrade of its credit rating by
any rating agency, the currency swap guarantor does not have a short term credit
rating of A-1+ and a long term credit rating of at least AA- by S&P and a long
term credit rating of at least A2 and a short term credit rating of P-1 by
Moody's and, in the case of Moody's, such a downgrade would, except for this
paragraph, adversely affect the rating of the notes, the currency swap provider
must within:
o 30 business days of a downgrade of the currency swap guarantor's short
term credit rating by S&P to not lower than A-1 or the downgrade of its
long term credit rating by Moody's to not lower than A3; or
o 5 business days of any other such withdrawal or downgrade,
or, in either case, such greater period as is agreed to in writing by the
relevant rating agency, at the currency swap provider's cost and at its
election:
o in the situation described in bullet point one above only, lodge a cash
collateral amount in US$ with an Approved Bank outside Australia; or
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o enter into an agreement transferring the currency swap to a replacement
counterparty in respect of which each rating agency has confirmed will
result in there not being a withdrawal or downgrade of the then current
credit ratings assigned by it to the Class A2 notes; or
o enter into such other arrangements which each rating agency has
confirmed will result in there not being a withdrawal or downgrade of
the then current credit ratings assigned by it to the Class A2 notes.
Any principal previously paid to the currency swap provider during an interest
period but prior to the downgrade will be deposited within 5 business days of
the downgrade with an Approved Bank in Australian dollars. Following the
downgrade of the swap guarantor, all interest and principal payments which would
have been payable by the issuer trustee to the currency swap provider under the
currency swap will deposited in Australian dollars with an Approved Bank.
Interest and principal payments on deposit with an Approved Bank may be invested
in Liquid Authorized Investments. On each quarterly payment date, the issuer
trustee will withdraw all such Australian dollar amounts payable with respect to
the Class A2 notes on such quarterly payment date and exchange such amounts for
U.S. dollars under the currency swap. Any income arising from such investments
will be paid to the currency swap provider.
TERMINATION PAYMENTS
On the date of termination of the currency swap, a termination payment
will be due from the issuer trustee to the currency swap provider or from the
currency swap provider to the issuer trustee. The termination of the currency
swap where a replacement currency swap, on terms that will not lead to a
withdrawal or downgrade of the then current rating assigned by either rating
agency to the notes, is not put in place, is an event of default under the
security trust deed.
The termination payment in respect of a currency swap will be
determined on the basis of quotations from four leading dealers in the relevant
market selected by the currency swap provider to enter into a replacement
transaction that would have the effect of preserving the economic equivalent of
any payment that would, but for the early termination, have been required under
the terms of the currency swap.
REPLACEMENT OF THE CURRENCY SWAP
If the currency swap is terminated, the issuer trustee must, at the
direction of the trust manager, enter into one or more replacement currency
swaps which replace the currency swap, but only on the conditions that:
o the termination payment, if any, which is payable by the issuer trustee
to the currency swap provider on termination of the currency swap will
be paid in full when due in accordance with the series notice and the
currency swap;
o the then current ratings assigned to the notes by either rating agency
will not be withdrawn or downgraded; and
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o the liability of the issuer trustee under that replacement currency
swap is limited to at least the same extent that its liability is
limited under the currency swap.
If the preceding conditions are satisfied, the issuer trustee must, at
the direction of the trust manager, enter into the replacement currency swap,
and if it does so it must direct the provider of the replacement currency swap
to pay any up-front premium to enter into the replacement currency swap due to
the issuer trustee directly to the currency swap provider in satisfaction of and
to the extent of the issuer trustee's obligation to pay the termination payment
to the currency swap provider. To the extent that such premium is not greater
than or equal to the termination payment, the balance must be paid by the issuer
trustee as an expense of the trust.
CURRENCY SWAP PROVIDER
The currency swap provider will be Zurich Capital Markets Australia
Limited.
ZURICH CAPITAL MARKETS AUSTRALIA LIMITED
The currency swap provider is Zurich Capital Markets Australia Limited
("ZCMAL").
ZCMAL is a limited liability company incorporated in Australia with its
principal place of business at Level 47, 2 Park Street, Sydney NSW 2000 (ABN
99095 545 887). It is a wholly owned indirect subsidiary of Zurich Financial
Services ("ZFS"). ZCMAL manages operations throughout the Asian region to
develop capital markets and banking operations for Zurich Capital Markets
("ZCM"), a subsidiary of ZFS.
As of December 31, 2001, based on audited Australian GAAP financial
statements, ZCMAL had total assets of A$123,680,000, total liabilities of
A$107,527,000 and shareholders funds of A$16,153,000. Australian GAAP financial
statements may not conform to generally accepted accounting principles applied
by United States companies.
As of June 4, 2002 ZCMAL had a long-term rating of Aa2, on review for
possible downgrade, from Moody's and AA- from S&P. These ratings are supported
by the following:
o a guarantee dated as of March 26, 2001 by ZCM Matched Funding Corp. in
favor of ZCMA and any person specified in the guarantee entitled to
payment or performance by ZCMA;
o a guarantee dated as of June 21, 2001 by ZFS and Zurich Group Holding
in favor of ZCMMF, Zurich Capital Markets Inc, Zurich Bank and ZCMA and
any person in the guarantee entitled to payment or performance by the
guarantors; and
o a surety bond dated as of August 6, 1997 by ZIC in favor of ZCMMF and
any person specified in the surety bond entitled to payment or
performance by ZCMMF under a "Financial Products Instrument" (as
described in the surety bond), including ZCMMF's obligations under the
March 26, 2001 guarantee and under any interest rate or currency
derivatives. The surety bond, among other things, requires ZIC to cause
ZCMMF to maintain a net worth of at least US$10 million at all times.
The obligations of ZIC under this surety bond are limited to
US$3 billion.
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CURRENCY SWAP GUARANTOR
ZCM MATCHED FUNDING CORP.
ZCMMF is a limited liability company incorporated in the State of
Delaware. It is a wholly-owned, indirect subsidiary of ZFS. Its principal
registered office is Trust Centre, 1209 Orange Street, Wilmington, Delaware, USA
and its business address is One Chase Manhattan Plaza, 44th Floor, New York, NY
10005, USA. It conducts various financial transactions for ZFS and its
subsidiaries, including raising funding for the Zurich Financial Services Group
and providing structured products for ZCM's clients.
As of December 31, 2001, based on audited US GAAP financial statements,
ZCMMF had total assets of US$3,918,407,545, total liabilities of
US$3,781,766,848 and shareholders' equity of US$136,640,697. ZCMMF is a wholly
owned subsidiary of ZFS. ZCMMF's share capital consists of 1,000 shares each
having a par value of one cent.
ZURICH FINANCIAL SERVICES
ZFS is the parent company of the Zurich Financial Services Group (the
"Group"). The Group provides customer solutions in the areas of financial
protection (non-life insurance and structured solutions) and asset gathering
(life insurance and asset management). The Group focuses its activities on its
markets in North America, the United Kingdom and continental Europe. Founded in
1872, ZFS is a limited liability corporation headquartered in Zurich,
Switzerland. The Group has offices in more than 60 countries and employs
approximately 70,000 people.
As of December 31, 2001, based on audited International Accounting
Standard financial statements, ZFS had total assets of US$231,605 million, total
liabilities of US$210,885 million, shareholders' equity of US$17,742 million and
minority interest of US$2,978 million. International Accounting Standards may
not conform to generally accepted accounting principles applied by United States
companies. On May 16, 2002, the Board of Directors of ZFS appointed a new Chief
Executive Officer after the resignation of its former Chairman, who served on
the Board of Directors for nearly 40 years.
ZFS directly and indirectly owns 100% of the issued share capital of
Zurich Group Holding ("ZGH"). ZGH is the holding company of the Zurich Group, a
leading multinational insurance and financial services group, which comprises
ZIC and its subsidiaries. ZGH directly owns 100% of the issued share capital of
ZIC.
ZIC is a limited liability corporation incorporated in Switzerland. ZIC
operates mainly in two capacities, firstly as a non-life insurer and reinsurer,
operating through branch offices in Switzerland and other countries and
secondly, as the holding company of its subsidiaries.
ZIC is an insurance company regulated under the laws of Switzerland.
Under Swiss law an insurance policyholder ranks above other unsecured creditors
of that insurance company. The surety bond, dated as of August 6, 1997, in favor
of ZCMMF is structured as an insurance policy. Persons specified in the surety
bond entitled to payment or performance by ZCMMF
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under certain agreements, including the March 26, 2001 guarantee, are treated as
beneficiaries of an insurance policy and as a result rank equally with the
insurance policyholders of ZIC.
SWAP COLLATERAL ACCOUNT
If a swap provider provides cash collateral to the issuer trustee:
o the trust manager must direct the issuer trustee, and the issuer
trustee must, as soon as practicable establish and maintain in the name
of the issuer trustee a swap collateral account with an Approved Bank
such that the deposit does not cause a downgrade or withdrawal of the
rating of any notes; and
o the swap provider must deposit the cash collateral in the swap
collateral account.
The issuer trustee may only make withdrawals from the swap collateral
account upon the direction of the trust manager and only for the purpose of:
o entering into a substitute swap;
o refunding to that swap provider the amount of any reduction in the swap
collateral amount, but only if the ratings of the notes are not thereby
withdrawn or reduced;
o withdrawing any amount which has been incorrectly deposited into the
swap collateral account;
o paying bank accounts debit tax or equivalent taxes payable in respect
of the swap collateral account; or
o funding the amount of any payment due to be made by that swap provider
under the relevant swap following the failure by that swap provider to
make that payment.
WITHHOLDING OR TAX DEDUCTIONS
All payments in respect of the notes will be made without withholding
or tax deduction for, or on account of, any present or future taxes, duties or
charges of whatever nature unless the issuer trustee or any paying agent is
required by applicable law to make any such payment in respect of the notes
subject to any withholding or deduction for, or on account of, any present or
future taxes, duties or charges of whatsoever nature. In the event that the
issuer trustee or the paying agents, as the case may be, shall make such payment
after such withholding or deduction has been made, it shall account to the
relevant authorities for the amount so required to be withheld or deducted.
Neither the issuer trustee nor any paying agent will be obligated to make any
additional payments to holders of the notes with respect to that withholding or
deduction.
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REDEMPTION OF THE NOTES FOR TAXATION OR OTHER REASONS
AT THE OPTION OF NOTEHOLDERS
If the trust manager satisfies the issuer trustee and the note trustee,
immediately prior to giving the notice to the noteholders as described in this
section, that:
o on the next relevant payment date the issuer trustee or any paying
agent would be required to deduct or withhold from any payment:
o of principal or interest in respect of the notes; or
o by the issuer trustee to the currency swap provider under the
currency swap,
any amount for or on account of any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by any government agency, or
o a government agency requires the deduction or withholding from payments
by borrowers under the housing loans of any amount for or on account of
any taxes, duties, assessments or governmental charges of whatever
nature imposed, levied, collected, withheld or assessed by that
government agency,
then the issuer trustee must, when so directed by noteholders representing at
least 75% of the outstanding Principal Amount of the notes provided that the
issuer trustee will be in a position on the next quarterly payment date to
discharge, and the trust manager will so certify to the issuer trustee and the
note trustee, all its liabilities in respect of the notes and any amounts
required under the security trust deed to be paid in priority to or equal with
the notes, redeem all, but not some, of the notes at their outstanding principal
amount, together with accrued interest to the date of redemption on any
subsequent quarterly payment date. Noteholders must be given notice of a
redemption not more than 60 nor less than 45 days prior to the date of
redemption.
AT THE OPTION OF THE TRUST MANAGER
If the trust manager satisfies the issuer trustee and the note trustee,
immediately prior to giving the notice to the noteholders as described in this
section, that on the next quarterly payment date the currency swap provider
would be required to deduct or withhold from any payment under the currency swap
any amount for or on account of any present or future taxes, duties, assessments
or governmental charges of whatever nature imposed, levied, collected, withheld
or assessed by any government agency, then the issuer trustee must, when so
directed by the trust manager, in its sole discretion, provided that the issuer
trustee will be in a position on such payment date to discharge, and the trust
manager will so certify to the issuer trustee and the note trustee, all its
liabilities in respect of the notes and any amounts required under the security
trust deed to be paid in priority to or equal with the notes, redeem all, but
not some, of the notes at their outstanding principal amount, together with
accrued interest to the date of redemption on any subsequent quarterly payment
date. Noteholders must be given notice of a redemption not more than 60 nor less
than 45 days prior to the date of redemption.
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REDEMPTION OF THE NOTES UPON AN EVENT OF DEFAULT
If an event of default occurs under the security trust deed while the
Class A2 notes or Class B notes are outstanding, the security trustee may,
subject in some circumstances to the prior written consent of the Noteholder
Mortgagees in accordance with the provisions of the security trust deed, and
will, if so directed by the Noteholder Mortgagees where they are the only Voting
Mortgagees, or, otherwise by a resolution of 75% of the Voting Mortgagees,
provided that the trust manager is able to certify to the issuer trustee that
the issuer trustee will be able to do so, enforce the security created by the
security trust deed. That enforcement can include the sale of some or all of the
housing loans. If the trust terminates while notes are outstanding, each seller
has a right of first refusal to acquire the housing loans. Any proceeds from the
enforcement of the security will be applied in accordance with the order of
priority of payments as set out in the security trust deed. See "Description of
the Transaction Documents -- The Security Trust Deed".
OPTIONAL REDEMPTION OF THE NOTES
ON STEP-UP MARGIN DATE
At the trust manager's direction, to be given not later than 2 business
days before the relevant quarterly payment date, the issuer trustee must redeem
all of the notes in a class by repaying the outstanding principal amount of the
notes in that class, together with accrued interest to, but excluding, the date
of redemption, on any quarterly payment date falling on or after the Step-Up
Margin Date, being the July 2009 quarterly payment date, provided that:
o the trust manager has provided to:
o each relevant noteholder, the note trustee and the issuer
trustee, 30 days prior notice; and
o each rating agency, 30 days prior written notice,
of the trust manager's intention to direct the issuer trustee to
redeem the relevant notes;
o the trust manager has received from each rating agency written
confirmation that the repayment will not result in a downgrade or
withdrawal of the rating of any other notes;
o the issuer trustee has sufficient cash to make such repayment, in
respect of which the issuer trustee may rely conclusively on a
certification from the trust manager;
o the issuer trustee retains such amount as the trust manager or the
issuer trustee reasonably determines will be necessary to satisfy any
outstanding or anticipated expenses of the trust, payment to any
noteholder in respect of a note which is not to be so redeemed or
payment to any swap provider; and
o in no circumstance may the trust manager give such a direction in
relation to Class B noteholders unless:
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o there are at that time no Class A notes outstanding; or
o the trust manager at the same time gives or has given a direction to
redeem the Class A notes.
WHEN 10% OF NOTES OUTSTANDING
If the total outstanding principal amount of all notes in all classes
does not exceed 10% of the initial principal amount of all notes the issuer
trustee must, if so directed in writing by the trust manager, repay the whole of
the principal amount of all notes together with any outstanding interest in
relation to those notes on the next quarterly payment date provided that:
o the trust manager has provided to:
o each noteholder, the note trustee and the issuer trustee, 30
days prior notice; and
o each rating agency, 30 days prior written notice,
of the trust manager's intention to direct the issuer trustee to redeem
the notes;
o the issuer trustee has sufficient cash to make such repayment, in
respect of which the issuer trustee may rely conclusively on a
certification from the trust manager;
o the issuer trustee retains such amount as the trust manager or the
issuer trustee reasonably determines will be necessary to satisfy any
outstanding or anticipated expenses of the trust or payment to any swap
provider; and
o the repayment of principal on the notes is made in the order of
priority described under "--Principal Distributions" above.
FINAL MATURITY DATE
The issuer trustee must pay the Principal Amount in relation to each
note on or by the final maturity date relating to that note. The failure of the
issuer trustee to pay the Principal Amount within ten business days of the final
maturity date, or within any other applicable grace period agreed upon with the
Mortgagees, will be an event of default under the security trust deed.
FINAL REDEMPTION OF THE NOTES
Each note will be finally redeemed, and the obligations of the issuer
trustee with respect to the payment of the Principal Amount of that note will be
finally discharged, upon the first to occur of:
o the date on which the outstanding principal balance of the note is
reduced to zero;
o the date upon which the relevant noteholder renounces in writing all of
its rights to any amounts payable under or in respect of that note;
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o the date on which all amounts received by the note trustee with respect
to the enforcement of the security trust deed are paid to the principal
paying agent;
o the quarterly payment date immediately following the date on which the
issuer trustee completes a sale and realization of all of the assets of
the trust in accordance with the master trust deed and the series
notice;
o the date on which all of the principal of the notes are repaid in
accordance with "--Principal Distributions" described above;
o the date on which the notes are redeemed for taxation or other reasons;
and
o the date on which optional redemption of the notes is exercised.
TERMINATION OF THE TRUST
TERMINATION EVENTS
The trust shall continue until, and shall terminate on the later of:
o the Termination Date; and
o the date on which the assets of the trust have been sold or realized,
which shall be within 180 days after the Termination Date so far as
reasonably practicable and reasonably commercially viable.
REALIZATION OF TRUST ASSETS
On the Termination Date, subject to each seller's right of first
refusal, the issuer trustee must sell and realize the assets of the trust within
180 days. During the 180-day period, performing housing loans may not be sold
for less than their Unpaid Balance, and non-performing housing loans may not be
sold for less than the fair market value of such housing loans and their related
security, as agreed upon by the issuer trustee, based on appropriate expert
advice, and the seller; provided that the issuer trustee may not sell any
performing housing loan within the 180-day period for less than its fair market
value without the consent of the holders of 75% of the aggregate outstanding
principal amount of the notes. The trust manager will determine whether a
housing loan is performing or non-performing.
SELLERS' RIGHT OF FIRST REFUSAL
As soon as practical after the Termination Date, the trust manager will
direct the issuer trustee to offer to assign to each seller, its entire right,
title and interest in and to the housing loans sold by it for their Unpaid
Balance, for performing housing loans, and their fair market value, for
non-performing housing loans; provided that, if the fair market value of a
housing loan is less than its Unpaid Balance, the sale requires the consent of
the holders of 75% of the aggregate outstanding principal amount of the notes.
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The issuer trustee is not entitled to sell any housing loans unless the
relevant seller has failed to accept the offer made to it within 180 days after
the occurrence of the Termination Date by paying to the issuer trustee the
purchase price.
DISTRIBUTION OF PROCEEDS FROM REALIZATION OF TRUST ASSETS
After deducting expenses, the trust manager shall direct the issuer
trustee to distribute the proceeds of realization of the assets of the trust in
accordance with the cashflow allocation methodology set out in "Distribution of
Available Income" and "Principal Distributions", and in accordance with any
directions given to it by the trust manager. If all of the notes have been fully
redeemed and the trust's other creditors have been paid in full, the issuer
trustee shall distribute the assets of the trust to the residual beneficiary.
PRESCRIPTION
A note will be void in its entirety if not surrendered for payment
within ten years of the relevant date in respect of any payment on the note, the
effect of which would be to reduce the principal amount of such note to zero.
The relevant date is the date on which a payment first becomes due but, if the
full amount of the money payable has not been received in New York City by the
principal paying agent or the note trustee on or prior to that date, it means
the date on which the full amount of such money having been so received and
notice to that effect is duly given in accordance with the terms of the relevant
note. After the date on which a note becomes void in its entirety, no claim may
be made in respect of it.
REPORTS TO NOTEHOLDERS
On each Determination Date, the trust manager will, in respect of the
collection period ending before that Determination Date, deliver to the
principal paying agent, the Luxembourg paying agent, the note trustee and the
issuer trustee, a noteholder's report containing the following information:
o the outstanding principal balance of each class of notes;
o the interest payments and principal distributions on each class of
notes;
o the Available Income;
o the Total Available Funds;
o the aggregate of all redraws made during that quarterly collection
period;
o the Redraw Shortfall, if any;
o the Payment Shortfall, if any;
o the principal draw, if any, for that quarterly collection period,
together with all principal draws made before the start of that
quarterly collection period and not repaid;
o the Principal Collections;
o the bond factor for each class of notes, which with respect to a class
of notes, means the aggregate of the outstanding principal balance of
the class of notes less all principal payments on that class of notes
to be made on the next quarterly payment date, divided by the aggregate
initial outstanding principal balance for all of that class of notes;
o if required, the threshold rate at that quarterly Determination Date;
o the interest rates on the notes for the related Interest Period;
o scheduled and unscheduled payments of principal on the housing loans;
o aggregate outstanding principal balance of the fixed rate housing loans
and the aggregate principal balance of the variable rate housing loans;
and
o delinquency and loss statistics with respect to the housing loans.
Unless and until definitive notes are issued, beneficial owners will
receive reports and other information provided for under the transaction
documents only if, when and to the extent provided by DTC and its participating
organizations.
Unless and until definitive notes are issued, periodic and annual
unaudited reports containing information concerning the trust and the Class A2
notes will be prepared by the trust manager and sent to DTC. DTC and its
participants will make such reports available to holders of interests in the
Class A2 notes in accordance with the rules, regulations and procedures creating
and affecting DTC. However, such reports will not be sent directly to each
beneficial owner while the Class A2 notes are in book-entry form. Upon the
issuance of fully registered, certificated notes, such reports will be sent
directly to each Class A2 noteholder. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The trust manager will file with the SEC such periodic reports as are required
under the Exchange Act, and the rules and regulations of the SEC thereunder.
However, in accordance with the Exchange Act and the rules and regulations of
the SEC thereunder, the
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trust manager expects that the obligation to file such reports will be
terminated following the end of June 2003.
VOTING AND CONSENT OF NOTEHOLDERS
The note trustee is not bound to:
o vote under the security trust deed;
o direct the security trustee to enforce the security under the security
trust deed; or
o otherwise take any proceedings, actions or steps pursuant to or in
connection with the security trust deed, the note trust deed or the
Class A2 notes,
unless the note trustee is directed or requested to do so by
noteholders of at least 75% of the outstanding Principal Amount of the
Class A2 notes.
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DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary describes the material terms of the transaction
documents. The summary does not purport to be complete and is subject to the
provisions of the transaction documents. All of the transaction documents,
except for the note trust deed, are governed by the laws of New South Wales,
Australia. The note trust deed is governed by the laws of New South Wales,
Australia and the administration of the trust is governed by New York law. A
copy of the master trust deed and the investment management agreement and a form
of each of the other transaction documents have been filed as exhibits to the
registration statement of which this prospectus is a part.
TRUST ACCOUNTS
The issuer trustee will establish and maintain the collection account
with an Approved Bank. The collection account will initially be established with
National Australia Bank Limited, which has a short term rating of P-1 from
Moody's and A-1+ from S&P. The bank account shall be opened by the issuer
trustee in its name and in its capacity as trustee of the trust. This account
will not be used for any purpose other than for the trust.
The trust manager shall have the discretion and duty to recommend to
the issuer trustee, in writing, the manner in which any moneys forming part of
the trust shall be invested in Authorized Investments and what purchases, sales,
transfers, exchanges, collections, realizations or alterations of assets of the
trust shall be effected and when and how the same should be effected.
MODIFICATIONS
The issuer trustee, the trust manager and the servicer, with respect to
the master trust deed, the series notice and the investment management
agreement, after giving notice to the rating agencies, or the note trustee, the
trust manager and the issuer trustee with respect to the note trust deed or any
other transaction document, except for the currency swap and fixed-floating rate
swap agreement, may by way of supplemental deed alter, add to or modify the
master trust deed, the series notice, the note trust deed or any other
transaction document so long as such alteration, addition or modification was
effected upon - in the case of the master trust deed or the series notice - the
consent of the noteholders or residual beneficiary or - in the case of the note
trust deed - the consent of the Class A2 noteholders as described in the
following paragraph or is:
o to correct a manifest error or ambiguity or is of a formal, technical
or administrative nature only;
o necessary to comply with the provisions of any law or regulation or
with the requirements of any Australian governmental agency;
o appropriate or expedient as a consequence of an amendment to any law or
regulation or altered requirements of the government of any
jurisdiction, any department, commission, office of any government or
any corporation owned or controlled by any government, including,
without limitation, an alteration, addition or modification which is
appropriate or expedient as a consequence of the enactment of a statute
or regulation or an
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amendment to any statute or regulation or ruling by the Australian
Commissioner or Deputy Commissioner of Taxation or any governmental
announcement or statement, in any case which has or may have the effect
of altering the manner or basis of taxation of trusts generally or of
trusts similar to any of the Interstar Millennium Trusts;
o in the case of the master trust deed only, in the opinion of the issuer
trustee, desirable to enable the provisions of the master trust deed to
be more conveniently, advantageously, profitably or economically
administered or is otherwise desirable for any reason.
Except for an alteration, addition or modification as described in the
preceding section, where, in the opinion of the issuer trustee - in the case of
the master trust deed or the series notice - or the note trustee - in the case
of the note trust deed - a proposed alteration, addition or modification to the
master trust deed, the series notice or the note trust deed is prejudicial or
likely to be prejudicial to the interests of the noteholders or a class of
noteholders or the residual beneficiary, such alteration, addition or
modification may only be effected with the prior consent of the holders of at
least 75% of the aggregate outstanding principal amount of the relevant class or
classes of notes or with the prior written consent of the residual beneficiary,
as the case may be.
THE ISSUER TRUSTEE
The issuer trustee is appointed as trustee of the trust on the terms
set out in the master trust deed and the series notice. The issuer trustee has
all the rights, powers and discretions over and in respect of the assets of the
trust in accordance with the transaction documents.
The issuer trustee must act honestly and in good faith in performance
of its duties and in exercising its discretions under the master trust deed, use
its best endeavors to carry on and conduct its business in so far as it relates
to the master trust deed in a proper and efficient manner and to exercise such
diligence and prudence as a prudent person of business would exercise in
performing its express functions and in exercising its discretions under the
master trust deed.
DELEGATION
In exercising its powers and performing its obligations and duties
under the master trust deed, the issuer trustee may, with the approval of the
trust manager, delegate any or all of the duties, powers, discretion or other
functions of the issuer trustee.
TRUST INDENTURE ACT OF 1939
Under the note trust deed, the issuer trustee, or the trust manager on
its behalf, must deliver to the note trustee, within 120 days after the end of
each fiscal year of the trust, commencing on September 30, 2003, and otherwise
in compliance with the requirements of section 314(a)(4) of the United States
Trust Indenture Act of 1939, a certificate stating that:
o a review of the activities of the issuer trustee in respect of the
trust during such year and of performance under the transaction
documents has been made under supervision of the person signing the
certificate; and
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o to the best of the knowledge of the person signing the certificate,
based on the review referred to in the above bullet point, the issuer
trustee has complied with all conditions and covenants under the
transaction documents throughout the relevant year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to that person of the nature and
status of the default.
The issuer trustee, or the trust manager, on its behalf, must deliver
to the note trustee on the closing date, an opinion stating that the security
trust deed and any other requisite documents have been properly recorded and
filed. Within 120 days after the end of each fiscal year commencing on September
30, 2003, the issuer trustee, or the trust manager, on its behalf, must deliver
an opinion stating that action has been taken with respect to the recording and
filing of the security trust deed and any other requisite document or that no
action is required to maintain the security interest created by the security
trust deed.
ISSUER TRUSTEE AND SECURITY TRUSTEE FEES AND EXPENSES
The issuer trustee and the security trustee are collectively entitled
to a fee for each collection period equal to 0.0605% per annum of the aggregate
outstanding principal amount of the notes on the first day of each collection
period payable in arrears on the next monthly payment date.
The issuer trustee and the security trustee will be indemnified out of
the assets of the trust for any liability, cost or expense incurred by it in its
capacity as issuer trustee or security trustee, as applicable, of the trust
except to the extent that such liability, cost or expense is caused by the
fraud, negligence or wilful default of the issuer trustee or security trustee,
as applicable.
REMOVAL OF THE ISSUER TRUSTEE
The issuer trustee is required to retire as trustee after a direction
from the trust manager in writing following an Issuer Trustee's Default.
If the issuer trustee does not retire within 30 days of being directed
by the trust manager to do so, the trust manager shall have the right to remove
the issuer trustee from office as trustee of the Interstar Millennium Trusts.
On the retirement or removal of the issuer trustee the trust manager,
subject to giving prior notice to each rating agency shall be entitled to
appoint in writing some other statutory trustee to be the issuer trustee
provided that appointment will not in the reasonable opinion of the trust
manager materially prejudice the interests of any noteholders. Until the
appointment is completed the trust manager shall act as issuer trustee and will
be entitled to the trustee's fee for the period it so acts as issuer trustee.
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VOLUNTARY RETIREMENT OF THE ISSUER TRUSTEE
The issuer trustee may resign on giving to the trust manager, with a
copy to the rating agencies, not less than three months' notice in writing, or
such other period as the trust manager and the issuer trustee may agree, of its
intention to do so.
Before retirement, the issuer trustee must appoint a successor trustee
who is approved by the trust manager, or who may be the trust manager, and whose
appointment will not materially prejudice the interests of noteholders. If a
successor trustee has not been appointed by the end of the three months' notice
period, the trust manager shall act as trustee until a successor trustee is
appointed.
LIMITATION OF THE ISSUER TRUSTEE'S LIABILITY
The issuer trustee enters into the transaction documents and issues the
notes only in its capacity as trustee of the trust and in no other capacity. A
liability incurred by the issuer trustee acting in its capacity as trustee of
the trust arising under or in connection with the transaction documents or the
trust or in respect of the notes is limited to and can be enforced against the
issuer trustee only to the extent to which it can be satisfied out of the assets
of the trust out of which the issuer trustee is actually indemnified for the
liability. This limitation of the issuer trustee's liability applies despite any
other provision of the transaction documents and extends to all liabilities and
obligations of the issuer trustee in any way connected with any representation,
warranty, conduct, omission, agreement or transaction related to the transaction
documents or the trust.
No noteholder nor any party to any transaction document may sue the
issuer trustee in any capacity other than as trustee of the trust or seek the
appointment of a receiver - except in relation to the assets of the trust -
liquidator, administrator or similar person to the issuer trustee or prove in
any liquidation, administration or arrangements of or affecting the issuer
trustee - except in relation to the assets of the trust.
The other paragraphs in this section do not apply to any obligation or
liability of the issuer trustee to the extent that it is not satisfied because
under a transaction document or by operation of law there is a reduction in the
extent of the issuer trustee's indemnification out of the assets of the trust as
a result of the issuer trustee's fraud, negligence, or wilful default.
Each of the trust manager, the servicer, the calculation agent, the
paying agents and the swap providers are responsible under the transaction
documents for performing a variety of obligations relating to the trust. No act
or omission of the issuer trustee, including any related failure to satisfy its
obligations or breach of representation or warranty under the transaction
documents, will be considered fraud, negligence or wilful default of the issuer
trustee to the extent to which the act or omission was caused or contributed to
by any failure by such person - other than a person whose acts or omissions the
issuer trustee is liable for in accordance with the transaction documents - to
fulfil its obligations relating to the trust or by any other act or omission of
any such person - other than a person whose acts or omissions the issuer trustee
is liable for in accordance with the transaction documents - regardless of
whether or not that act or omission is purported to be done on behalf of the
issuer trustee.
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No attorney, agent, receiver or receiver and trust manager appointed in
accordance with a transaction document has authority to act on behalf of the
issuer trustee in a way which exposes the issuer trustee to any personal
liability and no act or omission of any such person will be considered fraud,
negligence or wilful default of the issuer trustee provided, in the case of any
person selected and appointed by the issuer trustee, that the issuer trustee has
exercised reasonable care in the selection of such persons.
RIGHTS OF INDEMNITY OF ISSUER TRUSTEE
The issuer trustee will be indemnified out of the assets of the trust
against all losses and liabilities properly incurred by the issuer trustee in
performing its duties or exercising its powers under the transaction documents
in relation to the trust except to the extent that such losses and liabilities
arose as a result of the issuer trustee's fraud, negligence or wilful default.
The issuer trustee is indemnified out of the assets of the trust
against certain payments it may be liable to make under any Consumer Credit
Legislation. The trust manager also indemnifies the issuer trustee in relation
to such payments and the issuer trustee is required to first call on the
indemnity from the trust manager before calling on the indemnity from the assets
of the trust.
THE TRUST MANAGER
POWERS
The trust manager will have full and complete powers of management of
the trust, including the administration and servicing of the assets which are
not serviced by the servicer, borrowings and other liabilities of the trust and
the conduct of the day to day operation of the trust.
The issuer trustee has no duty to supervise the trust manager in the
performance of its functions and duties, or the exercise of its discretions.
The trust manager has the absolute discretion to recommend Authorized
Investments to the issuer trustee and direct the issuer trustee in relation to
those Authorized Investments.
DELEGATION
The trust manager may, in carrying out and performing its duties and
obligations contained in the master trust deed, delegate to any of the trust
manager's officers, all acts, matters and things, whether or not requiring or
involving the trust manager's judgment or discretion, or appoint any person to
be its attorney, agent, delegate or sub contractor for such purposes and with
such powers as the trust manager thinks fit.
Notwithstanding that delegation, Interstar Securitisation Management
Pty Limited will continue to be liable for the acts and omissions of Interstar
Securities (Australia) Pty Limited in respect of the performance of the trust
manager's obligations under and in connection with the transaction documents.
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Interstar Securities (Australia) Pty Limited will indemnify the trust
manager for any liability, cost or expense incurred by the trust manager as a
consequence of a failure by Interstar Securities (Australia) Pty Limited to
perform the obligations delegated to it by the trust manager.
TRUST MANAGER'S FEES, EXPENSES AND INDEMNIFICATION
The trust manager is entitled to a fee for each collection period equal
to 0.055% per annum of the aggregate outstanding principal amount of the notes
on the first day of each collection period payable in arrears on the next
monthly payment date.
The trust manager will be indemnified out of the assets of the trust
for any liability, cost or expense properly incurred by it in its capacity as
trust manager of the trust except to the extent that such liability, cost or
expense is caused by the fraud, negligence or wilful default of the trust
manager.
REMOVAL OR RETIREMENT OF THE TRUST MANAGER
The trust manager shall retire as trust manager if the issuer trustee
so directs in writing following a Trust Manager's Default.
The trust manager may resign on giving to the issuer trustee, with a
copy to each rating agency, not less than 90 days, or another period as the
trust manager and the issuer trustee may agree, notice in writing of its
intention to do so.
On retirement or removal of the trust manager, the issuer trustee may
appoint another trust manager, or may act as trust manager, on such terms as the
issuer trustee sees fit, provided the appointment will not materially prejudice
the interests of noteholders. Until a replacement trust manager is appointed, or
the issuer trustee agrees to act as trust manager, the trust manager must
continue as trust manager. If a replacement trust manager is not appointed
within 90 days of the issuer trustee electing to appoint a new trust manager,
the issuer trustee will be the new trust manager.
LIMITATION OF TRUST MANAGER'S LIABILITY
The principal limitations on the trust manager's liability are set out
in full in the master trust deed. These include the following limitations:
o the trust manager will be indemnified out of the trust in respect of
any liability, cost or expense properly incurred by it in its capacity
as trust manager of the trust; and
o subject to the master trust deed, the trust manager is not responsible
for any act, omission, misconduct, mistake, oversight, error of
judgment, forgetfulness or want of prudence on the part of the issuer
trustee or any agent appointed by the issuer trustee or on whom the
trust manager is entitled to rely under the master trust deed, other
than a related company, attorney, banker, receiver, barrister,
solicitor, agent or other person acting as agent or adviser to the
trust manager, except to the extent of losses, costs, claims or damages
caused or contributed to by the breach of its obligations under any
transaction documents.
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THE NOTE TRUSTEE
The Bank of New York, New York branch will serve as the note trustee.
The corporate trust office of the note trustee responsible for the
administration of the trust is located at 101 Barclay Street, 21W, New York, New
York 10286. The note trustee will be entitled to execute any of its trusts or
powers under the note trust deed either directly or through agents or attorneys
providing that the use of such agent does not have an adverse effect on the
rating of the Class A2 notes. The note trustee and every other person properly
appointed by it under the note trust deed will be entitled to indemnification
from the assets of the trust against all loss, liability, expense, costs,
damages, actions, proceedings, claims and demands incurred by, or made against,
the note trustee in connection with its execution of the trusts under the note
trust deed, provided that the indemnification will not extend to any loss,
liability or expense arising from any fraud, negligence or wilful default by the
note trustee or any other person properly appointed by the note trustee.
The note trustee will at all times be a corporation or association,
organized and doing business under the laws of the United States of America, any
individual state or the District of Columbia, authorized under those laws to
exercise corporate trust powers, having a combined capital and surplus of at
least US$50,000,000, as set forth in its most recent published annual report of
condition, and subject to supervision or examination by federal, state or
District of Columbia authority. The note trustee may also, if permitted by the
SEC, be organized under the laws of a jurisdiction other than the United States,
provided that it is authorized under such laws to exercise corporate trust
powers and is subject to examination by authority of such jurisdictions
substantially equivalent to the supervision or examination applicable to a
trustee in the United States.
The note trustee may resign after giving three months' written notice
to the issuer trustee, the trust manager, the security trustee and each rating
agency. The issuer trustee may also remove the note trustee in the following
circumstances:
o if the note trustee becomes insolvent;
o if the note trustee ceases its business;
o if the note trustee fails to comply with any of its obligations under
any transaction document and the issuer trustee determines that this
failure has had, or if continued, will have, a Material Adverse Effect,
and if capable of remedy, the note trustee does not remedy this failure
within 14 days after the earlier of the following:
o the note trustee becoming aware of this failure; and
o receipt by the note trustee of written notice with respect to
this failure from either the issuer trustee or the trust
manager; or
o if the note trustee fails to satisfy any obligation imposed on it under
the United States Trust Indenture Act of 1939 with respect to the trust
or the note trust deed.
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Holders of 75% of the aggregate outstanding principal amount of the
Class A2 notes may require the issuer trustee to remove the note trustee.
Any resignation or removal of the note trustee and appointment of a
successor note trustee will not become effective until acceptance of the
appointment by a successor note trustee.
NOTE TRUSTEE'S ANNUAL REPORT
To the extent required by the United States Trust Indenture Act of
1939, as amended, the note trustee will mail each year to all Class A2
noteholders a report concerning:
o its eligibility and qualifications to continue as trustee under the
note trust deed;
o any amounts advanced by it under the note trust deed.
o the amount, interest rate and maturity date or indebtedness owing by
the issuer trustee to it in the note trustee's individual capacity;
o the property and funds physically held by it as note trustee;
o any release or release and substitution of collateral subject to the
lien of the security trust deed that has not previously been reported;
and
o any action taken by it that materially affects the Class A2 notes and
that has not previously been reported.
LIST OF NOTEHOLDERS
Three or more holders of Class A2 notes, each of whom has owned a Class
A2 note for at least six months, may, upon written request to the note trustee,
obtain access to the current list of Class A2 noteholders of the issuer trustee
for purposes of communicating with other Class A2 noteholders concerning their
rights under the note trust deed or the Class A2 notes. The note trustee may
elect not to give the requesting noteholders access to the list if it agrees to
mail the desired communication or proxy to all applicable noteholders.
REPORTS
On or before January 31 of each calendar year, the principal paying
agent, on behalf of the note trustee, will furnish to each person who at any
time during the prior calendar year was a Class A2 noteholder, a statement
containing the information required to be provided by an issuer of indebtedness
under the Code.
THE SECURITY TRUST DEED
GENERAL
Perpetual Trustee Company Limited of Level 7, 39 Hunter Street, Sydney,
New South Wales, Australia will be the security trustee. Perpetual Trustee
Company Limited's principal activities are the provision of services as trustee,
executors, administrators, attorneys and agents
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and other fiduciary services. The issuer trustee will grant a first ranking
floating charge, registered with the Australian Securities and Investments
Commission, over all of the trust assets in favor of the security trustee. The
floating charge will secure the issuer trustee's obligations to the noteholders,
the trust manager, the security trustee, the servicer, the note trustee, the
underwriters, each paying agent, the calculation agent, the mortgage insurers,
the underwriters, the sellers with respect to the Accrued Interest Adjustment
and seller's fees and each provider of a support facility. These secured parties
are collectively known as the MORTGAGEES.
NATURE OF THE CHARGE
A company may not deal with its assets over which it has granted a
fixed charge without the consent of the relevant mortgagee. Fixed charges are
usually given over real property, marketable securities and other assets which
will not be dealt with by the company.
A floating charge, like that created by the security trust deed, does
not attach to specific assets but instead "floats" over a class of assets which
may change from time to time. The company granting the floating charge may deal
with those assets and give third parties title to those assets free from any
encumbrance, provided such dealings and transfers of title are in the ordinary
course of the company's business. The issuer trustee has agreed not to dispose
of or create interests in the assets of the trust subject to the floating charge
except in the ordinary course of its business and the trust manager has agreed
not to direct the issuer trustee to take any such actions. If the issuer trustee
disposes of any of the trust assets, including any housing loan, in the ordinary
course of its business, the person acquiring the property will take it free of
the floating charge. The floating charge granted over the trust assets will
crystallize, which means it becomes a fixed charge, upon the occurrence of
specific events set out in the security trust deed, including notice to the
issuer trustee following an event of default under the security trust deed. On
crystallization of the floating charge, the issuer trustee may not deal with the
assets of the trust without the consent of the security trustee.
THE SECURITY TRUSTEE
The security trustee is appointed to act as trustee on behalf of the
Mortgagees and holds the benefit of the charge over the trust assets in trust
for each Mortgagee on the terms and conditions of the security trust deed. If
there is a conflict between the duties owed by the security trustee to any
Mortgagees or class of Mortgagees, the security trustee must give priority to
the interests of the noteholders, as determined by the noteholders or the note
trustee acting on their behalf. In addition, the security trustee must give
priority to the interests of the Class A noteholders if, in the security
trustee's opinion, there is a conflict between the interests of the Class A
noteholders and the interests of the Class B noteholders or other Mortgagees.
DUTIES AND LIABILITIES OF THE SECURITY TRUSTEE
The security trust deed contains a range of provisions regulating the
scope of the security trustee's duties and liabilities. These include the
following:
o The security trustee is not required to monitor compliance by the
issuer trustee or trust manager with the transaction documents or their
other activities.
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o Unless required by a transaction document, the security trustee need
not give Mortgagees information concerning the issuer trustee which
comes into the possession of the security trustee.
o The security trustee has no duties or responsibilities except those
expressly set out in the security trust deed or any collateral
security.
o Any action taken by the security trustee under the security trust deed
or any collateral security binds all the Mortgagees.
o The security trustee in its capacity as a Mortgagee can exercise its
rights and powers as such as if it were not acting as the security
trustee. It and its associates may engage in any kind of business with
the issuer trustee, the trust manager, Mortgagees and others as if it
were not security trustee and may receive consideration for services in
connection with any transaction document or otherwise without having to
account to the Mortgagees.
EVENTS OF DEFAULT
Each of the following is an event of default under the security trust
deed:
o the issuer trustee fails to pay:
o any interest within 10 business days of the relevant payment
date on which the interest was due to be paid to noteholders;
or
o any other amount owing to a Mortgagee within 10 business days
of the due date for payment, or within any applicable grace
period agreed with the relevant Mortgagee, or where the
Mortgagee is a Class A2 noteholder, with the note trustee;
o the issuer trustee fails to perform or observe any other provisions,
other than the obligations already referred to in this section, of a
transaction document and that default is not remedied within 30 days
after written notice from the security trustee requiring the failure to
be remedied;
o an Insolvency Event occurs relating to the issuer trustee, in its
capacity as trustee of the trust;
o the charge created by the security trust deed is not or ceases to be a
first ranking charge over the assets of the trust, or any other
obligation of the issuer trustee, other than as mandatorily preferred
by law, ranks ahead of or equal with any of the moneys secured by the
security trust deed;
o any security interest over the trust assets is enforced;
o a fixed-floating rate swap or currency swap is terminated and a
replacement fixed-floating rate swap or currency swap on terms that
will not lead to a withdrawal or downgrade of the rating of any notes,
is not put in place;
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o all or any part of any transaction document, other than a
fixed-floating rate swap or a currency swap, is terminated or is or
becomes void, illegal, invalid, unenforceable or of limited force and
effect or a party becomes entitled to terminate, rescind or avoid all
or part of any transaction document, other than or a fixed-floating
rate swap or a currency swap; or
o without the prior consent of the security trustee, that consent being
subject in accordance with the terms of the security trust deed to the
prior written consent of the Noteholder Mortgagees:
o the trust is wound up, or the issuer trustee is required to
wind up the trust under the master trust deed or applicable
law, or the winding up of the trust commences;
o the trust is held or is conceded by the issuer trustee not to
have been constituted or to have been imperfectly
constituted; or
o unless another trustee is appointed to the trust under the
transaction documents, the issuer trustee ceases to be
authorized under the trust to hold the property of the trust
in its name and to perform its obligations under the
transaction documents.
Where the security trustee has notified the rating agencies, obtained
the written consent of the relevant Noteholder Mortgagees and, in its reasonable
opinion, considers that it would not be materially prejudicial to the interests
of the Mortgagees, it may elect to treat an event that would otherwise be an
event of default as not being an event of default for the purpose of the
security trust deed. Unless the security trustee has made such an election and
provided the security trustee is actually aware of the occurrence of an event of
default, the security trustee must promptly convene a meeting of the Voting
Mortgagees at which it shall seek directions from the Voting Mortgagees by way
of Extraordinary Resolution of Voting Mortgagees regarding the action it should
take as a result of that event of default.
MEETINGS OF VOTING MORTGAGEES
The security trust deed contains provisions for convening meetings of
the Voting Mortgagees to enable the Voting Mortgagees to direct or consent to
the security trustee taking or not taking certain actions under the security
trust deed, including directing the security trustee to enforce the security
trust deed. VOTING MORTGAGEES are:
o the Noteholder Mortgagees alone for as long as amounts outstanding
under the notes are 75% or more of the total Secured Moneys; and
o otherwise, the note trustee, acting on behalf of the Class A2
noteholders and each other Mortgagee.
The security trustee must promptly convene a meeting of the Voting
Mortgagees after it receives notice, or has actual knowledge of, an event of
default under the security trust deed.
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VOTING PROCEDURES
Every question submitted to a meeting of Voting Mortgagees shall be
decided in the first instance by a show of hands. If a show of hands results in
a tie, the chairman shall both on a show of hands and on a poll have a casting
vote in addition to the vote or votes, if any, to which he may be entitled as
Voting Mortgagee or as a representative. A representative is, in the case of any
noteholder, a person or body corporate appointed as a proxy for that noteholder.
On a show of hands, every person holding, or being a representative holding or
representing other persons who hold, Secured Moneys shall have one vote except
that the note trustee shall represent each Class A2 noteholder who has directed
the note trustee to vote on its behalf under the note trust deed. On a poll,
every person who is present shall have one vote for every US$10,000 or its
equivalent, but not part thereof, of the Secured Moneys that he holds or in
respect of which he is a representative.
A resolution of all the Voting Mortgagees, including an Extraordinary
Resolution, may be passed, without any meeting or previous notice being
required, by an instrument or notes in writing which have been signed by all of
the Voting Mortgagees.
ENFORCEMENT OF THE CHARGE
At any time after an event of default occurs, a resolution passed at a
duly convened meeting by a majority consisting of not less than 75% of the votes
capable of being cast by Voting Mortgagees present in person or by proxy or a
written resolution signed by all of the Voting Mortgagees may direct the
security trustee to do any or all of the following:
o declare the charge to be enforceable;
o declare all Secured Moneys immediately due and payable;
o convert the floating charge to a fixed charge over any or all of the
trust assets; or
o appoint a receiver over the trust assets or itself exercise the powers
that a receiver would otherwise have under the security trust deed.
If the Noteholder Mortgagees are the only Voting Mortgagees, they may
direct the security trustee to do any act which the security trustee is required
to do, or may only do, at the direction of an Extraordinary Resolution of Voting
Mortgagees, including enforcing the charge.
THE NOTE TRUSTEE AS VOTING MORTGAGEE
If an event of default under the security trust deed occurs and is
continuing, the issuer trustee and the trust manager will promptly notify the
note trustee of such an occurrence and the note trustee shall deliver to each
Class A2 noteholder notice of such event of default within 90 days of the date
that the note trustee became aware of such event of default. However in the case
of a default in payment of interest and principal on the notes, the note trustee
may withhold such notice if and so long as it determines in good faith that
withholding the notice is in the interests of Class A2 noteholders.
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The rights, remedies and discretion of the Class A2 noteholders under
the security trust deed, including all rights to vote or give instructions or
consents to the security trustee and to enforce its undertakings and warranties,
may only be exercised by the note trustee on behalf of the Class A2 noteholders,
and the security trustee may rely on any instructions or directions given to it
by the note trustee as being given on behalf of the Class A2 noteholders without
inquiry about compliance with the note trust deed.
The note trustee shall not be bound to vote under the security trust
deed, or otherwise direct the security trustee under the security trust deed or
to take any proceedings, actions or steps under, or any other proceedings
pursuant to or in connection with the security trust deed, the note trust deed
or any notes unless directed or requested to do so by the holders of at least
75% of the aggregate outstanding principal amount of the Class A2 notes and then
only if the note trustee is indemnified to its satisfaction against all action,
proceedings, claims and demands to which it may render itself liable and all
costs, charges, damages and expenses which it may incur by so doing.
If any of the Class A2 notes remain outstanding and are due and payable
otherwise than by reason of a default in payment of any amount due on the Class
A2 notes, the note trustee must not vote under the security trust deed to, or
otherwise direct the security trustee to, dispose of the mortgaged property
unless either:
o a sufficient amount would be realized to discharge in full all amounts
owing to the Class A2 noteholders, and any other amounts payable by the
issuer trustee ranking in priority to or equal with the Class A2 notes;
or
o the note trustee is of the opinion, reached after considering at any
time and from time to time the advice of a merchant bank or other
financial adviser selected by the note trustee, that the cash flow
receivable by the issuer trustee or the security trustee under the
security trust deed will not, or that there is a significant risk that
it will not, be sufficient, having regard to any other relevant actual,
contingent or prospective liabilities of the issuer trustee, to
discharge in full in due course all the amounts referred to in the
preceding paragraph.
LIMITATIONS OF ACTIONS BY THE SECURITY TRUSTEE
The security trustee is not obliged to take any action, give any
consent or waiver or make any determination under the security trust deed
without being directed to do so by the note trustee or by Extraordinary
Resolution of the Voting Mortgagees in accordance with the security trust deed.
The security trustee is not obligated to act unless it obtains an indemnity from
the Voting Mortgagees and funds have been deposited on behalf of the security
trustee to the extent to which it may become liable for the relevant enforcement
actions.
If the security trustee convenes a meeting of the Voting Mortgagees, or
is required by an Extraordinary Resolution to take any action under the security
trust deed, and advises the Voting Mortgagees that it will not act in relation
to the enforcement of the security trust deed unless it is personally
indemnified by the Voting Mortgagees to its reasonable satisfaction against all
actions, proceedings, claims and demands to which it may render itself liable,
and all costs,
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charges, damages and expenses which it may incur in relation to the enforcement
of the security trust deed and is put in funds to the extent to which it may
become liable, including costs and expenses, and the Voting Mortgagees refuse to
grant the requested indemnity, and put the security trustee in funds, then the
security trustee is not obliged to act in relation to that enforcement under the
security trust deed. In those circumstances, the Voting Mortgagees may exercise
such of those powers conferred on them by the security trust deed as they
determine by Extraordinary Resolution.
The security trustee will not be liable for any decline in the value,
nor any loss realized upon any sale or other dispositions made under the
security trust deed, of any mortgaged property or any other property which is
charged to the security trustee by any other person in respect of or relating to
the obligations of the issuer trustee or any third party in respect of the
issuer trustee or the secured moneys or relating in any way to the mortgaged
property or for any such decline or loss directly or indirectly arising from its
acting, or failing to act, as a consequence of an opinion reached by it, except
for the fraud, negligence or wilful default of the security trustee.
PRIORITIES UNDER THE SECURITY TRUST DEED
The proceeds from the enforcement of the security trust deed are to be
applied in the order of priority set forth in this subsection, subject to any
other priority which may be required by statute or law. Certain federal taxes,
unpaid wages, long service leave, annual leave and similar employee benefits and
certain auditor's fees, if any, will be paid prior to the Mortgagees. Subject to
the foregoing, the proceeds from enforcement of the security trust deed over the
trust assets will be distributed as follows:
o first, to the extent required by law, to pay the holder of any prior
ranking security interest of which the security trustee has notice;
o second, to pay all costs, charges, expenses and disbursements properly
incurred in the exercise of any power by the security trustee, the note
trustee, a receiver or an attorney and other amounts payable to the
security trustee or note trustee under the security trust deed or the
note trust deed;
o third, to the extent that any moneys received by the security trustee
represent the proceeds of any cash collateral lodged by a support
facility provider, to pay that support facility provider;
o fourth, to pay pro rata:
o any fees and other expenses due to the security trustee, the
note trustee, a paying agent or the calculation agent;
o any fees and expenses incurred in relation to the operation
and administration of the trust, including the issuer
trustee's fees and expenses; and
o the receiver's remuneration;
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o fifth, to pay pro rata the unpaid Accrued Interest Adjustment due to
each seller;
o sixth, to pay pro rata:
o monetary liabilities of the issuer trustee to all providers
of support facilities;
o monetary liabilities of the issuer trustee to the Class A
noteholders;
o monetary liabilities owing in relation to any redraws; and
o seventh, to pay any monetary liabilities of the issuer trustee to Class
B noteholders;
o eighth, to pay pro rata any amounts not covered in this section owing
to any Mortgagee under any transaction document;
o ninth, to pay the holder of any subsequent security interest over the
assets charged by the security trust deed of which the security trustee
has notice of the amount properly secured by the security interest; and
o tenth, to pay any surplus to the issuer trustee to be distributed in
accordance with the master trust deed.
The surplus will not carry interest. If the security trustee pays the
surplus to the credit of an account in the name of the issuer trustee with any
bank carrying on business in Australia, the security trustee, receiver,
Mortgagee or attorney, as the case may be, will be under no further liability in
respect of it.
Upon enforcement of the security created by the security trust deed,
the net proceeds thereof may be insufficient to pay all amounts due on
redemption to the noteholders. Any claims of the noteholders remaining after
realization of the security and application of the proceeds as aforesaid shall,
except in limited circumstances, be extinguished.
SECURITY TRUSTEE'S FEES AND EXPENSES
The issuer trustee shall reimburse the security trustee for all costs
and expenses of the security trustee properly incurred in acting as security
trustee. The fee payable to the issuer trustee and the security trustee shall be
as described in the section entitled "Issuer Trustee and Security Trustee Fees
and Expenses".
If, at any time, the security trustee is required to take any action
relating to the enforcement of the terms of the transaction documents upon
default by any other party, the security trustee shall be entitled to additional
remuneration.
INDEMNIFICATION
The issuer trustee has agreed to indemnify the security trustee from
and against all losses, costs, liabilities, expenses and damages arising out of
or in connection with the transaction
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documents, except to the extent that they result from the fraud, negligence or
wilful default of the security trustee.
RETIREMENT AND REMOVAL OF THE SECURITY TRUSTEE
The security trustee may retire on three months' notice in writing to
the issuer trustee, the trust manager and each rating agency if a successor
security trustee is appointed.
Subject to the appointment of a successor security trustee and prior
notice being given to each rating agency, an Extraordinary Resolution of the
Voting Mortgagees may remove the security trustee at any time and the trust
manager may remove the security trustee if:
o an Insolvency Event occurs in relation to the security trustee in its
personal capacity;
o the security trustee ceases business;
o the security trustee fails to remedy within 14 days after written
notice from the trust manager any material breach of duty by it;
o there occurs a change in the control of the security trustee from that
existing on the date of the security trust deed, unless approved by the
trust manager.
Upon notice of resignation or removal of the security trustee, the
trust manager has the right to appoint a successor security trustee who has been
previously approved by an Extraordinary Resolution of the Voting Mortgagees and
who accepts the appointment. If no successor security trustee is appointed
within 30 days after notice, the retiring security trustee may on behalf of the
Mortgagees appoint a successor security trustee, other than the trust manager or
its affiliates.
AMENDMENT
The issuer trustee and the security trustee may, following written
notice to each rating agency and with the written approval of the trust manager
and the note trustee, amend the security trust deed to, among other things,
correct a manifest error or ambiguity or which in the opinion of the security
trustee is necessary to comply with the provisions of any law or regulation. If
the amendment is prejudicial or likely to be prejudicial to the interests of the
Mortgagees or a class of Mortgagees, an Extraordinary Resolution of the Voting
Mortgagees or that class of Voting Mortgagees is required.
THE CHECK ACCOUNT AND DIRECT PAPERLESS ENTRY FACILITIES AGREEMENT
The servicer has arranged for National Australia Bank Limited to
provide borrowers with an option to utilise a check account and direct entry
paperless facility which provides borrowers with an expanded range of financial
services that are directly linked to the borrower's mortgage loan account. The
provision of these facilities has been documented in a check deposit and direct
paperless entry facilities agreement between National Australia Bank Limited,
the servicer and the issuer trustee known as the NBFI AGREEMENT.
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The facilities under the NBFI Agreement are being provided to both:
o borrowers in relation to the trust; and
o borrowers under other Interstar mortgage backed securities programs
which are funded by various warehouse funding trusts, other Interstar
Millennium Trusts and other trusts which issue mortgage backed
securities. Perpetual Trustees Victoria Limited is the trustee of each
of these other trusts.
Under the terms of the NBFI Agreement, the servicer is responsible for
the day to day verification and processing of checks and direct entry paperless
facilities. In providing these facilities to borrowers, there is a possibility
that the servicer may:
o process and authorize the issuer trustee to pay forged or fraudulently
drawn checks or entries;
o fail to comply with stop payment notices made by borrowers; or
o breach other covenants, representations and warranties or other
provisions of the NBFI Agreement.
The NBFI Agreement also requires the issuer trustee to place moneys
from the trust into an account known as the TRUST DRAWINGS ACCOUNT which is
maintained with National Australia Bank Limited in the name of Perpetual
Trustees Victoria Limited - Interstar Securities MBS Program Distribution
Account. The other trusts are also required to deposit moneys into this account
thereby resulting in co-mingling of part of the assets of the trust with assets
of other trusts.
National Australia Bank Limited may, in accordance with the terms of
the NBFI Agreement, be entitled to withdraw moneys out of that Trust Drawings
Account to the limit of moneys held in that account. National Australia Bank
Limited may withdraw those moneys even though the legal entitlement of National
Australia Bank Limited in that regard relates to a matter or thing concerning
one of the other trusts and not the trust. In those circumstances, the other
trust would be required to replenish the Trust Drawings Account. There is no
guarantee that the other trusts will have the financial capacity at the relevant
time to replenish the Trust Drawings Account in these circumstances.
THE INVESTMENT MANAGEMENT AGREEMENT
SERVICING OF HOUSING LOANS
The servicer is required to administer the housing loans in the
following manner:
o in accordance with the investment management agreement;
o to the highest standard of accepted servicing practice of prudent
mortgage lending and investment management institutions;
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o exercising a high degree of skill and care in respect thereof; and
o in compliance with all relevant legislation.
In performing any services under the investment management agreement
the servicer shall take into account whether its performance of such services
may adversely affect the rating of any notes. The servicer is entitled to
delegate its duties under the investment management agreement. The servicer at
all times remains liable for servicing the housing loans and the acts or
omissions of any delegate.
POWERS
Subject to the standards for servicing set forth in the preceding
section, the servicer has the express power, among other things:
o to waive any fees which may be collected in the ordinary course of
servicing the housing loans or arrange the rescheduling of interest due
and unpaid following a default under any housing loans;
o to waive any right in respect of the housing loans and mortgages in the
ordinary course of servicing the housing loans and mortgages; and
o to extend the maturity date of a housing loan beyond 30 years from the
date of origination when required to do so by law or a government
agency. This extension is not subject to the requirement that the
action not have a Material Adverse Effect.
UNDERTAKINGS BY THE SERVICER
The servicer has undertaken, among other things, the following:
o to collect all moneys due under the housing loans and related mortgages
and pay them into the collection account;
o if a default occurs in respect of a housing loan, to take action in
accordance with its normal enforcement procedures to enforce the
relevant housing loan and the related mortgage to the extent it
determines to be appropriate;
o to act in accordance with the terms of any mortgage insurance policies
or title insurance policies, not do or omit to do anything which could
be reasonably expected to prejudicially affect or limit its rights or
the rights of the issuer trustee under or in respect of a mortgage
insurance policy or title insurance policy;
o not consent to the creation or existence of any security interest in
favor of a third party in relation to any mortgaged property which
would rank before or equal with the related housing loan and mortgage
or allow the creation or existence of any other security interest in
the mortgaged property unless priority arrangements are entered into
with such third party under which the third party acknowledges that the
housing loan and the related mortgage ranks ahead in priority to the
third party's security interest on enforcement for
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an amount not less than the Unpaid Balance of the housing loan plus
such other amount as the servicer determines in accordance with the
servicer's ordinary course of business;
o to ensure that the authorized investments held by the issuer trustee
yield an amount which is 0.25% per annum greater than the amount
required to ensure that the issuer trustee has sufficient cash at all
times to enable the issuer trustee to pay all payments of interest in
respect of the notes and otherwise to comply with all of the issuer
trustee's duties and obligations under the transaction documents as and
when they fall due;
o to give notice in writing to the issuer trustee and each rating agency
if it becomes aware of the occurrence of any Servicer Transfer Event;
o to maintain in effect all qualifications, consents, licenses, permits,
approvals, exemptions, filings and registrations as may be required
under any applicable law in order properly to service the housing loans
and mortgages and to perform or comply with its obligations under the
investment management agreement;
o to notify the issuer trustee and the trust manager of any event which
it reasonably believes is likely to have a Material Adverse Effect
promptly after becoming aware of such event; and to notify the trust
manager of anything else which the trust manager reasonably requires
regarding any proposed modification to any housing loan or related
mortgage; and
o to provide information reasonably requested by the issuer trustee or
the trust manager, with respect to all matters relating to the trust
and the assets of the trust that the issuer trustee or the trust
manager believes reasonably necessary for it to perform its obligations
under the transaction documents, and upon reasonable notice and at
reasonable times permit the issuer trustee to enter the premises and
inspect the data and records in relation to the trust and the housing
loan agreements, mortgages, certificates of title and other documents
related to the housing loans.
SERVICING COMPENSATION AND EXPENSES
The servicer will receive a fee for servicing the housing loans equal
to 0.22% per annum of the aggregate outstanding principal amount of the notes on
the first day of each collection period payable in arrears on the next monthly
payment date.
The servicer must pay from such fee all expenses incurred in connection
with servicing the housing loans, except for expenses relating to the
enforcement of a housing loan or its related mortgaged property or any amount
repaid to a liquidator or trustee in bankruptcy pursuant to any applicable law,
binding code, order or decision of any court, tribunal or the like or based on
advice of the servicer's legal advisers.
LIABILITY OF THE SERVICER
The servicer fully indemnifies the issuer trustee against all losses,
liabilities, costs and expenses incurred as a result of the failure by the
servicer to perform its duties under the investment management agreement or any
action or conduct undertaken or not taken by the servicer, including as a
consequence of a Servicer Transfer Event.
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REMOVAL, RESIGNATION AND REPLACEMENT OF THE SERVICER
The issuer trustee must terminate the servicer's appointment if the
issuer trustee determines that any of the following SERVICER TRANSFER EVENTS
occurs:
o an Insolvency Event occurs with respect to the servicer;
o the servicer fails to pay any amount within 5 business days of receipt
of a notice to do so from the issuer trustee or the trust manager;
o the servicer fails to comply with any of its other obligations under
any transaction document and such action has had, or, if continued will
have, a Material Adverse Effect, as determined by the issuer trustee
and that failure is not remedied within the earlier of 30 days after
the servicer becomes aware of that failure and receipt of a notice from
either the issuer trustee or the trust manager;
o any representation, warranty or certification made by the servicer is
incorrect when made and is not waived by the issuer trustee or remedied
to the issuer trustee's reasonable satisfaction within 90 days after
notice from the issuer trustee, and the issuer trustee determines that
breach would have a Material Adverse Effect;
o it becomes unlawful for the servicer to perform the services under the
investment management agreement.
The servicer will indemnify the issuer trustee against all losses,
costs and expenses incurred as a result of a Servicer Transfer Event.
RESIGNATION
The servicer may voluntarily resign after giving 90 days notice to each
rating agency, the trust manager and the issuer trustee.
REPLACEMENT OF THE SERVICER
The trust manager and the issuer trustee shall use reasonable efforts
to find an eligible successor servicer. Until a successor servicer is appointed,
the servicer must continue to act as the servicer and will be paid the servicing
fee. If an eligible successor servicer is not appointed by the expiration of the
90-day notice period, the issuer trustee itself will act as servicer and be
entitled to the servicing fee.
TERMINATION OF INVESTMENT MANAGEMENT AGREEMENT
The investment management agreement will terminate on the earlier of:
o the date on which the investment management agreement is terminated
pursuant to a Servicer Transfer Event;
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o the date which is one month after the notes have been redeemed in full
in accordance with the transaction documents and the issuer trustee
ceases to have any obligation to any creditor in relation to any trust;
o the date on which the issuer trustee replaces the servicer with a
successor servicer; and
o the date on which the servicer is replaced after resigning.
AMENDMENT
The servicer and the issuer trustee may amend the investment management
agreement provided that each rating agency has confirmed that the amendment will
not have an adverse effect on the rating of any notes and the trust manager
certifies to the issuer trustee that, in the trust manager's opinion the
amendment will not adversely effect the rights of the noteholders.
THE BACKUP SERVICER AGREEMENT
THE PRIMARY BACKUP SERVICER AGREEMENT
The issuer trustee, the primary backup servicer and the servicer have
entered into the primary backup servicer agreement. Under the primary backup
servicer agreement, the issuer trustee has agreed that in the event the
servicer is removed or retires as a servicer of certain trusts, including this
trust, it must promptly notify the primary backup servicer of such removal or
retirement and offer to appoint the primary backup servicer as servicer. Within
5 days of such notice, the primary backup servicer will notify the issuer
trustee whether it will accept such appointment.
If the primary backup servicer accepts the issuer trustee's appointment
as servicer, then the primary backup servicer will act as servicer of the trust
from the date of appointment until such time as the primary backup servicer is
removed or retires in accordance with the primary backup servicer agreement. The
issuer trustee cannot appoint the primary backup servicer as servicer unless:
o the rating agencies have confirmed in writing to the issuer trustee
that such appointment will not have an adverse effect on the credit
rating of the notes; and
o the issuer trustee is of the opinion that the appointment of the
primary backup servicer will not materially prejudice the interests of
the noteholders and that the primary backup servicer is qualified to
assume the responsibilities of the servicer.
Once the primary backup servicer has been appointed, it will be bound
by and observe the rights, obligations and discretions conferred on the servicer
under the master trust deed and the investment management agreement as if it
were named in the master trust deed and the investment management agreement. The
servicer will immediately provide to the primary backup servicer all accounts,
books, documents, records or other property relating to the trust which are in
the servicer's possession or control. The issuer trustee will promptly arrange
to provide the primary backup servicer such accounts or information relating to
the trust which are in the possession or control of the issuer trustee to enable
the primary backup servicer to fulfill its duties, obligations and discretions
as servicer. The issuer trustee may remove the primary backup servicer as
servicer after providing the primary
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backup servicer with written notice and in accordance with the provisions of the
master trust deed.
Prior to its appointment as servicer, the primary backup servicer will
be entitled to receive a backup servicer standby fee from the servicer as agreed
upon between the servicer and the primary backup servicer and notified to the
issuer trustee. In the event that the servicer fails to pay the primary backup
servicer the backup standby fee, then subject to the primary backup servicer
giving written notice to the issuer trustee, the issuer trustee can deduct such
amount from the next servicer's fee due and payable to the servicer. After its
appointment as servicer, the primary backup servicer will be entitled to receive
a backup servicer fee on each monthly payment date from the servicer's fee due
and payable to the servicer for such monthly payment date.
If the primary backup servicer is unable or declines the issuer
trustee's request to be appointed as servicer, the issuer trustee will have the
option to appoint the secondary backup servicer as servicer under the secondary
backup servicer agreement.
The primary backup servicer agreement will be governed by the laws of
the State of Victoria.
THE SECONDARY BACKUP SERVICER AGREEMENT
The issuer trustee, the secondary backup servicer and the servicer have
entered into the secondary backup servicer agreement. The provisions of the
secondary backup servicer agreement are similar to the provisions described
above in the primary backup servicer agreement, except that the secondary backup
servicer would be required to accept any such appointment by the issuer trustee.
The secondary backup servicer agreement is governed by the laws of the State of
Victoria.
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THE SERVICER
SERVICING OF HOUSING LOANS
Under the investment management agreement, Interstar Securities
(Australia) Pty Limited has been appointed as the initial servicer of the
housing loans. The day to day servicing of the housing loans will be performed
by the servicer at its head office in Melbourne. Servicing procedures include
managing customer inquiries, monitoring compliance with the loan features and
rights applicable to these loans, and the arrears management of delinquent
loans. See "Description of the Transaction Documents -- The Investment
Management Agreement".
COLLECTION AND ENFORCEMENT PROCEDURES
Pursuant to the terms of the housing loans, borrowers must make the
minimum repayment due under the terms and conditions of the housing loans, on or
before each monthly installment due date. Interstar Securities (Australia) Pty
Limited gives credit to repayments to an individual housing loan on the date of
its receipt. Interest is accrued daily on the balance outstanding after close of
business and charged monthly to each relevant loan account.
When a housing loan is 1 day delinquent, it is identified in the
mortgage service system. At the close of business on the last business day of
the month each delinquent account is transferred to the collection system. The
collection system identifies all accounts which are overdue and provides
detailed lists of those loans for action and follow-up.
The collection system allocates overdue loans to designated collection
officers at close of business on the third business day of each month.
Actions taken by the servicer in relation to delinquent accounts will
vary depending on the following elements and, if applicable, with the input of
the mortgage insurer:
o arrears history;
o loan size;
o equity in the property - LVR; and
o arrangements made with the borrower to clear arrears and maintain
future minimum installments while arrears exist.
If satisfactory arrangements cannot be made to rectify a delinquent
housing loan, the servicer will instruct a panel solicitor to issue legal
notices and institute recovery action by enforcing the mortgage security.
Collection officers, under legal assistance, manage this process and pursue many
sources of recovery including the following:
o guarantees;
o government assistance schemes;
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o mortgagee sale; and
o claims on mortgage insurance.
It should be noted that Interstar Securities (Australia) Pty Limited
reports all actions that it takes on overdue housing loans to its respective
mortgage insurer in accordance with the terms of the mortgage insurance
policies.
COLLECTION AND FORECLOSURE PROCESS
Subject to the paragraph below, when a housing loan is 90 days
delinquent, a letter of demand is sent to the borrower advising of the situation
and requesting that payment be made to rectify the situation. If a response has
not been received within 15 days of the letter of demand, instructions are sent
to Interstar Securities (Australia) Pty Limited's panel solicitor to commence
recovery action by issuing the relevant default notices pursuant to the
registered mortgage and statutory time allowed in that state or territory.
Recovery action continues until such time as the borrower pays the
amount noted in the default notices, plus interest, legal fees etc., or vacant
possession of the security property is obtained. If a borrower does not respond
to any of the notices issued or served upon him or her, vacant possession may be
obtained within 45 days of issuing the letter of demand.
For housing loans:
o with an original loan balance in excess of A$300,000; or
o which, based on the characteristics of the borrower, the loan-to-value
ratio and payment history, the servicer determines to have a particular
risk profile,
the servicer will issue a letter of demand when the loan is 30 days delinquent.
These time frames assume that the borrower has taken no action to
remedy the default.
Upon gaining possession of the security property, two marketing
appraisals and an updated valuation are requested, with one of the marketing
appraisals selected to market and sell the property via auction or private
treaty. A reserve price/list price is determined with reference to the marketing
appraisals and valuation. Once a figure has been reached, this is submitted to
the mortgage insurer for approval. After the security property is sold and funds
received and an outstanding loan balance remains, a claim for the shortfall is
submitted to the mortgage insurer for processing.
It should also be noted that the mortgagee's ability to exercise its
power of sale on the mortgaged property is dependent upon the statutory
restrictions of the relevant state or territory as to notice requirements. In
addition, there may be factors outside the control of the mortgagee such as
whether the mortgagor contests the sale and the market conditions at the time of
sale. These issues may affect the length of time between the decision of the
mortgagee to exercise its power of sale and final completion of the sale.
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The arrears and security enforcement procedures may change over time as
a result of business changes, or legislative and regulatory changes.
SERVICER DELINQUENCY EXPERIENCE
The table below summarizes the delinquency and foreclosure experience
of housing loans serviced by Interstar Securities (Australia) Pty Limited.
INTERSTAR MORTGAGE BACKED PROGRAM - TOTAL PORTFOLIO HISTORICAL DELINQUENCIES
SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
PORTFOLIO AT: 1997 1998 1998 1999 1999
- ---------------------------------- --------------- ----------------- ------------------ ----------------- -----------------
Outstanding Balance............... $885,824,173.73 $1,096,782,340.81 $1,258,820,846.88 $1,500,609,532.07 $1,968,607,661.73
Number of Loans Outstanding....... 6,714 8,112 9,440 11,328 14,498
Percentage of Delinquent Loans *..
31 - 60 Days...................... 0.37% 0.38% 0.40% 0.55% 0.54%
61 - 90 Days...................... 0.13% 0.20% 0.23% 0.38% 0.31%
91 Days Plus...................... 0.09% 0.12% 0.17% 0.18% 0.15%
Total Delinquencies over 30 Days.. 0.60% 0.70% 0.80% 1.11% 1.00%
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31
PORTFOLIO AT: 2000 2000 2001 2001 2002
- ---------------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Outstanding Balance............... $2,609,611,105.11 $3,344,250,484.60 $4,021,142,286.04 $4,820,490,560.20 $5,864,319,193.21
Number of Loans Outstanding....... 18,579 23,091 27,406 32,114 38,133
Percentage of Delinquent Loans *..
31 - 60 Days...................... 0.43% 0.35% 0.33% 0.28% 0.40%
61 - 90 Days...................... 0.24% 0.16% 0.14% 0.12% 0.19%
91 Days Plus...................... 0.13% 0.10% 0.06% 0.06% 0.10%
Total Delinquencies over 30 Days.. 0.80% 0.61% 0.53% 0.46% 0.70%
SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
SIX MONTH PERIOD ENDING 1997 1998 1998 1999 1999
- ---------------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Loan Losses as a % of Total
Outstanding Balance **............ 0.00% 0.00% 0.00% 0.00% 0.00%
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31
SIX MONTH PERIOD ENDING 2000 2000 2001 2001 2002
- ---------------------------------- ----------------- ----------------- ------------------ ----------------- -----------------
Loan Losses as a % of Total
Outstanding Balance **............ 0.00% 0.00% 0.00% 0.00% 0.00%
* Totals may not sum exactly due to rounding
** Net loss after any claim under Mortgage Insurance
There can be no assurance that the delinquency and foreclosure
experience with respect to the housing loans comprising the housing loan pool
will correspond to the delinquency and foreclosure experience of the servicer's
mortgage portfolio set forth in the foregoing table. Indeed, the statistics
shown in the preceding table represent the delinquency and foreclosure
experience for the total residential mortgage portfolios for each of the years
presented, whereas the aggregate delinquency and foreclosure experience on the
housing loans will depend on the results obtained over the life of the housing
loan pool. In addition, the foregoing statistics include housing loans with a
variety of payment and other characteristics that may not correspond to those of
the housing loans in the pool. Moreover, if the real estate market should
experience an overall decline in property values such that the principal
balances of the housing loans comprising the housing loan pool become equal to
or greater than the value of the related mortgaged properties, the actual rates
of delinquencies and foreclosures could be significantly higher than those
previously experienced by the servicer. In addition, adverse economic
conditions, which may or may not affect real property values, may affect the
timely payment by borrowers of scheduled payments of principal and interest on
the housing loans and, accordingly,
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the rates of delinquencies, foreclosures, bankruptcies and losses with respect
to the housing loan pool.
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PREPAYMENT AND YIELD CONSIDERATIONS
The following information is given solely to illustrate the effect of
prepayments of the housing loans on the weighted average life of the Class A2
notes under the stated assumptions and is not a prediction of the prepayment
rate that might actually be experienced.
GENERAL
The rate of principal payments and aggregate amount of distributions on
the notes and the yield to maturity of the notes will relate to the rate and
timing of payments of principal and the amount and timing of redraws on the
housing loans. The rate of principal payments on the housing loans will in turn
be affected by the amortization schedules of the housing loans and by the rate
of principal prepayments, including for this purpose prepayments resulting from
refinancing, liquidations of the housing loans due to defaults, casualties,
condemnations and repurchases by a seller. Subject, in the case of fixed rate
housing loans, to the payment of applicable fees, the housing loans may be
prepaid by the mortgagors at any time.
PREPAYMENTS
Prepayments, liquidations and purchases of the housing loans, including
optional purchase of the remaining housing loans in connection with the
termination of the trust, will result in early distributions of principal
amounts on the notes. Prepayments of principal may occur in the following
situations:
o refinancing by borrowers with other financiers;
o receipt by the issuer trustee of enforcement proceeds due to a borrower
having defaulted on its housing loan;
o receipt by the issuer trustee of insurance proceeds in relation to a
claim under a mortgage insurance policy in respect of a housing loan;
o repurchase of the housing loans by a seller as a result of a breach by
it of certain representations;
o repurchase of the housing loans as a result of an optional termination
or a redemption for taxation or other reasons;
o receipt of proceeds of enforcement of the security trust deed prior to
the final maturity date of the notes; or
o receipt of proceeds of the sale of housing loans if the trust is
terminated while notes are outstanding, for example, if required by
law, and the housing loans are then either:
o repurchased by a seller under its right of first refusal; or
o sold to a third party.
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Since the rate of payment of principal of the housing loans cannot be
predicted and will depend on future events and a variety of factors, no
assurance can be given to you as to this rate of payment or the rate of
principal prepayments. The extent to which the yield to maturity of any note may
vary from the anticipated yield will depend upon the following factors:
o the degree to which a note is purchased at a discount or premium; and
o the degree to which the timing of payments on the note is sensitive to
prepayments, liquidations and purchases of the housing loans.
A wide variety of factors, including economic conditions, the
availability of alternative financing and homeowner mobility may affect the
trust's prepayment experience with respect to the housing loans. In particular,
under Australian law, unlike the law of the United States, interest on loans
used to purchase a principal place of residence is not ordinarily deductible for
taxation purposes.
WEIGHTED AVERAGE LIVES
The weighted average life of a note refers to the average amount of
time that will elapse from the date of issuance of the note to the date each US
dollar in respect of principal repayable under the note is reduced to zero.
Prepayments of principal of the mortgage loans will tend to shorten the weighted
average life of the Class A2 notes, while redraws will tend to extend the
weighted average life of the Class A2 notes.
Usually, greater than anticipated principal prepayments will increase
the yield on notes purchased at a discount and will decrease the yield on notes
purchased at a premium. The effect on your yield due to principal prepayments
occurring at a rate that is faster or slower than the rate you anticipated will
not be entirely offset by a subsequent similar reduction or increase,
respectively, in the rate of principal payments. The amount and timing of
delinquencies and defaults on the housing loans and the recoveries, if any, on
defaulted housing loans and foreclosed properties will also affect the weighted
average life of the notes.
The following tables are based on a constant prepayment rate model.
Constant prepayment rate represents an assumed constant rate of prepayment each
month, expressed as a per annum percentage of the principal balance of the pool
of mortgage loans for that month. Constant prepayment rate does not purport to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of housing loans, including the
housing loans in your pool. None of the sellers nor the trust manager believes
that any existing statistics of which it is aware provide a reliable basis for
noteholders to predict the amount or timing of receipt of housing loan
prepayments.
The following tables are based upon the assumptions in the following
paragraph, and not upon the actual characteristics of the housing loans. Any
discrepancies between characteristics of the actual housing loans and the
assumed housing loans may have an effect upon the percentages of the principal
balances outstanding and weighted average lives of the notes set forth in the
tables. Furthermore, since these discrepancies exist, principal payments on the
notes may be made earlier or later than the tables indicate.
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The following tables were prepared based on the characteristics of the
housing loan pool (as described in Description of the Assets of the Trust)
expected to be acquired by the Issuer and the following additional assumptions:
o the initial cut-off date is the close of business on June 28, 2002;
o closing date for the notes is July 9, 2002;
o on the closing date the Issuer will purchase housing loans with an
aggregate principal balance of AUD1,569,460,814;
o housing loans will be purchased by the issuer during the pre-funding
period with an aggregate amount of AUD285,743,315 and will be purchased
in full on [August 7], 2002;
o the characteristics of the housing loans purchased during the
pre-funding period will have the same blended loan characteristics as
the housing loan pool described in "Description of the Assets of the
Trust", save for its total size;
o payments on the Class A2 notes are made on the quarterly payment
date, regardless of the day on which payment actually occurs,
commencing in October 2002, and are made in accordance with the
priorities described in this prospectus;
o the housing loans' prepayment rates are equal to the respective
percentages of constant prepayment rate indicated in the tables;
o the scheduled payments of principal and interest on the housing loans
will be paid monthly and will be timely delivered on the fifteenth day
of each month, with no defaults or arrears;
o there are no redraws, principal increases, substitutions or payment
holidays with respect to the housing loans and accordingly no Class A1
notes are issued;
o housing loans bearing a variable rate of interest maintain the rate set
as at May 31, 2002;
o housing loans bearing a fixed rate of interest will continue to bear
the rate set at May 31, 2002, even at the expiration of their fixed
rate periods.
o any interest only housing loans in the portfolio are assumed to pay no
principal for a period of five years and will pay principal and
interest thereafter;
o Liquid Authorized Investments are maintained at the Prescribed Minimum
Level throughout the life of the notes and the Prescribed Minimum Level
at any time is 1% of the A$ equivalent of the outstanding principal
amount of all notes at that time.
o all prepayments received on the fifteenth day of each month and include
the full month's interest on the prepayment;
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o principal collections are distributed according to the rules of
distribution set forth in this prospectus;
o all payments under the swaps are made as scheduled;
o the trust manager does not direct the issuer trustee to exercise its
right of optional redemption of the notes, except in the following
case:
o with respect to the line titled "Weighted Average Life - To
Earlier of Clean Up Call and Step-Up and Call (Years)", the
trust manager exercises its right to redeem the notes on the
earlier to occur of the Step-Up Margin Date and the quarterly
payment date on which the total outstanding principal amount
of all notes in all classes does not exceed 10% of the
initial principal amount of all notes;
o the exchange rate is US$0.5738=A$1.00.
It is not likely that the housing loans will pay at any assumed
constant prepayment rate to maturity or that all housing loans will prepay at
the same rate. In addition, the diverse remaining terms to maturity of the
housing loans could produce slower or faster distributions of principal than
indicated in the tables at the assumed constant prepayment rate specified, even
if the weighted average remaining term to maturity of the housing loans is the
same as the weighted average remaining term to maturity of the assumptions
described in this section. You are urged to make your investment decisions on a
basis that includes your determination as to anticipated prepayment rates under
a variety of the assumptions discussed in this prospectus as well as other
relevant assumptions.
In the following tables, the percentages have been rounded to the
nearest whole number and the weighted average life of a class of notes is
determined by the following three step process:
o multiplying the amount of each payment of principal thereof by the
number of years from the date of issuance to the related payment date,
o summing the results, and
o dividing the sum by the aggregate distributions of principal referred
to in the first clause above and rounding to two decimal places.
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PERCENTAGE OF INITIAL PRINCIPAL OUTSTANDING AT THE FOLLOWING PERCENTAGES
OF CONSTANT PREPAYMENT RATE*
DATE 0.0% 10.0% 15.0% 17.5% 20.0% 25.0% 30.0%
- ------------------------------- ------ ----- ----- ----- ----- ----- -----
Closing Date................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
July 7, 2003................... 99.1% 88.6% 83.3% 80.7% 78.1% 72.8% 67.6%
July 7, 2004................... 98.0% 78.1% 69.0% 64.6% 60.3% 52.2% 44.5%
July 7, 2005................... 97.0% 68.8% 56.8% 51.3% 46.2% 36.8% 28.5%
July 7, 2006................... 95.8% 60.4% 46.6% 40.5% 35.0% 25.3% 17.4%
July 7, 2007................... 94.5% 52.9% 37.9% 31.6% 26.1% 16.8% 9.7%
July 7, 2008................... 92.4% 45.7% 30.3% 24.1% 18.8% 10.4% 4.3%
July 7, 2009................... 90.2% 39.3% 23.9% 18.0% 13.0% 5.6% 0.6%
July 7, 2010................... 87.8% 33.6% 18.5% 13.0% 8.5% 2.1% 0.0%
July 7, 2011................... 85.2% 28.5% 14.0% 9.0% 5.0% 0.0% 0.0%
July 7, 2012................... 82.5% 23.9% 10.3% 5.7% 2.2% 0.0% 0.0%
July 7, 2013................... 79.6% 19.9% 7.1% 3.0% 0.0% 0.0% 0.0%
July 7, 2014................... 76.6% 16.3% 4.5% 0.9% 0.0% 0.0% 0.0%
July 7, 2015................... 73.3% 13.1% 2.3% 0.0% 0.0% 0.0% 0.0%
July 7, 2016................... 69.8% 10.2% 0.4% 0.0% 0.0% 0.0% 0.0%
July 7, 2017................... 66.2% 7.7% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2018................... 62.2% 5.4% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2019................... 58.1% 3.4% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2020................... 53.6% 1.7% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2021................... 48.9% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2022................... 43.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2023................... 38.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2024................... 33.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2025................... 28.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2026................... 22.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2027................... 17.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2028................... 10.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2029................... 4.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2030................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life -
To Earlier of Clean Up Call and
Step-Up and Call (Years)....... 6.73 4.71 3.94 3.61 3.30 2.77 2.32
To Maturity (Years)............ 17.73 6.59 4.66 4.03 3.54 2.82 2.32
* Totals may not sum exactly due to rounding.
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USE OF PROCEEDS
The proceeds from the sale of the Class A2 notes, after being exchanged
pursuant to the currency swap, will amount to A$[*] and will be used by the
issuer trustee, in most part, to acquire from each seller that seller's
beneficial interest in the housing loans and related mortgages, to make a
deposit in the prefunding account and to acquire Liquid Authorized Investments.
See "Description of the Assets of the Trust--Acquisition of Housing Loans after
the Closing Date" and "Description Class A2 Notes--Application of Capital and
Liquid Authorized Investments to Available Income".
LEGAL ASPECTS OF THE HOUSING LOANS
The following discussion is a summary of the material legal aspects of
Australian retail housing loans and mortgages. It is not an exhaustive analysis
of the relevant law. Some of the legal aspects are governed by the law of the
applicable State or Territory of Australia. Laws may differ between such States
and Territories. The summary does not reflect the laws of any particular
jurisdiction or cover all relevant laws of all jurisdictions in which a
mortgaged property may be situated, although it reflects the material aspects of
the laws of New South Wales, without referring to any specific legislation of
that State.
GENERAL
There are two parties to a mortgage. The first party is the mortgagor,
who is either the borrower and homeowner or, where the relevant loan is
guaranteed and the guarantee is secured by a mortgage, the guarantor. The
mortgagor grants the mortgage over their property. The second party is the
mortgagee, who is the lender. Each housing loan will be secured by a mortgage
which has a first ranking priority over all other mortgages granted by the
relevant borrower and over all unsecured creditors of the borrower, except in
respect of certain statutory rights such as some rates and taxes, which are
granted statutory priority.
NATURE OF HOUSING LOANS AS SECURITY
There are a number of different forms of title to land in Australia.
The most common form of title in Australia is "Torrens title". The housing loans
in the proposed housing loan pool are all secured by Torrens title land.
"Torrens title" land is freehold or leasehold title, interests in which
are created by registration in one or more central land registries of the
relevant State or Territory of Australia. Each parcel of land is represented by
a specific certificate of title. The original certificate is retained by the
registry, and in most States a duplicate certificate is issued to the owner. Any
dealing with the relevant land is carried out by pro forma instruments which
become effective on registration.
Ordinarily the relevant certificate of title, or any registered plan
and instruments referred to in it, will reveal the position and dimensions of
the land, the present owner, and any leases, mortgages, registered easements and
other dealings to which it is subject. The certificate is conclusive evidence,
except in limited circumstances, such as fraud, of the matters stated in it.
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Some Torrens title property securing housing loans and thus comprised
in the mortgaged property, will be "strata title" or "urban leasehold".
STRATA TITLE
"Strata title" is an extension of the Torrens system and was developed
to enable the creation of, and dealings with, various parts of multi-story
buildings, commonly referred to as apartment units or strata lots, which are
similar to condominiums in the United States, and is governed by the legislation
of the State or Territory of Australia in which the property is situated. Under
strata title, each proprietor has title to, and may freely dispose of, their
strata lot. Certain parts of the property, such as the land on which the
building is erected, the stairwells, entrance lobbies and the like, are known as
"common property" and are held by an "owners corporation" for the benefit of the
individual proprietors. All proprietors are members of the owners corporation,
which is vested with the control, management and administration of the common
property and the strata scheme generally, for the benefit of the proprietors,
including the rules governing the apartment block.
Only Torrens title land can be the subject of strata title in this way,
and so the provisions referred to in this section in relation to Torrens title
apply to the title in an apartment unit held by a strata proprietor.
URBAN LEASEHOLD
All land in the Australian Capital Territory is owned by the
Commonwealth of Australia and is subject to a leasehold system of land title
known as urban leasehold. Mortgaged property in that jurisdiction comprises a
Crown lease and developments on the land are subject to the terms of that lease.
Any such lease:
o cannot have a term exceeding 99 years, although the term can be
extended under a straightforward administrative process in which the
only qualification to be considered is whether the land may be required
for a public purpose; and
o where it involves residential property, is subject to a nominal rent of
A$0.05 per annum on demand.
As with Torrens title land, the proprietor's leasehold interest in the
land is entered in a central register and the proprietor may deal with their
leasehold interest, including granting a mortgage over the property, without
consent from the government.
In all cases where mortgaged property consists of a leasehold interest,
the unexpired term of the lease exceeds the term of the housing loan secured by
that mortgaged property.
Leasehold property may become subject to native title claims. Native
title has only quite recently been recognized by Australian courts. Native title
to particular property is based on the traditional laws and customs of
indigenous Australians and is not necessarily extinguished by grants of Crown
leases over that property. The extent to which native title exists over
property, including property subject to a Crown lease, depends on how that
property was previously used by the indigenous claimants asserting native title,
and whether the native title has been
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extinguished by the granting of the leasehold interest. If the lease confers the
right of exclusive possession over the property, which is typically the case
with residential leases, the current view is that native title over the relevant
property would be extinguished. Whether a lease confers exclusive possession
will depend on a construction of the lease and the legislation under which the
lease was granted.
TAKING SECURITY OVER LAND
The law relating to the granting of securities over real property is
made complex by the fact that each State and Territory of Australia has separate
governing legislation. The following is a brief overview of some issues involved
in taking security over land.
Under Torrens title, registration of a mortgage using the prescribed
form executed by the mortgagor is required in order for the mortgagee to obtain
both the remedies of a mortgagee granted by statute and the relevant priorities
against other secured creditors. To this extent, the mortgagee is said to have a
legal or registered title. However, registration does not transfer title in the
property and the mortgagor remains as legal owner. Rather, the Torrens title
mortgage takes effect as a statutory charge or security only. The Torrens title
mortgagee does not obtain an "estate" in the property but does have an interest
in the land which is recorded on the register and the certificate of title for
the property. A search of the register by any subsequent creditor or proposed
creditor will reveal the existence of the prior mortgage.
In most States and Territories of Australia, a mortgagee will retain a
duplicate certificate of title which mirrors the original certificate of title
held at the relevant land registry office. Although the certificate is not a
document of title as such, the procedure for replacement is sufficiently onerous
to act as a deterrent against most mortgagor fraud. Failure to retain the
certificate may in certain circumstances constitute negligent conduct resulting
in a postponement of the mortgagee's priority to a later secured creditor.
In Queensland, under the Land Title Act 1994, duplicate certificates of
title are no longer issued to mortgagees as a matter of practice. A record of
the title is stored on computer at the land registry office and the mortgage is
registered on that computerized title.
Once the mortgagor has repaid the loan, a discharge of mortgage
executed by the mortgagee is lodged with the relevant land registry office by
the mortgagor or the mortgagee and the mortgage will then be removed from the
certificate of title for the property.
ENFORCEMENT OF REGISTERED MORTGAGES
Subject to the discussion in this section, if a borrower defaults under
a housing loan the loan documents provide that all moneys under the housing loan
may be declared immediately due and payable. In Australia, a lender may sue to
recover all outstanding principal, interest and fees under the personal covenant
of a borrower contained in the loan documents to repay those amounts. In
addition, the lender may enforce a registered mortgage in relation to the
defaulted loan. Enforcement may occur in a number of ways, including the
following:
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o The mortgagee may enter into possession of the property. If it does so,
it does so in its own right and not as agent of the mortgagor, and so
may be personally liable for mismanagement of the property and to third
parties as occupier of the property.
o The mortgagee may, in limited circumstances, lease the property to
third parties.
o The mortgagee may foreclose on the property. Under foreclosure
procedures, the mortgagee extinguishes the mortgagor's title to the
property so that the mortgagee becomes the absolute owner of the
property, a remedy that is, because of procedural constraints, rarely
used. If the mortgagee forecloses on the property, it loses the right
to sue the borrower under the personal covenant to repay and can only
look to the value of the property for satisfaction of the debt.
o The mortgagee may appoint a receiver to deal with income from the
property or exercise other rights delegated to the receiver by the
mortgagee. A receiver is the agent of the mortgagor and so, unlike when
the mortgagee enters possession of property, in theory the mortgagee is
not liable for the receiver's acts or as occupier of the property. In
practice, however, the receiver will require indemnities from the
mortgagee that appoints it.
o The mortgagee may sell the property, subject to various duties to
ensure that the mortgagee exercises proper care in relation to the
sale. This power of sale is usually expressly contained in the mortgage
documents, and is also implied in registered mortgages under the
relevant Torrens title legislation. The Torrens title legislation
prescribes certain forms and periods of notice to be given to the
mortgagor prior to enforcement. A sale under a mortgage may be by
public auction or private treaty. Once registered, the purchaser of
property sold pursuant to a mortgagee's power of sale becomes the
absolute owner of the property.
A mortgagee's ability to call in all amounts under a housing loan or
enforce a mortgage which is subject to the Consumer Credit Legislation is
limited by various demand and notice procedures which are required to be
followed. For example, as a general rule enforcement cannot occur unless the
relevant default is not remedied within 30 days after a default notice is given.
Borrowers may also be entitled to initiate negotiations with the mortgagee for a
postponement of enforcement proceedings.
PENALTIES AND PROHIBITED FEES
Australian courts will not enforce an obligation of a borrower to pay
default interest on delinquent payments if the court determines that the
relevant default interest rate is a penalty. Certain jurisdictions prescribe a
maximum recoverable interest rate, although in most jurisdictions there is no
specified threshold rate to determine what is a penalty. In those circumstances,
whether a rate is a penalty or not will be determined by reference to such
factors as the prevailing market interest rates. The Consumer Credit Legislation
does not impose a limit on the rate of default interest, but a rate which is too
high may entitle the borrower to have the loan agreement re-opened on the ground
that it is unjust. Under the Corporations Act 2001 of Australia, the liquidator
of a company may avoid a loan under which an extortionate interest rate is
levied.
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The Consumer Credit Legislation requires that any fee or charge to be
levied by the lender must be provided for in the contract, otherwise it cannot
be levied. The regulations under the Consumer Credit Legislation may also from
time to time prohibit certain fees and charges. The Consumer Credit Legislation
also requires that establishment fees, termination fees and prepayment fees must
be reasonable otherwise they may be reduced or set aside.
BANKRUPTCY
The insolvency of a natural person is governed by the provisions of the
Bankruptcy Act 1966 of Australia, which is a federal statute. Generally, secured
creditors of a natural person, such as mortgagees under real property mortgages,
stand outside the bankruptcy. That is, the property of the bankrupt which is
available for distribution by the trustee in bankruptcy does not include the
secured property. The secured creditor may, if it wishes, prove, or file a
claim, in the bankruptcy proceeding as an unsecured creditor in a number of
circumstances, including if they have realized the related mortgaged property
and their debt has not been fully repaid, in which case they can prove for the
unpaid balance. Certain dispositions of property by a bankrupt may be avoided by
the trustee in bankruptcy. These include where:
o the disposition was made to defraud creditors; or
o the disposition was made by an insolvent debtor within 6 months of the
petition for bankruptcy and that disposition gave a preference to an
existing creditor over at least one other creditor.
The insolvency of a company is governed by the Corporations Act 2001 of
Australia. Again, secured creditors generally stand outside the insolvency.
However, a liquidator may avoid a mortgage which is voidable under the
Corporations Act because it is an uncommercial transaction, or an unfair
preference to a creditor or a transaction for the purpose of defeating
creditors, and that transaction occurred:
o when the company was insolvent, or an act is done to give effect to the
transaction when the company is insolvent, or the company becomes
insolvent because of the transaction or the doing of an act to give
effect to the transaction; and
o within a prescribed period prior to the commencement of the winding up
of the company.
ENVIRONMENTAL
Real property which is mortgaged to a lender may be subject to
unforeseen environmental problems, including land contamination. Environmental
legislation which deals with liability for such problems exists at both State
and Federal levels, although the majority of relevant legislation is imposed by
the states. No Australian statute expressly imposes liability on "passive"
lenders or security holders for environmental matters, and some states expressly
exclude such liability. However, liability in respect of environmentally damaged
land, which liability may include the cost of rectifying the damage, may attach
to a person who is, for instance, an owner, occupier or person in control of the
relevant property. In some but not all States, lenders are expressly excluded
from the definitions of one or more of these categories.
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Merely holding security over property will not convert a lender into an
occupier. However, a lender or receiver who takes possession of contaminated
mortgaged property or otherwise enforces its security may be liable as an
occupier.
Some environmental legislation provides that security interests may be
created over contaminated or other affected property to secure payment of the
costs of any necessary rectification of the property. The security interests may
have priority over pre-existing mortgages. To the extent that the issuer trustee
or a receiver appointed on its behalf incurs any such liabilities, it will be
entitled to be indemnified out of the assets of the trust.
INSOLVENCY CONSIDERATIONS
The current transaction is designed to mitigate insolvency risk. For
example, the assignment of the beneficial interest of each seller in the housing
loans to the issuer trustee should ensure that the housing loans are not assets
available to the liquidator or creditors of each seller in the event of an
insolvency of that seller. Similarly, the assets in the trust should not be
available to other creditors of the issuer trustee in its personal capacity or
as trustee of any other trust in the event of an insolvency of the issuer
trustee.
If any Insolvency Event occurs with respect to the issuer trustee in
its capacity as trustee of the trust, the security trust deed may be enforced by
the security trustee at the direction of the Voting Mortgagees. See "Description
of the Transaction Documents -- The Security Trust Deed -- Enforcement of the
Charge". The security created by the security trust deed will stand outside any
liquidation of the issuer trustee, and the assets the subject of that security
will not be available to the liquidator or any creditor of the issuer trustee,
other than a creditor which has the benefit of the security trust deed until the
secured obligations have been satisfied. The proceeds of enforcement of the
security trust deed are to be applied by the security trustee as set out in
"Description of the Transaction Documents -- The Security Trust Deed --
Priorities under the Security Trust Deed". If the proceeds from enforcement of
the security trust deed are not sufficient to redeem the Class A2 notes in full,
some or all of the Class A2 noteholders will incur a loss.
TAX TREATMENT OF INTEREST ON AUSTRALIAN HOUSING LOANS
Under Australian law, interest on loans used to purchase a person's
primary place of residence is not ordinarily deductible for taxation purposes.
Conversely, interest payments on loans and other non-capital expenditures
relating to non-owner occupied properties that generate taxable income are
generally allowable as tax deductions.
CONSUMER CREDIT LEGISLATION
The majority of the housing loans are regulated by the Consumer Credit
Legislation. Under the Consumer Credit Legislation a borrower has the right to
apply to a court to do the following, among other things:
o vary the terms of a housing loan on the grounds of hardship or that it
is an unjust contract;
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o reduce or cancel any interest rate payable on a housing loan if the
interest rate is changed in a way which is unconscionable;
o have certain provisions of a housing loan which are in breach of the
legislation declared unenforceable;
o obtain an order for a civil penalty; or
o obtain additional restitution or compensation in relation to breaches
of the Consumer Credit Legislation in relation to a housing loan or a
mortgage.
Any order under the Consumer Credit Legislation may affect the timing
or amount of interest or principal payments or repayments under the relevant
housing loan, which might in turn affect the timing or amount of interest or
principal payments or repayments to you under the notes.
At the time the issuer trustee acquires the beneficial interest in the
housing loans, the trust manager and the servicer represent and warrant that the
housing loans and related mortgages complied in all material respects with the
Consumer Credit Legislation at the applicable cut-off date. Under the investment
management agreement, the servicer has undertaken to comply with the Consumer
Credit Legislation in connection with servicing the housing loans and related
mortgages.
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UNITED STATES FEDERAL INCOME TAX MATTERS
OVERVIEW
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of the Class A2
notes by investors who are subject to United States federal income tax. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended, proposed, temporary and final Treasury regulations under the Code,
and published rulings and court decisions, all of which are subject to change,
possibly retroactively, or to a different interpretation at a later date by a
court or by the Internal Revenue Service. The parts of this summary which relate
to matters of law or legal conclusions represent the opinion of Mayer, Brown,
Rowe & Maw, special United States federal tax counsel for the trust manager, and
are as qualified in this summary. We have not sought and will not seek any
rulings from the Internal Revenue Service about any of the United States federal
income tax consequences we discuss, and we cannot assure you that the Internal
Revenue Service will not take contrary positions.
Mayer, Brown, Rowe & Maw has prepared or reviewed the statements under
the heading "United States Federal Income Tax Matters" and is of the opinion
that these statements discuss the material United States federal income tax
consequences to investors generally of the purchase, ownership and disposition
of the Class A2 notes. However, the following discussion does not discuss and
Mayer, Brown, Rowe & Maw is unable to opine as to the unique tax consequences of
the purchase, ownership and disposition of the Class A2 notes by investors that
are given special treatment under the United States federal income tax laws,
including:
o banks and thrifts;
o insurance companies;
o regulated investment companies;
o dealers in securities;
o investors that will hold the notes as a position in a "straddle" for
tax purposes or as a part of a "synthetic security", "conversion
transaction" or other integrated investment comprised of the notes and
one or more other investments;
o foreign investors, except as specifically set forth below;
o trusts and estates; and
o pass-through entities, the equity holders of which are any of the
foregoing.
Additionally, the discussion regarding the Class A2 notes is limited to
the United States federal income tax consequences to the initial investors and
not to a purchaser in the secondary market and is limited to investors who will
hold the Class A2 notes as "capital assets" within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the CODE).
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It is suggested that prospective investors consult their own tax
advisors about the United States federal, state, local, foreign and any other
tax consequences to them of the purchase, ownership and disposition of the Class
A2 notes, including the advisability of making any election discussed under
"Market Discount".
The issuer trustee will be reimbursed for any United States federal
income taxes imposed on it in its capacity as trustee of the trust out of the
assets of the trust. Also, based on the representation of the trust manager that
the trust does not and will not have an office in the United States, the trust
does not and will not avail itself of the office of an agent in the United
States, and that the trust is not conducting, and will not conduct, either
directly or through an agent, any activities in the United States, other than in
connection with its issuance of the Class A2 notes, in the opinion of Mayer,
Brown, Rowe & Maw, the issuer trustee and the trust will not be subject to
United States federal income tax.
In the opinion of Mayer, Brown, Rowe & Maw, special tax counsel for the
trust manager, the Class A2 notes will be characterized as debt for U.S. federal
income tax purposes. Each Class A2 noteholder, by acceptance of a Class A2 note,
agrees to treat the notes as indebtedness.
GENERAL
Mayer, Brown, Rowe & Maw is of the opinion that you will be required to
report interest income on the Class A2 notes you hold in accordance with your
method of accounting.
SALE OF NOTES
Mayer, Brown, Rowe & Maw is of the opinion that if you sell a Class A2
note, you will recognize gain or loss equal to the difference between the amount
realized on the sale, other than amounts attributable to, and taxable as,
accrued interest, and your adjusted tax basis in the Class A2 note. Your
adjusted tax basis in a note will equal your cost for the Class A2 note,
decreased by any amortized premium and any payments other than interest made on
the Class A2 note and increased by any market discount or original issue
discount previously included in your income. Any gain or loss will generally be
a capital gain or loss, other than amounts representing accrued interest or
market discount, and will be long-term capital gain or loss if the Class A2 note
was held as a capital asset for more than one year. In the case of an individual
taxpayer, the maximum long-term capital gains tax rate is lower than the maximum
ordinary income tax rate. Any capital losses realized may be deducted by a
corporate taxpayer only to the extent of capital gains and by an individual
taxpayer only to the extent of capital gains plus US$3,000 of other U.S. income.
MARKET DISCOUNT
In the opinion of Mayer, Brown, Rowe & Maw, you will be considered to
have acquired a Class A2 note at a "market discount" to the extent the remaining
principal amount of the note exceeds your tax basis in the note, unless the
excess does not exceed a prescribed de minimis amount. If the excess exceeds the
de minimis amount, you will be subject to the market discount rules of Sections
1276 and 1278 of the Code with regard to the note.
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In the case of a sale or other disposition of a Class A2 note subject
to the market discount rules, Section 1276 of the Code requires that gain, if
any, from the sale or disposition be treated as ordinary income to the extent
the gain represents market discount accrued during the period the note was held
by you, reduced by the amount of accrued market discount previously included in
income.
In the case of a partial principal payment of a Class A2 note subject
to the market discount rules, Section 1276 of the Code requires that the payment
be included in ordinary income to the extent the payment does not exceed the
market discount accrued during the period the note was held by you, reduced by
the amount of accrued market discount previously included in income.
Generally, market discount accrues under a straight line method, or, at
the election of the taxpayer, under a constant interest rate method. However, in
the case of bonds with principal payable in two or more installments, such as
the Class A2 notes, the manner in which market discount is to be accrued will be
described in Treasury regulations not yet issued. Until these Treasury
regulations are issued, you should follow the explanatory Conference Committee
Report to the Tax Reform Act of 1986 for your accrual of market discount. This
Conference Committee Report indicates that holders of these obligations may
elect to accrue market discount either on the basis of a constant interest rate
or as follows:
o for those obligations that have original issue discount, market
discount shall be deemed to accrue in proportion to the accrual of
original issue discount for any accrual period; and
o for those obligations which do not have original issue discount, the
amount of market discount that is deemed to accrue is the amount of
market discount that bears the same ratio to the total amount of
remaining market discount that the amount of stated interest paid in
the accrual period bears to the total amount of stated interest
remaining to be paid on the obligation at the beginning of the accrual
period.
Under Section 1277 of the Code, if you incur or continue debt that is
used to purchase a Class A2 note subject to the market discount rules, and the
interest paid or accrued on this debt in any taxable year exceeds the interest
and original issue discount currently includible in income on the note,
deduction of this excess interest must be deferred to the extent of the market
discount allocable to the taxable year. The deferred portion of any interest
expense will generally be deductible when the market discount is included in
income upon the sale, repayment, or other disposition of the indebtedness.
Section 1278 of the Code allows a taxpayer to make an election to
include market discount in gross income currently. If an election is made, the
previously described rules of Sections 1276 and 1277 of the Code will not apply
to the taxpayer.
Due to the complexity of the market discount rules, we suggest that you
consult your tax advisors as to the applicability and operation of these rules.
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PREMIUM
In the opinion of Mayer, Brown, Rowe & Maw, you will generally be
considered to have acquired a Class A2 note at a premium if your tax basis in
the note exceeds the remaining principal amount of the note. In that event, if
you hold a Class A note as a capital asset, you may amortize the premium as an
offset to interest income under Section 171 of the Code, with corresponding
reductions in your tax basis in the note if you have made an election under
Section 171 of the Code. Generally, any amortization is on a constant yield
basis. However, in the case of bonds with principal payable in two or more
installments, like the Class A2 notes, the previously discussed conference
report, which indicates a Congressional intent that amortization be in
accordance with the rules that will apply to the accrual of market discount on
these obligations, should be followed for the amortization of such premium. We
suggest that you consult your tax advisor as to the applicability and operation
of the rules regarding amortization of premium.
BACKUP WITHHOLDING
Mayer, Brown, Rowe & Maw is of the opinion that, backup withholding
taxes will be imposed on payments to you of interest paid, and original issue
discount accrued, if any, on the Class A2 notes if, upon issuance, you fail to
supply the trust manager or its broker with a certified statement, under
penalties of perjury, containing your name, address, correct taxpayer
identification number, and a statement that you are not required to pay backup
withholding. The backup withholding tax rate of 30%, in effect for payments made
during the years 2002 and 2003, will be reduced to 29% for payments made during
the years 2004 and 2005, and 28% for payments made during the years 2006 through
2010. For payments made after 2010, the backup withholding tax rate will be
increased to 31%. Exempt investors, such as corporations, tax-exempt
organizations, qualified pension and profit sharing trusts, individual
retirement accounts or non-resident aliens who provide certification of their
status as non-resident are not subject to backup withholding. Information
returns will be sent annually to the Internal Revenue Service by the trust
manager and to you stating the amount of interest paid, original issue discount
accrued, if any, and the amount of tax withheld from payments on the Class A2
notes. We suggest that you consult your tax advisors about your eligibility for,
and the procedure for obtaining, exemption from backup withholding.
A foreign investor generally will be exempt from backup withholding and
information reporting requirements, assuming payments on the Class A2 notes are
otherwise exempt from United States federal income tax, provided that such
foreign investor complies with certain certification and identification
procedures in order to prove its exemption. In order for a foreign investor to
prove its exemption, such foreign investor should submit the appropriate
Internal Revenue Service Form W-8, attesting to such foreign investor's foreign
status. We suggest that you consult your tax advisors about your eligibility
for, and the procedure for obtaining, such an exemption.
The Treasury Department has issued new regulations that, among other
things, make certain modifications to the backup withholding rules. The new
regulations attempt to unify certification requirements and modify reliance
standards. The new regulations are effective for
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payments made after 31 December 2000, subject to certain transition rules. We
suggest that you consult your own tax advisor regarding the impact of the new
regulations.
AUSTRALIAN TAX MATTERS
The following statements with respect to Australian taxation are the
material tax consequences for holders who are not residents of Australia for tax
purposes of purchasing, holding and disposing of the Class A2 notes and are
based on advice received by the trust manager on the basis of Australian law as
in effect on the date of this prospectus which is subject to change possibly
with retroactive effect. It is suggested that purchasers of Class A2 notes
should consult their own tax advisers concerning the consequences, in their
particular circumstances under Australian tax laws and the laws of any other
taxing jurisdiction, of the purchase, ownership, disposal or dealing of or in
the notes.
PAYMENTS OF PRINCIPAL, PREMIUMS AND INTEREST
Under existing Australian tax law, non-resident holders of notes or
interests in any global note, other than persons holding such securities or
interest as part of a business carried on, at or through a permanent
establishment in Australia, are not subject to Australian income tax on payments
of interest or amounts in the nature of interest, other than interest
withholding tax, which is currently 10%, on interest or amounts in the nature of
interest paid on the notes. A premium on redemption would generally be treated
as an amount in the nature of interest for this purpose.
Pursuant to section 128F of the Income Tax Assessment Act 1936 of the
Commonwealth of Australia (the TAX ACT), an exemption from Australian interest
withholding tax applies provided all prescribed conditions are met.
These conditions are:
o the issuer trustee is a company that is a resident of Australia when it
issues the notes and when interest, as defined in section 128A (1AB) of
the Tax Act, is paid; and
o the notes, or a global bond or note or interests in such a global bond
or note, were issued in a manner which satisfied the public offer test
as prescribed under section 128F of the Tax Act.
The issuer trustee will seek to list the Class A2 notes on the
Luxembourg Stock Exchange and the Australian Stock Exchange. On the basis that
the issuer trustee has previously entered into an agreement with the
underwriters in relation to the placement of the Class A2 notes, requiring the
issuer trustee to seek any such listing, the issue of the Class A2 notes will
satisfy the public offer test of section 128F of the Tax Act.
The public offer test will not be satisfied, if at the time of issue,
the issuer trustee knew or had reasonable grounds to suspect that the Class A2
notes were being or would later be acquired directly or indirectly by an
associate of the issuer trustee within the meaning of that section, other than
in the capacity of a dealer, trust manager or underwriter in relation to the
placement of a note. "Associate" for these purposes is widely defined and means,
generally speaking, in
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relation to an issuer acting in the capacity of a trustee, the beneficiaries of
the trust. Thus the relevant associates of the issuer trustee in the present
case will be the trust manager as the residual beneficiary of the trust and the
associates of the trust manager and the other beneficiaries of the trust, if
any, from time to time.
If the requirements for exemption under section 128F of the Tax Act are
met with respect to the Class A2 notes, payments of principal, interest and any
premium made to a holder of the notes who is not a resident of Australia and who
does not carry on business through a permanent establishment in Australia, will
not be subject to Australian income or withholding tax.
The exemption from Australian withholding tax will also not apply to
interest paid by the issuer trustee to an associate of the issuer trustee within
the meaning of section 128F of the Tax Act, which, as discussed, would be an
associate of the residual beneficiary, if, at the time of the payment, the
issuer trustee knows, or has reasonable grounds to suspect, that the person is
an associate.
NOTE TRANSFERS
A noteholder may be subject to taxation in respect of any gain made on
the transfer of notes. The specific taxation implications in respect of the
transfer depends on the nature of the gain which will vary as between
noteholders. Broadly, the taxation consequences will depend on whether
noteholders own the notes on revenue or capital account.
Noteholders should seek their own advice in relation to the specific
taxation consequences of the transfer of their notes.
In addition, noteholders should also seek their own advice regarding
the goods and services tax implications of the transfer of their notes.
PROFIT ON SALE
Under existing Australian law, non-resident holders of notes will not
be subject to Australian income tax on profits derived from the sale or disposal
of the notes provided that:
o the notes are not held as part of a business carried on, at or through
a permanent establishment in Australia; and
o the profits do not have an Australian source.
The source of any profit on the disposal of notes will depend on the
factual circumstances of the actual disposal. Where the notes are acquired and
disposed of pursuant to contractual arrangements entered into and concluded
outside Australia, and the seller and the purchaser are non-residents of
Australia and do not have a business carried on, at or through a permanent
establishment in Australia, the profit should not have an Australian source.
There are, however, specific withholding tax rules that can apply to
treat a portion of the sale price of notes as interest for withholding tax
purposes and which amounts are not covered by the exemption in section 128F of
the Tax Act. These rules can apply when:
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o notes are sold for any amount in excess of their issue price prior to
maturity to a purchaser who is either a resident who does not acquire
the notes in the course of carrying on business in a country outside
Australia at or through a permanent establishment in that country or a
non-resident that acquires the notes in the course of carrying on a
business in Australia at or through a permanent establishment in
Australia; or
o notes are sold to an Australian resident in connection with a "washing
arrangement" as defined in the Tax Act.
GOODS AND SERVICES TAX
The goods and services tax regime was introduced in Australia from July
1, 2000.
The goods and services tax (GST) is a transactions tax and accordingly
may impact various transactions in which the issuer trustee is involved.
Broadly, the impact of the goods and services tax regime will depend on the type
of supply made by the issuer trustee.
Where the supply by the issuer trustee is a "taxable supply", the
issuer trustee will have to remit goods and services tax equal to 1/11th of the
total consideration received for the supply to the Australian Taxation Office
(ATO). The issuer trustee can obtain full input tax credits for goods and
services tax paid on things acquired to make the taxable supply.
Where the supply by the issuer trustee is a "GST free supply", the
issuer trustee does not remit goods and services tax on the supply to the ATO.
The issuer trustee can obtain full input tax credits for goods and services tax
paid on things acquired to make the GST free supply.
Where the supply by the issuer trustee is an "input taxed supply",
which includes financial supplies, the issuer trustee is not required to remit
goods and services on the supply. The issuer trustee is generally not entitled
to input tax credits for goods and services tax paid on things acquired to make
input taxed supplies. In some circumstances, however, "reduced input tax
credits" may be available.
On the basis of the current goods and services tax legislation, the
issue of the notes would constitute either a financial supply or a GST-free
supply depending on the status of the noteholders. In either case GST is not
charged in respect of the supply. Payments made to noteholders would not
constitute a separate supply for GST purposes.
FIXED-FLOATING RATE SWAP & GST
Where the fixed-floating rate swap provider is an Australian resident, the GST
implications under current Australian law are as follows:
o the exchange of fixed interest rate obligations for floating interest
rate obligations by the issuer trustee would constitute a financial
supply. Accordingly, the issuer trustee would not be obliged to remit
GST to the ATO and would not be entitled to claim full input tax
credits in relation to the costs associated with making the supply,
although the issuer trustee may be entitled to claim a reduced input
tax credit; and
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o the exchange of floating interest rate obligations for fixed interest
rate obligations by the fixed-floating rate swap provider would also
constitute a financial supply.
Where the fixed-floating rate swap provider is not an Australian resident, the
GST implications under current Australian law are as follows:
o the supply of fixed interest rate obligations for floating interest
rate obligations by the issuer trustee to the non-resident
fixed-floating rate swap provider, constitutes a GST-free supply.
Accordingly, the issuer trustee is not required to remit GST to the
ATO, however, the issuer trustee is entitled to claim input taxed
credits in relation to the costs associated with making this supply;
and
o the supply of floating interest rate obligations for fixed interest
rate obligations by the non-resident fixed-floating rate swap provider
to the issuer trustee has no impact for GST purposes.
CURRENCY SWAP PROVIDER & GST
Where the currency swap provider is an Australian resident, the GST implications
under current Australian law are as follows:
o the exchange of currency denominations by the issuer trustee would
constitute a financial supply. Accordingly, the issuer trustee would
not be obliged to remit GST to the ATO and would not be entitled to
claim full input tax credits in relation to the costs associated with
making the supply, although the issuer trustee may be entitled to claim
a reduced input tax credit; and
o the exchange of currency denominations by the currency swap provider
would also constitute a financial supply.
Where the currency swap provider is not an Australian resident, the GST
implications under current Australian law are as follows:
o the supply of currency denominations by the issuer trustee to the
non-resident currency swap provider, constitutes a GST-free supply.
Accordingly, the issuer trustee is not required to remit GST to the
ATO, however, the issuer trustee is entitled to claim input taxed
credits in relation to the costs associated with making this supply;
and
o the supply of currency denominations by the non-resident currency swap
provider to the issuer trustee has no impact for GST purposes.
OTHER TAXES
No stamp, issue, registration or similar taxes are payable in Australia
in connection with the issue of the Class A2 notes. Furthermore, a transfer of,
or agreement to transfer, notes executed outside of Australia should not be
subject to Australian stamp duty.
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TAX REFORM PROPOSALS
Under the Review of Business Taxation recommendations it was proposed
that some trusts be taxed as if they were companies as from July 1, 2001. The
Australian Federal Government released draft legislation to implement these
recommendations. The draft legislation provided that non-fixed trusts would be
taxed as if they were companies. Fixed trusts, however, would not be subject to
the proposed measures and would therefore retain their current taxation
treatment and accordingly will continue to receive flow-through treatment. The
Exposure Draft Legislation was subject to an extensive consultation process. As
a result of this process, the Australian Federal Government resolved that the
Exposure Draft Legislation involved numerous complications, therefore it has
since been withdrawn.
The Australian Federal Government may issue new draft rules in relation
to the taxation of trusts in the future, however the form and proposed state
date of these measures remain uncertain.
In any case, the measures should in no way impact the payment to
noteholders who will continue to receive their interest payments in respect of
the notes issued by the issuer trustee.
DEBT & EQUITY
The New Business Tax System (Debt and Equity) Act 2001 was enacted on
October 1, 2001 with effect from July 1, 2001 and amends the Income Tax
Assessment Act 1997 (Cth).
The debt/equity rules recharacterize as equity, for tax purposes,
certain interests in a company which would otherwise be regarded as debt. In so
doing, a tax deduction is denied for any interest paid on such "non-share
equity".
The notes on issue have the following attributes:
o the notes are not convertible to equity;
o interest payment in respect of the notes is based on a specific
formula;
o the rights attaching to the notes and the amount of the return is not
subject to the discretion of the issuer
trustee.
In light of the debt/equity rules, the notes issued by the issuer
should constitute debt.
ENFORCEMENT OF FOREIGN JUDGMENTS IN AUSTRALIA
Interstar Securitisation Management Pty Limited is an Australian
private company incorporated with limited liability under the Corporations Act
2001 of Australia. Any final and conclusive judgment of any New York State or
United States Federal Court sitting in the Borough of Manhattan in the City of
New York having jurisdiction recognized by the relevant Australian jurisdiction
in respect of an obligation of Interstar Securitisation Management Pty Limited
in respect of a note, which is for a fixed sum of money and which has not been
stayed or satisfied in full, would be enforceable by action against Interstar
Securitisation Management Pty
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Limited in the courts of the relevant Australian jurisdiction without a
re-examination of the merits of the issues determined by the proceedings in the
New York State or United States Federal Court, as applicable, unless:
o the proceedings in New York State or United States Federal Court, as
applicable, involved a denial of the principles of natural justice;
o the judgment is contrary to the public policy of the relevant
Australian jurisdiction;
o the judgment was obtained by fraud or duress or was based on a clear
mistake of fact;
o the judgment is a penal or revenue judgment; or
o there has been a prior judgment in another court between the same
parties concerning the same issues as are dealt with in the judgment of
the New York State or United States Federal Court, as applicable.
A judgment by a court may be given in some cases only in Australian
dollars. Interstar Securitisation Management Pty Limited expressly submits to
the jurisdiction of New York State and United States Federal Courts sitting in
the Borough of Manhattan in the City of New York for the purpose of any suit,
action or proceeding arising out of this offering. Interstar Securitisation
Management Pty Limited has appointed CT Corporation System, 111 Eighth Avenue,
13th Floor, New York, New York 10011, as its agent upon whom process may be
served in any such action.
All of the directors and executive officers of Interstar Securitisation
Management Pty Limited, and certain experts named in this prospectus, reside
outside the United States in the Commonwealth of Australia. Substantially all or
a substantial portion of the assets of all or many of such persons are located
outside the United States. As a result, it may not be possible for holders of
the notes to effect service of process within the United States upon such
persons or to enforce against them judgments obtained in United States courts
predicated upon the civil liability provisions of federal securities laws of the
United States. Interstar Securitisation Management Pty Limited has been advised
by its Australian counsel, Allens Arthur Robinson, that, based on the
restrictions discussed in this section, there is doubt as to the enforceability
in the Commonwealth of Australia, in original actions or in actions for
enforcement of judgments of United States courts, of civil liabilities
predicated upon the federal securities laws of the United States.
EXCHANGE CONTROLS AND LIMITATIONS
Under certain instruments issued by the Reserve Bank of Australia under
the Banking (Foreign Exchange) Regulations, the specific prior approval of the
Reserve Bank of Australia must be obtained for certain payments to be made in or
from Australia to, by the order of, on behalf of, or relating to property,
securities or funds belonging to or controlled by:
o the Government of Iraq or its agencies or its nationals;
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o the Embassy of the Federal Republic of Yugoslavia, the
Consulate-General of the Federal Republic of Yugoslavia, Narodna Banka
Jugoslavije, including Banque Nationale de Yugoslavie, and certain
other persons listed in the relevant instrument as known supporters of
the former Milosevic regime of the Federal Republic of Yugoslavia;
o the Government or a public authority of Libya or certain Libyan
undertakings;
o the Taliban, including the Islamic Emirate of Afghanistan, or any
undertaking owned or controlled by the Taliban;
o certain other persons and entities listed in the relevant instrument
identified by the United Nations and the United States of America as
being linked to terrorism; or
o UNITA, being the United Union for the Total Independence of Angola, its
senior officials and their immediate families.
ERISA CONSIDERATIONS
Subject to the considerations discussed in this section, the Class A2
notes are eligible for purchase by employee benefit plans.
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh plans from engaging in certain transactions
with persons that are "parties in interest" under ERISA or "disqualified
persons" under Section 4975 of the Code with respect to these Benefit Plans. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for these persons.
Title I of ERISA also requires that fiduciaries of a Benefit Plan subject to
ERISA make investments that are prudent, diversified, except if prudent not to
do so, and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
Class A2 notes might be deemed to constitute prohibited transactions under ERISA
and Section 4975 of the Code if assets of the trust were deemed to be assets of
a Benefit Plan. Under a regulation issued by the United States Department of
Labor, the assets of the trust would be treated as plan assets of a Benefit Plan
for the purposes of ERISA and Section 4975 of the Code only if the Benefit Plan
acquires an "equity interest" in the trust and none of the exceptions contained
in the regulation is applicable. An equity interest is defined under the
regulation as an interest in an entity other than an instrument which is treated
as indebtedness under applicable local law and which has no substantial equity
features. Although there can be no assurances in this regard, it appears, at the
time of their initial issuance that the notes should be treated as debt without
substantial equity features for purposes of the regulation and that the notes do
not constitute equity interests in the trust for purposes of the regulation. The
debt characterization of the notes could change after their initial issuance if
the trust incurs losses.
However, without regard to whether the Class A2 notes are treated as an
equity interest for these purposes, the acquisition or holding of the notes by
or on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the trust, the issuer trustee, the servicer, a
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backup servicer, the trust manager, the note trustee, the seller, a swap
provider, the underwriters or the security trustee is or becomes a party in
interest or a disqualified person with respect to these Benefit Plans. In such
case, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a note. Included among these exemptions are:
o Prohibited Transaction Class Exemption 96-23, regarding transactions
effected by "in-house asset managers";
o Prohibited Transaction Class Exemption 95-60, regarding transactions
effected by "insurance company general accounts";
o Prohibited Transaction Class Exemption 91-38, regarding investments by
bank collective investment funds;
o Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts; and
o Prohibited Transaction Class Exemption 84-14, regarding transactions
effected by "qualified professional asset managers".
By your acquisition of a Class A2 note, you shall be deemed to
represent and warrant that your purchase and holding of the note will not result
in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code.
Employee benefit plans that are governmental plans, as defined in
Section 3(32) of ERISA, and certain church plans, as defined in Section 3(33) of
ERISA, are not subject to ERISA requirements; however, governmental plans may
be subject to comparable state law restrictions.
If you are a plan fiduciary considering the purchase of any of the
Class A2 notes, you should consult your tax and legal advisors regarding whether
the assets of the Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
LEGAL INVESTMENT CONSIDERATIONS
The Class A2 notes will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984, because
the originator of the housing loans was not subject to United States state or
federal regulatory authority. Accordingly, some United States institutions with
legal authority to invest in comparably rated securities based on such housing
loans may not be legally authorized to invest in the Class A2 notes. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or to
review by any regulatory authorities. You are urged to consult with your counsel
concerning the status of the Class A2 notes as legal investments for you.
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AVAILABLE INFORMATION
Interstar Securitisation Management Pty Limited, as trust manager, has
filed with the SEC a registration statement under the United States Securities
Act of 1933 (SECURITIES ACT) with respect to the Class A2 notes offered pursuant
to this prospectus. For further information, reference should be made to the
registration statement and amendments thereof and to the exhibits thereto, which
are available for inspection without charge at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549; and at
the SEC's regional offices at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of the registration statement, including any amendments
or exhibits, may be obtained from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC also
maintains a World Wide Web site which provides on-line access to reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC at the address "http://www.sec.gov".
RATINGS OF THE NOTES
The issuance of the Class A2 notes will be conditioned on obtaining a
rating of AAA by S&P and Aaa by Moody's. The issuance of the Class B notes will
be conditioned on obtaining a rating of AA- by S&P. You should independently
evaluate the security ratings of each class of notes from similar ratings on
other types of securities. A security rating is not a recommendation to buy,
sell or hold securities. A rating does not address the market price or
suitability of the notes for you. A rating may be subject to revision or
withdrawal at any time by the rating agencies. The rating does not address the
expected schedule of principal repayments other than to say that principal will
be returned no later than the final maturity date of the notes. The ratings of
the Class A2 notes will be based primarily on the creditworthiness of the
housing loans, the subordination provided by the Class B notes with respect to
the Class A2 notes, the mortgage insurance policies and title insurance
policies, the creditworthiness of the swap providers and the mortgage insurers
and the foreign currency rating of Australia. The Commonwealth of Australia's
current foreign currency long term debt rating is AA+ by S&P and Aa2 by Moody's.
In the context of an asset securitization, the foreign currency rating of a
country reflects, in general, a rating agency's view of the likelihood that cash
flow on the assets in such country's currency will be permitted to be sent
outside of that country. None of the rating agencies have been involved in the
preparation of this prospectus.
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PLAN OF DISTRIBUTION
UNDERWRITING
Under the terms and subject to the conditions contained in the
underwriting agreement among the underwriters, the issuer trustee and the trust
manager, the issuer trustee has agreed to sell to the underwriters the entire
Principal Amount of the Class A2 notes:
PRINCIPAL AMOUNT OF
CLASS A2 NOTES
UNDERWRITERS (US$)
Barclays Capital, Inc........................................................... $[*]
[*] $[*]
[*] $[*]
Total........................................................................... $[*]
The underwriting agreement provides that the underwriters are obligated
to purchase all of the Class A2 notes if any are purchased.
The underwriters propose to offer the Class A2 notes initially at the
public offering prices on the cover page of this prospectus and to selling group
members at the price less a concession not in excess of the respective amounts
set forth in the following table, expressed as a percentage of the principal
balance. The underwriters and selling group members may reallow a discount not
in excess of the respective amounts set forth in the following table to other
brokers and dealers. After the initial public offering, the public offering
price and concessions and discounts to brokers and dealers may be changed by the
representative of the underwriters.
SELLING REALLOWANCE
CONCESSIONS DISCOUNT
Class A2 notes....................... [*]% [*]%
The trust manager estimates that the out-of-pocket expenses for this
offering will be approximately US$[*] million.
The underwriters have informed the trust manager that they do not
expect discretionary sales by them to exceed [5]% of the principal balance of
the Class A2 notes.
The trust manager has agreed to indemnify the underwriters against
civil liabilities under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
The underwriting discounts and commissions will be paid separately by
Interstar Securities (Australia) Pty Limited and not from the proceeds to the
issuer trustee.
The underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act.
o Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position;
160
o Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum;
o Syndicate covering transactions involve purchases of the Class A2 notes
in the open market after the distribution has been completed in order
to cover syndicate short positions;
o Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the Class A2 notes originally sold by a
syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
Stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the Class A2 notes to be higher than it would
otherwise be in the absence of these transactions. These transactions, if
commenced, may be discontinued at any time.
In the ordinary course of its business, the underwriters and some of
their affiliates have in the past and may in the future engage in commercial and
investment banking activities with the trust manager and its affiliates.
OFFERING RESTRICTIONS
THE UNITED KINGDOM
The Class A2 notes have only been offered or sold and will only be
offered or sold in or from the United Kingdom: (a) to persons (i) whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of their businesses; or
(ii) to persons who it is reasonable to expect will acquire, hold, manage or
dispose of investments, as principal or agent, for the purposes of their
businesses; or (iii) otherwise in circumstances that have not resulted and will
not result in an offer to the public under the Public Offers of Securities
Regulations 1995 (as amended); and (b) in compliance with all applicable
provisions of the Financial Services and Markets Act 2000 (FISMA), and rules and
regulations made thereunder with respect to anything done in relation to the
Class A2 notes in, from or otherwise involving the United Kingdom. Any
invitation or inducement to engage in investment activity, within the meaning of
Section 21 of FISMA, will only be communicated or caused to be communicated in
circumstances when Section 21 of FISMA does not apply, including to persons
exempted as investment professionals under Article 19 or to high net worth
persons under Article 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001, as amended.
Neither this prospectus nor the Class A2 notes have been, or will be,
available to other categories of persons in the United Kingdom and no-one
falling outside such categories is entitled to rely on, and must not act on, any
information in this prospectus. The transmission of this prospectus to any
person in the United Kingdom other than the categories stated above is
unauthorized and may contravene FISMA.
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AUSTRALIA
No offering circular, prospectus or other disclosure document in
relation to any notes has been lodged with the Australian Securities and
Investments Commission. The Class A2 notes may not, in connection with their
initial distribution, be offered or sold, directly or indirectly, in the
Commonwealth of Australia, its territories or possessions, or to any resident of
Australia. Each underwriter has agreed that it:
o has not, directly or indirectly, offered for issue or sale or invited
applications for the issue of or for offers to purchase nor has it sold
the Class A2 notes;
o will not, directly or indirectly, offer for issue or sale or invited
applications for the issue of or for offers to purchase nor will it
sell the Class A2 notes; and
o has not distributed and will not distribute any draft, preliminary or
definitive offering circular, or any advertisement or other offering
material,
in Australia, its territories or possessions unless:
o the amount payable for the Class A2 notes on acceptance of the offer by
each offeree or invitee is a minimum amount of A$500,000, or its
equivalent in another currency - disregarding amounts, if any, lent by
the issuer trustee or other person offering the notes or any associate
of them - or the offer or invitation is otherwise an offer or
invitation for which no disclosure is required to be made under Part
6D.2 of the Corporations Act 2001 of Australia;
o the offer, invitation or distribution complies with all applicable
laws, regulations and directives in relation to the offer, invitation
or distribution and does not require any document to be lodged with the
Australian Securities and Investments Commission; and
o the Class A2 notes will not be acquired by an associate of the issuer
trustee within the meaning of section 128F of the Tax Act, other than
in the capacity of a dealer, trust manager or underwriter in relation
to a placement of the Class A2 notes, as identified on a list provided
by the trust manager, the LIST.
In addition, each underwriter has agreed that, in connection with the
primary distribution of the Class A2 notes, it will not sell any Class A2 notes
to any person if, at the time of such sale, the employees of the underwriter
aware of, or involved in, the sale know, or have reasonable grounds to suspect
that, as a result of such sale, such Class A2 notes or any interest in such
Class A2 notes were being, or would later be acquired, directly or indirectly,
by an associate of the issuer trustee for the purposes of section 128F of the
Tax Act.
Each underwriter has agreed that it must offer the Class A2 notes for
which they subscribe for sale within 30 days of the issue of those Class A2
notes. Such offer must only be by one of the following means, or a combination
thereof:
o as a result of negotiations being initiated by each underwriter in
electronic form on Reuters or the electronic information system made
available to its subscribers by
162
Bloomberg, L.P., specifying in such offer the name of the issuer and
the price at which the Class A2 notes are offered for sale; or
o by an underwriter offering those Class A2 notes for sale to at least 10
persons, each an INVESTOR, each of whom must be:
o carrying on a business of providing finance, or investing or dealing in
securities, in the course of operating in the financial markets; and
o not known to be an associate of any of the others.
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GENERAL INFORMATION
LISTING
Application has been made to list the Class A2 notes on the Luxembourg
Stock Exchange and the Australian Stock Exchange. In connection with listing
application to the Luxembourg Stock Exchange, copies of the constitutional
documents of the issuer trustee and the legal notice relating to the issuance of
the Class A2 notes will be deposited with the Chief Registrar of the District
Court of Luxembourg, Greffier en Chef du Tribunal d'Arrondissement de et a
Luxembourg, where such documents may be examined and copied upon request.
The Bank of New York (Luxembourg) S.A. will initially act as the
Luxembourg listing agent, Luxembourg paying agent and Luxembourg transfer agent.
Each of these agents agree that so long as the Class A2 notes are listed on the
Luxembourg Stock Exchange, such agents will be maintained in Luxembourg. Any
changes thereto must be notified to the Class A2 noteholders.
AUTHORIZATION
The issuer trustee has obtained all necessary consents, approvals and
authorizations in connection with the issue and performance of the Class A2
notes. The issue of the Class A2 notes has been authorized by the resolutions of
the board of directors of Perpetual Trustees Victoria Limited passed on [*]
2002.
LITIGATION
The issuer trustee is not, and has not been, involved in any litigation
or arbitration proceedings that may have, or have had during the twelve months
preceding the date of this prospectus, a significant effect on its financial
position nor, so far as it is aware, are any such litigation or arbitration
proceedings pending or threatened.
EUROCLEAR AND CLEARSTREAM, LUXEMBOURG
The Class A2 notes have been accepted for clearance through Euroclear
and Clearstream, Luxembourg with the Common Code number [*] and ISIN [*].
TRANSACTION DOCUMENTS AVAILABLE FOR INSPECTION
You may obtain copies of the reports to Class A2 noteholders during
normal business hours on a weekday, excluding Saturdays, Sundays and public
holidays, at the specified offices of [the Luxembourg paying agent], with
initial specified offices located at [ ], Luxembourg.
You may inspect copies of the following transaction documents during
normal business hours on any weekday, excluding Saturdays, Sundays and public
holidays, at the specified offices of [ ], with initial specified
offices located at [ ], Luxembourg, during the period of fourteen
days from the date of this prospectus:
164
o constitution of the issuer trustee;
o underwriting agreement;
o master trust deed;
o series notice;
o security trust deed;
o note trust deed;
o agency agreement;
o investment management agreement;
o fixed-floating rate swap; and
o currency swap.
ANNOUNCEMENT
By distributing or arranging for the distribution of this prospectus to
the underwriters and the persons to whom this prospectus is distributed, the
issuer trustee announces to the underwriters and each such person that:
o the Class A2 notes will initially be issued in the form of book-entry
notes and will be registered in the name of Cede & Co., as nominee of
DTC;
o in connection with the issue, DTC will confer rights in the Class A2
notes to the noteholders and will record the existence of those rights;
and
o as a result of the issue of the Class A2 notes in this manner, these
rights will be created.
LEGAL MATTERS
Mayer, Brown, Rowe & Maw, New York, New York, will pass upon some legal
matters with respect to the Class A2 notes, including the material U.S. federal
income tax matters, for Interstar Securitisation Management Pty Limited. Allens
Arthur Robinson, Sydney, Australia, will pass upon some legal matters, including
the material Australian tax matters, with respect to the Class A2 notes for
Interstar Securitisation Management Pty Limited. Orrick, Herrington & Sutcliffe,
London, United Kingdom will act as United States legal counsel to the
underwriters.
165
GLOSSARY
A$ INTEREST AMOUNT................means, in relation to the Class A2 notes and a
monthly payment date, the amount in Australian
dollars calculated as follows:
o on a daily basis at the applicable
rate set out in the currency swap;
o on the A$ Equivalent of the
Currency Swap Notional Amount for
that monthly payment date; and
o on the basis of the actual number
of days in the relevant interest
period and a year of 365 days.
A$ EQUIVALENT.....................means, in relation to an amount denominated or
to be denominated in US$:
o prior to the termination of the
currency swap, the amount converted
to and denominated in A$ at the
rate of exchange set forth in the
currency swap for the exchange of
United States dollars for
Australian dollars; and
o after the termination of the
currency swap, the amount that,
when converted into US$ at the then
prevailing spot exchange rate in
New York City for A$ purchases of
US$, will equal the US$ amount
owing in respect of principal or
interest, as applicable, on the
Class A2 Notes to be paid from or
by reference to such amount.
ACCRUED INTEREST ADJUSTMENT.......means, in relation to a seller, the amount
equal to any interest and fees accrued on the
housing loans purchased from that seller up
to, but excluding, the closing date and which
were unpaid as of the close of business on the
closing date.
APPROVED BANK.....................means a bank which has a short term rating of
at least A-1+ from S&P and P-1 from Moody's
and which is approved by the trust manager in
writing.
AUTHORIZED INVESTMENTS............means any investments which at their date of
acquisition are:
166
acquisition are:
o housing loans secured by mortgages,
those mortgages and any other
related securities and rights;
o bills, promissory notes or other
negotiable instruments accepted,
drawn or endorsed by an Approved
Bank;
o cash and/or deposits with an
Approved Bank or deposits with, or
the acquisition of certificates of
deposit or any other debt security
issued by an Authorized Bank;
o loan securities issued, secured, or
guaranteed by the Commonwealth of
Australia or any State or Territory
within the Commonwealth of
Australia; and
o any mortgage-backed security issued
by any entity,
which satisfy the following conditions:
o unless otherwise advised in writing
by each rating agency:
o each proposed investment falling
within bullet points 2, 3 and 4
must have a credit rating issued by
S&P of A-1+ or AAA and by Moody's
of P-1 or Aaa;
o each proposed investment falling
within bullet point 5 must have a
credit rating issued by S&P of AAA
and by Moody's of Aaa;
o each proposed investment falling
within bullet points 2, 3 and 4
must mature by the earlier of the
following dates:
o the monthly payment date following
the date on which it was acquired;
or
o such other date as the issue
trustee and the trust manager may
determine to be necessary to enable
the issuer trustee to
167
have sufficient cash to meet any
expenses of the trust which may be
payable prior to that monthly
payment date;
o unless the series notice otherwise
provides, all Authorized
Investments must be denominated in
Australian currency and held in
Australia; and
o all Authorized Investments must be
held in the name of the issuer
trustee or in the name of such
other person or persons as approved
by the issuer trustee from time to
time.
AVAILABLE INCOME..................see page [47].
BANK BILL RATE....................means as at any date the rate per cent per
annum being the average of the buying and
selling rates for a 30 day bill or, in the
case of the first Interest Period, the linear
interpolation of the average of the buying and
selling rates for a [*] day bill and a 30 day
bill, quoted on the page designated "BBSW" of
the Reuters Monitor System at or about 10.30
am, Melbourne time, on that date by each
person so quoting, but not less than five, and
rounding the resultant figure upwards to four
decimal places, provided that if in respect of
any date the BANK BILL RATE cannot be
determined because fewer than five persons
have quoted rates or a rate is not displayed
for a term equivalent to that period, then the
BANK BILL RATE for that date shall mean such
rate as determined by a financial advisor
nominated by the trust manager or by the trust
manager having regard to comparable indices
then available. In the event that any such
date is not a business day, then the BANK BILL
RATE applicable on that date shall be deemed
to be the BANK BILL RATE which is applicable
on the business day next succeeding that date.
A certificate signed by a financial advisor
nominated by the trust manager or the trust
manager certifying as to the BANK BILL RATE on
any date shall be final and conclusive
evidence thereof in the absence of manifest
error.
BENEFIT PLAN......................means an employee benefit plan as defined in
Section 3(3) of ERISA that is subject to Title
I of ERISA, a plan described in section
4975(e)(1) of
168
the Code or an entity deemed to hold plan
assets of any of the foregoing by reason of an
employee benefit plan's or plan's investment
in the entity.
CAPITAL...........................means any assets of the trust from time to
time which constitute or are attributable to
capital rather than income and includes any
Mortgage Principal Repayments.
CODE..............................see page [*]
COLLECTION PERIOD.................see page [46].
CONSUMER CREDIT LEGISLATION.......means any legislation relating to consumer
credit, including the Credit Act of any
Australian jurisdiction, the Consumer Credit
Code (VIC) 1996 and any other equivalent
legislation of any Australian jurisdiction.
CURRENCY SWAP NOTIONAL AMOUNT.....means as follows:
o in relation to a monthly payment
date which is 2 monthly payment
dates immediately preceding a
quarterly payment date, the
aggregate Principal Amount of the
Class A2 notes as at the first day
of the relevant interest period;
o in relation to a monthly payment
date immediately preceding a
quarterly payment date, an amount
equal to:
o the aggregate Principal
Amount of the Class A2
notes as at the first day
of the relevant interest
period; minus
o the US$ Equivalent of the
amounts distributed to
the currency swap
provider on the
immediately preceding
monthly payment date;
o in relation to a monthly payment
date which is also a quarterly
payment date, an amount equal to:
o the aggregate Principal
Amount of the Class A2
notes as at the first day
of the relevant interest
period for
169
such quarterly payment
date; minus
o the US$ Equivalent of the
amounts distributed to
the currency swap
provider on the two
immediately preceding
monthly payment dates.
DETERMINATION DATE................see page [46].
EXTRAORDINARY RESOLUTION..........means a resolution passed at a duly convened
meeting by a majority consisting of not less
than 75% of the votes capable of being cast by
Voting Mortgagees present in person or by
proxy or a written resolution signed by all of
the Voting Mortgagees.
INCOME............................see page [47].
INCOME SHORTFALL..................see page [47].
INITIAL PRINCIPAL AMOUNT..........means the Principal Amount of the note on its
issue date.
INSOLVENCY EVENT..................means with respect to the issuer trustee, in
its personal capacity and as trustee of the
trust, the trust manager, the servicer, a
seller or a mortgage insurer (each a RELEVANT
CORPORATION), the happening of any of the
following events:
o an administrator of the relevant
corporation is appointed;
o except for the purpose of a solvent
reconstruction or amalgamation:
o an application or an order is made,
proceedings are commenced, a
resolution is passed or proposed in
a notice of proceedings or an
application to a court or other
steps, other than frivolous or
vexatious applications,
proceedings, notices and steps, are
taken for:
o the winding up,
dissolution or
administration of the
relevant corporation; or
o the relevant corporation
to enter into
170
an arrangement,
compromise or composition
with or assignment for
the benefit of its
creditors or a class of
them; or
o the relevant corporation ceases,
suspends or threatens to cease or
suspend the conduct of all or
substantially all of its business
or disposes of or threatens to
dispose of substantially all of its
assets;
o the relevant corporation is, or
under applicable legislation is
taken to be, unable to pay its
debts, other than as the result of
a failure to pay a debt or claim
the subject of a good faith
dispute, or stops or suspends or
threatens to stop or suspend
payment of all or a class of its
debts, except, in the case of the
issuer trustee where this occurs in
relation to another trust of which
it is the trustee;
o a receiver, receiver and trust
manager or administrator is
appointed by the relevant
corporation or by any other person,
to all or substantially all of the
assets and undertaking of the
relevant corporation or any part
thereof, except, in the case of the
issuer trustee where this occurs in
relation to another trust of which
it is the trustee;
o the relevant corporation is or
makes a statement from which it may
be reasonably deduced that the
relevant corporation is, the
subject of an event described in
section 459C(2)(b) or section 585
of the Corporations Act 2001 of
Australia;
o the relevant corporation takes any
step to obtain protection or is
granted protection from its
creditors, under any applicable
legislation; or
o anything analogous to an event
referred to in the six preceding
paragraphs or having a
substantially similar effect occurs
with
171
respect to the relevant
corporation.
INTEREST PERIOD...................see page [46].
ISSUER TRUSTEE'S DEFAULT..........means:
o an Insolvency Event has occurred
and is continuing in relation to
the issuer trustee;
o any action is taken in relation to
the issuer trustee which causes the
rating of any notes to be
downgraded or withdrawn;
o the issuer trustee, or any employee
or officer of the issuer trustee,
breaches any obligation or duty
imposed on the issuer trustee under
any transaction document in
relation to the trust where the
trust manager reasonably believes
it may have a Material Adverse
Effect and the issuer trustee fails
or neglects after 30 days' notice
from the trust manager to remedy
that breach;
o the issuer trustee merges or
consolidates with another entity
without ensuring that the resulting
merged or consolidated entity
assumes the issuer trustee's
obligations under the transaction
documents; or
o there is a change in control of the
issuer trustee from that existing
on the date of the master trust
deed unless approved by the trust
manager.
LIBOR.............................means, in relation to any Interest Period for
a Class A2 note, the rate applicable for
deposits in US dollars for a period of 3
months - or in the case of the first Interest
Period, the linear interpolation of [*] and 3
months - which appears on the Telerate Page
3750 as of 11.00 am, London time, on the
relevant rate reset date. If such rate does
not appear on the Telerate Page 3750, the rate
for that Interest Period will be determined as
if the issuer trustee and the calculation
agent had specified USD-LIBOR-REFERENCE BANKS
as the applicable Floating Rate Option under
the Definitions of the International Swaps and
Derivatives Association, Inc. (ISDA)
incorporating the 2000 ISDA definitions, as
amended and updated as at the issue date for
the notes (the ISDA
172
DEFINITIONS). USD-LIBOR-REFERENCE BANKS means
that the rate for an Interest Period for a
Class A2 note will be determined on the basis
of the rates at which deposits in US dollars
are offered by four major banks in the London
interbank market agreed to by the calculation
agent and the currency swap provider (the
REFERENCE BANKS) at approximately 11.00 am,
London time, on the relevant rate reset date
to prime banks in the London interbank market
for a period of 3 months commencing on the
first day of the Interest Period and in a
Representative Amount, as defined in the ISDA
Definitions. The calculation agent will
request the principal London office of each of
the Reference Banks to provide a quotation of
its rate. If at least two such quotations are
provided by Reference Banks to the calculation
agent, the rate for that Interest Period will
be the arithmetic mean of the quotations. If
fewer than two quotations are provided by
Reference Banks to the calculation agent
following the calculation agent's request, the
rate for that Interest Period will be the
arithmetic mean of the rates quoted by four
major banks in New York City, selected by the
calculation agent and the currency swap
provider, at approximately 11.00 am, New York
City time, on that rate reset date for loans
in US dollars to leading European banks for a
period of 3 months commencing on the first day
of the Interest Period and in a Representative
Amount. If no such rates are available in New
York City, then the rate for such Interest
Period will be the most recently determined
rate in accordance with this definition.
LIQUID AUTHORIZED INVESTMENTS.....as at any date means any of the following
Authorized Investments:
o bills, promissory notes or other
negotiable instruments accepted
drawn or endorsed by a bank which
has a short term rating of at least
A-1+ from S&P and P-1 from Moody's
which is approved by the trust
manager in writing;
o cash and/or deposits with an
Approved
173
Bank, or the acquisition of
certificates of deposits or any
other debt security issued by a
bank which has a short term rating
of at least A-1+ from S&P and P-1
from Moody's which is approved by
the trust manager in writing;
o loan securities issued, secured or
guaranteed by the Government of
Australia or any State or Territory
within the Commonwealth of
Australia; and
o any other Authorized Investments
approved by the rating agencies.
LIQUIDITY PURPOSES................see page [52].
LVR...............................means in relation to a housing loan, the
ratio, expressed as a percentage, which the
outstanding amount of the housing loan secured
or to be secured by the related mortgage bears
to the value of the land mortgaged or to be
mortgaged, both at the time the borrower
entered into the relevant housing loan
agreement.
MATERIAL ADVERSE EFFECT...........means an event which will materially and
adversely affect the amount or the timing of a
payment to a noteholder.
MONTHLY PAYMENT DATE..............see page [ ].
MORTGAGEES........................see page [62].
MORTGAGE PRINCIPAL REPAYMENTS.....see page [49].
NOTEHOLDER MORTGAGEES.............means the Class B noteholders, the Class A1
noteholders and the note trustee, on behalf of
the Class A2 noteholders.
PREFUNDING ACCOUNT................see page [*]
PRESCRIBED MINIMUM LEVEL..........see page [47].
PRIMARY EXPENSES..................see page [47].
PRINCIPAL AMOUNT..................means, on any date in relation to a note, the
Initial Principal Amount of that note minus
the aggregate of repayments of principal made
in respect of the
174
note on or before that date.
QUARTERLY PAYMENT DATE............see page [ ].
SECURED MONEYS....................means all money which the issuer trustee is or
at any time may become actually or
contingently liable to pay to or for the
account of any Mortgagee for any reason
whatever under or in connection with a
transaction document.
SERVICER TRANSFER EVENT...........see page [69].
STEP-UP MARGIN DATE...............means the quarterly payment date falling in
July 2009.
SURPLUS LIQUIDITY.................means on any monthly payment date the amount
by which the value of the Liquid Authorized
Investments exceeds the Prescribed Minimum
Level on such monthly payment date after
replenishing Liquid Authorized Investments
used for any Income Shortfalls.
TERMINATION DATE..................with respect to the trust shall be the earlier
to occur of:
o the date which is 80 years after
the date of creation of the trust;
o the termination of the trust under
statute or general law;
o full and final enforcement by the
security trustee of its rights
under the security trust deed after
the occurrence of an event of
default under the security trust
deed; or
o at any time after all creditors of
the trust have been repaid in full,
the business day immediately
following that date.
175
TRUST MANAGER'S DEFAULT...........means:
o the trust manager fails to make any
payment required by it within the
time period specified in a
transaction document, and that
failure is not remedied within 5
business days of receipt from the
issuer trustee of notice of that
failure;
o an Insolvency Event has occurred
and is continuing in relation to
the trust manager;
o the trust manager breaches any
obligation or duty imposed on the
trust manager under the master
trust deed, any other transaction
document or any other deed,
agreement or arrangement entered
into by the trust manager under the
master trust deed in relation to
the trust, the issuer trustee
reasonably believes that such
breach has a Material Adverse
Effect and the breach is not
remedied within 30 days' notice
being given by the issuer trustee
to the trust manager, except in the
case of reliance by the trust
manager on the information provided
by, or action taken by, the
servicer, or if the trust manager
has not received information from
the servicer which the trust
manager requires to comply with the
obligation or duty; or
o a representation, warranty or
statement by or on behalf of the
trust manager in a transaction
document or a document provided
under or in connection with a
transaction document is not true in
a material respect or is misleading
when repeated and is not remedied
to the issuer trustee's reasonable
satisfaction within 90 days after
notice from the issuer trustee
where, as determined by the issuer
trustee, it has a Material Adverse
Effect.
176
UNPAID BALANCE....................means, at any time, the unpaid principal
amount of the housing loan plus the unpaid
amount of all finance charges, interest
payments and other amounts accrued on or
payable under or in connection with the
housing loan or the related mortgage at that
time.
US$ EQUIVALENT....................means, in relation to an amount denominated or
to be denominated in A$:
o prior to the termination of the
currency swap, the amount converted
to and denominated in US$ at the
rate of exchange set forth in the
currency swap for the exchange of
Australian dollars for United
States dollars; and
o after the termination of the
currency swap, the amount that,
when converted into A$ at the then
prevailing spot exchange rate in
New York City for US$ purchases of
A$, will equal the A$ amount needed
to convert into US$ to pay
principal or interest, as
applicable, on the Class A2 notes.
VOTING MORTGAGEES.................see page [63].
177
- --------------------------------------------------------------------------------
INTERSTAR MILLENNIUM SERIES 2002-1G TRUST
$[ ] CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
---------------
PROSPECTUS
---------------
UNDERWRITERS OF THE CLASS A2 NOTES
BARCLAYS CAPITAL
[ O ] [ O ]
You should rely only on the information contained in this prospectus.
No one has been authorized to provide you with any other, or different,
information.
This document may only be used where it is legal to sell these
securities. The information in this document may be accurate only on the date of
this document.
Until [*], all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to unsold allotments
or subscriptions.
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the notes being registered under this
registration statement, other than underwriting discounts and commissions:
SEC Registration Fee........................................................................ $ 92
Printing and Engraving...................................................................... $[ * ]
Legal Fees and Expenses..................................................................... $[ * ]
Trustee Fees and Expenses................................................................... $[ * ]
Rating Agency Fees.......................................................................... $[ * ]
Accounting Fees & Expenses.................................................................. $[ * ]
Miscellaneous............................................................................... $[ * ]
----------------
Total............................................................................Total $[ * ]
================
- --------------------
* To be filed by amendment.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the registrant
issued or sold by the registrant that were not registered under the Securities
Act:
The registrant was incorporated on April 26, 2002. Two fully paid shares of
A$1.00 each were allotted to Interstar Securitisation Management Pty
Limited on April 26, 2002.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Constitution of the Registrant, every director, agent,
auditor, secretary and other officer for the time being of the Registrant shall
be indemnified out of the assets of the Registrant against any liability
incurred by him as such director, agent, auditor, secretary or other officer in
defending any proceedings whether civil or criminal in which judgment is given
in his favor or in which he is acquitted or in connection with any application
under the Corporations Act in which relief is granted to him by the court in
respect of any negligence, default, breach of duty or breach of trust. However,
the right of indemnity against the Registrant may, in certain circumstances, be
limited by the Corporations Act.
ITEM 36. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
1.1 Form of Underwriting Agreement.
3.1 Constitution.
4.1 Master Trust Deed.
4.2 Form of the Series Notice.
4.3 Form of the Security Trust Deed.
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4.4 Form of the Note Trust Deed.
4.5 Form of the Agency Agreement.
5.1 Opinion of Mayer, Brown, Rowe & Maw as to legality of the Notes.
8.1 Opinion of Mayer, Brown, Rowe & Maw as to certain tax matters
(included in Exhibit 5.1 hereof).
8.2 Opinion of KPMG as to certain tax matters.
10.1 The Investment Management Agreement
10.2 Form of the Fixed-Floating Rate Swap.
10.3 Form of the Currency Swap.
10.4 Primary Backup Servicer Agreement
10.5 Secondary Backup Servicer Agreement*
23.1 Consent of Mayer, Brown, Rowe & Maw (included in Exhibit 5.1 hereof).
23.2 Consent of KPMG (included in Exhibit 8.2 hereof). 24.1 Power of
Attorney (included on signature pages).
25.1 Statement of Eligibility of Note Trustee.
99.1 Opinion of Allens Arthur Robinson as to Enforceability of U.S.
Judgments under Australian Law.
* To be filed by amendment.
ITEM 37. UNDERTAKINGS.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
II-2
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of New York, on the 10th day of June, 2002.
Interstar Securitisation
Management Pty Limited
By: /s/ Diane Citron, attorney-in-fact,
pursuant to a Power of Attorney
dated June 7, 2002
-------------------------------------
Name: Diane Citron
Title: Attorney-in-fact, under a Power
of Attorney dated June 7, 2002
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Paul Jorissen and Diane Citron,
or any of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Sam Kyriacou Principal Executive Officer June 7, 2002
- -----------------------
/s/ Andrew Twyford Principal Financial Officer June 7, 2002
- -----------------------
/s/ Andrew Twyford Principal Accounting Officer June 7, 2002
- -----------------------
/s/ Vernon Spencer Director June 7, 2002
- -----------------------
/s/ Sam Kyriacou Director June 7, 2002
- -----------------------
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SIGNATURE OF AGENT FOR SERVICE OF PROCESS
Pursuant to the requirements of Section 6(a) of the Securities Act of
1933, the undersigned hereby certifies that it is the agent for service of
process in the United States of the Registrant with respect to the Registration
Statement and signs this Registration Statement solely in such capacity and for
the limited purpose of said Section 6(a).
/s/ Robin LaPeters
--------------------------------------------
Name: Robin LaPeters
Title: Vice President
Address: CT Corporation System
111 8th Avenue
New York, NY 10011
Telephone: (212) 590-9100
II-6
EXHIBITS INDEX
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
---- ---------------------- ----------
1.1 Form of Underwriting Agreement.
3.1 Constitution.
4.1 Master Trust Deed.
4.2 Form of the Series Notice.
4.3 Form of the Security Trust Deed.
4.4 Form of the Note Trust Deed.
4.5 Form of the Agency Agreement.
5.1 Opinion of Mayer, Brown, Rowe & Maw as to legality of the Notes.
8.1 Opinion of Mayer, Brown, Rowe & Maw as to certain tax matters (included in
Exhibit 5.1 hereof).
8.2 Opinion of KPMG as to certain tax matters.
10.1 The Investment Management Agreement.
10.2 Form of the Fixed-Floating Rate Swap.
10.3 Form of the Currency Swap.
10.4 Primary Backup Servicer Agreement
10.5 Secondary Backup Servicer Agreement*
23.1 Consent of Mayer, Brown, Rowe & Maw (included in Exhibit 5.1
hereof).
23.2 Consent of KPMG (included in Exhibit 8.2 hereof).
24.1 Power of Attorney (included on signature pages).
25.1 Statement of Eligibility of Note Trustee.
99.1 Opinion of Allens Arthur Robinson as to Enforceability of U.S. Judgments under
Australian Law.
* To be filed by amendment.
II-7